The Director General of the European Stability Mechanism (ESM) believes that the bailout plans awarded to four Eurozone countries (Spain, Ireland, Greece and Portugal) would have cost less if a European deposit insurance system had been in place.
“It is often forgotten that if we had had a common credible deposit insurance scheme the last few years, all the ESM programmes would have been smaller”, said the head of the permanent bailout fund of the Eurozone on Monday 12 March, following the Eurogroup meeting. He stresses that an EDIS mechanism is in the interests of the Nineteen - and therefore also of the creditor countries - as on average, 40% of the envelopes of the ESM went to stabilise the banking sector of a country under budgetary tutelage.
This comment comes as part of ongoing discussions on the deepening of Economic and Monetary Union (EMU). Regling has taken note of the scepticism of certain finance ministers over the EDIS deposit insurance scheme (see EUROPE 11881), with the legislative proposal for this treading water at the Council because the northern countries are determined to move forward on the risk reduction package first (see other article).
The Eurogroup anticipates that on Friday 23 March, the Eurozone summit will confer upon it a specific mandate to work towards political decisions in June at the next summit of the Nineteen, on the two subjects closest to fruition: the completion of Banking Union and converting the ESM into a European Monetary Fund (EMF).
Regling argues that the ESM should be in a position to intervene at any point in time with a Eurozone country in difficulties. However, he stressed that the aim is not to take competences away from the Commission, particularly in terms of budgetary monitoring.
The President of the Eurogroup, Mario Centeno, referred to a package of measures to be submitted to the Eurozone leaders in June. He said that the ESM would play an increased role in crisis management in a framework that is still inter-governmental and act as backstop for the Single Resolution Fund, the financial arm of Banking Union in the Eurozone.
However, discussions on creating a fiscal capacity for the Eurozone, which is under consideration with a view to supporting investment and/or countries facing macro-economic shocks, seem to have made less headway. Centeno said that there is still no decision on the objectives and form of this fiscal capacity, but that the Eurogroup would also table proposals on this point at the June Eurozone summit. (Original version in French by Mathieu Bion)