France’s President Emmanuel Macron on Tuesday won German Chancellor Angela Merkel’s backing for reforms aimed at bolstering the eurozone against crises, including a vaunted budget for the bloc.
But its size remains vague and its creation could still face resistance from other members.
‘We are beginning today a second step in the life of our common currency,’ said Macron, after talks in Germany with Merkel.
The eurozone budget will have its own governance structure, and be a ‘real budget with annual revenues and spending’, he said, adding that Paris and Berlin hoped to have it in place by 2021.
It will fund investments in the bloc, and go towards helping poorer members, allowing the eurozone to ‘respond to the .. divergences between our economies’.
He would however not be drawn into giving a figure for the budget, saying that its size would be discussed with other members of the bloc.
How it would be funded was also up for discussion with other eurozone members, said Merkel, suggesting that it could involve regular transfers made by individual countries, a tax on financial transactions or funds from the EU.
‘Let me be pragmatic. When (a proposal) is too detailed, that can be counter-productive,’ noted Macron.
The French president, who had won power on a pro-European platform, has championed an overhaul of the bloc to reinvigorate it at a time when populist and eurosceptic sentiment is gaining ground across the continent.
He had initially sought a common eurozone finance minister as well as a common budget. But ideas for a minister of the bloc had been shot down by Berlin.
Mindful of Germans’ fear of funding eurozone laggards, Merkel had initially appeared lukewarm to the idea of a budget for the bloc.
But in a recent interview she offered a key concession, saying she could back a budget with a total sum ‘at the lower end of the double-digit billions of euros range.’
‘Some won’t be happy’
While he now has Merkel’s backing in hand, Macron still has an uphill struggle to convince the other members of the 19 member eurozone to sign off on the budget.
In Brussels, a high-ranking official speaking on condition of anonymity said: ‘Some countries won’t be happy’ about the plan.
While the official did not cite countries, Dutch Prime Minister Mark Rutte has already previously voiced his opposition.
Beyond calls for a common budget, Berlin and Paris are also seeking to expand the remit of European Stability Mechanism (ESM) – the firefighter for eurozone countries with serious debt problems.
The twin EU engines now want the ESM to become a European version of the International Monetary Fund that could provide emergency loans to countries that fall victim to crises not linked to their debt levels.
Among other reform proposals detailed in a joint paper is the plan to harmonise corporate taxes within the bloc, as well as reach an EU agreement on a digital tax by the end of 2018.
Ireland and Luxembourg, however, are vehemently against a digital tax that could hurt their competitiveness in attracting big tech multinationals, unless the tax is broadened to include OECD countries such as Switzerland or the United States.