Brussels, 02/10/2015 (Agence Europe) - On Tuesday 6 October, European finance minsters will work on the establishment of bridge financing to give the Single Resolution Fund (SRF) €55 billion during its phase-in (2016 to 2023).
Final agreement in principle is not expected on Tuesday on this question, which will be discussed over breakfast, but the Luxembourg Presidency of the Council of the EU wants the question to be on the Ecofin Council's agenda. Time is racing ahead because a final decision will have to be taken by the end of the year since the SRF comes on stream on 1 January 2016.
SRF financing is connected with the question of a common backstop that eurozone nations pledged in 2013 to set up by 2023 to ensure that the SRF, financing arm of the Single Resolution Mechanism, has sufficient capacity at any time to finance the winding up of a failed big bank in the eurozone.
The ministers' discussions will be based on the ongoing work at the national expert group at the Council. In line with guidelines received at the Ecofin Council in September, the experts are trying to establish a compromise solution covering temporary bridge financing that would leave room for the bridge financing for the Single Resolution Fund (see EUROPE 11388).
According to information received by this newsletter, this approach foresees the introduction of national credit lines for the first year or years of the phase-in of the SRF (2016-2023) with a more rapid transition ahead of 2013 to a backstop based on the European Stability Mechanism, the eurozone's bailout fund. If political agreement on this approach, which would allow a gradual pooling of risk, proves impossible, then purely national solutions would reportedly be considered.
The credit lines would total €55 billion, with the bonds broken down among the 19 eurozone nations. As the SRF gains in strength, the availability of the credit lines would be adjusted in line with national contributions to the fund. Three important questions still need to be settled: - Should activation of the credit lines be automatic (as desired by the SRB, the Single Resolution Board, which will manage the SRF) or would national authorisations be required? - Several counties want to set a date in advance for the ESM backstop coming on stream; - Some counties would prefer national guarantees to national credit lines for reasons connected with managing their public debt. (Original version in French by Mathieu Bion)