On Monday 30 November, euro-area Finance Ministers will discuss the reform of the European Stability Mechanism (ESM). In the Council of the European Union, it is hoped that the Treaty revising the ESM will be signed in January 2021 with a view to entry into force at the end of next year.
The reform of the ESM foresees in particular that the permanent euro-area rescue fund will play a greater role in preventing macroeconomic crises in the euro area and that it will act as a backstop for the Single Resolution Fund (SRF), the financial arm of the resolution arm of the euro-area banking union (see EUROPE 12441/17).
The text of the Treaty revising the ESM and its annexes are the same as those already under negotiation at the end of 2019. Only a few guidelines have been provided for the implementation of the future treaty.
On Monday, the Eurogroup will return to this issue, with the aim of agreeing on a process that will allow the revised treaty to be signed “in January” and enter into force at the end of 2021, said a senior European official on Thursday 26 November.
While not ruling out the possibility that a country might not be able to ratify the revised treaty, he nevertheless hoped that “all Ministers will be able to join the agreement and that the agreement will hold up under national ratification procedures”. The fact that the revision of the ESM is a technical precondition for the ESM to become a safety net for the SRF means there is “more at stake”, he noted.
And according to this source, the entry into force at the end of 2021 of the treaty revising the ESM will serve as a “technical precondition for the backstop to become reality” in “early 2022”.
All eyes will be on Italy, where the governing coalition has been tearing itself apart for a year over approval of the revision of the ESM. The link established between the reform of the permanent rescue fund and the entry into operation of the ESM as a safety net for the SRF Fund could help the socialists in power to convince their partners in the Five Star Movement. The latter oppose any request for macroeconomic assistance from Italy to the ESM, arguing that the conditions for structural reforms would be imposed on their country.
According to the Italian press, a way out may not be found before Italian Prime Minister Giuseppe Conte addresses Parliament on the eve of the 10-11 December EU summit.
2021 draft budgetary plan. As part of the budgetary process for the ‘European Semester’, the Eurogroup will also be informed of the recent opinions of the European Commission on the Member States’ draft budget plans for 2021 (see EUROPE 12604/1).
In 2021 as in 2020, Member States’ fiscal positions will continue to be expansionary in order to address the health and economic consequences of the Covid-19 pandemic. Nevertheless, the Commission stressed the temporary nature of the emergency measures, which will need to be lifted at the right time to ensure the sustainability of public finances in the medium term.
On Thursday, the Italian Finance Minister, Roberto Gualtieri, announced an agreement with his French counterpart, Bruno Le Maire, on the need to initiate a European proposal to provide more support to the most affected sectors, such as tourism and catering.
The Eurogroup will take note of the work carried out at technical level on the completion of banking union in the euro area. Its president, Paschal Donohoe, will report back to European leaders who will meet in euro-area format on Friday 11 December.
In addition, the IMF will present its analysis of the economic situation in the euro area and its recommendations on economic and fiscal policy in times of pandemic to the ministers.
Greece. The Eurogroup will be informed of the macroeconomic post-rescue monitoring reports of Cyprus, Portugal, Ireland, Spain and Greece. The eighth report on Greece welcomes the reforms undertaken by the Greek authorities and should form the basis for ministers to approve a fourth reduction in Greek public debt, this time valued at €767 million. (Original version in French by Mathieu Bion)