Meeting in an enlarged format, on Friday 11 December, the Euro Summit recommended that the momentum generated by the successful reform of the European Stability Mechanism (ESM) should be used to advance the work being done on the banking union. It asked the Eurogroup to prepare a specific work programme by June 2021.
In their declaration, the EU27 invited the European Finance Ministers to “prepare, on a consensual basis, a stepwise and time-bound work plan on all outstanding elements needed to complete the Banking Union”.
We will carry out this task and “will review progress next June” at the Euro Summit, said the President of the Eurogroup, Paschal Donohoe, at the end of the summit.
While the adoption of the declaration was a formality, several sources have highlighted the substantive debate lasting an hour-and-a-half, held by EU leaders who were joined by Mr Donohoe and President of the ECB, Christine Lagarde, despite a sleepless night primarily focussing on climate issues (see other news). This substantive debate focused on the economic situation and the strengthening of accommodative monetary policy measures that were unveiled the previous day by the ECB (see EUROPE 12620/8). One source has pointed to a convergence of views on the importance of using all available budgetary and financial instruments to get the economy – which has been hit hard by the Covid-19 pandemic – back on its feet and to see the banking union not as a source of risk, but as an element of stability.
The President of the European Council, Charles Michel, reported on an “extremely important” debate over how to encourage the finalisation of the banking union moving beyond the decisions taken on the post-2020 EU budget.
Mr Donohoe has already started holding talks with his French, Luxembourg and Belgian counterparts. In parallel, work being undertaken at a technical level will continue on the four dimensions relevant to the finalisation of the banking union (see EUROPE 12613/4).
The Spanish Prime Minister, Pedro Sánchez, described the political agreement reached in the Eurogroup on the reform of the ESM as a “step forward”. It will play a greater role in the prevention and management of macroeconomic crises and will serve as a backstop for the Single Resolution Fund from the start of 2022 as long as the reform of the permanent euro area rescue fund is ratified by then.
“It remains for us to continue the work on the banking union along with the many other projects ahead of us in order to complete it, as well as going through with the capital markets union”, said the French president, Emmanuel Macron. To complement the economic response to the crisis, “the euro area needs to have fully integrated capital markets” so that savings can be better distributed and financing of SMEs can be improved.
See the Euro Summit declaration: https://bit.ly/2IGQ2Ec (Original version in French by Mathieu Bion and the editorial staff)