Dutch ready to quit talks about common euro-zone budget

The Netherlands is ready to walk away from plans to create a common euro-zone budget if the spending tool championed by Emmanuel Macron does not fulfil the Dutch government's demands, according to the country's finance minister.

Wopke Hoekstra told the Financial Times his government would participate in the budget – the details of which are set to be finalised in June – only if it met the strict conditions of the Netherlands, including giving a veto power to national capitals on spending decisions.

“This is highly sensitive and for us to subscribe to this, it should really meet our requirements and desires. Only then will it be something that we will take part in,” said Mr Hoekstra.

The Dutch finance minister has privately told the eurogroup he is ready to let the other 18 euro-zone countries go ahead without the Netherlands. One diplomat from a major national capital said they were willing to let the Dutch walk away rather than sabotage the entire project.

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The Netherlands has been the most vocal opponent of French-led designs for a common spending instrument to help out euro-zone countries during downturns. Mr Hoekstra and Dutch prime minister Mark Rutte have long argued for euro-zone governments to take responsibility for their economic affairs, rather than relying on the help of taxpayer funds from across the bloc.

Convergence

Last December, the Netherlands and other sceptical allies in Germany, Austria and Finland successfully limited the budget’s scope to help fund “competitiveness and convergence” in the euro zone, rather than the more ambitious aim of providing funds to help “stabilise” economies in bad times.

But Mr Hoekstra’s renewed threat to walk away underlines the still steep resistance to elements of the budget. They have already been significantly scaled down from Mr Macron’s initial plan for a tool that would be worth several percentage points of euro-zone GDP.

Euro-zone finance ministers have two months to finalise the broad elements of the budget – including its spending priorities, source of revenues, and who should ultimately wield control over its decisions.

Meeting in Bucharest last week, ministers failed to resolve differences on how the budget should be set up. The Netherlands, Finland, Austria, and Ireland are resisting a French push for a governmental agreement among the 19 euro-zone countries to establish the budget and would rather it is kept under European Union law.

Sceptical capitals fear an intergovernmental structure would mean the size of the pot would not be limited to the restrictions imposed by the size of the EU’s next long-term common budget. They also fear the agreement would have to be ratified by their national parliaments.

"I don't quite see why [the international agreement] would be necessary,'' said Mr Hoekstra. He said he supported a system where the European Commission and heads of governments would have the final say on how the money is spent.

France is determined to have the 19 euro-zone governments set up the tool, in the hope that the budget can develop from modest beginnings to become a source of significant financial firepower over the next decade.

“There is no other way for euro area member states alone to decide on amounts to be spent,” Bruno Le Maire, France’s economy minister told the eurogroup last week, according to a senior diplomat.

Long-term budget

The fight over governance is the latest flashpoint among ministers who have until June to work out how the budget should operate. But officials warn that the most sensitive discussions – such as the size of the pot – will have to be decided in a more complex set of talks over the EU’s next long-term common budget, unlikely to be concluded before 2020.

The Netherlands has been a consistent opponent of plans to pool spending in Brussels. But Mr Hoekstra’s room for negotiating deals in the euro zone has been limited further after a new political party called the Forum for Democracy, which is calling for the Dutch to quit the EU, became the largest in the upper house of parliament last month.

Mr Hoekstra has also led the fight to ensure the commission does not allow Italy’s populist government to flout the bloc’s spending rules with its 2019 budget. He has demanded Brussels provide public explanations over its decision to terminate a sanctions process against Rome last December.

“Transparency is something our people expect. The Dutch expect it from their parliament and parliament expects from its government and rightly so,” said Mr Hoekstra. He added that the commission’s failure to explain how it came to sensitive decisions about Italy’s draft budget was damaging Dutch voters’ trust in the EU. “I don’t think it is helpful,” Mr Hoekstra added.– Copyright The Financial Times Limited 2019.