Budget of the euro area: Paris and Berlin hope a european compromise

France and Germany are hoping for a european compromise on the outlines of a euro zone budget at a ministerial meeting Thursday in Luxembourg, somewhat tarnished by the bisbilles between Italy and Brussels, that the threat of sanctions for its excessive debt.

The Finance ministers of the EU need to agree on the broad outlines of a budget for the euro zone, a flagship project of French president Emmanuel Macron, considerably revised downwards.

A Fervent defender of this initiative, the French Finance minister, Bruno Le Maire, said on arriving in Luxembourg: “I hope that we will reach a compromise, perhaps today or tomorrow, very soon”. “We are close” to an agreement, added to his German counterpart, Olaf Scholz.

Mandated by european leaders in December, the Finance ministers debated for the last six months of this question that divides the countries of the South, advocates of greater solidarity, and those of the North, followers of the budgetary discipline.

However, the distrust of the supporters of the discipline, led by the netherlands, in the face of the Southern States are considered to be too extravagant, has increased after the recent tensions between the european Commission and the Italian government, which leaves it spinning its huge public debt.

MESSRS. The Mayor and Scholz have urged Rome to make concessions. “I hope that Italy will seize the hand extended by the Commission in taking the appropriate measures,” said French. “The rules are not only something that is written on paper, they have goals,” added Mr. Scholz.

Called “budgetary instrument for competitiveness and convergence”, the embryo of the budget of the eurozone is to encourage structural reforms to increase competitiveness in the 19 countries that have adopted the single currency.

In practical terms, this would, for example, explains a diplomat, the French reform of vocational training, which could be funded, at least partially, by this instrument. But if countries do not honour their commitments to reforms, they must repay the funds allocated.

– The “big bazooka” –

This “instrument” will be incorporated in the budget of the EU (and therefore of the 27 countries of the Union, the less the United Kingdom that must come out). It does not, moreover, the name “euro zone budget”, as had initially imagined Mr. Macron, the countries of the North were opposed to its own budget to this area.

Its amount should be as much less than that desired by the French president, who was considering a number of hundreds of billions of euros.

The discussion on the exact magnitude of this “instrument” will also be later in the year, during negotiations over global on the future framework of the multiannual EU budget for 2021 to 2027.

Two european sources talked of a budget of 17 billion euros spread over seven years between the 19 countries.

“We’re going to start with an amount rather small, this will not be the big bazooka (at the beginning, editor’s note), but it can grow” thanks to additional revenues from new taxes, for example, said a senior european official.

France and Germany propose to establish a tax on financial transactions (FTT) at european level –a project in suffering for several years– that would abound.

The Second point of the reform of the euro zone, where Finance ministers have yet to make progress Thursday: the strengthening of the european stability Mechanism (ESM), created in 2012 in the midst of the debt crisis, and designed to help countries in difficulty.

Third, they must also move forward on the banking Union, which was launched in 2012 after the financial crisis and is currently in a stalemate.

For years, Germany drags its feet to create a european system of deposit guarantee (IDES in English), fearing that its investors pay for the banks of countries of the South, such as the Italian. Berlin wants first reduces the level of bad debts of bad students prior to pooling.

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