Meeting in an inclusive format, the finance ministers of the eurozone countries will discuss, on Thursday 17 June in Luxembourg, the elaboration of a work programme that would allow the completion of the banking union, notably through the setting up of a European deposit insurance scheme (EDIS).
The outcome of these discussions remains uncertain. “If ministers want to give it a try, it will take time. If, on the contrary, it’s wiser to try again when the stars are better aligned, it might not be such a long meeting”, an EU source said on Wednesday 16 June.
According to her, Eurogroup President Paschal Donohoe wants to arrive at an “ambitious” programme which would then be submitted to the Eurozone summit, scheduled for Friday 25 June. “The reality is that the next few months will be quite challenging in engaging in big political decisions”. Hence the possibility that Mr Donohoe will postpone any breakthrough in this area “until the end of the year”.
The momentum in the work on the banking union, which the finalisation of the reform of the European Stability Mechanism (ESM) was supposed to instil, is struggling to materialise at the political level as technical meetings on the banking union have been held in the first half of the year. Among the headwinds is the imminence of electoral deadlines, such as the German parliamentary elections in September, which will limit the German government’s willingness to commit to such a sensitive issue.
Germany recalls that its traditional position has not changed: all elements of the banking union, in particular those contributing to a reduction of financial risks (for example: regulatory treatment of sovereign risk, non-performing loans, etc.), must be part of the discussions. In her view, an agreement is possible provided that the Eurozone summit endorses a work programme that is considered balanced.
On the French side, it was made known that the Eurogroup’s preparatory body preferred to recommend a priori the continuation of the work rather than spending a night negotiating with no prospect of achieving convincing results on Thursday.
On Friday 18 June, the Ecofin Council will take note of the technical work on EDIS. In its progress report, the Portuguese Presidency of the Council refers to discussions on the creation of a hybrid model which, in the event of bank failure, would allow national deposit guarantee schemes to access additional financial support from a compulsory lending mechanism between national schemes, coupled with a guarantee fund at central level (EUROPE 12736/16).
See the progress report: https://bit.ly/3g2yWyz
Greece. The nineteen ministers will receive the 10th post-bailout monitoring report on Greece.
The report is likely to form the basis for the release of further Greek debt relief, quantified at €748 million.
See the 10th report: https://bit.ly/3wvx47h
In addition, the European Commission will present to ministers the main lessons learnt from the post-bailout surveillance plans of Cyprus, Ireland, Spain and Portugal.
Despite the pandemic, these countries are still on a favourable trajectory with regard to the sustainability of their public debt.
ERM II. The ministers will also take stock almost a year after the integration of Bulgaria and Croatia into the Exchange Rate Mechanism (ERM II), which is considered the waiting room for integration into the euro area (EUROPE 12525/4).
My understanding is that the implementation of the commitments made by the two countries is “broadly on track”, the diplomatic source said.
Only when the convergence reports are published in June 2022 could dates for the accession of Bulgaria and Croatia to the euro area be put forward.
IMF. Finally, the Eurogroup will be informed of the IMF’s ‘article 4’ report on the economic and budgetary situation in the eurozone. The latter advocates maintaining an expansionary fiscal stance at the Eurozone level in order to avoid a premature withdrawal of aid to sectors in difficulty.
It should be noted that, in the margins of the Eurogroup, the Governing Council of the ESM, the permanent rescue fund of the euro area based in Luxembourg, will hold its annual meeting. (Original version in French by Mathieu Bion with Marion Fontana)