EU considering major Tunisia aid package as migration surges

TUNIS (Reuters) -The European Union said on Sunday it may loan Tunisia over 1 billion euros ($1.07 billion) to help develop its battered economy, rescue state finances and deal with a migration crisis, with most funds contingent on it agreeing economic reforms.

The offer was announced by European Commission President Ursula von der Leyen during a visit to Tunisia along with Dutch Prime Minister Mark Rutte and Italian Prime Minister Giorgia Meloni, who is anxious about migration across the Mediterranean.

Their effort, spurred by increasing concerns in Europe about Tunisia's stability, is part of a last-ditch push by major donors to persuade President Kais Saied to agree to the terms of a $1.9 billion International Monetary Fund (IMF) bailout.

Saied has so far rejected the proposals, originally made by his own government, to cut subsidies and restructure loss-making state-owned companies, saying this risks a social explosion.

Tunisian state media cited Saied as saying he had "confirmed" during the meeting with the European leaders that "solutions cannot be in the form of diktats and the IMF should review its prescriptions".

Donors say time is almost up for Tunisia to agree to the loan and avert a collapse in its state finances, but they are unwilling to lend it money without the reassurance of fully costed reforms that could allow it to repay its debts.

Any amended IMF deal could take months more to negotiate.

A factsheet released by the EU said the body would lend Tunisia up to 900 million euros to help its macro-finances once it finalised the IMF programme, for which a preliminary agreement was reached in October.

The EU could also provide 150 million euros in budget support this year "in the context of a reform agenda", the factsheet said.

Von der Leyen added that the EU would also this year provide Tunisia with 100 million euros for border management, search and rescue, anti-smuggling operations and returns "rooted in respect for human rights".

Tunisia's presidency said in a statement that it was creating a partnership with the EU to combat illegal migration. But Saied also said: "The solution that some secretly call for is to settle migrants in exchange for money, a solution that is neither humane nor acceptable".

Meloni, who has pressed for the IMF to relax conditions for its loan programme, said there was "an important window of opportunity" to finalise the aid agreement before the European Council at the end of June.

Von der Leyen said Europe was helping Tunisia's economy in other ways, including a 150 million-euro digital cable link to Europe and a 300 million-euro renewable energy power export project.

She said the EU would also expand opportunities for young Tunisians to study, work and train in the EU to help them develop skills that could be used to boost the Tunisian economy.

($1 = 0.9305 euros)

(Reporting by Angus McDowall and Tarek Amara in Tunis and Federico Maccioni in Milan; Editing by Alex Richardson, Sharon Singleton and Ros Russell)