Category Archives: Eurogroup

Eurogroup: remarks by Jeroen Dijsselbloem

Remarks by Jeroen Dijsselbloem following the Eurogroup meeting of 9 October 2017

“Let me start by saying that today was Wolfgang Schäuble‘s last Eurogroup. A number of colleagues took the floor to thank him and bring back to memory his long involvement. He was in the Eurogroup for 8 years, but he has been a very strong participant in discussions about Europe for, I would almost say 45 years – I believe he has been in domestic politics for 45 years. He was there and actively involved at the start of the euro and the monetary union.

He was, as I said, member of the Eurogroup for 8 years, therefore present and very actively involved during all those crisis years in which the Eurozone almost fell apart. Some have said that Wolfgang Schäuble is dominant because Germany is dominant. Germany is a large country, but I think that is completely misunderstanding his position and the authority that he has among us, the colleagues. This has to do with his experience, but also his wisdom and his strong focus on the European interest. I’ve always been convinced, even in the toughest discussions that we had in the Eurogroup in the five years that I was involved, that he always put the long term interest of a strong and stable Eurozone first. He always kept a very strong view of that long term interest. And I think that has been mutually valuable for all of us.

So we thanked him, professionally and personally, and wished him well in his new and very important job in Berlin. Of course, we will immediately meet him again tomorrow at Ecofin, but it was his last Eurogroup. And then Washington, where he will also join us at the IMF/World Bank meetings.

Our main discussion today was on the role of the ESM. A discussion that, of course, takes place in the broader context of the future of the monetary union. Next month, we will continue that debate when we will focus on the completion of the banking union and on a number of fiscal issues, both the present fiscal framework – is it effective? how should it be changed, if it should be changed? – but also what possible new instruments we would need in terms of fiscal policy. So those are the topics for next month.

Today, we focused on the role of the ESM, along, basically, 3 strands. First of all, the role of the ESM in crisis management: how it could be strengthened, deepened. Secondly, the role of the ESM in the completion of the banking union. And thirdly, issues of governance and relation with the EU legal framework.

It was a very good discussion. Among the member states, the ministers, there was quite a strong agreement on that we should work predominantly within the current legal framework, in the ESM treaty. It means that the current governance setup could, in general terms, work also for the future, not precluding future changes or integration, in the future, in the European institutional frameworks.

Secondly, there was a strong positive sense about the work that the ESM has done. The ESM has now existed for five years and has been very effective, both on the financing sides and in bringing in the money on both sides of the balance sheets so to speak. Number of colleagues have pointed out that the ESM has more instruments than it has so far used. We could look at that to see what future role, further role, could be envisaged, but also possible additional instruments. Also that should be further discussed. I think everyone agreed that the ESM has a very strong role to play, not just in crisis management but possibly also in the prevention of the future crises.

And, finally, there was quite a broad support in involving the ESM in providing a backstop to the single resolution fund. Of course, as you know, that’s part of the roadmap for the banking union which outline number of actions that need to take place. I think next month we will discuss that whole agenda, that whole roadmap, but there seems to be a strong support for the ESM in the role of a backstop.

So I was quite happy with that debate and we will continue it and complete it working towards the eurozone summit in December.

Also, today, we discussed the topic of the tax wedge on labour. As you may recall, since 2014, we’ve had this topic on our agenda, following it closely. The Commission is monitoring progress, we’ve developed common principles to guide the reforms of the tax wedge. The euro-area tax wedge on labour is still very high, also looking at OECD statistics. There are also some big differences between countries.

Today, three of our colleagues shared the progress they have made on this topic, in Austria and in Belgium. And the French minister talked about the progress made in the past, for example in the period that Pierre Moscovici was minister in France, and the plans that the current French government has for the future. So, lots of lessons to be learned, also on how to finance these tax reforms. We will come back to that already in December, when the Commission will also report, this is an annual exercise, on the progress being made throughout the eurozone on the topic of the tax burden on labour. We will come back to that in December and continue this push for reforms.

Finally, we had two recurring items on our agenda. One is the post-programme monitoring for Portugal, the second one was a short discussion on exchange rates developments.

We commended Portugal for the recent improvements in economic performance, while, of course, recalling the importance of maintaining the reform momentum and continuing on the road of fiscal consolidation.

On exchange rates we noted that the euro has strengthened in recent months but it is broadly in line with long term averages.

Finally, let me make a few remarks, because you will ask me anyway, about my position. The rumour is that we will have a new government in the Netherlands. The latest news is that it could be in office in the week of 23 October, so I would leave my job in that week. I have put to the colleagues in the Eurogroup today that it would be my intention to complete my mandate which runs until 13 January, of course, if the colleagues in the Eurogroup would support that. There was unanimous support for that, everyone was content with me staying on until mid-January.

