Hollande: Eurozone budget will come ‘in addition, not in substitution’ of EU budget

Hollande Oct 2012 summit.jpg

French President François Hollande sought to reassure Britain and other non-eurozone countries that plans to establish a special budget for the currency bloc will only come "in addition" to the EU budget and not "in substitution" of it. But he also warned: No country can prevent the others from moving forward.

Speaking after an EU summit in Brussels on Friday (19 October), Hollande told journalists to prepare for "several nights" of discussions next time EU leaders meet on 22-23 November.

The discussions, which are expected to centre exclusively on the EU's budget for 2014-2020, promise to be heated indeed.

British Prime Minister David Cameron said he would block talks if "massive increases" in the budget were proposed or if a deal that "does not have proper control" was put forward. Other countries like Germany are also opposed to any increase in the EU's next long-term budget, although they appear less categorical than Britain.

But the EU budget's overall pricetag will be only one of many other variables in the budget equation, with poorer countries also expected to throw their full weight into the negotiations.

>> Read EURACTIV's LinksDossier: EU budget 2014-2020: The €1 trillion deal

Two separate budgets

Speaking to journalists after the October summit of EU leaders, Hollande said he had sensed that relations between those in and outside of the eurozone will be a defining issue at the next summit.

"Immediately, the reaction of countries that are not members of the eurozone is to say: 'If you have a fiscal capacity, that means you remove [money] from the EU budget for a separate budget on the side'," Hollande said.

"No! I have reassured those countries. There is a European budget. This budget, we have to jointly determine its mass, its distribution, with cohesion funds, structural funds and agriculture policy. This is our budget for 27 [countries], tomorrow 28 or more."

For the euro area, there will be a separate budget, Hollande said, that will be put in place "in parallel" to the wider EU budget.

"It is not in substitution, it is in addition" to the EU budget, he stressed.

Non-eurozone countries told to stand out of the way

Cameron has acknowledge that eurozone countries will have to move forward on their own, saying: "There will come a time I believe where you're going to need to have two European budgets – one for the single currency, because they're going to have to support each other much more, and perhaps a wider budget for everybody else."

But Britain should stand out of the way when it comes to how eurozone countries decide to organise themselves, Hollande warned.

"I do not force anybody to enter," the French president said. "But no country can prevent the euro area from moving forward as it wishes. And this is very important."

Two-speed Europe

Hollande said this move towards a two-speed Union was already well underway, with eurozone countries already making decisions of their own, for example on banking supervision.

"Everyone now accepts the idea of ??multiple speeds," Hollande said. "There are even some moving in reverse gear," he added wittingly without naming Britain.

The French leader stressed there was "a responsibility" for being in the euro area which implied a "reinforced Eurogroup" and more frequent meetings of heads of states from countries sharing the single currency.

He also said that European Parliament representatives from eurozone countries should be able to meet and take decisions separately on questions that affect the single currency.

"We will do it with the countries willing to commit more."

Several countries would like a special budget for the eurozone, with France, Germany and others backing the idea, according to EU diplomats.

The idea of a special budget for the eurozone was first spelled out by European Council President Herman Van Rompuy in his recent 'Issues paper on completing the Economic and Monetary Union'.

EU countries are currently discussing what type of income and expenditure the budget would cover, with the aim of putting in place an instrument for financial and macroeconomic intervention against “asymmetric shocks”.

Tricky discussions lie ahead on how the two budgets would function in the EU's current institutional architecture.

  • 22-23 Nov.: Next EU summit in Brussels to focus on the bloc's future multi-annual budget for 2014-2020.

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