Brussels, 14/02/2014 (Agence Europe) - On Monday 17 and Tuesday 18 February, European finance ministers will examine the question of the single resolution mechanism (SRM) for eurozone banks after the Eurogroup looks at the situation in countries in receipt of financial aid.
The Greek Presidency is hoping to obtain a revised negotiating mandate on Tuesday so that progress can be made in the interinstitutional trialogue talks on bank resolution (part of banking union) with the European Parliament, scheduled for Wednesday 19 February. It is confident that such a mandate will be forthcoming, given the talks at Coreper among member states' representatives to the EU on Thursday (see EUROPE 11018). A high-ranking European official said the EU28 understand that they have to budge, but he rejected the idea of a qualified majority vote to win over the doubtful countries and enable the draft legislation to be adopted before the end of the current European Parliament in April.
On Monday, ministers will discuss the intergovernmental agreement to establish the single resolution fund (SRF). The Council of Ministers says the fund must initially comprise national compartments that can then be pooled over a ten-year transition period. The EP is categorically opposed to an intergovernmental system for establishing the fund because it deprives Parliament of its prerogatives. Instead, the EP wants a fund to be set up that has sufficient funding right from the start, and wants it to be set up in 2016 (see EUROPE 11013).
Based on a document by national experts (see Twitter @AgencEurope), the ministers will discuss the financing of bank resolutions during the SRF transition phase, and the sequence of instruments that can be used once the national compartments and the pooled section of the fund have run out. Should the fund be allowed flexibility for the choice of other instruments, like “ex-post contributions” from banks and inter-lending by national compartments?
As suggested by the ECB, some countries (France, for example) want the SRF to be able to borrow directly from the money markets and possibly be granted state guarantees so it can raise funds at a low interest rate, but this would have an impact on public finances. The granting of a bank licence to enable the SRF to borrow cash from the ECB is not on the negotiating table at this stage.
Another question to be answered is the length of time over which the fund will be pooled. Reducing the transition phase would speed up the process of transferring the fund to the Community regulation, but this depends on how fast the fund can be financed by banks. The ministers will discuss the option of member states having the right of scrutiny over decisions about the transfer of finance from one national compartment to another, and will also discuss what is to be done with countries joining the SRM at a later date.
On Tuesday, the ministers will talk about the negotiating with the EP on the draft regulation to establish the SRM. The Greek Presidency has identified areas where it says the ministers must change their approach (see EUROPE 11018). It points out that the trialogue talks on the regulation have to be able to impact on the intergovernmental agreement's duration and scope. The EP is insisting that a credible backstop is needed for the SRF right from the start.
Direct recapitalisation. The Eurogroup will continue to work on the details of direct recapitalisation of solvent banks by the European stability mechanism (ESM) ahead of the results of the bank assets solidity tests by the ECB and the European Banking Authority. Agreement is expected by April. A progress report will be given on the talks on the single bank supervision mechanism (SSM) at the ECB that will directly supervise the 130 biggest banks in the eurozone from November 2014 onwards.
The ministers will publish a conclusions document on the Annual Growth Survey used by the member states to draw up stability and structural reform programmes as part of the European Semester. They will decide on a position to be defended at the G20 Finance Summit in Sydney, Australia, on 21-23 February.
Greece. It is now clear that the troika of lenders (European Commission, European Central Bank and International Monetary Fund) will not return to Athens until Monday at the earliest, although they are expected to return shortly after the Eurogroup meeting where, a European official says, the ministers will simply discuss the situation in the country. A preliminary decision might be taken at the Eurogroup meeting on 10 March. The source expressed surprise at the confidence of the Greek government about the scale of the primary budget surplus for 2013 (not including debt servicing). The source said that Greek finance minister Yannis Stournaras has said that the figures to be published shortly were a “very big surprise” but added that it was “astonishingly early to have an opinion, because Eurostat is working at its fastest” and the official figures are not expected until the end of April.
Cyprus. No decisions are expected on the Cypriot programme, warned a high-ranking EU official on Wednesday (see EUROPE 11018). At the Eurogroup meeting in March, the ministers are expected to endorse the payment of the aid of €150 million from the ESM expected in April, and the €86 million from the IMF, as long as the two final prior actions are implemented.
For Portugal, there will be a discussion of the aid programme exit strategy at a meeting of European finance ministers in Athens in early April.
FTT. Although the financial transactions tax (FTT) to be introduced by eleven member states using enhanced cooperation is not on the agenda, work is continuing on technical aspects of its introduction, particularly for derivatives. Taxation of these products, the first of its kind, raises particular technical problems and is generating huge resistance in some of the financial world. The French and German finance ministers are hard at work at the Franco-German economic council to come up with proposals that can get round the various difficulties in the hope that the FTT can be adopted in 2014. (MB/EL/FG/transl.fl)