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Brussels presents euro reform despite resistance from northern countries

The Commission proposes to transform the rescue mechanism into a monetary Fund and to create a budget for the eurozone, but without the provision of resistance in the north

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Brussels presents euro reform despite resistance from northern countries

The euro remains a non-homeland, incomplete, vulnerable currency to next crisis. Brussels today presented a plan to prop up single currency, as country advanced last week. It is a question of converting European Rescue Mechanism (ESM) into a European Monetary Fund to allow for rescue of countries and troubled banks; To create an anticrisis budget; To simplify tax rules; and have a red phone so everyone knows who to call when re are problems, with a superminister of economy and finance. There's only one problem. Berlin or countries North (Holland and Austria, for example) have already made it clear that oppose a strong resistance to se plans. Macron's France supports se proposals. But battle for future design of economic and monetary union is looming. Germany defends maintaining status quo with minimal changes: Berlin wants crisis management to remain intergovernmental; After all, German economy and countries traditionally creditors have been great during Great Recession. Brussels and Paris lead faction of discontent, which coincides with that of international agencies: IMF, OECD and a large majority of experts believe that euro needs to be refounded so that next crisis does not take it ahead, with adjustment mechanisms ADE Quadi.

Brussels was scene of first stage of this battle, with presentation of proposals. The EU Heads of State and Government will start discussing m at Euro Summit on 15 December. The idea is that from re comes an agenda with an explicit timetable, and first measures approved for June 2018: The President of European Council, Donald Tusk, has held this week a meeting with still chief of Eurogroup, Jeroen Dijsselbloem; The ECB president, Mario Draghi, and head of ESM, Klaus Regling. The sources consulted point out that in that meeting it became clear that hostility to Brussels proposals is insured.

"After years of crisis, it is time to put future of Europe in our hands: re is no better time to fix roof of a house than when sun shines," said head of Commission, Jean-Claude Juncker. The Eurocomisario Pierre Moscovici has argued that it is Commission, executive arm of EU, who must make "concrete proposals to shore up euro", in reference to criticism in Germany and or countries, which accuse Brussels of putting on table measures Too ambitious. It does not seem: package designed by Commission is more a halfway point between minimum that Paris can accept and maximum that Berlin can give. These are main proposals.

1. New FME. Brussels wants to transform ESM into a European Monetary Fund that can rescue countries with problems (in exchange for harsh conditions) and that serves as a firewall for fund of resolution, created to save banks. It is about putting ESM, which has played a leading role in exit of great Crisis, within Community method, respecting its current structure. Brussels notes that decision-making could be even faster, and that it would increase democratic control of European Parliament. The proposal should be adopted in Council and Parliament in mid-2019. But Berlin strongly opposes that ESM ceases to be an intergovernmental agency (this is, controlled by euro countries), and would only agree to give it more power if it is also given a function of vigilance on European economies that is now in hands of D (e) The Commission, according to sources consulted.

2. Pseudopresupuesto anticrisis. Brussels sets in motion new budgetary instruments to combat asymmetric crises, in one country, as this diary has anticipated. But it does not specify amount of this new instrument, given reluctance of creditors to scratch ir pockets. It is a hodgepodge that combines instruments already created with new capacities, but without money and cash in expectation of political negotiation. Most importantly, for time being, possibility of a common unemployment insurance and a rainy day fund (a reserve fund for when a crisis appears) is left, and Brussels opts for an investment protection mechanism : When a country enters a recession, first thing its government does is to cut public investment; The idea is that Brussels has a budgetary facility to allow it to keep that chapter stable. That joins a fund to support reforms (already created), and a second fund to facilitate entry into euro of EU countries that are not yet part of currency (already existing, but about 180 million to 300 million euros). In addition, Brussels will allow co-financing of projects with European funds to be reduced to countries with problems, as has been done with Greece in recent times. The Juncker team believes that se proposals could be adopted between 2018 and 2020, and leave investment protection mechanism for next budgets, 2021-2027.

3. Superminister. The European Commission intends to create a European minister of Economy and Finance, a sort of euro superminister who would be vice president of EU executive arm and president of Eurogroup. I would go to G-20 international meetings and IMF, and it would have as its main function to coordinate economic and fiscal policies of eurozone, one of greatest problems today. It would be for mid-2019.

4. Simplification of tax rules. The EU executive ARM intends to integrate into treaties myriad of regulations created to manage crisis, basically Fiscal Compact, approved by intergovernmental method (and not signed by two countries: United Kingdom and Czech Republic). That proposal should be approved by mid-2019. But it has encountered formidable resistance in Germany, which accuses Brussels — without any basis — of wanting to soften Stability and Growth Pact.


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