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EU leaders approve small steps to buttress euro currency

December 14, 2018
French President Emmanuel Macron speaks during a media conference during an EU summit in Brussels, Friday, Dec. 14, 2018. European Union leaders expressed deep doubts Friday that British Prime Minister Theresa May can live up to her side of their Brexit agreement and they vowed to step up preparations for a potentially-catastrophic no-deal scenario. (AP Photo/Francisco Seco)

FRANKFURT, Germany (AP) — European leaders agreed Friday to press ahead with work toward a limited, common eurozone budget and took other steps to strengthen the currency union’s resistance to downturns and crises.

The budget proposal leaves its size undefined and it appeared to fall short of more sweeping ideas pushed by French President Emmanuel Macron.

The European Union leaders said that finance ministers would work out the precise features of the budget with an aim to reach an agreement on them by June.

Macron has pushed for a large eurozone budget that could support member states which run into economic trouble. That would help close a key vulnerability of euro monetary union, which has one currency but 19 different governments. The euro bloc’s weaknesses in adjusting to trouble were exposed during a financial and economic crisis that threatened to break up the currency union from 2010 to 2012.

The leaders’ statement Friday after a summit in Brussels said the eurozone fund would be part of the overall EU budget, suggesting it is likely to be smaller than Macron’s proposal. He has called for several percentage points of gross domestic output but the entire EU budget is only about 1 percent of GDP.

The leaders’ statement also limits the budget’s purpose as helping to make economies more competitive and similar in the way they function and omits a mention of stabilizing countries in recession — a key lack for the euro.

Proposals for a central budget had been resisted by northern European countries, which are concerned that they will be put on the hook for the troubles of less fiscally disciplined EU governments.

At a post-summit briefing, German Chancellor Angela Merkel called the budget “a good contribution” and said that “we have agreed on significant parts of what Emmanuel Macron proposed... And the French president was certainly very satisfied with that, and so am I.”

French officials said the fund was a starting point and the amount could grow gradually.

“If you start by saying I want a trillion-euro budget that does everything, when people are already against the whole idea, then you’ll never get anywhere,” said a French official on customary condition of anonymity.

The leaders also approved giving additional financial firepower to the EU’s fund that would help wind up or restructure failed banks. That would assume, however, sufficient progress in getting shaky European banks to clean up their finances.

There was no outright mention in the statement of progress toward an EU-wide deposit insurance, which aims to strengthen the banking system by reassuring depositors their money is safe even if national backstops fall short. The proposal has also faced a pushback from Germany, which has sought to first ensure that banks purge their finances of hidden losses from bad loans.

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Angela Charlton in Brussels contributed to this report.

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