The Eurogroup meeting of Monday 5 November will see the finance ministers of the Eurozone hold an exchange on the draft Italian budget for 2019, when a session in extended format bringing together the EU ministers (all but the UK minister) will be given over to the deepening of Economic and Monetary Union (EMU), more specifically the European Deposit Insurance Scheme (EDIS) and the European Stability Mechanism (ESM).
Although a discussion on the draft national budgets for 2019 is on the agenda of this meeting of the Eurozone financial policymakers, the title is somewhat misleading, as the Commission has yet to take position on the case of Italy, meaning this will be the only one discussed at the meeting.
Readers may recall that following the presentation by all Eurozone member states of their draft 2019 budgets on 15 October (see EUROPE 12117), the Commission asked Rome on 23 October to present a new draft budget within three weeks that respects its budgetary commitments (see EUROPE 12123). This decision, which is unprecedented in the entire history of the Stability and Growth Pact (SGP), was justified by the significant deviation forecast by the government of Giuseppe Conte as regards the budgetary trajectory Rome will follow next year.
Whereas Italy is supposed to reduce the structural deficit by 0.6% of GDP next year under the rules of the preventive arm of the Pact, the Italian authorities submitted a draft budget to the Commission that anticipates that its deficit will increase by 0.8% of GDP (see EUROPE 12111).
Both before and after the Commission's decision to send back the draft Italian budget, the Conte government expressed its intention of not changing the draft (see EUROPE 12122). The slow-down in Eurozone growth, and particularly the stagnation of Italian GDP in the third quarter of this year, moreover seem to justify Rome's decisions (see EUROPE 12128).
The discussion between the finance ministers could therefore be fairly delicate.
EDIS. Another subject of discussions, this time between twenty-seven, will concern the creation of the European Deposit Insurance Scheme. This exchange comes in the framework of the four sessions to punctuate the Eurogroup meetings ahead of its December meeting, which is to present results of the ministers' work on deepening Economic and Monetary Union (EMU) ahead of the Eurozone summit to be held afterwards (see EUROPE 12052). Furthermore, the heads of state or government reiterated this timeline at the Eurozone summit of 18 October (see EUROPE 12120).
The ministers of the 27 have already held an exchange in September on the common backstop of the Single Resolution Fund (SRF), a role that will be taken by the ESM (see EUROPE 12091), and one on EMS reform in October (see EUROPE 12108).
It now remains for the financial policymakers to discuss the EDIS and the creation of a fiscal capacity for the Eurozone, which is to be discussed at an extraordinary meeting on 19 November.
The creation of the EDIS is the least mature element of the completion of Banking Union. The idea is to present a roadmap in December with a view to resuming political discussions. If there was an agreement at the Council of the EU on non-performing loans (see other article) and an inter-institutional agreement between the Council and the European Parliament on the 'banking risk reduction' package (see EUROPE 12128), it might make it far easier to resume these discussions.
ESM. Finally, the finance ministers, still in the format of 27, will again discuss the backstop of the SRF and the reform of the ESM architecture.
No decision is anticipated, because as for the EDIS and the Eurozone fiscal capacity, the results of the Eurogroup work are to be presented at the December Eurozone summit. This means the participants will have to be content with examining the progress made by the work at technical level. (Original version in French by Lucas Tripoteau)