By Jan Strupczewski
BUCHAREST (Reuters) – The European Commission, with the approval of euro zone governments, will set priorities for the yet-to-be-created euro zone budget, EU finance ministers agreed on Friday, in an effort to balance national and EU powers over the new pool of money.
The discussion is the latest, small step in the euro zone’s long-standing drive for deeper economic integration that is to make the 19 countries sharing one currency more resilient to economic crises in the future.
The 28 countries that now form the European Union already have a shared EU budget, that is set every seven years and equal to 1 percent of the bloc’s gross national income.
But euro zone countries also want to have a separate euro zone budget, which would serve as a fiscal tool to intervene in the euro zone economy alongside the single monetary policy of the European Central Bank.
Detailed work on the construction of such a euro zone budget has been under way from the start of the year and is to finish in June by when the ministers will also have decided on the budget’s size and sources of financing.
At the meeting on Friday, ministers discussed the governance of the budget — a complex issue because euro zone governments want to retain control over how the money would be spent. They agreed in December to provide “criteria and strategic guidance”.
But they have also agreed that it must be part of the broader and bigger long-term EU budget and that they would determine its size “in the context of” the EU budget.
“There is broad support for making appropriate links between the budgetary instrument and … the euro area recommendations,” the chairman of euro zone finance ministers Mario Centeno told a news conference referring to recommendations for the euro zone economy issued annually by the Commission.
But to balance the Commission’s power, the recommendations have to be approved by euro zone finance ministers. The final text of the recommendations has sometimes changed in the past, when governments disagreed with Commission views.
“The euro area recommendations would set the direction and identify the areas of reform and investment that should be followed,” one euro zone official close to the talks said.
“This would then be trickled down to national recommendations, and the budget would support initiatives, reforms and projects linked to these recommendations,” he said.
“The euro area recommendations would need to beefed up. They would be much more pointed and operational. Because there would be money at the end of that line,” the official said.
Centeno said the strategic guidance role for the euro zone governments would have to be codified but there was still no consensus on how to do it best.
“Some prefer an Inter-Governmental Agreement, others prefer to develop legal arrangements within the EU law. We will come back to this issue next month,” he said.
(Reporting by Jan Strupczewski; Editing by Alison Williams)