The Eurogroup meeting will start on Monday, 9 July at 17.00. The European Commission will be represented by Olli Rehn, Vice-President and Commissioner for Economic and Monetary Affairs and the Euro. A press conference is expected to take place after the meeting.
1. ECB Executive Board Member (SOC)
José Manuel González-Páramo’s eight-year term as ECB Executive Board member ended on 31 May 2012.
The appointment of an ECB Executive Board Member is set out in Art 11.2 of the Statute of the ESCB and the ECB. The Council makes a recommendation (with euro area Member States only voting) to the European Council after consulting the European Parliament and the ECB Governing Council. The European Council then takes the appointment decision (by qualified majority, euro area only voting).
Before consulting the European Parliament and the ECB Governing Council, the Eurogroup solicits and reviews applications for a successor. The deadline for submitting candidates was 19 January, 2012. Spain has nominated Antonio Sainz de Vicuña (head of ECB’s legal department) as its candidate while Slovenia has nominated Mitja Gaspari (Minister for Development). Luxemburg has nominated Yves Mersch (Governor of the Central Bank of Luxembourg). The Eurogroup started to review the three applications at its meeting on January 23.
Current composition of the ECB’s Executive Board
Mario Draghi (IT), President
Vítor Constâncio (PT), Vice-President
Jörg Asmussen (DE), Member
Benoît Coeuré (FR), Member
Peter Praet (BE), Member
2. Spain: financial assistance (SOC)
On 25 June Spain formally requested financial assistance for the recapitalisation of financial institutions. Olli Rehn, Vice-President and Commissioner for Economic and Monetary Affairs and the Euro, said: “Restructuring the banking sector is key to reinforce the confidence in the Spanish economy and to restore the conditions for proper access to credit by companies and households, thus for sustaining the recovery.”
The financial assistance will be in the form of an EFSF/ESM loan. The policy conditionality will be focused on specific reforms targeting the financial sector, including restructuring plans which must fully comply with EU state-aid rules. Conditionality will apply to banks being recapitalised and to the Spanish financial sector as a whole, including its supervision and regulatory framework. Against this background staff of the European Commission, the European Central Bank (ECB), the European Banking Authority (EBA) and the International Monetary Fund (IMF) have been assessing the financial sector and its needs.
Vice-President Rehn underlined: “I expect Spain to keep the same determination and the momentum in the reforms that can bring sustainable growth and more and better jobs, as well as to honour its commitments under the excessive deficit procedure. Indeed there cannot be sustainable growth without sustainable public finances, both at national and subnational levels. Progress in these areas will be closely and regularly reviewed in parallel to the financial assistance.”
On 29th June 2012, the European Summit called for a rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain. As work has progressed very well in the meantime, Eurogroup Ministers will exchange views on the draft Memorandum of Understanding laying down the terms and conditions with a view to reach a political agreement.
3. Greece: implementation of adjustment programme and presentation of policy priorities of new government (SOC)
The Finance Minister of Greece will present the policy priorities of the new government. Ministers will hold a first discussion on the results of the fact-finding mission which began on 4 July and which carried out a first assessment of progress in implementation of the second programme
It is recalled that the international assistance loans disbursed so far to Greece amount in total to €148.6 billion. Out of this amount, €73 billion have been disbursed within the first programme (€52.9 billion by euro area Member States and €20.1 billion by the IMF). Under the new programme, the EFSF and the IMF have already disbursed €75.6 billion (€74 billion by the EFSF, €1.6 billion by the IMF; including €25 billion for bank recapitalisation).
4. Cyprus: adjustment programme (SOC)
On 25 June Cypriot authorities requested financial assistance from euro area Member States in view of the challenges that Cyprus is facing, in particular due to distress in the banking sector and the presence of macroeconomic imbalances. A technical fact-finding mission to Cyprus started early this week involving staff from the European Commission, the European Central Bank and the International Monetary Fund. The troika (EC, ECB and IMF) will present a preliminary report to the Ministers.
Once the assessment of the needs is complete, the euro area financial support would be provided in the framework of a comprehensive adjustment programme, building on the measures already taken by the Cypriot authorities and the recommendations put forward by the European Commission on 30 May under the European Semester. The programme will be negotiated by the Commission, in liaison with the ECB, with the Cypriot authorities and the IMF. After an agreement has been reached with the Cypriot authorities, the programme would be endorsed by the subsequent Eurogroup, in line with national procedures, on the basis of an assessment by the Commission, in liaison with the ECB, and the IMF, of the financing needs and the conditionality that shall accompany the assistance.
5. ESM matters (SOC)
Following-up on the mandate provided by the Euro Area Summit on 29 June, ministers will take stock of progress with the adoption of the remaining implementing acts necessary to have the European Stability Mechanism (ESM) fully operational from the start. For example the investment policy guidelines, the pricing policy guidelines and the staff rules still need to be adopted.
