European Union leaders are meeting between 18-19 October for a summit in Brussels. Speaking before the body, the President of the European Council, Herman Van Rompuy, and the President of the European Commission, José Manuel Barroso, will address issues on banking and fiscal union, a centralized euro zone budget, and direct recapitalization of banks from the European Stability Mechanism (ESM).
Plans for a separate Eurozone budget
The idea of a separate Eurozone budget was launched in June. EU leaders will discuss how to centralise tax and spending decisions for the 17-nation Eurozone. At a conference organised by the “Friends of Europe” think-tank in Brussels last week, Mr Herman Van Rompuy said he wanted the EU to have specific proposals before next year to help stabilise the Eurozone.
"The goal is not to build a political union for its own sake or to completely overhaul our Union…No, the goal is to make the euro stable – financially and economically, but also politically solid. That we must do,” he said.
He argued that any currency union needed a fiscal capacity - a budget of some kind – able to play a stabilising role when needed. "When a country is hit by an economic downturn, independent of other countries, we have no instrument [to help],” he said.
According to the draft EU summit conclusions, "mechanisms for fiscal solidarity, eg. via an appropriate fiscal capacity, should be explored.”
While the UK Prime Minister David Cameron says the Eurozone will need its own budget, he has warned that he will block any "massive increases" in that budget.
Meanwhile, the issue of the Spanish bailout remains a priority. According to growing speculations, Spain is very close to taping the ECBs new bond-buying program announced last month.
Talks between Greece and the Troika should also resume as Greece continues efforts to reach the required austerity needed to become eligible for its second bailout.
EU leaders would like to see a deal between Greece and the Troika at the summit. According to EuroGroup Chairman Jean-Claude Junker, the Eurozone finance ministers gave Greece a deadline "by 18 October at the latest” to implement reforms, such as privatization.
Last week, the IMF stated that Greece needed more time to meet its budget-cutting goals. Yet, German Finance Minister Wolfgang Schaeuble questioned the call for more flexibility and said we cannot judge "until we have the Troika report.”
Report: Plan for separate Eurozone budget on EU summit menu [BBC News, 11 Oct 2012]
Report: “The goal is to make the euro stable” [European Council, 12 Oct 2012]
Report: EU Summit to grab attention, U.K. releases important fundamentals [MENA.FN.COM, 14 Oct 2012]