The Heads of State or Government of the Twenty-Seven (all but the United Kingdom) called on Finance Ministers to continue their work in the Eurogroup on the deepening of the Economic and Monetary Union (EMU) in a short joint statement at the Euro Summit on Friday 21 June.
“Today I’m very pleased by the support of the Euro summit on our work, which is always good given that we give lots of efforts onto this very important task for Europe”, said Mário Centeno, President of the Eurogroup, at the end of the meeting.
This statement sums up quite well the spirit of the summit. After a long evening of negotiations the day before on the strategic agenda for the next institutional round and the appointments to senior posts in the European Union (see EUROPE 12279/1), European leaders did not dwell too much on the EMU, during discussions that lasted less than an hour and a half.
At a press conference, remarks by Donald Tusk, President of the European Council, were quite brief, indicating that the leaders had taken note of the progress presented to the Eurogroup in an inclusive format on 14 June last (see EUROPE 12275/1) and had invited the ministers to continue along these lines. This was as expected (see EUROPE 12278/4).
After a presentation of the economic situation and risks by Mario Draghi, the outgoing President of the European Central Bank (ECB), three points were covered by this agenda on the deepening of EMU: the establishment of a budgetary capacity for the euro area, the revision of the statutes of the European Stability Mechanism (ESM) and the establishment of a European Deposit Insurance Scheme (EDIS).
These issues are sensitive and do not enjoy the global consensus of all delegations. For example, Giuseppe Conte, the head of the Italian government, said he was “not enthusiastic” about the results of the work studied. But he expressed more satisfaction that these issues are being addressed in packages.
Fiscal capacity for the euro area. No progress to be noted, therefore, on this future fiscal capacity for the euro area compared to the previous week's Eurogroup.
It should be recalled that the European Finance Ministers had agreed that this tool should support public investment and structural reforms in order to strengthen convergence and competitiveness in the euro area.
Today, there is therefore no question of setting up a stabilisation function, as wanted by the Commission, Germany, Spain or France in particular. The Northern European states, led by the Netherlands, are opposed to this, as Mark Rutte recalled when he said that his country would never accept “fiscal stabilisation by the back door”. On the other hand, Pedro Sánchez, the Spanish Prime Minister, reiterated his desire to have such a stabilising function.
“I welcome the agreement on fiscal capacity for the euro area [...]. It was not an easy job, but it was a good working together”, said German Chancellor Angela Merkel.
But no agreement has yet been reached on the financial allocation of this future instrument – this issue being part of the negotiations on the 2021-2027 Multiannual Financial Framework (MFF), on how to finance it and on governance.
“The agreement reached last week goes in the right direction, but is not enough”, said French President Emmanuel Macron. In particular, he recalled that he wanted his own governance, so that this budgetary capacity could not be “confused with a budget line for the Twenty-Eight”.
While several delegations reiterated their usual positions, it was essentially the status quo that prevailed. It should be noted, however, that in the declaration, the leaders aim for “autonomy of decision of the euro area Member States”.
In addition, the Euro Summit instructs the Eurogroup to rapidly present solutions for financing this future fiscal capacity. On this point, there are two opposing sides. Several Member States, notably Germany and France, want additional resources to the MFF, such as a financial transaction tax, to be added to the budget, when the Northern European States are positioning themselves for funding strictly within the framework of the MFF. And, if there were to be additional resources, an intergovernmental agreement would be necessary.
Work in the Eurogroup on these various points will therefore continue by the end of the year, in the hope of making progress towards an agreement.
ESM. The Heads of State or Government also took note of the agreement at the Eurogroup on the reform of the statutes of the ESM, the permanent rescue fund for the euro area.
This will include making it the safety net of the Single Resolution Fund (SRF), no later than 2024, but potentially earlier, depending on the degree of financial risk reduction in the banking system. In addition, this agreement provides for an increased role for the ESM in crisis prevention and management and the conditions for access to the ESM's precautionary instruments (ECCL and PCCL credit lines) will be simplified.
While welcoming these points, Jean-Claude Juncker, President of the European Commission, said he did not want States to lose sight of “the need to incorporate the ESM Treaty into European Union law”. This is in accordance with the institution's proposal (see EUROPE 11920/1).
The Euro Summit also invited the Eurogroup to complete its work on this issue by the end of the year, implicitly referring to the rewriting of the guidelines for the ESM, so that States can start the process of ratifying the future new treaty in December.
“The reforms of the ESM Treaty have progressed well, but we have to wait for the full package in December [...] before we can say that we have really taken a big step forward in consolidating the euro”, Mrs Merkel said.
EDIS. Finally, the leaders expressed their wish to see progress in the technical work on EDIS, the third pillar of the Banking Union. The high-level working group set up at the beginning of the year made little progress on this issue, which is why discussions must continue, with a view to reaching an agreement one day.
Leo Varadkar, the Irish Prime Minister, said he was “disappointed” by the lack of progress on EDIS, while understanding the reservations of several delegations. The same is true of Mr Sánchez, who would have liked the process to be “faster”, since EDIS is “a fundamental issue for the governance of the euro”. (Original version in French by Lucas Tripoteau)