Finding Common Ground A pragmatic budgetary instrument for the Euro Area

Summary:

We outline a pragmatic proposal for a budgetary instrument for the euro area in line with the decision of the December 2018 Euro Summit. It is based on a very simple principle: any new instrument should make the euro area function better as a currency union. This is the only way to justify a euro area instrument in the first place.

This principle has two implications. First, duplication of existing tools needs to be avoided at all cost. In the current situation, we see a looming risk of layering a new instrument onto existing programmes such as EU structural funds, to which the new instrument would add no real value. Second, the two objectives set out in the Euro Summit decision – competitiveness and convergence – ought to be operationalized strictly in terms of their contribution to a better functioning of the euro area as a currency union.

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