The work of the European finance ministers (all but the British minister) on the future common backstop of the Single Resolution Fund (SRF), the financial arm of Banking Union, made no substantial progress in Vienna on Friday 7 September, following the Eurogroup meeting in enlarged format.
“Nothing is agreed until everything is agreed”, Mario Centeno, the President of the Eurogroup, explained to a press conference.
The Portuguese finance minister was referring to the series of key discussions to dominate the forthcoming Eurogroup meetings. In December, the Eurogroup will be called upon to set clear orientations on the completion of Banking Union and the creation of a fiscal capacity for the Eurozone, in line with the mandate conferred upon it by the Eurozone summit at the end of June (see EUROPE 12052).
This working meeting was the first of a series of meetings concerning the SRF backstop, the creation of a European Deposit Insurance System (EDIS) and of a fiscal capacity for the Eurozone.
Although three meetings were initially scheduled, Centeno said that they would “probably need an extra Eurogroup meeting” to conclude the discussions (see EUROPE 12088). There could be two meetings in November, including the one already scheduled for 5 November.
On the SRF backstop, the outstanding points discussed in July are still on the agenda (see EUROPE 12062). It has been noted that the European Stability Mechanism (ESM) will play the role of backstop, in the form of a neutral and renewable credit line, reimbursable by the banking industry over a period of three years. The level of the credit line will be in the neighbourhood of €60 billion.
The decision-making procedures and the date for the backstop to go live, on the other hand, have not yet been agreed upon.
Decision-making process. As regards the decision-making process, Centeno said that the ministers were closer to an agreement. The aim is to strike a balance between effectiveness and democratic legitimacy, so that it can act quickly in the event of crisis, whilst observing the prerogatives of certain national parliaments.
Germany is particularly concerned by this point and has called for the Bundestag, the lower house of the national parliament, to have a right of scrutiny. However, other states, including Finland and the Netherlands, also have reservations.
“Clearly, decisions must be swift, timely and allowing national parliaments to be involved, as necessary”, said Centeno.
It would, however, appear that to an extent, national procedures may allow for rapid decisions. The options under consideration include a list of preconditions that could be laid down in accordance with the national legislations. The ESM would act once it has ensured that its action is in line with these rules.
“I am confident” that a solution will be found, said Klaus Regling, the CEO of the ESM, the permanent bailout fund of the Eurozone.
Date of entry into force. Another point still to be clarified is the date on which the backstop will be up and running.
The cut-off has been set for 2024, when the build-up of the SRF is due to complete. Paris and Berlin have suggested 2021, as long as the level of non-performing loans (NPL) has been reduced sufficiently by then.
A number of states are making a connection between agreement on an earlier date and the conclusion of the ('trilogue') inter-institutional negotiations on the 'banking risk reduction' package (see EUROPE 12045), or reducing NPL. Other technical matters of a less political nature, for instance concerning the date of the end of the SRF build-up period, are also still outstanding.
Bringing this initial date forward would be a positive signal, said Regling. Additionally, many states are determined to work for this, said the Spanish minister, Nadia Calviño.
2022 would be reasonable, one source explained to us. (Original version in French by Lucas Tripoteau)