Brussels, 17/06/2011 (Agence Europe) - On Sunday 19 and Monday 20 June, the finance ministers of the eurozone will be at the bedside of the Greek patient to find a solution, for the short and medium terms, to the sovereign debt crisis of the eurozone. On Monday, the Ecofin Council will take stock of negotiations on the economic governance legislative package and finalise work on the European rescue funds. It will conclude a political agreement on reinforcing the national deposit guarantee systems. The ministers will also tackle the national measures adopted in response to problems certain banks may face when the results of the banking “stress tests” are published in July.
Greece. On Sunday, the Eurogroup is expected to approve the payment of the fifth tranche of aid of €12 billion provided for in the current Greek austerity programme, to allow Athens to meet its financial requirements until September. It will also seek to make progress on the details of a second bailout, ahead of definitive decisions to be taken at the Eurogroup meeting of Monday 11 July. This two-stage procedure has the approval of Economic and Monetary Affairs Commissioner Olli Rehn (EUROPE 10399).
The meeting of the Eurogroup will provide the opportunity to show that Europe stands united and together with Greece, to verify the efforts being made by Athens, to make sure that the seventeen agree on the procedure to follow and to continue the legal transcription of the political principles, a diplomatic source told us.
The second package of aid for Greece will include the voluntary participation of the private sector, whilst taking steps to avoid causing the country to default. The financial envelope will be made up of public aid from the Europeans (continuation of current bilateral loans and/or recourse to the EFSF) and the IMF, revenue from the Greek privatisation programme and the voluntary participation of the private sector. This aid is subject to the adoption by the Greek government, by the end of this month, of additional austerity measures (€28 billion between now and 2015). These sacrifices, which have been rejected by the population, will be vital to achieve the medium-term budgetary objectives: bringing public deficit down from 10.5% to 7.5% in 2011 and to 2.6% by 2014 (EUROPE 10398). The principal Greek political parties have been asked to reach a national consensus on this austerity plan.
Discussions will concentrate mostly on the terms and conditions for the involvement of the private sector. On Friday, German Chancellor Angela Merkel and French President Nicolas Sarkozy defined four principles: - the involvement of the private sector will be voluntary; - it must not lead to a “credit event”; - the wording retained will have the approval of the ECB; - a decision will be taken as soon as possible, in July.
Rescue fund. The ministers will finalise their work on developing European intergovernmental rescue funds. The EFSF facility, which was used to support Ireland and Portugal, will see its effective loan capacity rise to €440 billion, probably in the form of increased national guarantees. The European Stability Mechanism (ESM), which will replace the EFSF in mid-2013, will be able to lend €500 billion and provide for the private sector to be involved, on a case-by-case basis. The EFSF and the ESM will be authorised to buy sovereign debt instruments of struggling countries on the primary market. Any involvement of the European funds will be subject to strict conditions.
Stability and Growth Pact. The ministers will take stock of negotiations with the European Parliament on the package of six legislative texts reinforcing economic governance in Europe. After the extremely useful meeting of the inter-institutional trialogue on Wednesday (EUROPE 10399), a handful of questions remain open. The most political of these relates to the application of the so-called “reverse qualified majority” procedure to certain decisions to be made under the preventative plank of the Stability and Growth Pact. According to the EP, recourse to this procedure would reinforce the automatic nature of the decision and reduce political bargaining. The Council appears to be digging its heels in over the point.
Also pending are the following issues: - the precise wording and entry into application of the “economic dialogue” by which the member states would come before the EP to explain their actions, a little like the monetary dialogue which involves the presidents of the ECB and the Eurogroup; - the nature (proposal or recommendation) of the texts submitted by the Commission.
At the ambassador-level meeting on Friday, Germany made efforts to reopen discussions on the symmetry of controls on macroeconomic imbalances. It stressed the difference of treatment between surpluses, which characterise it, and deficits, although the embryonic compromise already provides for surpluses, unlike deficits, not to be subject to sanctions. Depending on the signals sent out by the Council, the committee on economic and monetary affairs of the EP may reach a political agreement on this dossier on Tuesday 21 June, to be confirmed by the mini-plenary of the EP on 22 or 23 June.
Despite the limited time available for analysis, the ministers are also expected to endorse the recommendations which the Commission has just presented on the national stability and growth programmes and the national economic reform programmes in the framework of the European semester (EUROPE 10393).
Deposit guarantee. On Monday, the Ecofin Council will approve the political agreement in principle on the proposed directive to modify the framework of the national deposit guarantee systems (EUROPE 10391). Under the compromise, the national regimes would be financed ex ante to a level of 0.5% of the total of deposits covered up to 2027. A number of countries (Belgium, Spain, Finland, Portugal and Romania) argued in favour of a threshold of 1.5% of deposits covered, the same figure retained by the competent committee of the EP in its adoption of the Simon report (EUROPE 10385). The time limit for guaranteed deposits to be paid (at least €100,000 per saver) will be 20 days, far more than the seven days recommended by the Commission. On this basis, the forthcoming Polish Presidency will be able to start talks with the EP.
SEPA. The ministers will confirm the political agreement on the proposed regulation bringing in on 1st February 2013 the move to credit transfers corresponding to the standards of the planned Single Euro Payments Area (SEPA) (EUROPE 10399). The date of 1st February 2014 has been laid down for the move to SEPA direct debits. The multilateral interchange fees applicable in certain countries (Germany, France, Spain, etc) to pay for direct debits will be phased out by 2018, rather than 2012 as previously reported by EUROPE.
Credit derivatives. Finally, the Hungarian Presidency will content itself with holding a public debate on the proposed regulation creating a framework for derivative financial products, as the national positions are too far apart for any hope of a political agreement on Monday. The main stumbling blocks are: - the division of competencies (national supervisors, College of supervisors, ESMA) for the authorisation and supervision of the central counterparty clearing (CCP) responsible for compensating standardised derivative financial products; - the scope of application of the regulation: the United Kingdom, standing alone against the majority of countries, is pleading for all derivative products, not just standardised products, to be traded on regulated stock exchange platforms; - France is calling for CCPs to have access to central bank cash resources, given their systemic importance. Under these circumstances, the EP could be tempted to vote in plenary on the draft Langen report, thereby paving the way for a second reading (EUROPE 10386).
The ministers will examine a draft decision revising the mandate of the EIB in its loan activities to third countries, the issue of Iceland's eligibility for this programme having been raised. They will also adopt conclusions on the quality of national statistics on the implementation of the code of conduct on harmful tax practices in a corporate taxation context. (M.B./F.G./transl.fl)