Brussels, 08/10/2013 (Agence Europe) - The Eurogroup meeting in Luxembourg on Monday 14 October is expected to postpone decisions on countries in receipt of aid, but will discuss state aid under Banking Union.
Back from Athens, the troika of lenders (the European Commission, the European Central Bank and the International Monetary Fund) will brief ministers about how things stand in Greece. The Greek government has issued economic forecasts, expecting growth to return in 2014 after six years of recession in a row (see EUROPE 10937), but the payment of the remaining €1 billion of aid will not be made until all the conditions have been met (privatisation and a mobility programme for civil servants). A European source said that at this stage, there would not be any detailed discussion about how to deal with any budget shortfall because the economic figures for 2013 have not been finalised and the results of the stress tests on Greek banks are not expected until the end of the year.
Portugal's implementation of its aid programme is broadly on track, but the talks with the troika during the recent mission to Lisbon are described as “difficult” due to the public deficit reduction target being kept at 4% of GDP (the Portuguese government tried to negotiate an easing of the target to 4.5% of GDP), explained the source, saying that Lisbon would be able to meet its budget targets if it remained determined to do so (see EUROPE 10936). No decision on payment of further aid will be taken until November, said the source, adding that it was much too soon to start talking about an exit from the aid programme, scheduled for the spring of 2014.
On Tuesday, the Portuguese central bank increased its economic forecasts due to a rise in exports, now expecting a recession of 1.6% of GDP in 2013 rather than 2%. Next week, the government will unveil its draft budget for 2014, which will set out how to make up for the savings due to be made in measures that the country's constitutional court has ruled unconstitutional.
The end of the Irish aid programme is scheduled for the end of 2013 and the last batch of aid will be paid in November. The question of aid from Europe to help Dublin return smoothly to the money markets will not be discussed until after publication of the results of the Irish bank stress tests currently being carried out. Ireland's budget trajectory and current market conditions suggest that it is unlikely to need any such aid for a smooth transition. A high-ranking official said that the conditions facing Ireland were so favourable that a preventive credit line under the ESM or the ECB's OMT programme were not needed.
The Spanish programme is also on track. It is based on restructuring the country's banks in return for aid of €40 million, and exit from the problem will be smooth. The source said that it is felt that no follow-up measures should or will be needed (see EUROPE 10932).
The Cypriot programme is not on Eurogroup's agenda.
Slovenia has recently admitted turning to aid from the ESM to bail out its banks (see EUROPE 10937). The results of the Slovenian bank stress tests will be known in a fortnight's time, explained the source, and will determine whether or not Eurogroup will discuss the matter in November.
Banking Union. The eighteen eurozone finance ministers will continue to work on the supervision and resolution side of Banking Union.
The question of backstops as a last resort for filling bank capital gaps as they become known in 2014 from the analyses being carried out by the ECB and European Banking Authority will be the subject of a Eurogroup statement later this year. Ministers will discuss the question of backstops to wind up failing banks before a European resolution fund (as suggested by the European Commission) or a network of national bank resolution funds (as suggested by a number of countries, including Germany) are up and running.
In both cases, the European Stability Mechanism may be able to intervene, and reportedly this would not cause too many problems for eurozone nations, as the ESM runs under an intergovernmental treaty. More complex legal and institutional questions arise if intervention involves banks from non-euro countries that have decided to join Banking Union. (MB/transl.fl)