It's Europe's moment of truth: one of the most difficult summits in its history. European Union leaders assembled in Brussels on Friday to discuss a recovery plan to rescue economies battered by the pandemic. 

"The stakes couldn't be higher," said European Commission president Ursula von der Leyen. "If we do it right, we can overcome this crisis stronger and emerge stronger from the crisis. All the necessary pieces are on the table and a solution is possible."

The summit was scheduled to last two days but has stretched into a third amid major divisions on how the money should be handed out. 

The stumbling block in the talks has been the issue of governance.  Under the EU's plans, the majority of the $855 billion fund would be given out as grants.

That has drawn opposition from a group of countries known as the Frugals. They're concerned about pooling debt with less solvent EU countries. The Netherlands has argued that if the funds come as grants, then any payouts should come with strict conditions. 

"In times of crisis, you have to show solidarity with countries that are suffering more than us," said Dutch prime minister Mark Rutte. "And there are countries where this is the case, who cannot take out loans at the scale at which we can, which means that the gap within Europe widens. 

"On the other hand, we also want to discuss what we will do to make sure that those countries carry out reforms. And how do we ensure that those really take place?"

Talks on the first day ran for 13 hours and ended badly. EU Council president Charles Michel has now offered a new compromise deal. This includes stricter governance, a reduced part of grants and increased rebates for the core EU budget. The first in-person meeting of EU leaders in months has brought fraught negotiations at a critical juncture.