French President Emmanuel Macron budget proposal for the currency area has received a cool reception from 12 of the 19 Eurozone members, despite having the backing of German Chancellor Angela Merkel.
Dutch Finance Minister Wopke Hoekstra and Eurogroup President Mario Centeno publicly came against the plan in a published statement that was cosigned signed by 11 other finance ministers from countries that maintain a budget and trade surplus, as well as a low debt-to-GDP ratio. The group advocates for “fiscal neutrality,” opposing initiatives hinting towards a transfer union.
The Member States staunchly oppose the idea of a common tax base, as their economic model is founded on tax competitiveness. Germany’s finance minister is, however, in favour of Macron’s budget plan.
Macron has championed the idea of a “normal budget,” rather than a fund, with an annual expenditure and a harmonised corporate tax base to fund it.
German Social Democrat Olaf Scholz defended Macron’s proposals, which prioritise systemic stability. Merkel’s own Christian Democrats (CDU) are have joined the 12 Member States in its opposition to the Franco-German euro budget plan.
The CDU’s Bavarian sister party (CSU) vehemently oppose the plan, with the party’s leader and the current Interior Minister in the Merkel government, Horst Seehofer, making clear that no euro budget plan will be approved by Germany unless it is costed.
The group also seems to reject the European Commission’s proposal for a Tobin Tax -is a levy on international financial transactions, especially speculative currency exchange transactions. Despite opposition to redistribution, critics have provided a framework for a rainy day fund, including an unemployment and a banking insurance fund.
The idea for a banking union is to guarantee deposits of up to €100,000 via a Europe-wide reinsurance fund that is paid for from a share of each Member State’s GDP.
There seems to be a consensus to bolster the capacity of the European Stability Mechanism in order for it to act as a backstop for the Member states and systemic lenders. The main objective is to convincingly decouple a lender’s solvency from that of the state without having to use transfers.
If the Franco-German alliance eventually secures the backing of the eurozone, a budget should be in place by 2021.