Bloc Budget

Ambition on the Commission

Pierre Moscovici, the incoming European Commissioner for economic and financial affairs. Source: AP
Pierre Moscovici, the European Commissioner for economic and financial affairs.
  • Why it matters

    Why it matters

    The struggling euro zone needs investments and reforms or risks long term economic stagnation.

  • Facts


    • Pierre Moscovici is the incoming European Union finance commissioner.
    • The former French finance minister did not pass the first round of hearings in the European Parliament.
    • The French government has announced that it will run a budget deficit of 4.3 percent in 2015.
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The new European Commission is pushing for a euro zone budget. That, at least, is the impression created by comments from the incoming commissioners who will be in charge of finance matters.

The idea of greater fiscal integration was brought up by both Pierre Moscovici, the commissioner designate for economic and finance affairs, and Vladis Dombrovskis, the new vice president of the commission with responsibility for the euro, in their written replies to the European Parliament following their confirmation hearings last week.

Members of the incoming commission, which is due to take office at the end of the month, faced tough hearings in the European Parliament. The legislative arm of the European Union has to approve the appointments by the incoming president, Jean-Claude Juncker.

“We should consider establishing targeted fiscal capacity at the level of the euro area.”

Pierre Moscovici, Commissioner designate for finance and economic affairs

“In the longer term, I think we should consider establishing targeted fiscal capacity at the level of the euro area,” Mr. Moscovici, who was previously French finance minister, wrote in response to questions from the parliament.

And the Latvian Mr. Dombrovskis had a similar response, writing that the “possibility” of a “targeted fiscal capacity for the euro area” should be examined in the long term. He also mentioned looking at whether “financial incentives” could be implemented to bring forward reforms.

The idea of fiscal integration of the economies of the 18 countries that use the euro currency is something that Germany has long been in favor of but which thus far had little backing from the other euro zone members.

Last year Chancellor Angela Merkel suggested that euro states would form bilateral agreements with the European Union which would commit them to structural reforms in return for the possibility of tapping emergency financial aid from a new euro fund.

However, her colleagues in the other euro zone countries were firmly against the plan. Some states such as the Netherlands categorically rejected the creation of a new fund for the currency zone. Others were wary of being bound by more economic commitments to Brussels, and thereby giving up even more of their sovereignty.

Hollande-Sapin-Macron. Source AP.
Taking on Brussels? French President Francois Hollande (l), Finance Minister Michel Sapin and Economics Minister Emmanuel Macron. Source: AP


In general, Berlin has favored the idea of further fiscal integration, before any move to increased debt sharing. The German government has firmly rejected proposals for euro bonds in the absence of fiscal union.  As the euro zone’s largest economy and effective paymaster, Germany has enormous clout in the European Union.

Meanwhile, national governments’ room for maneuver is likely to be even further curtailed over the coming five years. The new commission is determined to make the governments adhere to the E.U.’s economic directives in the future, something that up to now many countries have ignored. That is something that not only Mr. Moscovici and Mr. Dombrovskis, but also Jyri Katainen, the incoming vice president for growth and investment, have all emphasized.

There are other changes afoot in the euro zone. For example, the so-called “Troika,” of the E.U. Commission, the European Central Bank and the International Monetary Fund, which has overseen the implementation of the bailout programs in those countries hit worst by the euro crisis, will be affected.  Mr. Dombrovskis wrote of “revisiting the role of ‘Troika’, including the possibility of replacing it, over time, with a more democratically legitimate and more accountable structure.”

Both Mr. Dombrovskis and Mr. Moscovici back the idea of reforming the external representation of the euro zone in international organizations, such as the IMF, in order ensure that the currency bloc speaks with one voice.

Fiscal integration is something that Germany has long been in favor of but had little backing from other euro zone members.

They will only be able to implement these plans if their appointments are confirmed by the European Parliament. It is not certain that they will succeed. Mr. Moscovici, who is a member of the French Socialist Party, did not manage to convince the European lawmakers at his hearing last Thursday.

In particular, Christian Democrat and Liberal MEPs gave the Frenchman a grilling. “No one of good faith can imagine you should be given a post that you failed in as finance minister of France,” said Alain Lamassoure, a French member of the center-right group, the EPP, the parliament’s largest political group.

There are doubts about whether Mr. Moscovici would be able to discipline Paris for missing European Union deficit targets.

“France has to respect the rules like everybody else,” the commissioner designate said during his questioning, adding that France would not receive “special treatment” from him.

In what could prove to be bad timing for Mr. Moscovici, France has announced that it was going to adopt a budget for next year that exceeds the bloc’s 3 percent budget deficit rule. This could put Paris on a collision course with Brussels.

In fact, the European Union is preparing to reject France’s 2015 budget, according to the Wall Street Journal. If France’s budget was in “serious noncompliance” with tightened E.U. deficit rules, it could be sent back to Paris to be revised, E.U. officials said.

French President Francois Hollande has argued that neither France nor the rest of the European Union should stick to the austerity policy, including fiscal rectitude, favored by Germany, but instead need measures to boost growth.

Meanwhile, the proposal from Mr. Juncker, the incoming commission president, to  use some of the European Stability Mechanism, or ESM, to fund an investment program to encourage growth, has been rejected by the Berlin government, particularly by members of Ms. Merkel’s Christian Democrats, who are in government with the Social Democrats, or SPD, in a left-right coalition.

However, there may be some disagreement within the coalition over Mr. Juncker’s proposal.

The president of the European Parliament, Martin Schulz, who is a member of SPD, has voiced his support for the idea of tapping the ESM. “We have to mobilize money,” he told Der Spiegel. He said that the ESM had available funds that would not be required in the foreseeable future. “A part of the unused ESM funds could allow the European Investment Bank to give considerably more development loans for a few years.”

According Der Spiegel, Mr. Juncker wants to use around €100 billion of the ESM’s €450 billion to back European Investment Bank loans.


Ruth Berschens is Handelsblatt’s Brussels correspondent. Siobhán Dowling is an editor with Handelsblatt Global Edition in Berlin. To contact the authors:,

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