Eight countries downgrade expectations of an ambitious Eurozone reform
The Netherlands, Ireland, Denmark, Sweden, Finland, Estonia, Latvia and Lithuania today downgraded expectations of a deep reinforcement of the eurozone in the short term by presenting a common position for negotiations on the subject which puts the focus on making improvements at the national level.
“A stronger Economic and Monetary Union requires, first and foremost, decisive actions at the national level and full compliance with our common rules,” says the text published by the Dutch Government.
In the document, the eight states express their reluctance to undertake “far-reaching” reforms such as those proposed by the European Commission (EC) and the Executive of French President Emmanuel Macron, insist that each country must strengthen its own economy and They oppose the transfer of important national competences to the European Union (EU).
Specifically, they reiterate that the countries must continue to implement structural reforms respecting the rules of the Stability and Growth Pact -which set limits on public deficits and debt- and creating fiscal cushions that allow national recessions to be tackled.
They emphasize the need to focus on the initiatives that have the greatest consensus among the countries, in particular to complete the banking union and to convert the European Stability Mechanism (the ESM, eurozone rescue fund) into a European Monetary Fund.
However, as far as the banking union is concerned, they are only willing to hold technical discussions on the European Deposit Guarantee System – the main piece pending in the project agreed to in 2015 but not yet implemented – and the policies, they say, should be start only when countries have reduced the “enough” risks of their banking sectors.
In this regard, they point out that adequate cushions should still be created to cover internal rescues of the entities, make solid provisions against delinquent loans, address the regulation of entities’ exposure to sovereign debt and improve national insolvency proceedings.
Also, they say, the technical discussion to complete the firewall of the European bank resolution fund should continue.
As for the ESM, they are open to converting it into a Monetary Fund with greater responsibility for future financial bailouts, but warn that “decision-making must remain firmly in the hands of the member states”.
In other words, the intergovernmental structure must be maintained without including the ESM in the European treaties, an option that the Commission prefers and which would, among other things, lead to greater parliamentary scrutiny.
In addition, they advocate introducing a framework for the “orderly” restructuring of sovereign debt in those countries that have “unsustainable levels” of debt.
On the other hand, they argue that in the next multi-year budget, European funds should focus more on promoting structural reforms in the countries, but “reflecting budget constraints” of future accounts.
The document does not contemplate the creation of an own budget of the eurozone or a mechanism to protect the investments that allow responding to crises in a single country.
The Netherlands, the Nordic countries and the Baltics have traditionally advocated during the financial crisis for strict budgetary control and have opposed creating mechanisms that involve mutualizing losses or risks between countries.
Ireland, on the other hand, had to be rescued, which makes its alliance with the other seven countries to some extent unusual.
The position expressed by these contrasts with that of France, Italy, Spain, Portugal and other states willing to deepen the Eurozone, and even with that of Germany, which has traditionally aligned with the Netherlands but in recent months has been open to make greater advances.
This announces clashes in the upcoming negotiations for the reform, where Germany, France or Spain expect steps this month.