There is 'hope' for an agreement on EU Covid-19 recovery fund - Merkel

European Union leaders have come up with a "framework" for a possible agreement on the EU coronavirus recovery fund after overnight negotiations, German Chancellor Angela Merkel told reporters in Brussels.

"Last night — after long negotiations — we have come up with a framework for a possible agreement. That is progress — and it gives us hope that there may be an agreement today or at least that an agreement is possible," Merkel said on Monday, reports the CNN.

EU leaders have been locked in heated negotiations about the economic recovery plan for three days, including overnight Sunday into Monday, with the sticking points including the size of loans versus grants.

Austria, the Netherlands, Denmark and Sweden, the so-called "Frugal Four," had vehemently opposed the idea of 500 billion euros ($571 billion) in grants over concerns of loading their countries with national debt to fund the spending of other countries.

Whereas countries like Spain and Italy said they couldn't accept a reduction in the volume of grants.

Merkel said it was "clear negotiations would be incredibly tough" but that negotiations continue. 

"But extraordinary situations also require extraordinary efforts. So far we have lived up to this and I hope we will be able to make it the rest of the distance, which will not be easy," Merkel told reporters.