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

Good evening everyone and welcome to the Eurogroup press conference.

Today we held a regular Eurogroup on a number of topics, but also a second part of the meeting was in an inclusive format. 27 ministers were in the room to prepare the Euro Summit of December. As you know, President Tusk invited also 27 heads of governments and states to the Eurozone Summit of December.

To our discussions we welcomed two new ministers, one is the Minister from the Netherlands, Wopke Hoekstra, who presented the economic priorities of the new government in the Netherlands, and we welcomed the acting German Finance Minister Peter Altmaier, with whom I had the pleasure to speak in Dutch which is quite remarkable because it does not happen that often.

Let me first turn to our regular meeting, where we were joined by Danièle Nouy of the ECB Supervisory Board and Elke Koenig of the Single Resolution Board. They join us regularly to inform us on developments in the financial sector, on the work they are doing and any challenges they are facing. 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.

Secondly, we had a thematic discussion dedicated to investment in human capital. As you know, a significant share of our national budgets goes to education and finance ministries have a particular interest in improving the efficiency of public spending also on education. So, today we shared some experiences and best practices on possible ways to improve the “value for money” in the field of education policies. We will come back to it early next year. We had quite a lively discussion and ran out of time, given the fact that we had the other ministers waiting to join us. So we have decided to continue this discussion, perhaps already in January. A few ministers gave us some insights on their national experiences, in education reforms or tax measures to improve the participation race in the economy, so there was an interesting exchange of experiences and ideas.

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.

Finally, as you know, we have scheduled to elect a new President of the Eurogroup, in the Eurogroup of December 4th. Ministers wishing to put forward their candidacy will be invited to do so later this month. We will send a letter to the ministers outlining the exact procedures, and the dates, etc… so everyone knows in advance how it will take place. That will follow later. We did not spend any time on that today.

Let me turn to the second part of the Eurogroup in which we welcomed a number of ministers from non-euro countries. We had two topics: one was the completion of the banking union and the other one was fiscal policy.

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.

On institutions, there was quite little discussion. Everyone fully acknowledges the fact that the Commission is the guardian of the Pact and needs to keep playing that role also in the future. I didn’t hear any discussion on that.

On the rules themselves, the returning issue is that they are complex, they are not predictable, they are sometimes not based on observable criteria. That makes it difficult for national ministers to design their budgets, to explain what happens to their electorates, and that is an issue that keeps coming back. On the other hand, we all know why the rules are complex: because we want to take into account all different circumstances that may arise and we have allowed for a number of flexibilities. This has also made the rules more complex. There is a trade-off between having simple rules and having rules that fit everyone. I think we have to be realistic there: when people say let’s make rules much more simple, I am not sure that they want accept that they could also become much more harsh, in difficult circumstances. So that is a trade-off that we must realise.

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.

As I said, all of those topics will come back next month. We will also return to the topic we discussed last month, which was the future of the ESM. So then we have the three blocks: future of the ESM, completing the banking union and fiscal policy, including possible instruments. We will bring those three together next month to prepare the Eurozone summit later on.

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