Eurogroup chief hails German stance on euro zone reform

New Eurogroup chief Mário Centeno has called for concrete progress on euro zone reform by June, welcoming “encouraging” signals from Berlin on this front.

Days after assuming his new role, Mr Centeno, the Portuguese finance minister, was in the German capital on Wednesday for talks with his German opposite number, acting finance minister Peter Altmaier.

“The signals we get from Germany are very encouraging indeed,” said Mr Centeno.

Last week would-be coalition partners from German chancellor Angela Merkel’s Christian Democratic alliance (CDU/CSU) and the Social Democrats (SPD) flagged an “investment budget” for the single currency bloc in response to French calls for a fund to assist the euro zone in times of external economic shocks. The preliminary agreement in Berlin calls for the ESM bailout mechanism to be turned into a full-blown European Monetary Fund under parliamentary control and anchored in EU law.

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However the German paper made no reference to the French proposal for a euro finance minister. Dr Merkel said on Wednesday she was “sceptical” about the idea until it was clear what tasks were required.

At a joint press conference with Mr Altmaier, Mr Centeno addressed German concerns of euro reforms by rejecting ideas of loosening euro deficit rules and insisting that no one wanted to – nor could they – create a “transfer union”.

Moral hazard

The Portuguese said it “makes sense for a monetary union to have a budget capacity” to invest and support euro countries but, acknowledging moral hazard concerns, said conditionality must be attached to such loans.

Mr Centeno declined to be drawn on whether any new funds should be part of the EU budget, with parliamentary controls, or come under direct control of euro zone finance ministers.

He urged euro leaders to use a “unique window of opportunity” as long as the good economy cycle continued in order to complete their euro reform promises.

As the euro reform debate gathers momentum, meanwhile, 14 French and German economists issued a paper on Wednesday calling for new euro fiscal rules, an independent fiscal watchdog and a new “safe asset” – a derivative of weight sovereigns – to give investors an alternative to sovereign bonds.

“Implementing these reforms would be a game-changer for the euro zone,” the economists wrote, “significantly improving its financial stability, political cohesion and potential for delivering prosperity to its citizens, all while addressing the priorities and concerns of the participating countries.”