European leaders will endorse, over lunch on Friday 14 December, the modest progress made towards deepening Economic and Monetary Union (EMU) as a result of the Eurogroup's work.
They will act on the reform of the European stability mechanism (ESM), the permanent rescue fund for the eurozone. This will allow the ESM to intervene more to prevent a crisis. When the reduction of financial risks has been deemed sufficient, it will also become the lender of last resort ('backstop') of the Single resolution fund, if the financial arm of the 'resolution' part of the banking union does not have sufficient means to finance the resolution of a failing banking group (see EUROPE 12152).
"It is difficult to strengthen the eurozone outside a crisis”, noted a senior diplomat on Wednesday, December 12.
Outside times of crisis, work to establish the European Deposit Guarantee Scheme (EDIS), the last part of the banking union, is indeed almost at a standstill (see EUROPE 12150). On this point, the leaders will refer to the Eurogroup report on the continuation of technical work.
On Friday, the mandate that will be given to finance ministers to further explore the issue of the eurozone's budgetary capacity remains to be finalised.
According to another European source, there is “a critical mass” of Member States in favour of further work on this instrument, which should be included in the EU budget. Nevertheless, France would like this budgetary capacity to have specific governance.
Nevertheless, due to the reluctance of Northern European countries, the open question concerns the degree of precision of the declaration of the Eurozone Summit to define the modalities and timing of this budgetary capacity.
At this stage, the objective of the instrument will be macroeconomic "competitiveness and convergence", indicated the first source, for whom "there is no agreement" on a "stabilisation" function, via in particular "unemployment insurance".
On the other hand, the 2019 draft budgets of countries such as Italy (see EUROPE 12152) are not on the leaders' agenda, while the President of the European Commission, Jean-Claude Juncker, met on Wednesday with the Italian President of the Council, Giuseppe Conte; or France, after the recent announcements made by French President, Emmanuel Macron. (Original version in French by Mathieu Bion)