Brussels, 18/02/2014 (Agence Europe) - The Tuesday 18 February Ecofin Council decided not to give the Greek Presidency a new negotiating mandate for talks with the European Parliament on Wednesday on the single bank resolution mechanism (SRM).
The Greek Presidency of the Council of the EU does not have a new official negotiating mandate, but it has been given the go-ahead to explore new ideas with a view to reaching a compromise with the EP, said Greek Finance Minister Yannis Stournaras.
The European Commission is concerned about the paucity of progress. In the circles of EU Internal Market Commissioner Michel Barnier, who talked of “constructive ambiguity” among the member states, the danger is acknowledged of the talks going off track were the EP to rebel, annoyed after being kept waiting for two months and given the approach of the European elections. The Commissioner is reported to think that the EP might accept a limited intergovernmental agreement as long as other proposals are made in return. The president of the EP, Martin Schulz (Germany), recently expressed flexibility along these lines in an article in German newspaper Die Welt, much to the disgust of the two EP negotiators -Sven Giegold (Greens/EFA, Germany) and Sylvie Goulard (ALDE, France) - who accuse him of simply handing over the EP's democratic rights to the Council.
During the debate, the ministers confirmed a desire to reach a final agreement early enough for the EP to be able to endorse the deal at the final plenary of the current parliament, in April. We definitely want a solution before the elections, said Germany's Finance Minister Wolfgang Schäuble, but the member states made it clear that they are not prepared to alter the structure of the agreement they reached in December.
It was Germany that insisted on the intergovernmental agreement for setting up the single resolution fund (SRF) to help finance the winding up of failed banks and it will not drop the idea. Some delegations, France for example, want the agreement to be as limited as possible. On Monday evening, the ministers discussed a draft intergovernmental agreement and reached agreement on some areas, said the head of the Eurogroup, Jeroen Dijsselbloem, who chaired the talks (see EUROPE 11019), mentioning loans between national compartments of the SRF (which is being set up in separate sections that will gradually merge), the sharing among member states of the cost of winding up a bank and how countries that join the SRM at a later date are to be dealt with.
The ministers confirmed the use of bail-ins to make shareholders and other lenders to banks responsible before any public money is forthcoming. The bail-in rules are needed for 2015 or 2016, said Schäuble, stressing that the final tab would have to be borne by the financial industry.
Areas to be explored. Stournaras said the member states understood the need to demonstrate flexibility in the talks with the European Parliament and listed areas where the member states could do so, such as speeding up the pooling of the SRF; letting the SRF borrow from the money markets; restricting the Council of Ministers' decision-making powers for bank resolutions; giving the ECB a greater role in deciding when a bank needs to be wound up; limiting the criteria for the bank resolution board deciding on bank resolutions; and greater clarity about how banks' contributions to the SRF are to be calculated.
The member states say the SRF would have a budget of between €55 billion and €60 billion and would be divided up into national compartments that would then gradually be pooled. In order to reassure the EP, pooling of the fund could be speeded up, thus reducing the scope of the intergovernmental agreement. In this case, should the speed at which banks are to contribute to the fund be laid down? Ireland says yes, Germany and Austria say no. Barnier says not necessarily. The commissioner suggests a seven-year phase-in for the fund's financing and pooling, and allowing a speedier pooling at the beginning.
Dijsselbloem says one important thing to be sorted out is ensuring that the SRF has enough cash from day one. He said it should be allowed to borrow from the markets, an idea also suggested by the ECB vice-president, Vitor Constâncio. France and Belgium agree. French Economy Minister Pierre Moscovici said on Monday evening that introducing the capacity to borrow money did not seem to him to contradict the agreement reached at the Ecofin Council in December. Dijsselbloem said that, if the SRF is to be allowed to borrow money, then “national guarantees” would have to be provided during the SRF's phase-in period.
Italy raised the question of the SRF's backstop to ensure it has enough cash during the transition phase. Austria said the European stability mechanism (ESM) could provide the backstop and the faster the pooling of the fund, the less it would be needed. Rather than focussing on the compartments, it would be better and simpler, said Austria, to focus on the timetable. Schäuble commented that there was no point talking about a “common” backstop. (MB/transl.fl)