Finally, I said a few words about the election process of a new chair of the Eurogroup. His or her mandate would start as of the Eurogroup of January, but the election should take place at the end of the Eurogroup meeting in December. Candidates can be put forward in the two weeks before the Eurogroup of December, so starting on 4 December. And then, hopefully, in the January Eurogroup there will be a new chair.”

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Remarks by Jeroen Dijsselbloem following the Eurogroup meeting

Welcome to this Eurogroup press conference. We had a short meting today in the Eurogroup. First of all, I want to thank the Estonian Presidency of course for their hospitality and for allowing us to be in this very inspiring surroundings.

Let me first make a remark on the ongoing economic recovery. I’m not sure whether we should even talk about recovery anymore. In the Eurozone, growth keeps picking up, it is set to remain robust, it’s broad-based, it’s across all our countries. Of course, risks remain and work needs to be done to deal with those risks, but confidence is ever increasing and I think that’s hugely welcome.

 

We started our first meeting after the summer break with a discussion  on how to make our monetary union more resilient, which is vital for its sound functioning. The discussion took place about what is the responsibility of member states and what is the responsibility of the monetary union or the European Union, and I think reducing vulnerability. There are 3 aspects regarding resilience. First of all, of course, how we can make sure that we are less vulnerable to economic shocks. Secondly, how we can increase the absorption capacity. So this is how when the economic shock occurs, how it is being dealt with, absorbed, by institutions, by markets, by households, by companies. And thirdly, about enabling a faster economic recovery after a shock. And that, of course, is one of the lessons learnt from the crisis. We were much too slow in absorbing the shocks. We weren’t ready and fit to absorb the shocks, neither on the private nor on the public side, and it took a very long time to recover. Certainly, if you compare for example to how the US recovered from the crisis. So the three phases: reducing vulnerability before the shocks, absorption of the shock when it occurs, and having a fast recovery after the shock. Those were the elements discussed.

It is of course an umbrella issue, because when you get into it, it is again about the kind of structural reforms needed at national level, finishing the banking union, completing capital markets union so markets can absorb more shocks, improving our governance and institutional frameworks, both national and European. Many of those topics we will also return to today, tomorrow, in the coming months when we discuss the future of the monetary union.

So we will build on today’s discussion, bringing the topics back on our agenda in the coming weeks, putting it in the work programme of the Eurogroup, and start work this autumn on topics that are right in front of us, like finishing the banking union – the Commission already has proposals on the table -, doing more work on the capital markets union where proposals are on the table, while we discussed the future elements of the monetary union.

Second topic today was the state of play in Greece, the planning for the third review in Greece.

We got a report from the institutions on topics that are being worked on at the moment. Technical teams are at the moment in Athens, fact-finding and preparing the grounds, so that later on the third review can get off to a quick start. The idea is to finish that before the end of the year. More work needs to be done of course on a number of issues some of which were already mentioned today.

A sign that Greece has come a long way is the proposal to abrogate the excessive deficit procedure, which we welcomed today and is expected to be adopted by the Council later this month.

We also addressed ongoing court cases against the previous director of Elstat. Let me underline here again that, across the room in the Eurogroup, great concern was expressed about the ongoing court cases, the effect that it has internationally on the confidence in Greece and the process of modernisation in Greece, including the independence, of course, of Elstat itself. That concern was underlined and stressed. But of course the judicial procedures will go their independent ways.

Eurogroup: focus on Greece and economic resilience

Greece

Greece’s Minister for Finance, Euclid Tsakalotos, and the institutions (the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund) briefed the Eurogroup on the state of play of Greece’s ongoing economic adjustment programme.

They presented the expected timeline of the recently started third review of the programme. Greece will be required to complete some 95 actions, many of which concern the implementation of legislation that was adopted earlier during the programme.

Topics that will be covered in the third review include Greece’s budget for 2018, the review of social benefitslabour market reform, public administration-related matters, implementation of strategy for non-performing loans, energysector reform, and privatisation.

Economic resilience in the EMU

Ministers exchanged views on how to increase economic resilience in the Economic and Monetary Union.

They identified a number of policy areas, where improvements could lead to increased economic resilience. These include the need for the diversification of the economy, the flexibility of labour and product markets, taxation incentives for investment, quality of institutions, and other areas.

This initial discussion will guide the Eurogroup’s more concrete thematic discussions on growth and jobs in the future.

Economic resilience refers to a country’s ability to prevent and address economic shocks. It is particularly important for the euro area, where countries share a single currency and are highly interdependent, and where a lack of economic resilience in one country may rapidly lead to serious consequences in other euro area economies.

Czechs seeks observer seat at euro group finance

“I support having an observer status in the euro zone,” Foreign Minister Lubomir Zaoralek said in a comment to Reuters.

