Following the Ecofin Council meeting in Luxembourg on Tuesday 10 October, the French finance minister, Bruno Le Maire, took a position against creating an automatic restructuring instrument for sovereign debt in the Eurozone, in the framework of the reflection on the evolution of the European Stability Mechanism (ESM).
This position is a “red line for the French government”, he said, adding that it could scare investors off, a situation that would necessarily weaken the Eurozone. This instrument was mooted by the outgoing German finance minister, Wolfgang Schäuble, but according to one European source, Germany is looking fairly isolated on this dossier.
This question comes as part of the broader reflection on the future of the ESM launched by the finance ministers on Monday. The President of the Eurogroup, Jeroen Dijsselbloem, who will remain in position until January (see other article), said that most of the ministers welcomed the actions of the permanent bailout fund of the Eurozone since it was created five years ago. And although discussions have begun on reinforcing it, he stressed that the ESM has at its disposal certain instruments that have never yet been used, such as the direct bank recapitalisation instrument, which is difficult to implement.
Backstop. There was, furthermore, strong support from the Eurozone finance ministers for the idea that the ESM could serve as a backstop for the Single Resolution Fund (SRF). However, this idea, which the Commission considered when the SRF was created, has always been rejected by Germany. Valdis Dombrovskis, the Vice-President of the Commission with responsibility for the euro and Financial Services, said that this project would be relaunched on Wednesday 11 October in the framework of the Commission's presentation of proposals concerning Banking Union (see EUROPE 11878).
Finally, those attending the Eurogroup meeting discussed the governance of the ESM. Moscovici reiterated that he was in favour of 'communitising' this instrument, with decisions to be made under the control of the European Parliament. The proposals on Economic and Monetary Union, which are to be presented by the Commission on 6 December, will allow this debate to be relaunched. (Original version in French by Lucas Tripoteau)