Finance ministers from across the euro zone have overcome months of differences to finalize the framework for a shared financing mechanism, designed for deployment in the event of a future economic shock.
The president of the so-called “Eurogroup” gathering of national finance heads, Portuguese Finance Minister Mario Centeno, hailed the late-night agreement as “an important achievement,” and said that it had brought euro zone members closer to what he called a “textbook” definition of a single currency area.
Euro zone countries will be required to pay capped contributions into the fund, and those under economic pressure could be permitted to slash their own contributions in half when necessary. The fund’s actual size and scope has yet to be determined and will likely provoke further debate among European heads of government later in the year as they embark on discussions about the next half-decade of broader EU finances.
The development of an obligatory “rainy day” savings pot has long attracted support from certain member states, ever since the euro zone debt crisis threatened the very existence of the single currency several years ago and required wealthier states to disproportionately contribute to the underwriting of bailouts for indebted economies like Greece.
For the past two years, the French government of Emmanuel Macron has acted as the most forceful proponent of this concept, at one point suggesting that several percentage points of the euro zone’s overall gross domestic product (GDP) should be allocated to the fund.
Ultimately opposition from more austere-minded nations like the Netherlands, which resented the idea of underpinning fellow member states without guarantees of major structural reforms, saw that ambition scaled back. But Centeno said that future discussions might pave the way for those countries that are willing, like France, to voluntarily contribute more to the mechanism. It would, he said, be “much more profitable to increase its size in the future. And that’s my expectation.”
Macron’s Finance Minister Bruno Le Maire acknowledged the compromise had required “difficult conversations” with some of his peers, but insisted Thursday morning this new separate budget for the euro zone was a “game changer,” and that thanks to “major steps” overnight there would soon be in place a “solution” in case euro zone nations are once again required to “face an economic difficulty.”
One of his predecessors in the French finance role and now the outgoing European commissioner for economic and financial affairs, Pierre Moscovici, joked that the conclusion of discussions at “five minutes to midnight” showed how much more efficient debates among single currency member states had become in comparison to previous years.