By Jan Strupczewski and Francesco Guarascio
TALLINN (Reuters) - The euro zone must identify its problems, then see what changes to its institutions are needed to fix them, euro zone finance ministers said on Friday.
Their discussions in the Estonian capital of Tallinn follow differing proposals from France, Germany and the European Commission to revamp the institutions of the 19-country euro zone after Britain leaves the European Union in March 2019.
The proposals include creating a pan-EU or euro zone finance minister, setting up a separate euro zone budget or reserving a part of the existing EU budget for the currency union, and setting up a euro zone parliament alongside or within the existing EU parliament of all 28 EU members.
"I think we should start from what the problem is and end with an institutional debate," Jeroen Dijsselbloem, the chairman of euro zone finance ministers, said.
"Instead of having a debate mainly about the institutional side, (we should have) a debate about what is lacking in the economic and monetary union, in terms of resilience, competitiveness, solidarity," he said.
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The European Commission on Wednesday called for a pan-European finance minister in charge of all forms of EU or euro zone financing via the EU budget, not just for the euro zone.
In the Commission's view, the pan-European minister should also preside over the euro zone bailout fund ESM, which is now a separate institution set up by euro zone governments. The ESM itself would be transformed into a European Monetary Fund.
But the job of such a European Minister of Economy and Finance would not be created before 2025, Commission Vice President Valdis Dombrovskis told a news conference in Tallinn.
The Commission does not want a special euro zone parliament, however, stressing the need for unity among the 27 countries that will remain in the EU after Britain leaves. It called for the countries still outside the euro zone to join quickly.
DIFFERENT STROKES
France has a different view, however. It wants a large, separate euro zone budget financed from a special tax, a finance minister specifically for the euro zone and a separate euro zone parliament to which the minister would be accountable.
German Chancellor Angela Merkel appeared to support the Commission's idea of a pan-European finance minister, but noted the terms used were still undefined and said she did not see big differences between the Commission and French ideas.
She also backed financial support for EU countries that implement reforms -- one of the possible uses of the euro zone budget -- but shunned the French idea of financing this with a special tax.
"I don't see for the moment a convincing case for a European tax," she said.
Nor is there agreement on whether all the changes to the euro zone should be done through a separate treaty between governments, or by changing the European Union treaty.
The difference is more than just a technicality, because an intergovernmental treaty would be faster, involve only euro zone governments and leave all powers with these governments.
Changes through the EU treaty would require more time and mean non-euro zone countries and the European Parliament would have to agree, too. The powers of the new euro zone institutions would be shared with EU institutions, which are sometimes mistrusted by some national governments.
French President Emmanuel Macron is to present his views on the future shape of the euro zone on Sept. 26.
Euro zone ministers agree that a budget for the single currency area would help counter external shocks which hit just one or a few euro countries. But there is no agreement on its size or what it should be spent on.
Macron has mentioned such a budget could be several hundred billion euros. The head of the ESM bailout fund, Klaus Regling, suggested a figure of 1-2 percent of euro zone gross national product, which would mean 100-200 billion euros.
The gap with the expectations of Germany seems to be large because Berlin has signaled it was thinking about a budget in billions of euros, but in single digits.
If the euro zone budget were to be part of the overall EU war chest it would have to be much smaller than what France or the ESM are suggesting, because the EU budget itself is around 1 percent of the EU's gross national income.
HOW TO SPEND IT
Ideas for spending such money range from using it for investment during economic downturns, supporting structural reforms, spending it on unemployment insurance or putting it in a general rainy day fund.
Accompanied by strict adherence to the EU's fiscal rules, such a budget would ease the pressure on European Central Bank monetary policy as the only tool to counter crises, ECB Vice President Vitor Constancio said.
He said a budget would play an important stabilisation role and other institutional changes, such as appointing a finance minister, should only be considered once there was a deal on the budget.
French Finance Minister Bruno Le Maire, often mentioned as the likely next chairman of the euro zone finance ministers' group after Dijsselbloem steps down in mid-January, said he hoped the euro zone would agree on further integration within a few months.
Le Maire said now was the time to decide on the reforms because the economy was growing, France had a reform-minded president and Germany would have a new mandate for changes after its Sept. 24 elections.
Euro zone officials said there was consensus among the ministers that the window of opportunity for reforms was now and was relatively short -- 12 to 18 months.
(Reporting By Jan Strupczewski and Philip Blenkinsop, editing by Larry King and Hugh Lawson)