EU finance ministers tackle reforms as economy slumps

(BRUSSELS) - EU finance ministers discussed Tuesday how to get the economy back on track, tackling difficult reforms after their eurozone peers reported progress on solving Greece's bailout problems overnight.

The 27 EU ministers gathered in Brussels as the European economy shows every sign of slumping into recession, dragging down even Germany, Europe's powerhouse and paymaster, which no longer appears immune.

The downturn has been made worse by the grim austerity measures governments have adopted to balance the public finances and reduce debt, stoking calls for a change to more pro-growth policies.

A wave of anti-austerity protests are expected across Europe on Wednesday, with general strikes in Spain and Portugal spearheading a day of stoppages.

Against this backdrop, ministers were expected to discuss measures to boost economic policy coordination and oversight, controversial plans for a single European bank regulator and the introduction of a financial transactions tax.

The Single Supervisory Mechanism for the banks is a key element in Europe's new debt defences but it is also a major bone of contention between euro- and non-euro states led by Britain, which jealously guards the interests of the City of London, one of the world's top financial markets.

France and Germany meanwhile differ over the scope of the new regulator, with Paris saying it should oversee all banks while Berlin argues it should only cover the biggest and most important, at least initially.

A compromise was patched up at an October EU leaders summit but the details still need to be nailed down, with no certainty when the system based around the European Central Bank will be actually working.

Greece remained a talking point after the 17 eurozone finance ministers extended its bailout by two years to 2016 after Athens adopted a new austerity package and a tough 2013 budget demanded in return for its next aid payment worth 31 billion euros.

French Finance Minister Pierre Moscovici said the eurozone hoped Greece will get its long-delayed bailout funds by the end of this month after an accord on putting its massive debt burden on a more sustainable basis.

Greece's debt mountain is expected to reach a clearly unsustainable 190 percent of GDP in 2014, more than three times the EU 60 percent limit and way above the 2020 target of 120 percent.

Eurogroupe head Jean-Claude Juncker said Monday that Greece could now be given until 2022 to meet that target but International Monetary Fund head Christine Lagarde insisted the original date must stand.

Greek Prime Minister Antonis Samaras was in Brussels on Tuesday, holding talks with President Jose Manuel Barroso and EU President Herman Van Rompuy.

Greece managed to raise more than 4.0 billion euros in fresh funds Tuesday to help cover a financing gap caused by the delay in aid fund payment.

The French and German finance ministers meanwhile met before joining their colleagues Tuesday, highlighting their shared views after concerns surfaced in Germany about the stagnating French economy.

"There is no estrangement," Moscovici said. "I have been working in confidence with (Finance Minister) Wolfgang Schaeuble since the first day I took office. My first phone call was to him, my first trip too," he stressed.

Schaeuble replied in kind, saying relations were "very friendly."

"We have confidence in the French government's policies. We do not lecture others ... We have confidence in each other," he said, knocking back any suggestion that France should be considered the sick man of Europe.

Ministers are also expected to take up the Financial Transaction Tax (FTT).

The tax was originally an EU proposal, partly intended to raise new funds and partly to put a cap on the banking sector excesses blamed for the global financial crisis of 2008 which morphed into the debt crisis.

Facing opposition, the idea was dropped but 11 eurozone states led by France and Germany have returned to the charge, seeking to implement it on their own.

With the backing of more than a third of the 27 EU member nations, the measure can be implemented under an "enhanced cooperation" procedure but it will still need the blessing of the EU member states who will not be adopting it.

European Tax Commissioner Algirdas Semeta said those opposed "should not prevent others from moving ahead with an FTT through enhanced cooperation, when there is no valid reason to do so."

Economic and Financial Affairs Council