Eurozone finance ministers split on EU budget

Eurozone finance ministers split on EU budget

By Peter Maushagen and Jan Strupczewski

There is no agreement among eurozone finance ministers about a joint eurozone budget with different views being expressed at a meeting in Luxembourg.

EU finance ministers agreed to double a war chest for dealing with failing banks and boost powers of the eurozone bailout fund, but were split over whether to have a mechanism to restructure government debt or a eurozone budget.

All the EU’s finance ministers except Britain, which will leave the bloc in March, discussed ideas for deeper economic integration of the eurozone.

Part of a process born of the global financial crisis, the aim is to make the currency area more resilient to future upheavals.

The ministers were preparing for an EU summit on June 29, when leaders will discuss strengthening the role of the ESM bailout fund and completing an EU banking union project intended to increase savers’ trust in eurozone banks.

“We have chosen to provide a credible safety net for the banks; we have set the right incentives for banks to continue deleveraging risks; we have decided to beef up the ESM to reinforce our lines of defence,” the chairman of eurozone finance ministers, Mario Centeno, said.

The ministers agreed that the ESM should be able to lend to the eurozone’s Single Resolution Fund (SRF) for banks, if the SRF runs out of money in a major crisis.

The SRF is financed from bank contributions and should reach its maximum power of €55bn by the end of 2023. The bailout fund could backstop it with another €60bn.

There was also agreement that the bailout fund, run by eurozone governments, should monitor all economies in the currency bloc regularly to spot potential trouble early and design bailout programmes of reforms in exchange for cheap loans.

But a Franco-German idea of setting up a separate euro zone budget — funded by national contributions, a financial transaction levy and corporate taxes, including on firms’ digital revenues — did not win immediate support.

The ministers also kicked into the long grass the idea of setting up a European Deposit Insurance Scheme — a key element of completing the banking union — taking the cue from Germany which wants it to happen only once risks in the banking sector, seen in the number of bad loans, fall sharply.


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