Brussels, 18/05/2010 (Agence Europe) - On Monday evening on 17 May, the Eurogroup held a lengthy debate on the technical modalities for implementing the European financial stabilisation mechanism. Discussions will continue at the end of the week to settle, in particular, the question of activating the “Special Purpose Vehicle”, which will benefit from €440 billion in guarantees from eurozone member states (EUROPE 10137). Jean-Claude Juncker has arranged a meeting of the 16 finance ministers from the eurozone for Friday 21 May and confirmed that certain technical details and legal clarifications are expected in this connection. The president of the Eurogroup declared that “we need expertise from senior officials to prepare this meeting; there is nothing dramatic being cooked up”.
Olli Rehn also played down the difficulties and stated that “with regard to the European financial stabilisation mechanism, we discussed its principles and parameters, in an effort to conclude the technical work soon”. The commissioner for economic and monetary affairs confirmed that “if a country wants to resort to this programme, it will need to have the same kind of financial conditions as those of Greece”, even though the way in which this functions has not yet been totally decided.
The question of the role of national parliaments when producing issue guarantees was the subject of bitter discussions on Monday. Germany particularly insisted upon parliaments having their say whenever the mechanism is activated if a country requests assistance, although a majority wanted a lighter procedure. The French finance minister, Christine Lagarde, said that the debate had been quite “laborious” but that “in the great majority of countries, with the exception of one or two small ones … there is no question of going back to parliament every time there is an activation. This is a guarantee given to the whole programme”, she explained. Juncker sarcastically commented that discussions would continue between Paris and Berlin, although everything appeared to have been decided. The president of the Eurogroup said that this was all the more surprising because on 9 May, France announced that it totally agreed with Germany on the support mechanism. Although the mechanism is in essence intergovernmental, the idea of unanimous approval by eurozone states for each activation of it also appears to be necessary.
With regard to the ceiling for the guarantees by each country, it was decided, according to Lagarde, to use “the one included in the draft German law, which is 120% of the commitment agreed to”. The objective is to have a margin of manoeuvre in the event of a country failing to pay.
So far ministers have, nonetheless, agreed on certain elements in the new structure. The “SPV” (“European Financial Stability Facility”) will be established under the Luxembourg legal system. As planned, the shareholders will be the member states. The role of the Commission will be to ensure coherency between the work of the ECB in collaboration with the IMF.