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Portugal pushes for closer euro zone integration
March 28, 2015 / 1:20 PM / 2 years ago

Portugal pushes for closer euro zone integration

BRUSSELS, March 28 (Reuters) - Portugal has presented proposals for closer economic coordination between the countries of the euro zone as the bloc tries to put crises over Greece and other big debtor states behind it.

EU ministers will study the Portuguese discussion paper, entitled “The Missing Piece in the Economic and Monetary Union Puzzle: Economic Policy Coordination”, ahead of a summit of leaders in June at which they are expected to outline plans to strengthen the single currency area over coming years.

The paper carries weight not least because Portugal has been among those euro zone states obliged to adjust policy in return for an international bailout following the 2008 global crisis. Lisbon is now among the toughest critics of the new Greek government’s drive to ease the terms of its own bailout.

Among the Portuguese proposals is a common unemployment benefit scheme for the zone. That could help balance out the fiscal effects of different economies being bound by the same monetary policy due to sharing the single currency.

Geographically isolated, like Greece, from the core of the currency bloc, Portugal would also like states to benefit under euro zone budget rules from investments which produce spinoff gains for others - Lisbon, for example, wants more cross-border power lines.

“Member States need to recognise that cross-border coordination creates positive spillover effects and that in the case of structural reform ... a valid constituency exists beyond their borders,” read the Portuguese paper, seen by Reuters.

Current euro zone rules oblige governments to meet targets for public sector deficits which give special credit for efforts to make reforms to the underlying structure of their economies.

“Economic policies and structural reforms with significant spillover or coordination ‘dividend’ or, more generally, which promote greater policy convergence, could benefit from adequate incentives from fiscal guidance at the EU level,” Portugal said.

The paper proposes that such reform efforts be measured against the aggregate budget stance of the bloc rather than of one state. It also said efforts to create a single market in digital services should be recognised in monetary union rules.

It gave little detail on its suggested unemployment insurance scheme. Several proposals made by other countries last year included a shared budget for funds that could help countries in a downturn with the costs of unemployment benefit in exchange for contributions when they were doing well. (Writing by Jan Strupczewski; Editing by Gareth Jones)

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