The European Central Bank (ECB) would welcome a common budget for the 19-member Eurozone, the banks’ President Mario Draghi said on February 14.
“A common budgetary instrument could, if appropriately designed, increase the economic resilience of the individual participating Member States and of the Eurozone as a whole,” Draghi wrote in response to a query from a member of the European Parliament.
“Rather than creating conflicts of interest between policy areas, in this type of situation a fiscal capacity of this nature could support the single monetary policy in stabilising the economy and thus promote price stability,” Draghi added.
The intervention of the President of the ECB comes following the relaunch of a debate on a European budget during the last week’s ECOFIN, Europe’sEconomic and Financial Affairs Council.
France is currently championing a proper fiscal instrument, while net contributors to the EU budget, such as the Netherlands and Germany, are seeking a modest fund that can be used for EU-wide infrastructural investment.
Any decision that requires a consensus will, however, be hard to achieve. In December, the Eurogroup decided that the new fund/fiscal instrument should foster “convergence and competitiveness,” a language that leaves all options open in terms of what it could be used for.
Clearly, the “budget” or “fund” cannot duplicate the work already covered by the European Commission’s budget. A report by the Delors Institute recommends that the fund is dedicated to boosting productivity and helping “synchronise business cycles” across the 19-member Eurozone.
Another question is how the budget will be funded with some calling for EU-wide corporate revenue to a fixed amount. This is a non-starter for countries whose economic model is largely founded on “competitive” tax regimes ranging from the Netherlands and Ireland to Malta and Luxembourg.
France is trying to broker an agreement that will combine fiscal consolidation with the development of instruments that will foster systemic intervention.
This debate started when the Eurozone was on a growth trajectory. A renewed crisis in business confidence makes the debate more difficult, but also more urgent.