Discussions will also include the state of play of the ratification process of the underlying ESM Treaty in national parliaments. The ESM Treaty will enter into force as soon as participating Member States representing 90% of the authorized capital have submitted their instruments of ratification (to date 13 out of the 17 euro area Member states have ratified the ESM Treaty and the ratification process is expected to be completed shortly in all Member states.)
6. Follow up to the formal June European Council and the Euro Area summit (SOC)
The Eurogroup will discuss the decisions taken by Euro Area Summit on 29 June. According to the statement of the Euro Area Summit, the future ESM could have the possibility to recapitalize banks directly once a single supervisory mechanism is established for banks in the euro area. This aims at breaking the vicious circle between banks and sovereigns as the ESM loans would not add to the debt burden of countries facing intense market pressure. Any financial assistance would be subject to appropriate conditionality. Euro area Member States also affirmed their commitment to ensure the financial stability of the euro area, in particular by using the already existing instruments of the EFSF and the future ESM in a flexible and efficient manner in order to stabilize markets for Member States that are respecting their commitments under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalance Procedure.
The Commission is already working on a proposal for a supervisory mechanism for the euro area, involving the ECB on basis of article 127(6) of the Treaty. Ministers will have an exchange of views on the work streams and work methodologies that follow from the decisions made.
6. Miscellaneous (SOC)
a. Eurogroup Presidency (SOC)
In view of the expiration of the current mandate of the President of the Eurogroup Ministers will discuss the appointment of a new President.
b. Managing Director and Chairman of the ESM Board of Governors (SOC)
In view of the creation of the ESM Ministers will discuss the selection of a Managing Director for the ESM as well as the Chairman of the ESM Board of Governors.
COUNCIL OF ECONOMIC AND FINANCE MINISTERS (ECOFIN), 10 July
The EU’s Council of Economic and Finance Ministers will start on Tuesday, 10 July at 10.00. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro and Michel Barnier, Commissioner for Internal Market and Services. A press conference is expected to take place after the meeting.
1. Economic Governance (two-pack) (SOC)
On 23 November 2011, the Commission adopted two proposals for Regulations – the so-called “two-pack” – to reinforce economic and fiscal surveillance in the euro area (MEMO/11/822). The “two-pack” builds on the “six-pack” that entered into force in December 2011 to strengthen economic governance in the fiscal and macroeconomic field.
The first Regulation of the “two-pack” aims to strengthen budgetary surveillance for euro area Member States and to reinforce the monitoring of those under the Excessive Deficit Procedure. It is also a concrete way to apply some of the commitments of the Treaty on Stability, Coordination and Governance, in particular those of the Fiscal Compact.
The second Regulation aligns and better integrates the principles used in providing financial assistance via instruments outside of the Union framework with the EU Treaty framework.
The first Trilogue with the European Parliament and the Council of Ministers is scheduled for 11 July, with a view the ensuring that the legislative process for these two important proposals is completed swiftly. The Commission services stand ready to assist the Cypriot Presidency.
Olli Rehn, Vice-President and Commissioner for Economic and Monetary Affairs and the Euro, recently said: “Over the last two years we have been actively building up the new architecture of Economic and Monetary Union. The European Semester combined with the six-pack has been a major step forward. A further step, the two-pack, is on the table. It synchronises further our governance tools. We must implement the governance framework steadily to demonstrate that it can deliver better policy outcomes.”
2. Revised Capital Requirement Rules (CRD IV) (SdR)
The European Commission brought forward a proposal composed of both a Regulation and a Directive aimed to strengthen the solidity, security, and resilience of European banks. This newest proposal replaces the former Capital Requirements Directives with the goal of taking further steps to ensure the soundness of the EU banking sector while simultaneously enabling banks to continue financing economic growth.
The proposal is especially important in light of the recent crisis – one which was brought about by weak, poorly-coordinated global bank regulation and supervision.
To combat these systemic weaknesses, the Commission’s proposal aims to arm banks to resist future shocks by requiring them to hold increased amounts of capital, both in terms of quantity and quality. These increased capital standards will be in accordance with the international standards on bank capital established in the G20’s Basel III agreement. In addition to increasing capital requirements, the Commission’s proposal also lays out the creation of a stronger governance framework for banks – one that would give supervisors greater powers, both in terms of monitoring and sanctioning banks. The Commission is proposing the creation of a Single Rule Book for banking regulation that will allow for increased transparency and enforcement and the common application of rules throughout the Single Market. The Commission hopes that the co-legislators will reach a final agreement as rapidly as possibly in order to ensure a rapid entry into force of the new rules. To this end, the Commission stands ready to contribute to the negotiations in a pragmatic matter.
3. Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms (SdR)
On 6 June 2012, the European Commission adopted a proposal for EU-wide rules on bank recovery and resolution. These rules will ensure that in the future authorities will have the means to intervene decisively both before problems occur and early on in the process if they do. Furthermore, if the financial situation of a bank deteriorates beyond repair, the proposal ensures that a bank’s critical functions can be rescued while the costs of restructuring and resolving failing banks fall upon the bank’s owners and creditors and not on taxpayers.
