The ambassadors of the Member States to the European Union (Coreper) will sign the revised treaty of the European Stability Mechanism (ESM), the permanent rescue fund for the euro area, on Wednesday 27 January, said the president of the Eurogroup, Paschal Donohoe, on Monday 25 January, during a dialogue with the European Parliament's Committee on Economic and Monetary Affairs.
This protocol stage will pave the way for the process of ratification of the revised Treaty by the euro area countries. If this process ends in 2021, the ESM will become, in early 2022, the backstop for the Single Resolution Fund (SRF), the financial arm of the ‘resolution’ window of the euro area Banking Union (see EUROPE 12634/4). The reform also gives the ESM increased competences in macroeconomic crisis prevention and management.
See the revised Treaty of the ESM: https://bit.ly/36a0gp7
See the intergovernmental treaty establishing the safety net for the SRF Fund: https://bit.ly/2Y9geeO
Several MEPs asked Mr Donohoe about the Stability and Growth Pact, whose rules have been frozen since spring 2020 to allow member states to spend money to deal with the Covid-19 pandemic and its economic consequences.
Marcus Ferber (EPP, Germany) expressed particular concern about the rising levels of public debt. On behalf of the S&D Group, Spain's Jonás Fernández said that, for the Social Democrats, the freezing of the Pact should continue until a reform of the budgetary rules has been approved and implemented. Ireland's Chris MacManus noted that apart from the question of the timetable, Mr Donohoe did not speak about the content of the rules in the context of the reflection on a revision of the rules that the Commission is currently conducting.
The President of the Eurogroup has several times stressed the “vital” role of public finances in times of crisis to support weakened individuals and companies. The debt is increasing, but it remains “sustainable”, he said, convinced that the consequences of inaction would be worse than the current difficulties. He recalled that the Nineteen are advocating an expansionary fiscal stance in 2021 (see EUROPE 12624/3) while the uncertainties linked to the pandemic continue to weigh heavily on the economy. “By the summer” the ministers will have to reach a common position on the budgetary policy to be followed in 2022, in time for the presentation, in mid-October 2021, of the draft national budgets for next year. In any case, he stressed, any gradual return to the application of the Pact should avoid insurmountable cliff edge effects for economic operators.
On the completion of the Banking Union, Mr Donohoe wants to build on the revision of the ESM to make progress even if he expects “difficult” discussions. In April, the EU Council's expert group will provide guidance for a ministerial discussion in May, with the Eurogroup due to present a work plan to the euro area summit in June. Later in the afternoon, the European Commissioner for Financial Services, Mairead McGuinness, recalled that the European Commission intends to present a legislative proposal on bank crisis management and deposit guarantees “by the end of the year”. (Original version in French by Mathieu Bion with Marion Fontana)