In 'enlarged euro area' format, the EU27 will briefly review, on Friday 11 December, the progress made by the Eurogroup in the deepening of the Economic and Monetary Union (EMU) in 2020 despite the Covid-19 pandemic.
They will endorse the recent agreement by euro area ministers on the reform of the European Stability Mechanism (ESM), which will allow the euro area's permanent rescue fund to play a greater role in preventing and managing macroeconomic crises. If this reform is ratified by the euro zone countries in 2021, at the beginning of 2022, the ESM will become the backstop of the Single Resolution Fund, the financial arm of the resolution arm of the banking union (see EUROPE 12613/4).
The outcome of Wednesday evening's vote in the Italian Senate on the reform of the ESM will not be directly discussed, but its political impact will influence discussions at the euro area summit, a European source acknowledged on Thursday.
Together with the Presidents of the ECB, Christine Lagarde, and the Eurogroup, Paschal Donohoe, we will have “the opportunity to discuss the economic situation and provide further guidance on banking and capital market union”, said the President of the European Council, Charles Michel, in his letter of invitation to his counterparts.
In his letter to Charles Michel, Mr Donohoe underlines that the agreement on the reform of the ESM has been helped by a sufficient reduction of financial risks, although the subsequent commitments of Greece and Cyprus in this respect will be closely monitored.
Mr Donohoe hopes that the finalisation of the reform of the ESM will create an impetus for progress towards the completion of the banking union, with the creation of the third component devoted to the protection of bank deposits. On this point, “a hybrid model” based on national deposit guarantee schemes and a European reinsurance fund of the national schemes, is the most promising option for setting up a European Deposit Insurance Scheme (EDIS), he adds.
See the letter from the President of the Eurogroup: https://bit.ly/2VX7Iym (Original version in French by Mathieu Bion)