Eurozone finance ministers met again last Monday to debate possible measures for additional integration in the Eurozone.
On the agenda of the second half of 2017, the deepening of the monetary union was a priority after Emmanuel Macron had won the French presidential elections but was set aside because of German politics (and the unwillingness of other countries).
Another attempt for further Eurozone reform was made in the first half of this year, leading to an undeveloped plan to make the European Stability Mechanism (ESM) a backstop to the European bank resolution fund.
A Eurozone fiscal fund has been a goal of French President Emmanuel Macron as a way to strengthen the euro currency union, which has one currency but 19 separate governments.
It lacks stable spending from a central authority to even out recessions that hit one member worse than others, as the federal budget does in the United States when individual states bear downturns.
The question is how many exact results will Eurozone finance ministers be able to present to their government leaders, who in turn hope to present - next to Brexit - some positive European news at the December summit.
Time is clearly running out and the latest Italian fiscal skylarking has done little to increase the appetite for more fiscal integration or additional transfers of any kind.
Therefore, it is expected that the December summit will not produce any significant breakthrough, besides making the ESM a financial backstop to the bank resolution fund (SRF), probably with some strings attached.
Any additional decisions would be a surprise but a surprise would be a gift just in time for Christmas.
New details on the Eurozone budget proposal
Friday's reports of a French-German paper on a Eurozone budget were remarkable. The two-pager sketches a possible structure of a Eurozone budget, following up on the Meseberg Declaration of France and Germany.
Succinctly, such a Eurozone budget should foster convergence and prompt reform implementation by co-financing public expenditures. The Eurozone budget would be managed by the Eurogroup and Eurozone government leaders through another inter-governmental agreement.
The French-German paper does not say anything about its possible size and remains vague on the revenues for the aforementioned budget (keeping in mind that Angela Merkel once said she envisaged a small double-digit billion sum for such a budget).
How was this taken?
A top Eurozone official said that the 19 countries that use the euro will push ahead with discussions on a Eurozone budget proposed by France and Germany to make the currency union more resistant to crises.
That being said, it will now be interesting to see how the other Eurozone countries react to the proposal. We have seen the New Hanseatic League, the Netherlands, Ireland, Nordic and Baltic countries, have opposed most reform proposals, particularly those involving more money, in recent months.
That being said, events remain uncertain for the next few weeks if they will really deliver more than the backstop option for the ESM, but the lower the expectations, the higher the chances for a positive surprise.
Disclaimer: This article was issued by Maria Fenech, Investment Manager Support Officer at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.