LUXEMBOURG (Reuters) - European Union finance ministers are discussing the final details of a pool of money that would be earmarked for the euro zone and would support investment and reforms.
The talks, among the finance ministers of the 27 countries that will remain in the EU if Britain leaves, bring to an end two years of discussions that have reduced France’s ambitious idea of a euro zone budget to a bare minimum.
The budget, or the Budgetary Instrument for Competitiveness and Convergence (BICC), is likely to be around 17 billion euros starting in 2021. That is the euro zone’s share of the 25 billion euros proposed by the European Commission to support reforms in the next EU long-term budget.
“We’re attempting to find a consensus that brings all members together,” German Finance Minister Olaf Scholz said at the meeting in Luxembourg. “We have never been as close to a deal as today. Still, you never know for certain if it will work.”
The money would be divided between the 19 euro zone countries over seven years, leaving around 130 million euros per euro zone country per year, if it’s distributed evenly.
“The size is not what I would have dreamed of,” European Commissioner for Economic and Financial Affairs Pierre Moscovici said. “It will be a very useful first step, but not the last step,” he said, echoing a common view that the budget would grow in size and importance over time.
French President Emmanuel Macron proposed in 2017 that the euro zone create its own budget of several percentage points of gross domestic product. It would be used to narrow differences in economic performance among the 19 euro zone countries and provide a buffer for economic shocks.
His position was, to some extent, shared by Germany, Italy, Spain and Slovakia. But northern countries objected, worried about the extra spending and moral hazard, leaving the result well short of Macron’s vision.
The meagre funds will finance only investment and reforms. It will not be permitted to stabilize economies, on the insistence of the Netherlands and its allies who are concerned about free-riding and moral hazard.
The only way the money could contribute to economic stabilization would be through adjusting the national contribution to investment projects co-financed by the budget.
In times of economic strength, a country would get less co-financing from the fund. Those in the doldrums could count on the euro zone budget picking up more of the tab than usual.
The exact percentages of co-financing and the conditions for it to grow or diminish will only be decided later on Wednesday. So will the issue of whether the budget is financed only from the wider EU budget of both euro and non-euro countries or from external sources of revenue, such as dedicated taxes.
To satisfy those who want the budget to grow through external revenues sources, a compromise is likely to include an “enabling clause” allowing such an option in the future through an intergovernmental agreement. But joining such an agreement would be strictly voluntary.
Additional reporting by Thomas Escritt in Berlin and Francesco Guarascio in Luxembourg