12 July 2018

Main results - Eurogroup

The Eurogroup was briefed on the outcome of the June Euro Summit. It discussed the economic situation and the outlook for the euro area as well as the euro area's budgetary situation as a whole.

Main results

Information from June Euro Summit

Eurogroup President Mário Centeno informed ministers on the outcome of the Euro Summit, which took place on 29 June.

He also briefly outlined the issues relating to the deepening of the Economic and Monetary Union on which the Eurogroup would be expected to work before the next Euro Summit meeting, scheduled to take place in December this year.

These include terms of reference for the common backstop to the single resolution fund to be provided by the European Stability Mechanism (ESM), and a term sheet for the further development of the ESM, as well as a roadmap for the beginning of political negotiations on EDIS. The Eurogroup will also discuss all other elements listed in the Eurogroup president's letter of 25 June 2018 to President Tusk.

Presentation of the summer interim forecast

The Eurogroup discussed the economic situation and the outlook for the euro area, on the basis of a presentation by the European Commission on its summer interim forecast.

The Eurogroup regularly discusses the economic situation and economic policy challenges as part of its efforts to effectively contribute to economic growth and job creation.

European Economic Forecast. Summer 2018 (Interim)

Budgetary situation and prospects

The Eurogroup held a discussion on the budgetary situation in the euro area as a whole, focusing on prospects for 2019. The results of this exchange will contribute to the preparation of the draft budgetary plans of the euro area member states and the recommendations for the euro area member states in 2019.

The Chairman of the European Fiscal Board (EFB), Niels Thygesen, presented the EFB report. The EFB is an independent advisory body of the European Commission. It provides advice on matters related to the euro area fiscal stance.

The Eurogroup is required by EU law to discuss the euro area's budgetary situation and prospects, in the framework of the assessment of the draft budgetary plans of the euro area member states. It therefore holds regular discussions on the euro area fiscal stance.

European Fiscal Board (EFB)

EFB report: Assessment of the prospective fiscal stance appropriate for the euro area

Ireland and Spain: post-programme surveillance missions

The European Commission and the European Central Bank presented to the Eurogroup the main findings from theirpost-programme surveillance missions to Spain and Ireland, which respectively took place in April and May 2018.

The European Stability Mechanism presented findings in relation to its early warning system in both countries.

The International Monetary Fund also informed about its recent Article IV consultation with Ireland.

According to the institutions' reports, the economic performance of both Ireland and Spain remains strong, and the risks in terms of the repayment of their respective loans are low to very low.

Post-programme surveillance (PPS) is carried out in countries that have completed financial assistance programmes until at least 75% of the financial assistance received has been repaid. The purpose is to assess whether there are any risks to their ability to repay loans received during their programmes.

Bulgaria's intention to join the EU's Exchange Rate Mechanism (ERM II) 

In the margins of the Eurogroup meeting, the representatives from the euro area members states, the European Central Bank and Denmark met in the presence of the European Commission and of Bulgaria to discuss the prospects of Bulgaria's participation in the ERM II.

The participants of the meeting adopted a statement.

Statement on Bulgaria's path towards ERM II participation

Vice-President Valdis Dombrovskis' remarks at the press conference on Bulgaria's path towards ERM II and Banking Union participation

Remarks by M. Centeno following the Eurogroup meeting

First, on the Banking Union, we will need to work on a roadmap for beginning the political discussions on a European Deposit Insurance Scheme (EDIS). We also need to work on a possible framework for liquidity in resolution; and on measures to enhance the organisation of anti-money laundering (AML). We should also monitor progress with risk reduction. Finally, we should keep track of agreements reached on banking legislation and subsequent implementation.

Second, on reform of the ESM, we need to prepare a term sheet by December 2018 covering the following elements: (i) the common backstop to the Single Resolution Fund; (ii) the review of the ESM toolkit, in particular precautionary instruments and possible new instruments; (iii) a stronger role of the ESM in programmes; (iv) debt sustainability issues; and (v) a review of how the ESM is governed.

Finally, on fiscal capacity, we have two proposals by the Commission on the table – a stabilisation function and a reform delivery tool, within the Multi-annual financial framework (MFF) framework. In my letter to President Tusk, I have mentioned other ideas which should be pursued further: a possible euro area budget and an unemployment insurance fund, while acknowledging the concerns around moral hazard and the open questions on how these ideas could be financed.

All this will require further work. We will be more focused in our discussions in each of the upcoming Eurogroups, without prejudice to taking decisions as a package by December.

For our second agenda item, we took stock of economic developments based on the Commission forecast that was published today. Growth was very positive last year. It is now settling at a steadier pace. Despite the risks in the global economy, namely with tensions on trade, we are confident in the strength and resilience of the euro area economy. Years of reforms are now paying off. Employment is up. But clearly there are important challenges ahead in the global economy so we need to stay the course and continue sound economic policies.

Economic forecasts are the starting point for our fiscal policies. Under our third item today, we discussed the budgetary situation and prospects for the euro area as a whole. Professor Thygesen presented the report published by the European Fiscal Board last month. We agreed that rebuilding fiscal buffers remains a priority for some countries with high debt levels. On the other hand, there are countries that have some scope to prioritise investments to boost their growth potential, while preserving the long-term sustainability of public finances. Ministers will feed this euro area perspective into their national budgetary preparations in the coming months. We will come back to the issue when we assess the draft budgetary plans for 2019 towards the end of this year.

We then discussed Spain and Ireland post-programme surveillance. We congratulated both Nadia (Calviño) and Paschal (Donohoe) on the strong economic performance of their countries. We encouraged them to continue pursuing sound economic policies to safeguard the Spanish and Irish economies against downside external risks. [...]

Full remarks

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