06 November 2017

Main results - Eurogroup of 6th November

The first part of the Eurogroup meeting was a regular meeting of the euro area ministers. Later, the ministers of EU27 met to prepare the December Euro Summit. Topics discussed include public investment in human capital, the banking union, Greece and fiscal governance in the euro area.

Banking union - euro area aspects

The Chair of the European Central Bank's Supervisory Board, Danièle Nouy, presented an overview of the ECB Supervisory Board's activities since April 2017.

Ms Nouy gave an overview of the recent supervisory work and highlighted the recent addendum to the March 2017 ECB guidance to banks on non-performing loans (NPLs), possible risks related to Brexit, and other key activities, such as supervisory stress tests.

The ECB Supervisory Board's activities are presented at the Eurogroup biannually.

The Chair of the Single Resolution Board (SRB), Elke König, informed the Eurogroup about the SRB's activities over the past months: progress on resolution planning and priorities in this area, implementation of the minimum requirements for own funds and eligible liabilities (MREL) and the status of the building-up of the single resolution fund (SRF). [...]

Greece

The institutions (the European Commission, the European Central Bank, the International Monetary Fund and the European Stability Mechanism) briefly informed the Eurogroup about the constructive talks they have had so far with the Greek authorities in the context of the ongoing third review of Greece's macroeconomic adjustment programme.

The Eurogroup is expected to discuss the third review in more detail at its meeting on 4 December 2017. [...]

Completing the banking union

The ministers of 27 EU member states discussed possible steps towards the completion of the banking union. The Commission presented the main elements of its recent communication on this topic.

In June 2016, the Council concluded a roadmap to complete the banking union. In June 2017, the Council Presidency presented a progress report on the ongoing work on measures to strengthen the banking union and reduce risks in the banking sector.

Fiscal capacity and fiscal rules for the EMU

Ministers exchanged views on the future of fiscal governance in the euro area, including issues related to fiscal rules and ideas for possible new euro area fiscal policy instruments.

Full results

Remarks by J.Dijsselbloem following the Eurogroup meeting of 6 November 2017

[...] The banking sector is in a much better shape and that is very good news. There are still elements missing from our frameworks, from the bank union. There are still legacy issues to be dealt with and which are being dealt with in this period of time. The SSM and the SRB are working on both the open issues and the legacy issues. They have given us some input for our legislative work and have told us on some of the challenges they are facing. One of which was dealing with NPLs and we were informed by Danièle Nouy on the recent SSM guidance on NPLs and the provisioning for building up of possible future NPLs. We commended both Ms. Nouy and Ms. König for their excellent work. We encouraged them and the Commission to work on the issues that there are before us and we will meet again in Spring. [...]

We also had a short debrief from the institutions on the recent mission to Greece. I am sure Commissioner Moscovici will say more about this. This is of course in the context of the third review. Very positive signals, work ongoing but of course a lot of work still needs to be done, very much about implementation but everyone has a very strong will and commitment to get it done, preferably before the end of the year. [...]

About the completion of the Banking Union, as you remember, during the Dutch presidency in 2016, we had agreed on a roadmap which outlined the topics that have to be dealt with and how they interact. We introduced the connection between risk-sharing and risk-reduction. Both should be work on, in a particular order, and both are being worked on as we go along. We had an interesting debate. I think there was general agreement that it is useful to take stock of the exact work: where are we? what have been done, for example, when dealing with NPLs or other issues on risk reduction? And building up on the roadmap that we already have, to be more precise on what is then the next step, what more do we require in terms of risk reduction and how does that click into the next step on risk sharing. And that is the work that we will have to do: make more precision on how the process will continue from here on using that roadmap from 2016.

Of course, we have to take into consideration the political situation where the new German government is still to be formed and that will work into our political timeline. This topic, and the same goes for the fiscal issues, will come back on the agenda of the Eurogroup of 4th December where we will try to boil it down, so that we can report to the government leaders at the Euro Summit in December.

The second topic in that second part of our meeting was the fiscal framework. Let's distinguish the current rules as we have them - are they efficient? are they effective? are they doing what they should do? - and the debate on the need for more fiscal instruments, a fiscal capacity or other ideas on that. First of all, it's good to establish the fact that we don't just have rules, we also have institutions that play an important part in fiscal policy, and we have markets that give off incentives that create outside pressure for politicians to do the right thing. But there immediately, there is a word of caution to be used: markets are not always rationale, they are not always well-informed, risks are not always priced in the right way, so we must not take guidance from the market but use them and enable them to be more effective in providing some outside pressure to us. [...]

There was a general agreement that reducing debt levels would become more and more important, and is already if you realise that fiscal deficit in the eurozone is now less than 1,5% and will continue to go down, looking forward. So debt will become a bigger issue. Of course to the extent that we are more successful in reducing debt in our member states, national governments will also be able to absorb shocks better and that is very useful, for example in the case of an asymmetric shock.

 

That brings me to new instruments, such as the fiscal capacity. Lot of debate there still: about the function of it, what should it do? How can member states make use of it? What is the actual character of the instrument? Is it funding, is it financing, is it transfer, etc? So lots of debate there, but quite a large number of ministers feel that to complement our toolkit, a fiscal capacity as a stabilisation tool would be useful. So more work to be done there, but some convergence perhaps can be foreseen. [...]

Full remarks

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