Last week the finance ministers of France and Germany agreed to put forward a proposal that the eurozone should have its own budget in place by 2021, with enough resources that would enable the countries that have adopted the single currency to absorb any economic shocks like the one we had after the 2008 international financial crisis.

Their objective is also to ensure greater economic convergence in relation to fiscal policy. In effect this proposal seeks to achieve further economic integration of the countries that form the eurozone. To think that this proposal would come without any strings attached would be naïve and absurd. As such one needs to wait for the full proposal before expressing a definitive judgement.

Finance ministers of the eurozone are expected to debate this proposal, as well as the wider issue of providing economic safeguards in the eurozone in a week’s time at the Eurogroup meeting. A final decision would be taken in December.

Some countries have not warmed up to this proposal at all. For example the Dutch finance minister was reported saying that, “the need for such a budget is than convincing”. At first Germany was also not too keen on the idea, which had initially been put forward by French President Emmanuel Macron. Some countries are likely to be afraid of introducing further controls on the decisions of single member states, with regard to their economic policy.

Government has not expressed itself on this proposal. And rightly so since the full details are not known

So far EU member states still exercise control over their budgets, albeit within the so-called parameters of the Maastricht Agreement. In the face of the rise of populist parties which claim more powers for national governments and less interference from Brussels, it is unlikely that member states would be willing to surrender further authority on their economic policy to a central authority.

Moreover member states would be afraid that this initiative would come back to bite them. Smaller member states would also question whether this is yet another attempt by the larger and more powerful states to exert undue pressure on them. Is it a further step towards a common fiscal policy for all eurozone countries?

Many of these considerations are essentially political in nature. So it is pertinent to ask if there is merit in the argument from an economic perspective.

I believe that some form of mechanism that would serve as a buffer for member states against economic shocks would be a very useful tool. This time round, the buffer was provided by quantitative easing and low interest rates. This enabled member states to gradually ease themselves out of the recession. In addition a weaker euro helped to boost exports of goods and services.

In future the quantitative easing tool may not be available. Therefore alternative tools are required. However, their effectiveness will depend a great deal on the rules and strings attached to these tools. The devil will indeed be in the detail.

Will such a budget be good for Malta? To my knowledge government has not expressed itself on this proposal. And rightly so since the full details are not known. Further European integration may be desirable for Malta, if the rules are right. On the other hand, a common fiscal policy would be detrimental for our country. So we could end up in a bit of a quandary.

The funding requirements that a small country like Malta may have are not the same as the requirements of larger countries. As such, my initial reaction to the proposal that the eurozone would have its own budget is not an enthusiastic one. Eurozone governments need to be more creative in thinking of options on how to provide a safeguard against future economic shocks.