The European Union Finance Ministers (all but the British) did not make any significant progress at the Eurogroup meeting on Thursday 16 May on building fiscal capacity for the euro area, just under a month before a meeting at which a detailed architecture proposal should be presented.
“Since February, we have made good progress on several key features and options in terms of expenditure, governance, revenues and also the legal codification. A few critical elements are still open but I am confident we will find common ground in June”, said Mário Centeno, President of the Eurogroup, at the press conference following the Ministers' meeting.
While his speech was optimistic, participants at the meeting did not make significant progress to date.
After discussions on the expenditure side in March (see EUROPE 12212/10) and the governance side in April (see EUROPE 12230/4), it was the financing side of this future instrument that was discussed on Thursday 16 May. However, no decision was to be expected, the objective being to present a detailed proposal for fiscal capacity to support the convergence and competitiveness of the euro area in June, in accordance with the mandate given to the Eurogroup in December 2018 by the Heads of State or Government (see EUROPE 12160/1).
“The key issue is whether to rely on own resources only or also on so-called 'assigned revenues' – with contributions from Member States from outside the EU budget”, commented Mr Centeno.
This is indeed the heart of the debate, with on the one hand, Member States, mainly from Northern Europe, who want the sums allocated to this future tool to be strictly within the 2021-2027 Multiannual Financial Framework (MFF) without the participation of States outside the euro area (see EUROPE 12247/19). On the other hand, some States, in particular France and Germany, are considering that new sources of financing - for example, a possible financial transaction tax - could contribute to this budgetary capacity (see EUROPE 12200/8).
“There is a broad agreement that at least part of the financing should be drawn from the envelope the Commission has proposed for the reform support programme”, said Pierre Moscovici, Commissioner for Economic and Financial Affairs, referring to the institution's May 2018 proposal (see EUROPE 12031/7).
It may be that in June the major European funders will agree that, initially, the resources will come solely from the MFF and that the door will be opened to other sources of funding later. However, this politically sensitive issue has not been resolved, and work must continue until 13 June and the next Eurogroup meeting to find common ground.
In the meantime, it will also be necessary to agree on expenditure and governance aspects. Although things are not fixed, it would nevertheless seem that the national delegations are making progress in their reflection to converge towards common positions. In particular, compromises still need to be found on the investments and reforms that will be supported, on whether or not Member States will co-finance the targeted investments and reforms, or on governance, through an intergovernmental agreement or as part of the EU's legal framework.
Mr Centeno also recalled that the mandate given to the Eurogroup did not mention a stabilisation function for this instrument, although technical work continues in this area. “The Commission does not renounce to the proposal on stabilisation”, added Mr Moscovici.
Although these issues remain major, EU Finance Ministers show a willingness to reach an agreement. “When I’m looking back at where we were two years ago,there was no consensus about the idea of having a Eurozone budget [....] e have been discussing, we have been negotiating. Now there is consensus of the 19 member states […]”, said Bruno Le Maire, the French Minister of Finance, on his arrival at this Eurogroup meeting.
ESM and EDIS. It should also be borne in mind that the detailed proposal on a future fiscal capacity for the euro area will be part of a package approach. This is because the terms of a reform of the European Stability Mechanism (ESM), in particular to make it the common backstop for the Single Resolution Fund (see EUROPE 12177/3), and the results of the technical work on the establishment of a European Deposit Insurance Scheme (EDIS), carried out within the high-level working group set up at the beginning of the year, will also be presented.
As these various issues are linked to the deepening of the Economic and Monetary Union, they should be balanced. Considering all the issues still on the table, the Eurogroup meeting on 13 June in Luxembourg promises to be a long one. (Original version in French by Lucas Tripoteau)