European leaders are moving closer to fiscal union, according to a report from the Wall Street Journal.In a speech earlier today, ECB head Mario Draghi said that “a stable monetary union would ultimately require the establishment of true budgetary oversight at the European level.”
More from the Wall Street Journal’s Gabriele Steinhauser:
The idea was included in a paper on the overhaul of the euro zone prepared by European Council President Herman Van Rompuy that formed the basis of bilateral talks between the council and member states last week in Brussels.
In those talks, German officials conceded that limited fiscal transfers were necessary to fix the currency union, according to two European officials. They added that that approach was more attractive to Chancellor Angela Merkel than euro bonds or any other form of mutualized debt.
Officials warned that last week’s bilateral talks, which included diplomats in Brussels and officials from national finance ministries, were preliminary and wide-ranging and that several other euro-zone countries, including the Netherlands and Austria, weren’t in favour of setting up any kind centralized budget. The talks didn’t go into details, for instance on how big the budget should be or even whether it could be implemented under the EU’s current treaties.
And French newspaper Le Monde is reporting that Angela Merkel is the driving force behind the negotiations (via Google Translate):
Angela Merkel hopes to make an antidote to eurobonds: since September, German Chancellor quietly pushes the idea of a “central budget” in the euro area, presented in his environment as an alternative to any form of debt mutualisation. It would be said to be in Berlin, constitute a reserve allocated to States in the euro area financial assistance, such as Greece, the Portuguese or the Spanish, to encourage to take some painful reforms (labour market, youth unemployment).
But the German initiative is far from consensus: it arouses mixed reactions within the euro area and outside, at a time when the capitals are preparing a diplomatic battle hard to try, by November, is to agree, 20-seven on the Community budget.
Still embryonic, reflections on a budget in the euro area has accelerated since the end of the summer, under the leadership of the German government. Berlin, such an envelope would make financial transfers between states of the monetary union, without going against the European treaties and the German constitution.
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