We made it. After several months of intense negotiations and a very tough and long meeting we delivered a comprehensive plan to strengthen the euro. A plan that is agreed by all of us. I will come to that in a second. Let me run you through the rest of the Eurogroup agenda, which was already packed.
We started our meeting with an overview of the euro area economy. The IMF presented their initial views based on the so-called article IV mission. Given the current risks to our economic outlook, the IMF’s view that building buffers is needed at the current juncture is broadly shared.
We then moved on to Greece. It has been a while since we discussed Greece and that is a good thing. The Commission presented the first enhanced surveillance report – the Eurogroup will be following these reports on a quarterly basis. This first report shows some good results. Ministers welcomed that the primary surplus target of 3.5% of GDP is projected to be met in 2019. It’s the third year in a row this happens. This shows that the Greek authorities are committed to a sound fiscal path.
At the same time, further progress is clearly needed in some areas. This includes privatisation, arrears clearance, insolvency legislation and product market reforms. We all agree that it is paramount to continue the good work initiated in recent years by implementing the reform agenda. That is the sustainable path towards increasing Greece’s growth potential.
We then discussed Spain and Cyprus on the basis of post-programme surveillance. Both economies are performing well.
We particularly welcomed the strengthening of the Spanish financial sector.
We praised the fiscal performance of Cyprus and emphasised the need to reinforce the NPL reduction strategy and overall reform momentum.
A highlight was our discussion on draft budgetary plans of our euro area member states, following the 19 opinions provided by the Commission. There is a more detailed statement on this precise issue.
I need to remark that it is the 6th time that this exercise is conducted and it is the first time ever that no country is expected this year to register an excessive deficit, meaning above 3% of GDP.
The case of Italy deserved special attention, since the Commission identified a particularly serious non-compliance in the Italian budget plan.
We support the assessment by the Commission and recommend that Italy takes the necessary measures to be compliant with the Stability and Growth Pact.
Sound public finances are a condition for sustainable growth.
Respecting the rules that underpin our currency is essential to ensure consistency and stability in the euro area.
Going forward, we welcome and we support the ongoing dialogue between Italy and the Commission in pursuit of common ground.
We also adopted a work programme for the first half of 2019. And we had a sneak preview of the Commission’s plans to reinforce the international role of the euro. The Commission will issue a Communication on this, which we will study carefully – we will come back to this next year. Advancing on our plans to reform the euro area is a good contribution to enhance the international role of our single currency.
So now, on EMU reform, this was really the biggest topic on our agenda. Our plans for the future of the euro area.
Our aim was to agree on a report to deliver to the Euro Summit next week. Very hard negotiation, but I think the result is a breakthrough on some key issues.
The outcome of our deliberations is a report to the Leaders with 3 annexes:
- the terms of reference of the backstop
- the term sheet on ESM reform
- the ESM-Commission cooperation agreement.
My team is still consolidating the texts agreed, after this very intense and exhaustive negotiation.
This will be delivered to you shortly. I will then deliver this outcome in person to President Tusk this afternoon.
We have agreed to enhance the role of the ESM to further strengthen the crisis prevention and resolution capabilities of the euro area. We will also increase the effectiveness of ESM precautionary instruments. At the same time, we reaffirmed that ESM support is a last resort and that we need to ensure an appropriate level of conditionality.
Ministers very much welcome the agreement reached between the ESM and the Commission, which will improve cooperation within and outside financial assistance programmes.
Our agreement on the backstop to the Single Resolution Fund is an important step to further strengthen the credibility of the Banking Union. The backstop will be introduced earlier than the originally foreseen date of 2024, provided that sufficient progress with risk reduction is achieved by 2020.
Ministers also agreed on a process to promote debt sustainability in the euro area. To this end, we will introduce single-limb collective action clauses, known as CACs, by 2022.
This is not the end of the road in our plans to reinforce the euro. We will build on progress made to continue to work next year.
As regards the instruments for competitiveness and convergence, France and Germany proposed an architecture for the Eurozone budget, which would be part of the EU budget. Subject to a mandate to be given by the Euro Summit, work could proceed on the design, implementation and timing of such an instrument for convergence and competitiveness.
The possible features of a stabilization function were also discussed, including the unemployment insurance scheme. We did not reach a common view on the need and design of such a function but technical discussions continue.
More work is also needed on EDIS before we can agree on a roadmap to begin political negotiations. The news here is that we will establish a high-level working group with a mandate to work on next steps and report back in June 2019.
We will continue working on all possible solutions to the limitations in the current set-up for liquidity provision in bank resolution.
Finally, the preparation of an ESM Treaty change is another future undertaking.
To conclude, this was a good moment to mark in the Eurogroup the 20th anniversary of the start of the euro.
We demonstrated – yet again – our political commitment to the single currency by building bridges between our national positions and taking steps to collectively keep our economies out of trouble.