May 16, 2019 / 4:19 PM / 7 months ago

Ministers see deal in June on future euro zone budget

BRUSSELS (Reuters) - Euro zone finance ministers failed on Thursday to resolve all differences over the financing of a future budget for the 19 countries sharing the euro, but their chairman Mario Centeno expressed confidence they would reach a deal in June.

FILE PHOTO: The euro sign is photographed in Frankfurt, Germany, April 9, 2019. REUTERS/Kai Pfaffenbach/File Photo

The future euro zone budget is to be part of the next EU-wide long-term budget starting in 2021. It is aimed at making euro zone economies more competitive and getting them more in sync with each other, rather than at stabilizing them during economic downturns.

While limited in its role for now, such a budget was a milestone in euro zone integration, Centeno has said.

“It is a very import political and economic step for the euro zone,” he told a news conference after the discussions.

The budget’s size will be set by euro zone leaders “in the context” of the EU budget, or multiannual financial framework (MFF). That vague phrase leaves leeway for leaders’ decisions.

Officials said France and Germany have agreed to finance the euro zone budget with a mix of money from the bigger EU budget and dedicated taxes such as the financial transaction tax - called assigned revenues. France has also been pushing for a tax on digital economy.

For such additional financing, euro zone governments would have to sign a special intergovernmental agreement, like the treaty that created the euro zone bailout fund.

“The key issue is whether to rely on own resources only or also on so-called ‘assigned revenues’ - with contributions from member states from outside the EU budget. This has important legal and governance implications,” Centeno said.

“A few critical elements are still open but I am confident we will find common ground in June,” he said.

The European Commission opposes the intergovernmental approach, because this would put the budget firmly in the hands of governments and curb the influence of EU institutions and EU law, officials said.

In an effort to balance national and EU powers over the new pool of money, ministers agreed in April that the European Commission, with the approval of euro zone governments, would set the priorities for the budget.

The discussion is the latest step in the euro zone’s long-standing drive for deeper economic integration that is intended to make it more resilient to economic crises in the future.

The 28 countries that now form the European Union have a shared EU budget, which is set every seven years and equal to 1% of the bloc’s gross national income.

Euro zone countries also want to have a separate budget for their group, to serve as a fiscal tool to intervene in the euro zone economy alongside the single monetary policy of the European Central Bank.

Additional reporting by Peter Maushagen; Reporting by Jan Strupczewski; Editing by Hugh Lawson and Janet Lawrence

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