At the Eurogroup meeting to be held in Luxembourg on Monday 1 October, the finance ministers of the Twenty-Seven (all except the British minister) will discuss the future architecture of the European Stability Mechanism (ESM).
This discussion comes in the framework of four sessions punctuating the Eurogroup schedule ahead of the December meeting, which will aim to present the results of ministerial work on deepening Economic and Monetary Union (EMU) ahead of a debate at the Eurozone summit to be held subsequently (see EUROPE 12052).
Although the ministers of the Twenty-Seven held an exchange in Vienna on 7 September on the common backstop of the Single Resolution Fund (SRF), a role that will be given to the ESM (see EUROPE 12091), three subjects have yet to be discussed: - ESM reform; - the creation of a European deposit insurance system (EDIS), the third pillar of Banking Union; - the creation of a fiscal capacity for the Eurozone.
Readers may recall that in late 2017, the European Commission suggested making the current ESM into an instrument that is fully integrated in the legal order of the EU, in the form of a European Monetary Fund (EMF) (see EUROPE 11920). Currently, there is no question for the member states of creating the ESM, at least under that name, and the legal transformation of the current ESM, which is currently an international organisation, is not on the agenda.
Role of the ESM. The ministers intend to discuss increasing the competences of the ESM.
Although the idea is not to deprive the Commission of its current prerogatives in the framework of budgetary supervision and the financial adjustment programmes, the ministers will have to reflect on the framework for action that will be given to the ESM concerning the prevention, supervision and management of crises.
The supervisory commission will aim, amongst other things, to avoid the risks of financial and economic crisis, in full respect of the treaties of the European Union and of the ESM.
Preventative conditional credit line. Another major point of these discussions on the future of the ESM will concern the evolution of the preventative conditional credit line (PCCL). This credit line is an instrument available to member states facing financial difficulties, for instance in the event of exiting a financial bailout plan. However, this instrument has never yet been used.
Six conditions of good financial and economic health must be met in order to access this credit line. If the aim is to simplify and facilitate the terms and conditions for accessing the tool, the ministers will discuss how to strike a balance between reasonable access and the absence of moral hazard.
Certain member states, particularly northern European ones, fear that the possibility of benefiting from the credit line will encourage certain countries to get into excessive amounts of debt and send out negative signals to the financial markets.
If a permanent solution was found, this would allow member states in difficulties to use this instrument, rather than go under a bailout plan in due form.
In any event, no major decision will be made following the Eurogroup. Terms of reference on the ESM reforms will be presented, in the framework of the publication of the work on the future of the EMU, in December.
National automatic stabilisers in international meetings. Meeting in its classic format, the Eurogroup will also hold discussions on national automatic stabilisers. This debate may be linked to the potential creation of the stabilisation function of the Eurozone.
Finally, a discussion to prepare for forthcoming international meetings is timetabled, particularly on exchange-rate developments. This may provide the opportunity for the ministers to discuss the question of the single currency's place on the world stage, which was raised by Jean-Claude Juncker, the President of the European Commission, in his state of the union speech of 12 September (see EUROPE 12094). (Original version in French by Lucas Tripoteau)