EU says progress in euro zone reform but more work needed

Credit: REUTERS/FRANCOIS LENOIR

Euro zone finance ministers made some progress on Friday on establishing a budget for the 19-country currency area but have not yet agreed on its size or how it will be funded, their chairman Mario Centeno said.

adds ESM treaty, banking union

LUXEMBOURG, June 14 (Reuters) - Euro zone finance ministers made some progress on Friday on establishing a budget for the 19-country currency area but have not yet agreed on its size or how it will be funded, their chairman Mario Centeno said.

Centeno said the Eurogroup of finance ministers had taken "small steps" in a meeting which started on Thursday and ended early on Friday. But the main features of the possible new budget remained unclear as ministers did not agree on how it should be financed.

A decision on the size of any euro zone budget is expected to be made by leaders of the wider European Union later in the year, Centeno told a news conference after the Eurogroup's meeting in Luxembourg.

Centeno said the ministers had reached a "broad deal" on the reform of the euro zone's rescue fund, the European Stability Mechanism, which would give it new powers to handle future financial crises. The agreement on ESM reform needs to be finalised in coming months with the adoption of legal texts.

Ministers did not reach a deal to establish a common insurance scheme for bank deposits, considered key to strengthening the euro zone's banking union and bolstering its resilience in the face of financial crises but which remains a highly divisive issue.

EU economics commissioner Pierre Moscovici said he was "very disappointed" by the lack of progress on this matter.

(Reporting by Jan Strupczewski and Francesco Guarascio; Editing by Catherine Evans)

((Francesco.Guarascio@thomsonreuters.com; @fraguarascio; +32 2 287 68 17;))

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