Photographer: Dario Pignatelli/Bloomberg

In Challenge to Macron, Northern Lobby Wants a Lid on EU Reforms

  • Finance ministers of 8 Northern EU countries issue statement
  • Signatories want national governments to retain upper hand

Any changes to the euro area rule book should focus on real needs rather than pipe dreams, eight finance ministers from smaller, fiscally hawkish European Union countries said in a joint declaration that highlights resistance to the lofty ambitions of Emmanuel Macron.

The statement, signed by euro members Finland, Ireland, the Netherlands and the three Baltic states (Estonia, Latvia and Lithuania), and by non-members Sweden and Denmark, comes as talks on shoring up the single currency are entering a critical stage. The French president is expected to start pushing for closer integration now that a governing coalition is finally in place in Germany.

By setting out its position, the lobby of northern countries is trying to remain relevant and anticipate any likely compromise between Paris and Berlin on the deepening of the Economic and Monetary union. The statement also presents a challenge to the Brussels-based European Commission, which has advocated far-reaching reforms, including the establishment of a euro-area finance minister, who will also be a Commissioner.

“The discussion on the deepening of the EMU should find a consensus on ‘need to haves,’ instead of focusing on ‘nice to haves’,” the eight finance ministers wrote in the declaration. A stronger euro area “requires first and foremost decisive actions at the national level and full compliance with our common rules.”

Dos & Don’ts

The group is broadly supportive of efforts to complete the EU’s banking union –- a set of common rules on banking supervision and resolution for the bloc’s largest banks –- and on ways to strengthen the euro-area’s bailout fund.

While it agrees with plans to transform the European Stability Mechanism into a European monetary fund, it wants such a fund to be managed by national governments rather than by Brussels. It also opposes a broader overhaul of the euro area’s institution setup, for example through the creation of a common finance minister.

“We don’t believe that the current problems are solved with these kind of institutional changes. We need real action instead,” Petteri Orpo, Finland’s finance minister, said in an interview in Helsinki.

On plans for a beefed up ESM, the eight finance ministers argue that “the modalities of a framework for orderly sovereign debt restructuring in case of unsustainable debt levels should be explored.” This is particularly important for countries like the Netherlands and Germany, which want private investors to take write downs in euro-area bailouts before taxpayers’ money is tapped. The proposal is likely to face large resistance from those who worry that an automatic upfront debt restructuring mechanism could fan market volatility.

Inclusive Format

The ministers also stressed the importance of retaining control over fiscal policy, suggesting that Macron’s flagship plan for a euro-area wide stabilization mechanism -- through a rainy-day fund, an unemployment insurance or an investment budget -- is not a key priority for them.

The subject of euro reform has been dominating talks at the Eurogroup – as the collection of 19 euro-area finance ministers is known – since the latter part of last year. Non euro-area member states also participate in the discussions under a so-called inclusive format that the ministers said should be upheld.

The U.K.’s future exit from the bloc has caused concern among smaller, non-euro countries such as Sweden and Denmark, which fear a loss of influence with the departure of their main free-market ally.

“Unity is a key asset for the remaining EU27 and must be safeguarded,” the ministers said.

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