Some EU leaders see path to deal on Reconstruction Fund, talks to resume later

Some European Union leaders believe a deal on the bloc's Reconstruction Fund was now in sight after the four countries which had been holding out for greater conditionality signalled their agreement with the proposed split between grants and low-interest loans.

Austria, Denmark, the Netherlands and Sweden, the so-called 'Frugal Four', were onboard with the idea of €390bn of aid being extended via grants, Bloomberg reported.

The remainder of the funds would be made available as low-interest loans.

The talks, which had been expected to end on Sunday, extended through the night and were scheduled to resume at 1500 BST.

EU leaders had yet to agree however on the overall amount of the funds and the mechanisms that would be put in place to control how they were spent.

Austrian Chancellor, Sebastian Kurz, described the negotiations as "tough" but went on to say that the "be very happy with today’s result. It will continue this afternoon."

A French official meanwhile told Bloomberg that country's delegation now saw a path to a full agreement.

Dutch prime minister, Mark Rutte, on the other hand, remained wary.

"“We are not there yet, things can still fall apart," he said.

"But it looks a bit more hopeful than at the times were I thought last night that it was over."

Euro/dollar was nevertheless trading higher on the back of the news as of 0857 BST, adding 0.17% to 1.1447 - a four-month high.

For Neil Wilson, chief market analyst at Markets.com; "A deal would mark a breakthrough for the EU and show that the bloc can respond to an era-defining crisis with one voice.

"Failure today is not the end of the road by any means, but it could produce a negative reaction in Euro-area sovereign debt, European equities and the euro."