The European Union Finance Ministers (all, except the UK Minister) will work at an extraordinary meeting of the Eurogroup in an inclusive format on Monday 19 November on the reform of the European Stability Mechanism (ESM), the Single Resolution Fund (SRF) safety net and fiscal capacity at the euro area level.
This meeting will be the last of the four sequences of the Eurogroup meetings prior to the December meeting, which should lead to the presentation of the results of the ministerial work on the deepening of Economic and Monetary Union (EMU) in preparation for a debate at the euro zone summit to be held in the meantime (see EUROPE 12052).
The ministers have already exchanged views: - in September, on the ‘common backstop’ of the SRF, a function that will revert to the ESM (see EUROPE 12091); - in October, on the reform of the ESM (see EUROPE 12108); - in early November, on the European Deposit Insurance Scheme (EDIS) (see EUROPE 12131).
Backstop. On Monday, the Eurogroup will take note of the progress made in setting up the safety net for the SRF, the financial arm of the resolution component of the banking union in the euro zone. Significant progress would have been made, both at the technical and political levels.
The credit line from the ESM to the SRF, set at around 60 billion euros, already seems to have been established. On the other hand, the questions of the effective date of the backstop and the decision-making process to activate it have yet to be resolved.
These discussions, revolving around the risk-sharing aspect of the work to complete concerning the banking union, are to be compared with those on financial risk reduction and, in particular, the interinstitutional negotiations ('trilogues') on the Risk Reduction package (see EUROPE 12128).
Reform of the ESM. Similarly, the major funders will review progress on the reform of the ESM. This includes defining the future powers of the permanent rescue fund for the euro zone without affecting the Commission's powers. The Eurogroup has also worked on the preventive instruments of the ESM.
On the issue of competences, it would appear that the Commission and the ESM have reached an agreement on the distribution of their roles, and the results should be presented at this Eurogroup meeting.
Ministers will also discuss the possibility that the ESM could be given the opportunity to coordinate work to involve private investors in the event of non-sustainability of a State's debt ('collective action clauses'). This debate echoes the request of the Hanseatic League (informal meeting of Nordic and Central European countries) which was made on 1 November last.
Budgetary capacity for the euro area. The debate on fiscal capacity for the euro area will be the first in this sequence of four Eurogroup meetings. It echoes the European Commission's proposals to provide the EU with a budgetary capacity to support investment and a function to stabilise investment (see EUROPE 11920, 12031), and then the Franco-German Meseberg Declaration (see EUROPE 12044).
The approaches are different. Indeed, the institution proposes to set up these two instruments, open to non-Eurozone Member States, as an integral part of the Multiannual Financial Framework (MFF).
In the Meseberg Declaration, Berlin and Paris opted for the creation of a credit line for the euro area backed by the ESM. France and Germany are expected to present on Monday a more detailed proposal on the architecture and functioning of the stabilisation function, which aims to strike a balance between the intergovernmental functioning of the instrument and its inclusion in the EU's legal framework.
The German idea of setting up a European unemployment stabilisation fund should also be addressed.
Significant disagreements may be highlighted again. The Nordic European countries, led by the Netherlands, have traditionally opposed a stabilisation function (see EUROPE 12092). In any case, work will continue in the coming months.
Italy. Italy is not on the agenda of this Eurogroup meeting. On Tuesday, Rome submitted a revised draft budget to the margin that the Commission should again consider in breach of the rules of the Preventive arm of the Stability and Growth Pact (see EUROPE 12137).
This battle between Rome and its European partners, which is likely to have a negative impact on the work on deepening EMU, will be discussed in the margins of the Eurogroup, with informal bilateral discussions not to be ruled out.
On Wednesday 21 November, the Commission will deliver its final opinion on the 2019 draft budgets of all euro area countries and may unveil a new report on Italy's public debt (Article 126.3 of the Treaty on the Functioning of the European Union). (Original version in French by Lucas Tripoteau)