This proposal can be a first step towards an EU resolution fund. The Commission proposes the setting up of funds at national level which would interact and have to lend to each other under certain conditions and when necessary in order to constitute a European system of resolution funds. See MEMO/12/416.
It is recalled that together with proposals on banking supervisory mechanism, proposals for more integrated deposit guarantee funds and banks resolution mechanisms are essential elements of the future banking union, that the EU is now committed to putting in place.
4. Presentation of the Cyprus Presidency Work Programme
Cyprus took over the EU presidency on 1 July. The Cyprus presidency will present its priorities in the area of economic policy to the ECOFIN Council, including the effective implementation of the recently adopted initiatives for improving economic governance, ensuring fiscal consolidation, strengthening the European financial services framework and accelerating structural reforms, with a view to enhancing growth potential and social cohesion.
5. Follow-up to the European Council on 28-29 June 2012
Ministers will be duly informed on the discussions of the Eurogroup on the issues relating to the outcome of the Euro Area Summit, in particular with regard to increasing the flexibility of EFSF/ESM.
In addition, the Heads of State or Government of the EU Member States agreed to pursue the work that has been prepared by the President of the European Council together with the President of the Commission, the President of the Eurogroup and the President of the ECB in terms of establishing a genuine Economic and Monetary Union, which includes an integrated financial framework, an integrated budgetary framework, an integrated economic policy framework and strengthened democratic legitimacy and accountability.
Ministers will exchange views on what could be done within the current treaties and will take part in the reflections which should nourish the interim report to be presented by the four presidents in October.
Moreover, the Heads of State or Government decided on a “Compact for Growth and Jobs”, which includes a section on the financing of the economy. Ministers will take stock of the implementation of this set of measures (e.g. increase of the capital of the European Investment Bank (EIB), projects bonds pilot phase – see MEMO/12/525 – , re-allocation of structural funds, development of the European Investment Fund’s (EIF) venture capital activity).
With regard to project bonds, Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro, recently said: “Project bonds are a concrete demonstration of how the European Union can deliver for its citizens. They show how scarce public resources can be used to unlock private investment and thereby mobilise projects of European importance that would otherwise not be launched because of current uncertainties.”
6. European Semester (SOC)
a) Draft Council Recommendations on the national reform programmes 2012 to each Member State and draft Council Opinions on the updated stability or convergence programmes
b) Draft Council Recommendation on the implementation of the broad guidelines for the economic policies of the Member States whose currency is the euro
Ministers are expected to adopt the country-specific recommendations that the Commission has presented on 30 May under the European Semester 2012.
The European Semester started with Commission guidance on the policy priorities in the Annual Growth Survey (MEMO/11/821). This was followed by discussions in Council and Parliament and the presentation of Member States’ stability or convergence programmes and national reform programmes1. On 30 May the Commission proposed country-specific recommendations for each Member State and a recommendation for the euro area as a whole.
The June ECOFIN and EPSCO Councils have discussed the country-specific recommendations and the Heads of State or Government generally endorsed them at the European Council on 28-29 June. The European Semester will be closed by the Council adoption of the recommendations at the July ECOFIN. This leads to the “national semester”, when Member States draft their budgets and policy plans taking account of the EU guidance (IP/12/513, MEMO/12/386).
The focus of the 2012 European Semester was on assessing progress in the implementation of the 2011 country-specific recommendations. Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, said: “Member States have taken last year’s recommendations seriously. Efforts have been made to implement them, but progress is still very uneven between Member States, and more needs to be done.”
In case the recommendations were not fully followed, the Commission proposed taking further measures. In general, significant progress was made regarding public finances, although the composition of consolidation was not always growth-friendly. The adjustment of macroeconomic imbalances is progressing both in deficit and surplus countries, while the durability of the adjustment needs to be ensured. Implementation of structural reforms has been slow in most countries that have so far not faced market pressures.
With the six-pack in force since end-2011, the Macroeconomic Imbalance Procedure and strengthened fiscal surveillance were applied for the first time during the 2012 European Semester. All recommendations made in the context of the preventive arm of the Macroeconomic Imbalance Procedure are included in the set of country-specific recommendations for the concerned Member States. These encompass, inter alia, recommendations for correcting high public debt, improving external competitiveness and addressing high unemployment. The six-pack also puts on obligation on the Council to explain its motives in case it modifies the recommendations which the Commission has proposed.
Following the adoption of the recommendations, the Commission will follow-up on the implementation of the reforms on a continuous basis.
In the margins of the ECOFIN Council, a partnership agreement between the Government of the Republic of Latvia and the European Commission for the organisation of information and communication campaigns on the changeover to the euro in the Republic of Latvia in the framework of the information and communication strategy on the euro and Economic and Monetary Union will be signed.