Saturday

6th Jun 2020

EU finance ministers agree eurozone reforms, fall short of French ambitions

  • Ministers celebrate the euro's 20th 'birthday', with Eurogroup president Mario Centeno (r) and European Central Bank governor Mario Draghi (l) holding mock-up coins (Photo: Council of the European Union)

EU finance ministers on Tuesday morning (4 December) agreed on reforms to bolster the euro area's preparedness to tackle any future financial crisis - after talks that lasted all night in Brussels.

The deal, however, fell short of the ambitions of French president Emmanuel Macron - whose idea for a special eurozone budget received support, but not for the so-called "stabilisation" plan to help economies in unexpected trouble.

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The new budget would serve to boost competitiveness, linking it to economic reforms.

"Technical needs to work continue," finance commissioner Pierre Moscovici said of the eurozone budget's stabilisation element in the early hours of Tuesday after 18-hours of negotiations.

French finance minister Bruno Le Maire clashed with his Dutch colleague, Wopke Hoekstra, over the stabilisation function of a future eurozone budget.

The final agreement merely said that "possible features of a stabilisation function were also discussed, including the unemployment insurance scheme" for the eurozone budget.

"All in all, the way forward to a eurozone budget is opened, not fully-paved, but it is opened," Moscovici, a Frenchman himself, said.

The size of a future eurozone budget would be determined by EU leaders as part of their discussion on the EU's next long-term budget.

Completing the banking union, a result of fighting the euro crisis, has also proven to be difficult - with Germany opposing the launch of a European guarantee for bank deposits.

Critics see that guarantee as a way for southern member states to benefit from risk-averse Nordic EU countries. Ministers will come back to this issue next June.

But finance ministers managed to agree on expanding the effectiveness of the European Stability Mechanism (ESM) to help eurozone countries mired in large debts, but with the conditionality of EU countries reducing their pile of debts.

The backstop will be introduced earlier, provided that sufficient progress has been made in risk reduction - to be assessed in 2020, ministers said in a statement.

Ministers also agreed that the ESM would serve as a last resort in case of a major crisis for Europe's biggest banks.

All of the agreements reached by ministers are conditional on a nod from EU leaders gathering in Brussels next week for their summit.

Finance ministers have spent the last year coming up with reform proposals and deals on how to reinforce the stability of the eurozone in preparation for any future economic shock.

"These were very hard negotiations, the result is a breakthrough on some key issues," eurogroup president Mario Centeno told journalists after the meeting.

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With both Macron and Merkel losing support domestically, it is questionable whether their plans will succeed. Even more so, given the opposition by the Hanseatic states, the upcoming European elections and Italy's political hooliganism.

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A European financial regulatory body set up after the financial crisis is at loggerheads with the European Commission over whether to carry out a transparency review of certain financial products. The reason: Brexit.

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