0931 GMT May 22, 2019
European Commissioner for Economic and Financial Affairs Pierre Moscovici said the setting up of the limited “budgetary instrument for convergence and competitiveness for the euro area”, as agreed by EU leaders last December, was only the first step in creating a more developed budget, according to Reuters.
“This is the first step, a foot in the door,” Moscovici told Reuters in an interview on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.
“We need an instrument that is also capable of addressing asymmetric shocks, to create convergence and that can also have a stabilization function,” he said.
The design of the limited ‘budgetary instrument’, with a yet undetermined size and focused on supporting investment and research and development, is to be ready in June. But Moscovici said the EU could be forced to broaden the scope.
“Here at the IMF we are discussing a slowdown, downside risks, a possible next crisis, we are seeing that all our countries struggle with inequalities, that there is a rise of nationalism — we cannot wait for five more years,” he said.
“I am quite sure that the economic, social and political circumstances will lead us back to this greater ambition sooner rather than later,” he said.
Growth is slowing around the world, including in Europe, due to a number of factors including trade tensions and the risk of Britain crashing out of the EU without a deal.
“It is always the case in Europe that we act only when there is a sense of urgency, but this urgency might come back,” Moscovici said.
Ideas for the stabilization role include the offering of cheap loans to countries hit by an external crisis not of their own making and an unemployment reinsurance scheme. Money could be repaid once economies recovered.
An example often citied by officials as a possible beneficiary of such a stabilizing role could be Ireland, which might suffer an economic shock if Britain leaves the EU without a divorce deal.
But this stabilizing option has been deliberately left out from the design of the future eurozone budget for now, on the insistence of Germany, the Netherlands and their north European allies, even though officials privately agree it is needed.
It is a hard sell politically, because voters in many northern European countries are still reeling from the almost €300 billion lent by eurozone governments to mainly southern European nations during the sovereign debt crisis.
Their appetite for more financial solidarity among the 19 countries sharing the euro currency is limited.
Yet, giving the eurozone budget a stabilization role could mean higher contributions from governments and break with the logic that every country was responsible for its own policies and preparations for difficult times, Moscovici said.
“But if we accept the logic that there are always winners and losers, that logic is a threat to the euro,” he said.