The agreement on the financing of the budget of the eurozone reached at dawn on Thursday by the Eurogroup provides that 20% of its funds are set aside to respond to crises in specific countries, a mattress that Spain had claimed to allow weathering low moments.
The ministers of Economy and Finance of the eurozone – to which those of the rest of the European Union join in this negotiation – presented this morning the details of a pact that still leaves open questions, in particular, if the budget can increase in size in the future with additional contributions from countries, as requested by Germany and France but it has not been possible to agree, in part by the opposition of the Netherlands and the Nordics.
Countries could use the funds to finance reform and investment programs
“In December 2018 we launched the budget instrument for competitiveness and convergence. Last night, it finally landed, ”Eurogroup president Mário Centeno told a press conference, who made an effort to present the agreement as a new“ pillar ”for this mechanism.
It is anticipated that this embryonic budget will be provided with the part corresponding to the 19 euro countries of the budget line for the EU Reform Support Program. It would be about 17,000 million euros for seven years (between 2021 and 2027) if in the negotiations of the community budget the proposal made by the European Commission to provide it with 25,000 million for the Twenty-seven is respected. Countries could use these funds to finance reform and investment programs that receive a green light from the European Commission.
Of that total volume, 80% would be allocated in advance among the eurozone countries based on their population and their Gross Domestic Product – the lower GDP, the higher allocation. However, so that the richest can also benefit, a second criterion will have to be respected: each country must receive at least 70% of what it puts.
The remaining 20% - some 3.5 billion for seven years – would be reserved for use when a country is going through difficult times. The 20% mattress and the possibility of paying less in low periods opens the door, although with very little room for maneuver, for the budget to be used as an anti-crisis mechanism.
Spain looks forward to progress, but demands more
Spain considered both options as a way to provide the budget with the ability to stabilize the economy, explained on Wednesday the Minister of Economy, Nadia Calviño, who said that this instrument can be a "starting point" for something more powerful .
In the same vein, the Economy Commissioner, Pierre Moscovici, said on Thursday that he considered that "we must go much further" because a "real budget" is needed.