Eurozone budget could be conditional: Lagarde

IMF chief moots ‘disciplinary conditions’

AIX-EN-PROVENCE, France, July 7, (RTRS): IMF Managing Director Christine Lagarde said on Saturday that a proposed joint eurozone budget could be designed with conditions so that it does not become a no-strings-attached transfer of rich countries’ cash to poorer members.

The leaders of France and Germany agreed last month on a proposal for such a budget that would be used to smooth out economic difference between eurozone countries and stabilise their economies when facing shocks.

The Franco-German idea, at the

heart of French President Emmanuel Macron’s plans for deeper eurozone integration, quickly ran into opposition from a dozen other EU countries, led by The Netherlands, concerned about how the money would be raised and used.

“This centralised budget capacity does not need to become a payment facility,” Lagarde said.

“It can very well have disciplinary conditions attached,” Lagarde said, speaking at an economic conference in the southern French city of Aix-enProvence.

Though details remain to be hammered

out, the Franco-German proposal does not speak of imposing conditions, like fiscal discipline or carrying out reforms, to benefit from the joint budget.

Their proposal does, however, call for conditions to continue to be required for access to the eurozone’s bailout fund, the European Stability Mechanism.

France and Germany have proposed that the joint budget be functional from 2021 and that it should be financed by a financial transaction tax, which other countries have already poured cold water on.