Euro area finance ministers are expected to be able to finalise the reform of the European Stability Mechanism (ESM), the euro area's permanent rescue fund, at the Eurogroup on Monday 16 March.
"We are now almost in a position to endorse (the reform, editor's note)", a diplomatic source said Friday, 6 March.
The reform will give more power to the ESM in the event of a macroeconomic crisis. A euro area country, which will call for financial assistance, will not be subject to an automatic restructuring of its public debt. If this is the case, provision is made to facilitate such restructuring.
On Monday 16 March, the Eurogroup will have to decide definitively on the question of the insertion, as an annex to the revised Treaty on the ESM, of the modalities of operation of collective action clauses (CACs) drafted in contracts for the issue of sovereign debt. These clauses make it easier to force uncooperative creditors to participate in a country's debt restructuring.
According to our information, these clauses should not be annexed to the ESM Treaty, although confirmation is still needed at political level.
The permanent euro area rescue fund will also act as a ‘backstop’ for the Single Resolution Fund, the financial arm of the resolution arm of the euro area banking union. It will be able to mobilise up to €68 billion to help resolve a failing bank. This new function could be in force as early as 2021 or 2022 if the Eurogroup considers, at the end of 2020, that the reduction of financial risks, in particular non-performing loans (NPLs), has been sufficient.
One of the issues discussed at length was the documentation that the Single Resolution Board (SRB), the European authority responsible for resolving a large failing bank, will provide to the ESM to ensure that a decision to release funds is taken as soon as possible. The identification of an entity capable of certifying the appropriateness of the action required by the SRB was also on the table.
For the SRB, the decision of the ESM should be as automatic as possible, since it is the ESM that decides to intervene at European level in the event of a bank resolution. This position was hardly to Germany's liking, which argued that any mobilisation of the ESM must be validated by the Bundestag.
COVID-19. Following the videoconference held on Wednesday 4 March (see EUROPE 12439/16), the Eurogroup will once again take stock of the negative economic impact of the coronavirus epidemic which continues to spread in Europe, in particular of the existing instruments, including budgetary instruments, to support growth (see EUROPE 12441/1).
"We are working with the European Commission to identify more precisely what kind of measures are needed", the source said. It noted that some countries, such as France and Germany, had asked their National Development Bank to intervene to provide liquidity to companies. A reflection on the granting of state aid in crisis situations is also under way.
Greece. Ministers will discuss the economic recovery in Greece, looking at the 5th Greek post-rescue monitoring report (see EUROPE 12434/4). It confirms that Greece is meeting its budgetary commitments, with the primary surplus (excluding debt service) estimated at 4% of GDP for 2019, against a target of 3.5%.
On Monday 16 March, however, no decision will be taken on the use by the Greek authorities for investment purposes of part of the profits (€644.42 million) made by the European System of Central Banks in the acquisition of Greek debt securities (SMP/ANFA transactions). (Original version in French by Mathieu Bion)