Luxembourg, 19/06/2014 (Agence Europe) - “The possiblity of retroactive direct bank recapitalisation has been left open. It is techncially possible once parliamtenry procedures have endorsed it, but politically difficult. Given the size of the European Stablity Mechanism, there's a cap constraint on what we can do (Ed: €60 billion). We will need to complete the parliamentary procedure and then see what to do when there is any realistic request for this from the member states”, said the head of the Eurogroup, Jeroen Dijsselbloem, in Luxembourg on Thursday 19 June.
The ESM has the wind in its sails, having made a net profit of €253.9 billion compared with a loss of half a billion euro in its first quarter of existence (the fourth quarter of 2012).
The European Central Bank Governing Council unanimously endorsed the ESM's annual report, and “the results show that we've taken the right approach”, said Dijsselbloem. ESM Director General Klaus Regling said the ESM's strategy worked and three of the five countries in receipt of financial aid have now existed their macroeconomic adjustment programmes (Spain's bailout was solely for its banks). Regling said that the ESM had been affected by the recent ECB decisions, which probably meant that return on investment would become slightly smaller.
The report on the ESM, the eurozone's bailout fund, sets out the public spending savings made by each of the five countries that have been financed by the ESM (and its predecessor, the EFSF) rather than the markets. Greece made €8.6 billion of savings in 2013, Cyprus €3.4 billion, Portugal €1.7 billion, Ireland €1.1 billion and Spain €0.6 billion. Regling said the huge savings made by Greece were to be seen against the backdrop of the colossal sums provided for Athens.
Regling said Cyprus' return to the money markets on Wednesday 18 June was a “positive sign” (see EUROPE 11103) but warned: “Countries should not believe these low interest rates will last forever”. Saying he did not want to predict problems, Regling added that the ESM was ready to provide further aid if needed. (EL)