Opposition mounts to ‘solidarity fund’

Date: 29/04/1999

By Tim Jones

LARGE contributors to the EU budget have reacted with a mixture of scepticism and outright opposition to European Commission calls for a 'solidarity fund' to help crisis-hit member states.

The idea, first raised by Commission President-designate Romano Prodi in a keynote speech to the European Parliament and supported by Acting Economics Commissioner Yves-Thibault de Silguy, is seen by some as an attempt to boost the Union's budgetary powers by the backdoor.

Officials say that the German, Dutch and British governments, which fought to freeze EU spending in real terms over the next seven years in the run-up to last month's Berlin summit, are against creating a new economic crisis fund.

" It is a terrible idea," said a senior finance ministry official from a government which contributes more to the Union than it receives back in subsidies. "It would have to be a lot of money to be effective and it is not even justifiable in treaty terms."

De Silguy argues that the fund would be a perfect opportunity for beefing up the euro zone's economic policy coordination, which relies at the moment on peer pressure and the publication of annual 'broad economic guidelines' and 'employment guidelines'.

His aides say the fund would "provide leverage" to encourage euro-zone members to carry out the reforms to goods, services and labour markets needed to make them shock-proof.

In the event of a sudden economic change which hit countries in the euro zone with varied intensity ('assymetric shock'), the fund could be mobilised - but only if the recipient member state implemented the structural reforms to make itself less susceptible to such a shock in the future.

When he set out his idea for a "cyclical action fund" to MEPs last week, De Silguy said they built on Article 103a of the Maastricht Treaty. This specifies that when "a member state is in difficulties or is seriously threatened with severe difficulties caused by exceptional occurrences beyond its control", the Commission "may" recommend to ministers that this country should receive "Community financial assistance".

" That is a long way from saying that a new fund should be created," said a diplomat from net contributor member state. "It allows for case-by-case analysis of when a country needs assistance, not a special fund."

Opponents of the idea claim that Article 103a was simply drafted to replace Articles 109h-i, which allow member states to introduce "safeguard" measures in the event of a balance of payments crisis and receive special EU crisis aid.

Neither article was an invitation to create a brand new pot of cash. Indeed, billions of euro in aid were given to Italy and Greece during the Eighties on the basis of this treaty article.

The Acting Commissioner's suggestion comes hard on the heels of a push from Paris for the creation of true "economic government" for the euro zone. Both have suggested changes could be made to the EU's treaties during the next Intergovernmental Conference.

Large contributors to the EU budget have reacted negatively to Commission calls for a 'solidarity fund' to help crisis-hit Member States.