Wednesday

6th Jul 2022

Northern EU states to minimise euro reform

  • Euro is "relevant to all and should therefore be discussed and decided by all" (Photo: snorski)

Eight northern EU states have gone against France on euro reforms after the German coalition deal cleared the way for talks.

The EU should avoid "far-reaching transfers of competence to the European level" as it sought to "regain public trust" in the wake of the financial crisis, the finance ministers of Denmark, Estonia, Finland, Ireland, Latvia, Lithuania, the Netherlands, and Sweden said in a joint paper published on Monday (5 March).

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"Decision making should remain firmly in the hands of member states," on issues such as the use of the European Stability Mechanism (ESM), a bailout fund, or the creation of a European Monetary Fund (EMF) to handle future bailouts, they said.

They said the strength of the euro depended, above all, on "decisive actions at the national level" to comply with EU rules on debt and budgets, and that these national actions "should have priority over far-reaching proposals".

They also said decisions on euro reforms should be taken in an "inclusive format" with the nine non-euro EU states and that any new initiatives "should be open on a voluntary basis to non-euro area countries".

The euro was "relevant to all and should therefore be discussed and decided by all", the group said.

The mixed group includes non-euro sates (Denmark and Sweden), small EU states that suffered in the financial crisis (Estonia, Latvia, Lithuania, and Ireland), and a wealthy EU founding nation (the Netherlands).

They spoke out after a German coalition deal, announced on Sunday, cleared the way for negotiations on euro area reform to start in earnest.

France, last year, called for "far-reaching" changes that would give EU institutions more power over the single currency, creating what French president Emmanuel Macron called a "multispeed" Europe.

These included a joint eurozone budget overseen by the European Parliament and a common finance ministry in the EU Council in Brussels.

German chancellor Angela Merkel agreed a less radical agenda in preliminary talks in January with the centre-left SPD party, which joined up with her centre-right CDU/CSU party at the weekend for another four years.

Merkel did not back Macron on a eurozone budget, but did go further than the northern group, saying that the future EMF should be a fully fledged EU institution under EU parliament control instead of an intergovernmental body.

The euro reform talks were triggered by Brexit, with EU leaders to return to the subject at a summit in March - one year before the UK leaves the bloc.

The northern group said the EU needed to continue reforms despite the "benign economic conditions" in early 2018.

It said the EU should prioritise completion of the banking union and of the single market and pursue an "ambitious free trade agenda".

It listed several technical steps to prevent EU banks from going bust, including new rules on how much creditors would have to pay to "bail-in" lenders and how to treat non-performing loans.

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