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25/09/2016

Marathon negotiations on the eurozone budget continue

Euro & Finance

Marathon negotiations on the eurozone budget continue

Reimer Böge [European Parliament]

European lawmakers are trying to push ahead with plans for a eurozone budget. A consensus in the European Parliament could finally unblock the political debate. EurActiv France reports.

For anyone who wonders how MEPs fill their days, Pervenche Berès, a French Socialist (S&D group), and her German conservative colleague Reimer Böge (EPP group) provide an unusual example.

After meeting with Michel Sapin, the French minister of finance, on Tuesday morning (17 May), the two MEPs then met the German Ambassador to France, Nikolaus Meyer-Landrut, the French Secretary General for European Affairs Philippe Leglise-Costa, the president’s Advisor on European Affairs, Didier Migaud, the president of the French Court of Auditors and the finance committees of both houses of parliament.

The two politicians are attempting to drum up broad support for their report on a budgetary capacity for the eurozone, which is currently under discussion in the European Parliament.

“While the issue is so difficult to unblock, the European Parliament has a role to play,” said Berès, defending her report with her German co-rapporteur, a specialist in the European budget.

The two rapporteurs started from very different positions, with different nationalities and political colours. “We each have red lines, we have written them down and we have tried to work within this framework,” they said.

The idea of establishing an independent budgetary mechanism for the eurozone has long been gathering dust in the Commission and the Parliament, but no MEP has yet produced a report specifically on the subject. One year ago, the Five Presidents’ Report raised this subject in the context of the future of the Banking Union.

Banking stability key to EMU integration

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For the MEPs, it is important that the budget should address the broader macroeconomic situation without being limited to the financial sector.

Böge sees the economic situation in the EU as problematic. “When I was a farmer, 15 years ago, I borrowed at rates three times higher [than those available today] to invest in my farm. And today, despite the very low interest rates, nobody is investing. This is a sign of a problem,” said the politician from Schleswig-Holstein, in northern Germany.

The objective of the eurozone budget, as the two rapporteurs see it, is to establish budgetary tools to relaunch investment and counter asymmetric shocks to the single currency zone.

“Before the 2008 crisis, the viewpoints in Germany and in France were too diametrically opposed for a consensus to develop. Now it’s different; we have seen that a new tool is indispensable.”

But the differences are still visible, even before the report has been subjected to amendments by the different political groups. Aside from the members of the leftist GUE/NGL group and the Eurosceptic ENL, EFDD and ECR groups, which plan to oppose the report, most MEPs already agree that the issue needs to be tackled.

For the left, a European unemployment insurance system would help address structural differences and absorb economic shocks, as would a common minimum wage. The idea is not shared by Böge, who would prefer to introduce a more limited set of budgetary tools and to gain the support of national parliaments so they do not feel disenfranchised.

Throwing off the IMF

The establishment of a European budget would allow Germany to act without recourse to the IMF in future. “In the long term, we have to make do without them, it’s a question of sovereignty,” said the German MEP, who has made the bankruptcy of a European state one of his “red lines”.

For Germany, it is out of the question that the European budget should be used to prop up economically failing states. “You know in Germany, some of the Länder were very indebted. We were not far from a Greek situation. I don’t want to let Greece fall, I care deeply about it. But when international agreements are not respected, for a period of years, the other states cannot allow their partner simply to do as they please,” the MEP said.

The text, which will be presented in June, discussed this summer and voted on this October, could benefit from the shock of the Brexit referendum, whatever its outcome. “It will be easier to make a eurozone budget if they stay than if they go,” said Berès.

If the United Kingdom votes to leave the EU, it will spark a long series of negotiations, which could once again monopolise the political debate within the bloc. And again, plans for a eurozone budget would suffer as a result.

Pervenche Berès: Eurozone budget carries a ‘strong political message’

Plans for a eurozone budget have progressed quickly in recent months. The European Parliament is finalising its proposals and two European Council summits will focus on the subject by the end of the year.

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Background

At the eurozone summit of 24 October 2014, the presidents of the European Commission, the Council, the Eurogroup, the European Parliament and the European Central Bank were invited to combine their efforts to prepare the "next steps for a better economic governance in the euro area".

This mandate was confirmed at the European Council of 18 December 2014. The first stage of this collaboration was for the five presidents to draft a document that would serve as the basis for a discussion at the European Council meeting in February 2015. This discussion with the EU's heads of government then continued in June 2015.

Further Reading