Divided EU to urge return to talks on eurozone integration

President of the Eurogroup, Portuguese Finance Minister Mario Centeno holds a joint news conference on the Eurogroup meeting in Luxembourg, 14 June 2019. [EPA-EFE/JULIEN WARNAND]

European Union leaders will urge finance ministers on Friday (21 June) to keep working on deeper eurozone integration as flagship ideas such as a eurozone budget or a deposit guarantee scheme either lack key elements or have not progressed at all.

The chairman of eurozone finance ministers Mario Centeno will report what EU finance ministers have achieved over the six months since EU leaders asked them last December to work on creating a eurozone budget along with other reforms.

French President Emmanuel Macron told reporters on entering the summit that the ministers did not appear to have reached a “satisfactory situation”.

No agreement on euro budgetary tool- ministers send ‘hot potato’ back to leaders  

EU finance ministers failed to reach an agreement in the early hours of Friday (14 June) on an anti-shock instrument to shield the euro, as they continued to clash over almost every feature on the agenda, including the source of funding.

Euro zone budget

The ministers were to have worked out how a budget for the 19 countries sharing the euro currency could be financed, what it should be used for and how it would be managed, with the final size to be determined by the leaders.

But progress has been limited because of widely differing views. France and several southern European countries want a large budget funded by dedicated taxes and able to stabilise economies hit by an unexpected shock.

The Netherlands and its northern European allies want a small budget funded only from the existing, wider EU budget and used for investment or to support structural reforms.

Centeno told summit chairman Donald Tusk in a letter that no consensus had been found on financing and that finance ministers would work further, based on guidance from the leaders.

“Technical work has continued on stabilisation, on which there is no consensus,” Centeno also wrote.

Eurogroup to nudge forward EMU reform before next week's EU summit

EU finance ministers will try to close a deal on deepening the Economic and Monetary Union, including a tentative new budget for the eurozone, during the Eurogroup meeting on Thursday (13 June) in an inclusive format. 

Banking Union delayed

The ministers were also asked last December to prepare for the start of negotiations on a European deposit insurance system (EDIS).

But Germany and northern European allies are reluctant to commit to a joint scheme to insure eurozone deposits before banks in southern countries such as Italy, Greece or Portugal have substantially reduced their bad loans – a legacy of the sovereign debt crisis of 2010-2015.

An insurance scheme would make depositors across the euro zone feel safe and prevent bank runs in the event of a crisis. It would complete the EU’s “banking union”, which already has a single bank supervisor and a resolution authority.

But German resistance has so far blocked any progress even on a timetable for EDIS introduction.

“We recognise that further technical work will be needed on defining a transitional path to the steady state banking union,” Centeno wrote in the letter.

He said a working group would continue discussing the EDIS idea and report back to ministers in December.

Leaders wrap up year-long euro reform with face-saving package

EU leaders concluded on Friday (14 December) a year-long discussion to bolster the eurozone by approving extra money to resolve failing banks and additional powers for the European Stability Mechanism, the EU’s rescue fund.

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