French Economy Finance Trade Minister Bruno Lemaire | Julien Warnand/EPA-EFE France’s eurozone budget ambitions hit Hanseatic wall Denmark and Sweden gain assurance they won’t have to pay.

LUXEMBOURG — Paris' push for a sizeable budget to strengthen the euro area has suffered another blow after France lost support from some fellow eurozone members.

EU finance ministers agreed on the general structure of a scaled-back eurozone budget after eight hours of talks Wednesday night. On the way to agreement, they put in safeguards requested by Nordic countries.

The Netherlands, Ireland and other Hansa countries reached across the currency divide to ally with noneuro countries Denmark and Sweden against France’s integrationist plans.

France was pushing for a credible cash pot to support reforms in eurozone countries and ultimately help absorb sudden economic shocks across the currency union.

The pushback leaves the eurozone budget with an expected and unofficial size of €17 billion over seven years, a far cry from French President Emmanuel Macron's initial goal of a budget equivalent to several percentage points of eurozone economic output.



The two biggest Nordic countries demanded assurance of being made whole, in case any of their EU contributions end up in eurozone programs.

It’s unlikely that the cash pot’s size will increase any time soon.

France's plan was already facing a challenge from countries outside the eurozone over the budget instrument.

The Nordic countries were demanding — and are now set to win — some form of compensation to ensure they don’t pay into programs from which they can’t benefit. The outcome complicates the proposed Budgetary Instrument for Convergence and Competitiveness (BICC) while weakening its political and financial influence.

The Hague had already dialed down French President Emmanuel Macron’s original proposal in June. But even the scaled-back BICC raised concerns of fairness for other EU countries, Dutch Finance Minister Wopke Hoekstra said Thursday.

“I have sympathy ... for the proposal of particularly France,” for a budget to strengthen the euro area, Hoekstra told journalists. “But I’ve been equally sympathetic to Sweden and Denmark, who have vocalized that if they’re not going to take part in it, then also they shouldn’t receive a bill. Both asks to the group [of countries deciding on the budget] are just and fair.”

BICC ‘n mix

Ministers had gathered in Luxembourg to agree on the final nuts and bolts of the 19-nation BICC, before leaders sit down to final talks this month over the budget for all 27 EU countries. The euro instrument will be a component of the Europe-wide Multiannual Financial Framework for the years 2021 to 2027.

The two biggest Nordic countries demanded assurance of being made whole, in case any of their EU contributions end up in eurozone programs.

"It was important to make it absolutely clear that Denmark and Sweden will not have to pay for this instrument," Denmark’s finance minister, Nicolai Wammen, said Thursday morning on his way into a second day of meetings among the ministers.

It’s still unclear how compensation would work but Eurogroup President Mário Centeno promised the Scandinavians that it would happen.

Denmark’s and Sweden’s ministers have their Hanseatic peers to thank for getting the deal they wanted. Eurozone countries in the group, such as Ireland and the Netherlands, agreed to support the Scandinavian calls for compensation in a closed-door meeting before the formal talks in the Eurogroup.

Without their support, their compensation claims likely would not have materialized, officials in the room told POLITICO.

“We saw a huge sense of compromise among ministers so I don’t think that anyone is detrimental to anything that we agree upon in the Eurogroup” — Eurogroup President Mário Centeno

France saving face

French Finance Minister Bruno Le Maire put on a brave face Thursday.

“I just want to recall for all those full of skepticism or pessimism, two years ago when I was explaining the necessity of the eurozone budget there was no support for that idea and it was only an idea,” Le Maire told reporters.

“I’m really happy about these major steps that we have reached yesterday,” the Frenchman said. “I think we are now not far from having concretely the eurozone budget that we were expecting.”

France failed to secure an intergovernmental agreement between eurozone governments that would allow them to top up the budget with the help of a financial transaction tax.

Ministers instead agreed that eurozone countries could get a 70 percent refund for future projects that are backed by the budget. The amount they can spend depends on their population size and rate of economic growth.

Compromise

Centeno refused to blame the Nordics or Dutch for limiting the overall ambition of the budget that he brokered during the negotiations, which began in earnest last year.

“We saw a huge sense of compromise among ministers so I don’t think that anyone is detrimental to anything that we agree upon in the Eurogroup,” he said Thursday at a press conference. “Those decisions are very, very important, and very, very important decisions take a long, long time to take.”

Lawmakers back in Brussels that oppose the eurozone budget were less diplomatic.

“Finance ministers have trimmed down Emmanuel Macron’s megalomaniac ideas for a eurozone budget back to a realistic size," German conservative Markus Ferber said in a statement. "After all, the new instrument is not meant to finance social spending of member states."

However it’s spent, Sweden and Denmark have also now assured they won’t be financing it.

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