Brussels, 10/10/2014 (Agence Europe) - Eurozone finance ministers will sweep wide at their meeting in Luxembourg on Monday 13 October, discussing the full range of issues that they have been covering for weeks now (the budget situation, low investment, Banking Union and countries in receipt of aid), but will not make any decisions since more work is still needed on most issues.
The ministers will start by looking at the situation of the countries in receipt of financial aid. At their last meeting, they weren't able to give the go-ahead to disbursement of an instalment of aid for Cyprus because one of the 'prior actions' had not been carried out, namely introduction of new legislation on foreclosure. On its own initiative, the Cypriot parliament introduced a series of connected laws which the troika (European Commission, European Central Bank and International Monetary Fund) says will have a significant impact on the scope of the repossessions legislation. The Cypriot Supreme Court will rule on the controversial draft laws on 20 October 2014. “There is a certain parliamentary or popular obstacle there which I think is partially due to misperceptions of what the distributional impact of this foreclosure bill would be,” explains a high-ranking EU official, adding that the greatest resistance is from the real estate industry. He commented: “Retaining the status quo would be to the detriment of Cyprus authorities and against the interest of restructuring the financial sector.” The Eurogroup meeting on Monday will therefore not give the go-ahead for the disbursement of the €350 million sub-instalment.
Greece. The fifth monitoring mission was interrupted mid-week because of the IMF's annual summit in Washington, but is at an early stage because there has only been one week of disucssions so far. The troika is expecting to return to Greece in early November, when it will have the results of the health check of Greek banks carried out by the ECB and European Banking Authority. The second part of the monitoring mission may be more controversial because Greece is expected to exit the aid programme at the end of the year and would like the IMF's programme to end at the same time (it is currently scheduled to run until 2016). This would mean the country turning its back on more than €10 bn of IMF loans.
The Greek government does not want to take out a precautionary credit line (a safety net for countries exiting aid programmes, which comes with strings attached). The IMF set a cat amongst the pigeons this week when it said that a precautionary credit line would put Greece in a better position. The high-ranking EU official said it would depend on financing needs, and if there are any, then what the country's liquidity situation is and what the bank stress tests reveal. It has been repeatedly pointed out that if the banks don't need any bailouts, then the €11 billion that has been set aside for them could be used to finance the budget. The high-ranking official points out, however, that the €11 bn is in the form of bonds, not cash. Converting the bonds to cash is far from straightforward because it would require the unanimous approval of all eurozone finance ministers, along with the parliaments of the eurozone nations that require this, and also the European Financial Stability Fund.
The eurozone finance ministers will then discuss the economic situation and fiscal policy stance, with a briefing by EU Economic and Monetary Affairs Commissioner Jyrki Katainen and the president of the ECB, Mario Draghi. Countries are due to send in their draft 2015 budget by 15 October and the Commission will publish its opinions in early November. Eurogroup will then discuss procedural questions.
After discussing the over-burden of taxation on labour, Eurogroup will discuss the reasons for the low investment in the eurozone. The high-ranking EU official explains that depending on where you're coming from, there's a different analysis and that there is more than one problem to be sorted out. The question will be discussed at EU level and will be addressed at a Eurozone Summit on 23 October.
The ministers are expected to have a short discussion of Banking Union, focusing on the introduction of the single supervision mechanism and ensuring fair treatment for banks in countries in the eurozone and banks from non-EU countries. Finally, following the tradition, the new Slovenian finance minister will outline his priorities to his colleagues. (EL)