The future budgetary instrument for convergence and competitiveness in the euro zone will support structural reforms such as public investment, in accordance with the general principles that were agreed at dawn today by the European finance ministers in Luxembourg.
The compromise reached after some 15 hours of discussions, in a large format Eurogroup (with the participation of Member States that are not part of the euro zone), defines some general principles and main features of the budgetary instrument, but the proposal that Mário Centeno will present to the leaders at next week's summit, as mandated, still leaves open key issues such as the financial dimension and funding.
Despite the ambition of countries such as France, Spain and Portugal, and even Germany's support, the resistance of some Member States to the idea of a euro-zone budgetary capacity with the Netherlands at its head prevented a more comprehensive and precise agreement , several European sources told the Lusa news agency.
Recognizing that much work remains to be done, and in essential respects, Eurogroup President Mio Centeno and European Commissioner for Economic Affairs Pierre Moscovici stressed that vital "small steps" have been taken to ensure that the instrument become a reality.
Among these "small steps" described in a document published this morning by the Eurogroup, finance ministers agreed that "the instrument should, as a rule, support both structural reforms and public investment, through a coherent package reflecting the objective convergence and competitiveness within the euro area ", which would apply to all euro countries and, on a voluntary basis, to those belonging to the Exchange Rate Mechanism II (the framework for the euro area and non-participating Member States).
The agreed text states that the Euro-Summit (at the level of Heads of State and Government of the euro area) and the Eurogroup should provide strategic guidance on the investment priorities and fundamental reforms for the convergence and competitiveness of the euro area, which will Member States should submit proposals for reforms and investment which take account of the recommendations.
In order to ensure accountability at the level of governments, a minimum national co-financing rate will be established as a percentage of the total cost of investments or reforms, and the precise criteria for determining such rate will also be open.
Support will be provided through subsidies – that is, direct financial contribution, not loans, another hypothesis that was considered – and also the amount that a Member State can benefit, which will be determined on the basis of cost.
According to the compromise reached, Member States' access to funding will depend on the implementation of structural reforms and investments, which the European Commission will evaluate in the context of the European Semester for the coordination of economic and budgetary policies and, "in case of unsatisfactory implementation reforms and investments, the payments will be suspended, and, should the situation persist, canceled. "
Lastly, the finance ministers agreed that the instrument would be part of the European Union's budget and therefore its size (financial envelope) determined in the context of the multiannual financial framework, with negotiations on the next one (2021-2027) only new developments at the end of the year.
It will then be this commitment with many open questions that Centeno will present to the European leaders next week at the Euro Summit scheduled for June 21.