15 April 2013

Eurogroup: Good progress in several key areas

This press release summarises the Eurogroup's recent progress with financial assistance for Cyprus, and the Troika's proposal to extend loan maturities to Ireland and Portugal. Regarding ESM direct bank recapitalisation, the Eurogroup reports that an operational framework should be ready in June.

The Eurogroup on 12 April 2013 endorsed the policy conditionality attached to financial assistance to Cyprus and the Troika's proposal to extend loan maturities to Ireland and Portugal. It commended the Irish and Portuguese authorities for their programme implementation and took stock of the situation in Greece. The ministers also discussed several key issues regarding the operational framework for direct bank recapitalisation by the European Stability Mechanism.

Cyprus: formal approval in sight

Further to the agreement reached with the Cyprus authorities at staff level, the Troika (European Commission, ECB, IMF) presented the adjustment programme to the Eurogroup for political endorsement. Formal approval of the financial assistance is envisaged for 24 April. In the meantime, individual euro area countries are expected to complete their national procedures required for this decision. While the IMF is expected to cover about €1 billion of the agreed financial envelope, about €9 billion should come from the European Stability Mechanism (ESM). The first disbursement is planned for mid-May.

Ireland and Portugal: loan maturities to be extended

The Troika presented to the ministers the outcome of the latest reviews of the implementation of the Irish and the Portuguese programmes. "Ireland is a living example that adjustment programmes do work provided there is a strong ownership and genuine commitment to reforms", said President of the Eurogroup Jeroen Dijsselbloem at the press conference after the meeting.

The Portuguese Minister reassured his euro area colleagues that the government would agree with the Troika on additional budget consolidation measures within the next few weeks. These measures are necessary if Portugal is to meet the programme's targets, as some elements of the 2013 budget must be revised following a recent ruling of the constitutional court.

The Eurogroup agreed to extend by seven years maximum average maturities of the loans from the European Financial Stability Facility (EFSF) to Ireland and Portugal, provided they continue to implement their adjustment programmes fully. The same agreement was confirmed for the EU's European Financial Stabilisation Mechanism (EFSM) by all 27 ECOFIN ministers. These political decisions are expected to be formalised in the coming weeks.

The Troika also presented the state of play of the second review of the Greek adjustment programme, which is expected to be concluded over the coming days.

ESM direct bank recapitalisation: operational framework should be ready in June

The ministers made good progress on several main elements of a future new instrument for direct bank recapitalisation by the ESM. These include: 

• principles of fair burden-sharing between the Member State concerned and the ESM
• dealing with legacy assets
• the most appropriate and efficient financial architecture for this new instrument.

The discussion is ongoing, and the aim is to finalise the operational framework in June.

Press release

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