European finance ministers agreed Thursday on the basic terms of a tiny eurozone budget that has been scaled back from the ambitious goal of French President Emmanuel Macron.
“We have a new pillar in the foundation supporting the euro,” Eurogroup head Mario Centeno told reporters after ministers clinched the deal after hours of haggling in Luxembourg.
Critics however, dismissed his optimism.
Launched two decades ago, the euro single currency is often said to be undermined by the wide economic disparities of its member countries, a chasm that helped cause the debt crisis.
France, backed by other high-debt partners such as Spain, had called for the eurozone to wield a joint spending power, where richer countries could boost the economies of strugglers.
Instead, ministers decided on the details of something called a budgetary instrument that for now is limited to just 17 billion euros over seven years and would be attached to the EU budget.
Inspired by the bailout programmes for Greece, Portugal and Ireland, the tool only helps governments that deliver politically difficult reforms, such as loosening hiring and firing rules, slashing pensions or privatising state companies.
“We have reached an agreement on the general framework … but there are still important issues to be resolved”, said French Finance Minister Bruno Le Maire, acknowledging that there had been “difficult discussions”.
France is holding out hope eurozone members will be allowed to increase the pot either through national contributions from member states that so wish, or through external resources, such as a special tax.
For now, the debate is kicked over to the thorny EU budget negotiations, where all the 27 member states, including non-euro nations, will have to agree to see a slice of bloc-wide spending go to a eurozone pet project.
Those negotiations are already tense with the departure of net contributor Britain, putting pressure on rich countries to fork out more cash to the EU budget, or see coveted European programmes slashed.
Macron’s budget dream “crashed in the desert of eurozone nonsense a while ago and attempts to rescue the remains get increasingly desperate,” said analyst Lucas Guttenberg of the Delors Institute in Berlin.
“In the end, it’s pretty clear now that some member states just don’t want a meaningful fiscal instrument. That is the reality,” he said.
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