Thursday

21st Jun 2018

Germany to EU: stop talking about new budget schemes

  • A special budget would not solve the euro-crisis, says German official (Photo: PeterXIII)

German officials are in eye-rolling mode ahead of an EU summit about plans to create a eurozone "shock absorption fund" and say leaders should focus on reforms and stick to their promises.

"I am honestly a little surprised that everyone is just talking about how to spend money, but not about what matters: to increase competitiveness and employment," a senior German official told journalists in Berlin on Wednesday (12 December).

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A eurozone-only budget "would not solve the crisis, nor its root problems," the source added.

The idea of a "shock absorption fund" to offset the negative impact of economic crises for countries in the euro-area who cannot devalue their currencies was tabled by EU council chief Herman Van Rompuy in his latest proposals for the future of the eurozone.

But the German government is insisting that first more controls on national budgets need to be in place, in what Van Rompuy dubbed "contractual agreements" signed by member states.

Here too, there is no final concept yet on how these agreements would be implemented, at what stage stronger supervision would kick in and who would be the arbiter - the European Court of Justice being one option.

"About this fiscal capacity, it would be wrong to try and undermine one part what we are trying to establish on the other - more economic coordination and fiscal supervision. So there is no point now to think about anti-cyclical giant capacities," the official said.

Instead of trying to create new funding schemes that pose legal challenges, the existing EU budget should be better used and the pace of structural reforms kept, the official said.

However, back in June when EU leaders first floated the idea of a eurozone budget, Germany was more favourable of various forms of "solidarity" with the crisis-plagued countries in the eurozone.

The pressure has been lifted since, because the European Central Bank in August announced it would purchase "unlimited" amounts of government bonds from countries under market pressure, if they sign up to reforms plans.

Borrowing costs dropped and the pressure on EU leaders to agree on anything this week has virtually disappeared.

Even the German government, once a proponent of revamping euro-architecture, including via treaty change, is now admitting the time is not ripe for such discussions.

"We need to see how full the agenda since August was - banking union, EU multi-annual budget, efforts related to Greece. So perhaps it is human that the question of the mid-term future of the eurozone is not being now dealt with the intensity and the focus we would have liked," the official said.

A change to the EU treaties is "not off the table" but first leaders have to agree on the "content" of the changes and only later on the legal instruments to do so, the source explained. That process will take another "four to six months."

Eurozone needs a 'shock absorption' fund

A eurozone-wide 'shock absorption' fund should be created to assist countries in economic difficulty, according to a paper that will take centre stage at next week's EU summit.

Agenda

Minimal changes to euro structure at this WEEK's summit

EU leaders gathering for their sixth summit this year are likely to fudge plans for more integration in the eurozone that were originally aimed at calming market fears about the survival of the euro.

'Disappointment' for those expecting ambitious EU summit

EU leaders will gather in Brussels Thursday and Friday but as market pressure has waned so too have member states' ambitions. Draft summit conclusions have been re-written to reflect the reduction in reform zeal.

Leaders disagree on future euro integration

EU leaders early Friday had different views on how to deepen integration in the eurozone, with Germany keen to limit a new budget for reforms to €20 billion.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

Opinion

Europe could lose out in North Korean bonanza

South Korean businesses including Hyundai and Samsung are already scoping investment opportunities. Will North Korea become a 'new Vietnam' opportunity - or more like Myanmar, where slow Brussels policy-making meant EU exporters lost out.

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