Wrangling over eurozone reform kicks off with Juncker proposals
The European Union is due to outline proposals to strengthen the eurozone, a set of reforms already raising eyebrows in EU capitals as governments struggle to identify common ground on how to boost the resilience of the currency bloc.
European Commission President Jean-Claude Juncker will present the plans in Brussels on Wednesday, the EU executive arm’s contribution to a broader discussion across the 19-country currency union on ways to ensure it can better withstand future financial shocks. The aim is to stake out proposals including for a eurozone budget line, a dedicated finance minister and an overhaul for the region’s bailout fund before next week’s summit of European leaders tasked with drawing a road map toward reaching an agreement in June.
Helped by a growing economy and a string of election defeats for euro-sceptic populists, the EU and its 19-country currency area have been enjoying their strongest momentum since the financial crisis. That’s created a unique window of opportunity European officials want to use to pursue reforms and deepen the ties between eurozone economies.
This push gained new momentum with the election in May of President Emmanuel Macron in France, a staunch proponent of closer integration. But while consensus has emerged on the need to take further steps to strengthen the single currency, significant differences persist among the bloc’s members and the commission.
Pierre Moscovici, the EU commissioner for economic affairs, said the upcoming plan was underpinned by two guidelines. "First, that the unity of Europe through greater convergence has to be pushed further forward, within the eurozone and at the European level across the board," he said on Monday. "Second, that the governance of the eurozone should be more democratic and more effective."
Key among the commission’s plans will be a proposal to expand the role of the European Stability Mechanism -- the eurozone’s Luxembourg-based bailout fund -- giving it more powers while also bringing it within the EU’s legal framework. Set up at the peak of the sovereign debt crisis, the ESM is run by eurozone countries which also provided the fund with over 80 billion euros in paid-in capital.
While the bloc’s governments agree the ESM needs to be strengthened and transformed into a type of European Monetary Fund, with greater powers over the design and implementation of eurozone bailouts, they’re unlikely to favor ceding control to the commission.
"I do like the idea of strengthening the European Stability Mechanism and turning it into the European Monetary Fund, while keeping its ownership held by the member states and not make it an institutionalized instrument," Latvian Finance Minister Dana Reizniece-Ozola said in a Bloomberg Television interview.
Another proposal would seek the creation of a dedicated line in the EU budget for the eurozone. This could serve multiple purposes, including a mechanism to help in case of economic shocks, as well as providing funds for structural reforms and for countries that are working toward joining the currency area.
That option could face opposition both from countries such as France, which would like to see a dedicated eurozone budget to boost investment, and from those including Germany that have voiced skepticism on the need for any such a mechanism at all.
“A number of countries have said they are not yet convinced with regard to the mechanism to deal with shocks,” acting German Finance Minister Peter Altmaier told reporters in Brussels on Tuesday.
Another plan the commission is expected to present would see the creation of a finance minister for the eurozone who would also be an EU commissioner and president of the Eurogroup -- the body made up of eurozone finance ministers.
This proposal will also likely be received with skepticism from the bloc’s finance chiefs, who prefer to have one of their own preside over their meetings and resist ceding more power to Brussels.
Other proposals will look at the bloc’s fiscal rules as well as future steps for the completion of the banking union -- a set of new structures and regulations that centralize the supervision and resolution framework for the region’s biggest lenders.