The eurozone budget was at the heart of the Eurogroup meeting on Monday 19 November, following the presentation by the French and German Finance Ministers of a proposal on this subject matter.
"This is a major political breakthrough," said Bruno Le Maire, the French Finance Minister, describing the text at a press conference.
This issue was first addressed by the Eurogroup in the framework of the four sequences aimed at preparing the December meeting, which will lead to the presentation of work aimed at deepening the Economic and Monetary Union (EMU), ahead of the eurozone summit (see EUROPE 12139).
The Franco-German proposal differs from the European Commission's proposals on the creation of an investment stabilisation function and an instrument to support reforms (see EUROPE 12031), and from the June Franco-German roadmap on the future of the EMU, linked to the Meseberg Declaration (see EUROPE 12044).
According to the Franco-German project presented to the Eurogroup, the eurozone budget would be an integral part of the multiannual Financial Framework (MFF), and thus the related decision-making process would apply. However, this budget would only be aimed at countries in the eurozone, contrary to the wish of the European Commission, whose proposal is open to countries other than those in the eurozone.
The instrument to support reforms, investment and competitiveness would also seem to take precedence over a stabilisation function in the event of an asymmetric economic shock.
"It is true that the German-French contribution takes more on competiviveneess and convergence than on stabilisation," acknowledged Mário Centeno, President of the Eurogroup.
The Franco-German couple suggests here that external contributions, in particular tax contributions (FTT), should be made to this budget, with the participation distribution keys being the subject of an intergovernmental agreement (IGA) between Member States of the eurozone.
To benefit from this instrument, Member States should prepare programmes to be submitted to the European Commission for approval. And these states could only receive support if they comply with the European Union's budgetary and economic rules, a provision that is similar to a form of conditionality.
However, the Franco-German document does not give any indication of the amount that would be allocated to this budgetary instrument.
Always disagreements. Discussions on this matter will continue in the coming months, with no agreement expected in December.
"I was very happy to learn that no one was offended. No one said it would never happen," said Olaf Scholz, the German Finance Minister, satisfied, but acknowledging issues raised by some Member States.
The Netherlands would still be opposed to this instrument. And several States, such as the Baltic States, Austria, Finland and Ireland, would remain rather reserved, especially given the current situation around the Italian draft budget plan (see other news).
However, the objections would be less significant than they were a few weeks ago, as the various delegations were ready to discuss,
"I saw different tones than in the previous discussions," said Pierre Moscovici, Commissioner for Economic and Financial Affairs.
Mr Le Maire is scheduled to meet his Dutch counterpart on 22 November to discuss this subject. He hoped that this eurozone budget could be operational in 2021, an ambitious date that coincides with the entry into force of the next Multiannual Financia Framework.
Link to the document: https://bit.ly/2BgURxl.
Safety net for the SRF Fund. Finance ministers also discussed other issues related to the deepening of the EMU.
These include the creation of the safety net common backstop for the Single Resolution Fund (SRF), a function that will be the responsibility of the European Stability Mechanism. The issues of the decision-making process and the entry into force of the backstop before 2024 should be part of an agreement (see EUROPE 12091).
To do this, one of the options on the table is to revise the intergovernmental agreement governing the functioning of the SRF, but Mr Centeno expressed "strong concerns" on this point on the part of Member States, Germany being indeed sceptical.
This element should be linked to the work on reducing banking risks, which the Eurogroup now considers "sufficient", and to the interinstitutional negotiations on the package on "reducing banking risks" (see EUROPE 12128).
Reform of the ESM Finally, the ministers discussed the reform of the ESM, the permanent rescue fund for the eurozone.
The ESM and the Commission have unveiled an agreement on the distribution of their competences in the future, while the role of the ESM in the preparation and monitoring of financial assistance programmes (see EUROPE 12108) is to be strengthened.
"It is an agreement that I believe is well calibrated," said Pierre Moscovici. It is "not a Big Bang", said Klaus Regling, the Director General of the ESM.
The results of the work started in September will be presented at the Eurogroup on Monday 3 December. (Original version in French by Lucas Tripoteau)