Hawkish eurozone states demand further curbs to budget plan

Dutch lead opposition to Emmanuel Macron’s ambition for extensive fund

Jim Brunsden in Brussels AN HOUR AGO

The Netherlands and other fiscally hawkish EU members are calling for further reductions in the planned size and scope of a eurozone budget, a French political priority that has already been squeezed in negotiations in Brussels.

French president Emmanuel Macron is leading calls for the single currency to have its own budget to try to shore up its crisis resilience. EU leaders agreed in December to work on the idea in a more limited form than suggested by Mr Macron, who wanted a fund worth several percentage points of eurozone gross domestic product.

A joint diplomatic note from five eurozone countries — the Netherlands, Finland, Ireland, Latvia and Lithuania — has now demanded that it be even smaller, with stricter conditions on accessing money.

They insist the budget should be “significantly below” proposals made by Brussels last year for a fund worth €22bn over seven years, an amount that was already at the low end of French expectations.

Sweden and Denmark, non-eurozone EU states, have also signed the note, circulated to EU governments and seen by the Financial Times.

The paper underlines the difficult negotiations that lie ahead on the budget, with EU finance ministers seeking a deal on its main elements by next month. Governments remain far apart despite last year’s agreement by EU leaders on the idea of a fund to promote “convergence and competitiveness”.

France has made clear that it does not want the fund to rely entirely on money from the general EU budget, which is paid into by all 28 member states. Instead, it has argued for an international treaty that would allow individual governments to top it up through direct contributions.

But the note says “there cannot be any presumption” that governments will choose to participate in this part of the plan.

The signatory countries “are not convinced of the need for external assigned revenue through an intergovernmental agreement”, the note says.

While the initiative would be focused on the eurozone, it is tied to negotiations on the next EU multiannual budget, which involve all member states. There would also be some scope for non-euro countries that are seeking single currency membership to participate.

As a basis for negotiations on the budget, national governments have discussed how to adapt a proposal made by the European Commission last year for a fund to support countries undertaking key economic reforms.

But northern eurozone capitals have fundamental concerns about the blueprint. One EU diplomat said the idea of offering countries money in exchange for reforms was problematic, because it raised the question of whether European or national authorities were ultimately responsible for the measures.

“It blurs the lines of political accountability,” the diplomat said.

Brussels has argued that the budget would be more effective if conditions for accessing money were relaxed during economic downturns. But the note makes clear that northern capitals oppose the approach.

The Hague has staunchly resisted the idea that the budget could provide “stabilisation” support to countries in times of crisis, saying it amounts to putting Dutch taxpayers on the hook for problems elsewhere.

Making the budget countercyclical would “complicate the operation of the instrument and go beyond the mandate given by leaders”, the note says.