Ministers look at boosting eurozone links
By Tony Barber in Brussels and Ben Hall in Paris
Published: January 17 2010 16:37 | Last updated: January 17 2010 16:37
Finance ministers of the 16-nation eurozone will examine ways to strengthen economic policy co-ordination at a meeting on Monday where they are expected to reappoint Jean-Claude Juncker, Luxembourg’s prime minister, as their president.
If the most ambitious proposals aired in recent months were put into practice, the eurozone would move towards closer integration by agreeing to a single representation in the International Monetary Fund, issuing common bonds across the area and holding occasional summits of its heads of government.
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Yet each of these ideas has met resistance from certain eurozone governments, not least in Germany, the area’s biggest economy that contributes almost 30 per cent of its output.
Officials in Paris said Christine Lagarde, France’s finance minister, hoped to persuade Mr Juncker and Wolfgang Schäuble, Germany’s finance minister, to support the creation of a permanent secretariat for the eurozone – a long-standing French objective.
The area’s finance ministers currently gather for informal meetings once a month on the eve of sessions of the European Union’s 27 finance ministers. Under EU law, decisions on crucial issues such as taxation can be taken only at EU level.
However, the Lisbon treaty, which came into force in December, established a platform for closer eurozone integration by formalising the role of the eurogroup – as the finance ministers’ body is known – and setting the goal of “ever closer co-ordination of economic policies within the euro area”.
Officials in France and Spain, which holds the EU’s six-month rotating presidency, are keen to inject more political leadership into eurozone policymaking by bringing together the area’s heads of government.
Only one such meeting has so far been held – in Paris in October 2008, at the height of the financial crisis – but even this did not fully qualify as a eurozone summit, because Gordon Brown, the UK prime minister, attended.
Nevertheless, José Luis Rodríguez Zapatero, Spain’s prime minister, said the Paris summit had been a triumph, producing the agreements that averted a meltdown of Europe’s financial system.
Germany’s concern is that the eurozone’s stability should not be jeopardised by initiatives that might compromise the European Central Bank’s independence from political pressures, or diminish the responsibility of national governments to keep their public finances in order.
Berlin’s insistence on fiscal discipline has become louder as the financial crisis has unfolded, causing eurozone countries to pile up debt and raising questions about how weaker peripheral members such as Greece and Ireland will weather the storm.
Eurozone policymakers said the Greek crisis has played into German hands, because most governments as well as the European Commission, which is the guardian of the area’s fiscal rules, view Greece as largely to blame for its dire circumstances.
German politicians and central bankers oppose the issuance of common eurozone bonds, as it would let countries such as Greece piggyback on the strong reputation of Germany and France in bond markets.
Mr Juncker is expected to secure reappointment even though Nicolas Sarkozy, France’s president, has expressed frustration with his alleged failure to galvanise a co-ordinated response to the financial crisis.
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