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Macron's euro-reform plan hits headwinds at meeting in Brussels

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A Franco-German proposal to create a common budget for the shared currency area ran into trouble at a meeting of finance ministers in Brussels, even as advocates said a breakthrough was still possible before the end of the year.

[BRUSSELS] A Franco-German proposal to create a common budget for the shared currency area ran into trouble at a meeting of finance ministers in Brussels, even as advocates said a breakthrough was still possible before the end of the year.

Some European ministers tasked with assessing the plan on Monday said there still wasn't enough information to pass judgment, while others said they still had questions on how the blueprint would affect local constituents.

The proposal stems from a broad deal struck between France and Germany in June that aims to strengthen the European project in the face of "existential challenges" on multiple fronts, from migration to the economy. The new euro-area budget, according to plans submitted to the finance ministers by Paris and Berlin, would support investment and foster "convergence and competitiveness" in the region.

"We want clarity about how such an instrument can and should work on top of the existing measures," Austria's Hartwig Loeger said on his way into the meeting. Dutch Finance Minister Wopke Hoekstra said that "many questions remain," adding that "we need to be really convinced that something is in the interest of the Netherlands, in the interest of the Dutch citizens, in the interest of the Dutch taxpayer, and if not we're out."

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Beyond the reluctance of Northern European countries, there were also signs the plan could get tangled up in Italy's confrontation with the European Union over its national budget. Rome had been supportive of the idea, but Deputy Premier Matteo Salvini said Monday that the Franco-German proposal could damage Italy and if it does, he would oppose it, according to remarks cited by newswire Ansa.

European officials have been skeptical about the chances of agreeing to a euro-area budget before the end of the year, given resistance by a group of hawkish nations including the Netherlands, Finland, Ireland and Baltic nations. These countries argue that it is more important to have sound finances and build fiscal buffers at a national level rather than count on euro-area wide tools to weather financial turmoil.

"It's a very important contribution," Mario Centeno, Portugal's finance minister who also heads the Eurogroup, said before the meeting in reference to the plan. "It can be sort of a breakthrough toward December if we can fit all this in a package."

The blueprint marks the first attempt by France and Germany to flesh out their joint proposal for the euro-area agreed in June, however details fell short of what President Emmanuel Macron has been calling for over the past two years.

The joint plan doesn't mention the size of the budget and says it's designed to "foster convergence" and encourage reforms, rather than help boost the bloc's economies in a downturn - a key aim of France and other supporters of the idea. French officials say that proposals for more direct instruments to stabilize economies could come at a later date.

Crucially, under the plan the euro-area budget would fall under the EU's broader one, meaning negotiations for it could be held hostage by long and acrimonious talks over the EU's medium- and long-term spending plans.

German finance minister Olaf Scholz said that placing the euro-area budget within the EU budget had increased the chances of skeptical countries backing the plans.

"I hope we can convince many others that it's a good course from their point of view," Mr Scholz said.

BLOOMBERG