EU finance ministers on Tuesday morning (4 December) agreed on reforms to bolster the euro area’s preparedness to tackle any future financial crisis – after talks that lasted all night in Brussels.
The deal, however, explains the EU Observer, fell short of the ambitions of French president Emmanuel Macron – whose idea for a special eurozone budget received support, but not for the so-called “stabilisation” plan to help economies in unexpected trouble. The new budget would serve to boost competitiveness, linking it to economic reforms
The FTreports “Bringing an end to more than 12 months of sensitive negotiations over the future of the single currency, finance ministers in Brussels nailed down a reform package at 7.30am in talks marred by brinkmanship, foot-dragging and long rounds of redrafting designed to satisfy the competing demands of Paris, Rome, Berlin and The Hague. Finance ministers hailed the breakthrough on Tuesday as an agreement to equip the eurozone’s banking union with more financial muscle and to give its sovereign bailout fund — the European Stability Mechanism — extra flexibility in how it can help countries to weather market turmoil. Ministers also agreed to keep discussions alive about a future eurozone budget — a key demand for France’s Emmanuel Macron. Mário Centeno, president of the Eurogroup, said the result marked “a breakthrough on some key issues”, hailing the outcome of a “very tense and exhausting negotiation”.
“Technical needs to work continue,” finance commissioner Pierre Moscovici said of the eurozone budget’s stabilisation element in the early hours of Tuesday after 18-hours of negotiations. French finance minister Bruno Le Maire clashed with his Dutch colleague, Wopke Hoekstra, over the stabilisation function of a future eurozone budget.
The final agreement merely said that “possible features of a stabilisation function were also discussed, including the unemployment insurance scheme” for the eurozone budget.
“All in all, the way forward to a eurozone budget is opened, not fully-paved, but it is opened,” Moscovici, a Frenchman himself, said. The size of a future eurozone budget would be determined by EU leaders as part of their discussion on the EU’s next long-term budget.
Completing the banking union, a result of fighting the euro crisis, has also proven to be difficult – with Germany opposing the launch of a European guarantee for bank deposits. Critics see that guarantee as a way for southern member states to benefit from risk-averse Nordic EU countries. Ministers will come back to this issue next June.
But finance ministers managed to agree on expanding the effectiveness of the European Stability Mechanism (ESM) to help eurozone countries mired in large debts, but with the conditionality of EU countries reducing their pile of debts.
The backstop will be introduced earlier, provided that sufficient progress has been made in risk reduction – to be assessed in 2020, ministers said in a statement. Ministers also agreed that the ESM would serve as a last resort in case of a major crisis for Europe’s biggest banks.
All of the agreements reached by ministers are conditional on a nod from EU leaders gathering in Brussels next week for their summit. Finance ministers have spent the last year coming up with reform proposals and deals on how to reinforce the stability of the eurozone in preparation for any future economic shock.
“These were very hard negotiations, the result is a breakthrough on some key issues,” eurogroup president Mario Centeno told journalists after the meeting.
