Since the June agreement on the eurozone budget, blockages have persisted between the 19 members of the euro area. But France is now taking an active role in persuading the others of the need to pin down practical details. EURACTIV France reports.
France will begin the second act of its political crusade for an ambitious eurozone budget. After having convinced Germany to commit itself to a specific budget for the eurozone, France will now have to convince other member states about the size of the budget and its role as a stabiliser.
Following the agreement reached in June on the principle of a budget for the eurozone, European finance ministers are meeting from Tuesday to Wednesday (8-9 October).
They are currently discussing the operational implementation of this budgetary instrument led by French President Emmanuel Macron.
France and Germany tabled a joint proposal on Thursday (21 February) to establish a new “eurozone budgetary instrument” that would support national reforms and investments in the single currency bloc.
Ministers of the 19 eurozone member states will have to agree on the modalities for implementing the budget, including the allocation of funds, the allocation keys between member states and more.
But the most delicate part remains the financing of the budget as this is an issue that divides European states.
On the one hand, France and southern European countries are advocating a budget with a stabilising function, which is supported both by the European budget and by the eurozone members.
Other countries, such as the Netherlands and Nordic countries, take a negative view of the creation of a new item of expenditure at the national level and are opposed to any additional aid that would come from their public finances.
“Both options are open,” the French explained.
“From our point of view, it is unlikely that we will be able to reach an agreement in October because the discussion is a little difficult. But the mandate that has been given is to have an agreement by December,” the French source recalled.
France should push for an instrument that includes a counter-cyclical dimension, allowing it to respond to economic shocks, and not only to support reforms and investment.
To move in this direction, Paris intends to support the idea of making co-financing rates flexible. In principle, any project financed by the future instrument should also benefit from co-financing by the country receiving funding.
“The idea is that this national co-financing rate can be reduced in the event of a crisis. Thus, the eurozone budget could have a stabilising function,” the French government hopes.
This idea will be discussed in Brussels, but it remains below the French President’s initial ambitions. Nor should the possibility of increasing the eurozone budget in the event of a crisis be the subject of an automatic contribution mechanism by the monetary union’s members.
“It will be easier to revise the amounts with a direct contribution from the member states, but in any case, it will require unanimity from all 19 eurozone members,” the French source explained.
The other parameter that complicates the debate on the eurozone budget is the position of EU countries that are not part of the eurozone. The idea of total or partial financing of this budget via the multiannual financial framework (MFF), the EU’s seven-year budget, does not appeal to all countries.
“Denmark and Sweden, which are not eurozone members, are not necessarily in favour of the idea of having an MFF specifically dedicated to the eurozone”, the French acknowledged.
The discussion on the future multiannual financial framework will start at the European Council next week (17-18 October).
[Edited by Zoran Radosavljevic]