Attendees of the Eurogroup meeting of Monday 5 November reaffirmed their commitment to submitting the results of their work on the deepening of Economic and Monetary Union (EMU) ahead of the December Eurozone summit.
“There is a clear need now to intensify our work towards credible compromises so that the outcome of the December Euro Summit is sufficiently ambitious and convincing for all actors”, Pierre Moscovici, the Commissioner for Economic and Financial Affairs, told a press conference.
Although discussions on the draft Italian budget for 2019 have somewhat eclipsed matters surrounding the deepening of EMU (see EUROPE 12130), the EU finance ministers (not including the UK Minister) exchanged their observations on the future of the EMU.
The aim of the major European financial decision-makers is still to present the results of their work in December on four subjects: the creation of the common backstop of the Single Resolution Fund (SRF), a role to be taken by the European Stability Mechanism (ESM) (see EUROPE 12091), the reform of the ESM architecture (see EUROPE 12108), the resumption of discussions on the European Deposit Insurance System (EDIS) and the creation of a fiscal capacity for the Eurozone.
The ministers also took note of the results of the October Eurozone summit, where this timetable was reiterated (see EUROPE 12120).
EDIS. This is the first time that the subject of the EDIS has been dealt with in the framework of these four sessions.
This is the element of Banking Union completion on which the least progress has been made. “No progress was made, but we now have a better understanding on where we are, how we should approach this issue and work towards a roadmap”, said Mario Centeno, the President of the Eurogroup.
Acknowledging these differences of opinion, Moscovici nonetheless welcomed the “widespread determination” to agree that the EDIS is a mechanism needs be set up. While this debate sets those in favour of reducing banking risks against those in favour of sharing the risks, the Commissioner considers that the level of risk reduction is enough to be able to stop political negotiations in December.
It would appear that the Commission tabled the question of liquidity loans, the first stage of creating the EDIS, rather than the creation of this single fund, the final stage. France is reported to have mooted the idea of setting conditions proportionate to the level of risk reduction in place within this framework.
Backstop. On the 'backstop' plank, Centeno said that the ministers were a few steps closer to finalising the terms of reference.
The decision-making procedure is one of the points that is traditionally in suspense and the Eurogroup President announced that decisions will be made “on a case-by-case basis” by the Board of Directors, with the involvement of the national parliaments if necessary. “We are making good progress”, said Klaus Regling, the Director General of the ESM.
Details on decision-making, the trajectory of the size of the backstop and an evaluation of the ESM when the backstop is launched have not yet been agreed upon and this is notably connected to the inter-institutional negotiations on the 'risk reduction' package (see EUROPE 12128).
ESM. Concerning ESM reform, the ministers discussed the preventive credit instruments, but the debate between ease of access to these mechanisms and the need to avoid creating a moral hazard does not seem to have been resolved.
It is worth noting that the finance ministers of the Hanseatic League, from northern and central Europe, published a declaration on 1 November reiterating their usual arguments in favour of strict conditionality to access the ESM instruments.
Meeting on 19 November. One last meeting before the December session will take place on Monday 19 November. It will discuss the question of creating a fiscal stabilisation capacity for the Eurozone, a subject that is particularly important to France, as Bruno Le Maire, the French finance minister, reiterated upon his arrival. (Original version in French by Lucas Tripoteau)