|
 The option of legally committing to a reform in exchange for money
would apply to euro zone countries, but be open also to non-euro
zone members of the 28-nation European Union, the draft conclusions
of the December 19-20 summit said.
How exactly the system would work, and, more importantly, where the
money in support of the reforms would come from, is to be worked out
by the head of the European Commission Jose Manuel Barroso and the
summit chairman Herman van Rompuy by June 2014.
The contracts would be for reforms that boost economic growth or
create jobs, increase the efficiency of the public sector, help
research and innovation, education and vocational training,
employment and social inclusion, the conclusions said.
As an incentive to undertake them, the contracts "would include
associated solidarity mechanisms offering support, as appropriate,
to member states", the draft, seen by Reuters said.
The contracts would be a legally binding agreement between a
government, the European Commission and the council of EU ministers,
tailored to the needs of each individual country.
"The economic policy measures and reforms included in the
contractual arrangements should be designed by the member states, in
accordance with their institutional and constitutional
arrangements," the draft said.
Once agreed with the Commission and approved by EU ministers, the
government would deliver on agreed reform milestones and deadlines
for implementation.
The question of how to financially reward such reforms remains open,
but once agreed, it would have a legally binding nature, the
conclusions said.
"On the associated solidarity mechanisms, work will be carried
forward to further explore all options regarding the exact nature
(e.g. loans, grants, guarantees), institutional form and volume of
support," the draft said.
CHEAP LOANS?
Leaders note in the conclusions, however, that the financial help
cannot not entail financial obligations for countries that do not
participate in the system of contracts.
[to top of second column] |
Neither should they become an income equalization tool nor have an
impact on the EU's long-term budget, the conclusions said. The
financing system should also respect the budgetary sovereignty of
countries.
In November EU policy-makers preparing the discussion on the
contracts proposed that the financial support could take the form of
cheap loans which would be paid out in tranches on reaching reform
milestones.
The loans would be attractive because they would carry an interest
rate lower than the one a government could get on the market.
In that respect, it would amount to a degree of subsidized lending,
ultimately amounting to a mutualising of risk among involved member
states and a degree of financial transfer — an idea that Germany has
long resisted.
The November guidelines said the size of the loan would not be
linked to the cost of reform and would be meant as general support
for the economy.
It did not say what time-frame the loans would be offered for, or
what the limit on the size of any loan would be. They could come
from the euro zone's rescue fund, the European Stability Mechanism,
which raises money on international markets and can on-lend capital
to a contracted member state.
The loans would not be available to countries running excessive
macroeconomic imbalances or currently under a bailout.
The money could also come from direct contributions of EU or euro
zone countries paid into a special fund, or euro zone budget, which
could also be filled from a new revenue source, like the financial
transaction tax the EU is considering.
(Editing by Alison Williams)
[© 2013 Thomson Reuters. All rights
reserved.] Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
