Brussels: The results of the European parliamentary election are likely to lead to less ambitious eurozone integration plans and set Italy up for more clashes with the European Commission over its fiscal policy, eurozone officials said on Monday.
Voting around the 28-nation bloc on Sunday appears to have produced a more fragmented parliament, while the fight against climate change has emerged a focal point after EU Green parties became the fourth-biggest force in the assembly.
“Eurozone integration was not mentioned during the election campaign. It was not an issue, while climate change, migration and social issues were—and this is what is on politicians’ minds," one eurozone official said.
“The eurozone integration package to be decided by leaders in June is, therefore, likely to be minimal and progress on it postponed," the official said.
Eurozone finance ministers have been discussing an integration package for a long time, including a budget specifically for the 19 countries sharing the euro and a decision on how and when to create a eurozone-wide bank deposit guarantee scheme (EDIS).
But with no crisis to focus minds and other pressing issues on the political agenda, the euro budget is likely to be small and earmarked mainly to help investment, rather than to stabilize economies under stress as many wanted, officials said.
French President Emmanuel Macron was the champion of a large euro zone budget, financed from dedicated taxes, that could serve as a fiscal capacity complementing the monetary policy power of the European Central Bank.
But the Netherlands, Germany and several other northern EU countries oppose that and are pushing for a small fund that would support investment and convergence of eurozone economies.
The fact that Macron’s party came second in the EU vote after the eurosceptic National Rally of Marine Le Pen will not make Macron stronger in the debate, officials said.
“Macron’s case is weakened, so progress on the budget could become even slower than it already is," a second euro zone official said.
EDIS, an idea already fiercely opposed by Germany which fears it would have to insure deposits in Italy where the banking system is more fragile, is now even less likely to get Berlin’s backing, officials said.
This is because of the surge in support in the EU vote for far-right winger Matteo Salvini’s League party, which calls for a re-write of EU fiscal rules that put limits on budget deficits and public debt, at a time when Italy is almost stagnating and its debt is on the rise.
“Now we trust the Italians even less than before, so progress on EDIS ... could get slower," the second official said.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.