Brussels, 30/09/2011 (Agence Europe) - EU27 finance ministers will be meeting in Luxembourg on Monday 3 and Tuesday 4 October 2011 to discuss the sovereign debt crisis in the eurozone and try to convince the United Kingdom to agree to a compromise on the draft EU legislation on derivatives.
Greece's international creditors (the European Commission, the European Central Bank and the International Monetary Fund) have sent a fact-finding mission to the country but the experts are not expected to finish their work for some time so Eurogroup will not be able to decide on whether to authorise the payment of the sixth instalment of aid to Greece (EUR 8 bn under the first bailout package), but as soon as the fact-finders' report becomes available, eurozone finance ministers will meet up to enact between now and the European Council on 17 and 18 October 2011, possibly on 13 October. A diplomat said the meeting was likely to be at some point between 3 October and 17 October.
The eurozone finance ministers will be examining ratification of the 21 July decisions about the second Greek bailout and giving the EFSF bailout fund greater powers. After ratification by Germany and Estonia on Thursday and Austria on Friday, only three member states now need to ratify the decisions, namely the Netherlands, Malta and Slovakia. The vote is expected to be tight in Slovakia where the government faces hostility from the SaS liberal party (which is a member of the coalition government), which means it does not have the automatic majority needed to push ratification through. EU Economic and Monetary Affairs Commissioner Olli Rehn pressed home that there was no Plan B and all countries were in the same boat. All eurozone nations have pledged to ensure the single currency's financial stability and giving the EFSF greater powers is part and parcel of this, he pointed out. Asked whether the ministers on Monday would discuss future changes to the EFSF to make it more effective (allowing it to use leverage, for example), a diplomat said this was not the time or the place and would be pointless because the 21 July decisions have not yet been implemented so it was too early to already consider replacing them.
The ministers are expecting their Greek counterpart to give a progress report on austerity measures introduced to help the country meet its economic and budget commitments for 2011 and 2012. Venizélos will also discuss private sector involvement in the second bailout. At the end of July 2011, the private sector agreed to participate, on a voluntary basis, in the bailout costs by agreeing to a 20% cut in the value of Greek bonds. It is estimated that this would amount to a €37 bn cut over 2011-2014. A diplomat said that everything had been worked out and rules were attached, so there was no need to alter the agreement (referring to rumours circulating about talks on getting increased private sector involvement). The Greek government is also planning to buy up its own bonds to reduce the total debt, which is currently close to EUR 350 bn (150% of GDP). The question of the collateral demanded by Finland for its share of the second bailout will be discussed on Monday and diplomats suggest that a solution will be found shortly.
US-style economic recovery programme just not possible. The ministers will discuss progress in the excess deficit procedures (currently open against 23 member states) on the basis of a European Commission report, but are not expected to publish a report on their review. The top priority as far as the EU is concerned is budget consolidation, unlike in the United States, where an economic recovery programme is promoted. A diplomat commented that the eurozone simply did not have the cash to launch this type of programme to boost economic growth. A further priority in Europe is the introduction of structural reforms. Countries whose economic forecasts have been revised down will be expected to announce further austerity measures. The few member states which are not in budget deficit (Finland and Estonia, for instance) have a slight degree of room for manoeuvre and could act as “economic stabilisers”, in the sense of allowing the economic downturn to take its course without cutting expenditure or increasing taxes.
Derivatives. Twenty-six member states have accepted a Polish Presidency compromise on the draft regulation on derivatives (see EUROPE 10412), leaving the United Kingdom isolated in its opposition. One of the areas of disagreement relates to the measures concerning centralised clearing houses/counterparties (CCPs) for standard derivatives (not OTCs), and the British seem to have won here because the European Securities and Markets Authority (ESMA) will not be responsible for monitoring CCPs, but rather the member states, although the ECB will have the right to scrutinise affairs.
The 26 countries are reported to be tempted to force the legislation through as a qualified majority deal without the UK's agreement, but diplomats say that it is in nobody's interest to act against the will of the one member state where half of all the derivatives market is located because it could encourage the UK to undermine the Franco-German move to introduce a tax on financial transactions. After making its views clear on Tuesday, it is possible that the UK will let the legislative procedure continue and try to wield influence in informal talks with the EP once agreement in principle has been reached by the Council of Ministers.
Stability and Growth Pact. The ministers will mark their formal agreement to the changes in the Stability and Growth Pact a week after the deal was approved at the European Parliament (see EUROPE 10462). The budget surveillance rules have been tightened up and debt reduction targets set. A new macroeconomic surveillance system has been introduced for both countries in deficit and countries in surplus. It will be possible to fine or otherwise penalise eurozone countries breaking the rules in a more automatic manner earlier in proceedings. It is the extent of wriggle room to be left to the member states that was the toughest area of the negotiations between the Council of Ministers and the EP as the latter wanted the Commission to be given the power to take action under the “preventive” arm of the SGP.
G20. Ahead of the G20 Finance Summit in Paris in October, the ministers will set out the views that European G20 members will be arguing at the summit. French Economy Minister François Baroin will set out the aims that the French presidency of the G20 wants to achieve, such as regulations to restrict derivatives deals and pay and bonus policies. At the G20 Summit in Cannes in November, the EU will find it difficult to argue the cause for a finances transactions tax if the UK and the Netherlands are still fundamentally opposed to the idea.
The ECOFIN Council will decide on a financial negotiating mandate for the UN climate change conference in Durban, South Africa, in December. (MB/transl.fl)