Good morning. Last night we reached an agreement in principle on the package of elements related to the ESM reform and we laid the ground for our upcoming discussions to complete Banking Union, including a common deposit insurance.
It was a long meeting but we managed to be quicker than a few other meetings this year - also there, we are making progress.
Let me start with the beginning, with our newcomer. The Eurogroup welcomed Paolo Gentiloni, who will be representing the Commission for the next five years. Paolo is highly experienced and a heavyweight in European policymaking, who will add value to our discussions. I very much look forward to a fruitful cooperation with him.
We had a short exchange on Greece - for good reasons. The Commission presented its 4th enhanced surveillance report assessing Greece’s reform commitments.
Good reasons because of the good progress. For instance, the institutions concluded the budget plan for 2020 meets the target of 3.5% of GDP primary surplus, while the tax burden on labour and capital has been lowered. These elements are positive for growth. There has also been progress with structural reforms, notably in the area of the labour market, digital governance, investment licensing and the business environment. Overall, the Commission’s report concludes that Greece has taken the necessary actions to achieve its commitments for mid-2019.
This progress will allow our deputy finance ministers to approve, at the EWG and the EFSF Board of Directors, the policy-contingent debt relief measures. As usual, the decision is subject to the completion of national procedures. These debt measures concern the transfer to Greece of profits made by the central banks on Greek government bonds, the so-called SMP-ANFA, and the reduction to zero of the step-up interest margin on certain EFSF loans. This adds up to a grant of 767 million euros. This sends investors a positive signal of continued ownership of the reform agenda in Greece.
We also looked at the post-programme surveillance for Cyprus and Spain. We commended both countries for their strong economic performance and encouraged them to keep addressing the remaining imbalances and vulnerabilities of their financial sectors.
We then had our annual discussion of budgets for the year ahead. The Eurogroup broadly supports the Commission’s analysis of the draft budgetary plans for 2020 and we issued a statement.
We echoed the Commission’s concerns about the slow pace of debt reduction in some Member States and risks to compliance with the rules.
Some other Member States have started using their favourable situation to start to boost investment - this is very welcome as it was recommended for some time.
If downside risks were to materialise, fiscal responses should be differentiated, taking into account country-specific circumstances and avoiding pro-cyclicality to the extent possible. The Eurogroup stands ready to co-ordinate this action.
We have also adopted a work programme for the first half of 2020 and re-appointed Hans Vijlbrief for a second term as President of the Eurogroup Working Group. His second term will commence on 1 February 2020.
Let me pay tribute to the extraordinary work that Hans has done in the last couple of years. His commitment in the various preparatory bodies has been instrumental to push forward our Eurogroup agenda to complete the institutional setting of the euro area.
Yesterday, we continued on the same path to strengthen the euro.
Let me start by the ESM. As mandated by Leaders in June, we had a comprehensive package of measures to discuss, starting with the ESM Treaty reform.
Back in June, we already reached a broad agreement on ESM Treaty text. Leaders invited us to continue working on the legal documentation with the aim of concluding on the full package in December.
Yesterday, we have reached an agreement in principle on all elements related to ESM reform, subject to the conclusion of national procedures.
This included the Backstop Guideline, the Pricing Guideline, three Board of Governors (BoG) resolutions, the amended Guideline on Precautionary Financial Assistance and terms of reference and explanatory note of the single limb Collective Action Clauses (CACs).
Some important features of this agreement include the nominal cap of the common backstop which is for the absolute limit that the ESM can lend to the Single Resolution Fund, which is set at €68 billion. We have also agreed in principle on the modalities how to introduce the backstop early.
At the same time, there are a couple of loose ends of legal nature, where we need some clarification before we close this file. I trust that we will be able to do it in our meeting as soon as January.
Following a final political agreement, the Treaty will be subject to national procedures and translated in all languages.
I still expect us to be able to sign this Treaty change in the first quarter of next year, which was our initial expectation. And in the course of 2020, countries are expected to proceed with national ratifications of the Treaty.
Last night we also continued our work on further strengthening of the Banking Union, building on the positive momentum evidenced in our November meeting.
We took note of the report from the Chair of the High Level Working Group on EDIS on a roadmap on further strengthening the Banking Union, including EDIS.
Let’s not lose sight of our final goal. A Common Deposit Insurance Scheme is the missing link of Banking Union. It will increase the protection of all our savings in case of a banking crisis, instilling confidence of investors and citizens in our common financial system.
There was broad recognition that this report by the high-level working group contains important elements for a strengthened Banking Union.
Besides the gradual introduction of a European Deposit Insurance Scheme, the report touches upon several elements which are really far-reaching. They are not yet ripe for endorsement or an in-depth discussion at ministers’ level.
At the same time, they will help to frame political negotiations going forward. To that avail, we have asked the High-Level Working Group to continue work on all elements with a view to take it forward within this new European Union institutional cycle.
This year, we have focused on the deepening of the EMU via establishing the BICC - the Budgetary Instrument for Convergence and Competitiveness - and reinforcing the ESM. Next year completing the Banking Union, including EDIS, will be a key aspect on the finance ministers' agenda.
In the meantime, there is ongoing legislative work on the euro area budget - the BICC - building on our October agreement.
Taken together, all these elements contribute to a comprehensive package of deepening our Economic and Monetary Union to build and secure our prosperity.
I will present the outcome of our discussions to the President of the European Council, in view of the Euro summit next week.