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ECONOMIC AND MONETARY UNION : EMBRYONIC EUROZONE BUDGET: SUMMIT LIKELY TO POSTPONE DISCUSSION.

The June European Council, which is set to discuss the creation of an embryonic eurozone budget, is likely to kick this particular can' further down the road. During a discussion at technical level on 4 April, EU member states showedalittle enthusiasm for this carrot and stick' mechanism, known as the Convergence and Competitiveness Instrument (CCI), for which the Commission will submit a proposal the end of the year.

On 20 March, it issued two communications to gauge the mood in member states: one being an ex ante coordination of major national economic reforms that have spill-over effects and one on contracts to undertake structural reforms potentially matched with financial incentives in case of negative short-term effects, the CCI.

The Economic and Financial Committee (EFC), composed of national and central banks officials, showed little enthusiasm for the CCI on 4 April. The feeling was that the focus should be on reforms that have major spill-over effects, added the source.

In light of this, two diplomats consider that the June summit, where EU leaders are to discuss these two ideas in a push toward an Economic and Monetary Union 2.0, will probably push the can down the road yet again after two stocktaking exercises in December and March.

'The Germans, who came up with the contractual obligations and fiscal capacity (or embryonic eurozone budget) ideas, have - to say the least - doubled back,' says one diplomat. The idea of a new budget does not sit well with countries such as Denmark and Finland, adds another diplomat. Member states already have a lot to digest in terms of new economic governance and, after five years of crisis, there is a certain "reform fatigue", says the first diplomat.

Sherpas are to discuss the CCI on 25 April to prepare the June summit.

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Publication:European Report
Article Type:Brief article
Geographic Code:4E
Date:Apr 8, 2013
Words:298
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