BRUSSELS (Reuters) – European governments and institutions want to create a euro zone budget to make the single currency area more economically stable and finance various new joint initiatives that the bloc may undertake after Britain leaves in 2019.
Top euro zone officials expect key decisions on the euro zone’s future, including a potential budget, to be taken in the first half of 2018. Below are ideas on the euro zone budget floated by some of the key players:
EURO ZONE BUDGET
The European Central Bank believes setting it up is the most important of all the proposed new elements because it would create an alternative to ECB monetary policy to react to crises.
Germany, France and the executive European Commission all agree a euro zone budget would be useful, but they differ on its size and purpose.
French President Emmanuel Macron has said the euro zone budget should be several hundred billion euros.
German Chancellor Angela Merkel has rejected that, saying it should be “small amounts”.
The head of the ESM euro zone bailout fund, Klaus Regling, suggested 1-2 percent of euro zone Gross National Product, which would be some 100-200 billion euros.
European Commission President Jean-Claude Juncker rejected a separate budget for the euro zone, saying that what was needed was “a strong euro area budget line within the EU budget.”
Since the whole EU budget is around 1 percent of the EU’s gross national income (GNI), a part of it dedicated to the euro zone would be much closer in size to the view of Germany than to that of France.
Macron wants the budget to be funded from environmental and digital economy taxes which would become the EU’s “own resource”, like customs duties are now. He also said corporate taxes, once they are harmonized, could fund such a budget.
Merkel mentioned “contributions” rather than dedicated taxes.
This would be the spirit of the Commission’s model as well, because the EU budget, of which the euro zone budget would be a part, comes mainly from country contributions based on GNI.
Senior euro zone officials are also considering the idea of contributions, for instance from national unemployment benefit contributions, which would be paid into a budget modeled on a rainy day fund.
Finally, the budget could be a pool of paid-in capital, a bit like the euro zone bailout fund is now, which could then be leveraged in various ways to provide loans to euro zone countries in some kind of economic…