Brussels, 04/11/2015 (Agence Europe) - On Monday 9 November, the finance ministers of the Eurogroup will be called upon to take stock of the implementation of the third Greek bailout plan and the completion of banking union.
On Wednesday 4 November, it was not clear whether Monday's Eurogroup would be able to recommend the payment of the next tranche of financial aid to Greece. Speaking from Athens, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, referred to three or four questions still outstanding. “I am optimistic that we will reach a compromise on all of the issues. The aim is to come to the Eurogroup with an agreement, so that the finance ministers can recommend positive decisions for Greece”. However, a senior official from the eurozone feels that the deadline is extremely tight, but did not rule out a positive outcome.
According to the Greek press, the four outstanding questions to which the Commissioner was referring have to do with the settlement of tax arrears, real estate seizures, minimum pricing levels for generic medicines and the measures to replace the 23% VAT rate on private education and designed to have the same budgetary impact. The payment of a sub-tranche of €2 billion is related to the first wave of 48 prior actions, with this payment due to have been made two weeks ago, under the initial timetable. The measures of the first list were initially supposed to have been implemented by mid-October. “We are behind schedule. I am not yet worried, but acceleration is of the essence”, this senior official explained.
The Eurogroup will also hear back from the ECB on the results of the ECB's health check of the Greek banks, which revealed capital requirements of €14.4 billion (see EUROPE 11423). On first sight, the amount of €10 billion blocked in an account over and above the initial envelope of €25 billion laid down in the Greek bailout plan for bank recapitalisation ought to be enough. The bail-in of the 'senior' creditors is likely to be necessary, this senior official explained. Readers may recall that the banks have until Friday 6 November to present their recapitalisation plans to the ECB, with priority recourse to private funds.
To allow some or all of the envelope of €10 billion to be paid out, implementing the first and the second list of prior actions will be necessary, this senior official went on. The second list, for which the Eurogroup working group has not yet seen any proposals, is expected to contain measures related to the governance of the financial sector.
Moscovici went on to explain that the month of November would be the month of pension reform - a highly “sensitive” issue, he said.
Banking union. With the 'supervision' pillar of banking union in the eurozone in place for a year (see other article), the President of the Single Resolution Board (SRB), Elke König, will present the work to make the 'resolution' pillar operational from January (see EUROPE 11420).
The Single Resolution Board will manage the Single Resolution Fund (SRF), the financial arm of banking union. With an intervention capacity of €55 billion, this fund will be used to finance the resolution of large failing banks once a bail-in has been carried out on this bank, in line with the rules of the 'BRRD' directive, which harmonises the national resolution schemes.
19 ministers on Monday, and then 28 the following day, will discuss the bridge financing to allow the SRF fund to be at full capacity from January 2016 and for the entire transitional period (2016-2023) covering its build-up. In line with the ministerial orientations (see EUROPE 11402), the national experts of the Council of the EU will discuss the creation of national credit lines aiming to guarantee the contributions of the national banking industries to the national compartments of funds. These credit lines, which will be mobilised by the SRB board on the basis of needs, will have no impact on the budgetary deficit with regard to the Stability and Growth Pact.
“We have not yet reached an agreement on the bridge financing” of the SRF fund, but we are “relatively close to one”, a senior European civil servant said on Wednesday 4 November, for whom an agreement is more likely to be reached at the Ecofin Council of December. He went on to explain that there is “certainly” no agreement either on the progressive pooling of the credit lines, in the same way as the national contributions to the fund. On Monday, the ministers will be invited to provide orientations on any possible upper limit to the pooling requests made by the SRB Council and the introduction of approval procedures at national level.
Budgets 2016. The European Commission will present the Eurogroup with its autumn economic forecasts, which it will announce this Thursday. On Monday 23 November, an extraordinary meeting will be held, at which the finance ministers will take position on the draft national budgets for 2016. One of the questions raised has to do with the treatment of the cost of hosting and integrating refugees with regard to the Stability Pact. “These are highly specific costs which need to be assessed on a case-by-case basis and over a very short period. It is understandable that some leeway will be necessary in 2015, and particularly in 2016. But this is not something that will continue in the medium term”, the source explained.
The Commission's opinion on the Spanish draft budget, which Madrid submitted early due to the general elections of December (see EUROPE 11408), is not believed to have been discussed yet at the Council. As regards the absence of a Portuguese draft budget, due to political instability in the country, this is in breach of the rules of the Pact, according to the Council and the Commission.
EMU. Lastly, the ministers will discuss the Commission's recent proposals on reinforcing economic and monetary union, in particular the draft decision of the Council to set in place, by 2025, unified representation and common positions of the eurozone within the IMF, until the eurozone becomes a full member of this body (see EUROPE 11415). Under this proposal, the president of the Eurogroup would have a seat on the governing Council of the IMF as an administrator of a 'eurozone' group, following the establishment of one or more groups made up exclusively of eurozone countries. At the Council, it goes without saying that this is a “very, very, very long-term project”, this senior European official told us, noting that the most recent reform of IMF quotas had not been fully approved by the major jurisdictions (such as the United States: Ed). (Original version in French by Elodie Lamer and Mathieu Bion)