“It is undoubtedly beneficial for us to have the possibility to take part in their meetings and thus have a direct insight into the governance of the euro zone.”

It is clear that in response to Brexit, European leaders are pondering reforms. The foreign minister argued that Czech republic may try to get an observer seat at the euro group of euro zone finance ministers if its decision-making powers are boosted under plans to reshape the European Union.

Remarks by Jeroen Dijsselbloem following the Eurogroup meeting of 15 June 2017

 

Today we welcomed two new ministers, Toomas Toniste, who is the new finance minister for Estonia, and Paschal Donohoe, who is the newly appointed Irish minister of finance. We very much look forward to working together with them. We also congratulated Edward Scicluna who, after winning the elections, was appointed for another term as minister for finance, so he will stay with us.

For today’s meeting, we also welcomed Christine Lagarde, Managing Director of the IMF, and thank you for joining us here also at the press conference. She joined us both for the Article IV discussions on the Eurozone as well as, of course, on the Greek programme. We welcomed Elke König, who is the Chair of the Single Resolution Board, and Sabine Lautenschläger, the Vice-Chair of the ECB Supervisory Board to present the first case of implementation of the European resolution framework in the Eurogroup.

Our meeting revolved mainly around Greece, and was a crucial one for the programme. I am glad to announce that we have achieved an agreement on all elements: conditionality, debt strategy moving forward and IMF participation. Christine Lagarde will speak about that.

We have issued a statement. I will therefore only present the key elements.

First, we welcomed the ambitious policy package that was fully agreed between Greece and the institutions and the adoption of the agreed prior actions for the second review.

The fiscal measures for the post-programme period that have been adopted address the underlying structural imbalances in Greek public finances. Decisive steps have also been taken to reduce NPLs and to operationalise the privatisation and investment fund.

The policy package also contains a large number of reforms to increase potential growth of the Greek economy, whilst at the same time reinforcing the social safety net. The labour and product market reforms, along with the enhanced use of EU structural funds, technical assistance and growth initiatives, will enable Greece to return to a sustainable growth path. For this purpose, the Greek authorities helped while the European institutions will work on the creation of a National Development Bank, as well as measures to spur investment.

Second, the Eurogroup discussed the debt strategy for Greece on the basis of the agreement of May 2016, last year’s agreement.

It is, first of all, essential that public finances in Greece remain on a solid track. The Greek authorities committed to maintain a primary surplus of 3.5% of GDP until 2022 and a fiscal trajectory after that, that is consistent with its commitments under the European fiscal framework thereafter.

The Eurogroup also specified further the medium term debt measures that were already in the May 2016 statement, which it stands ready to implement at the end of the programme. We confirmed that we are ready to consider a further extension of the weighted average maturities and a further deferral of EFSF interest and amortization, both up to 15 years.

In addition, we also stand ready to implement an operational growth adjustment mechanism to adjust the EFSF loan re-profiling should growth developments in the post-programme period differ from what will be expected at the end of the programme in 2018. In other words, if there is more growth, then more or faster repayment of loans can take place; if growth is less; then further lengthening or further deferral of interest could take place. We have mandated the EWG to work further on this mechanism and it will be part of the decision-making at the end of the programme, part of the medium-term debt package.

As agreed in May last year, these medium-term measures, as well as the growth adjustment mechanism, will be implemented as far as needed at the end of the programme, conditional upon its successful implementation. That is the standard language and that is still valid. The exact calibration of these measures will also be confirmed at the end of the programme on the basis of an updated DSA delivered by the IMF, in cooperation with the European institutions.

For the long term, the Eurogroup recalled the agreement that in the case of an unexpectedly more adverse scenario, an additional contingency mechanism on debt could be activated. In other words, the Eurogroup reiterated its commitment to continue to support Greece in case of a more adverse scenario than now is foreseen.

Finally, against this background, the IMF management will shortly recommend to the board… I’ll stop here, this is the kind of text that Christine, I think, would like to use.

As regards the next steps, following national procedures, the ESM governing bodies are expected to approve the disbursement of the third tranche of the ESM programme amounting to a total of €8.5 bn. Klaus Regling will say more about that figure and how it is built up.

Overall, I think this is a major step forward. The Eurogroup commends the institutions, the Greek authorities and, foremost of course, the Greek people for their intense efforts and resolve. We are now going into the last year of the financial support programme for Greece. We will prepare an exit strategy going forward to enable Greece to stand on its own feet again over the course of next year.

Other than Greece, the key issues we addressed concern recent developments in the context of the European resolution framework for banks, spending reviews and the IMF Article IV review.

We were informed by the institutions, the SSM and the resolution board, of the successful resolution of Banco Popular last week in line with the newly established resolution framework. The authorities involved in the resolution acted in a very swift manner, ensuring a continuation of core functions and with no resulting costs for the taxpayers, and this is very good news.

Last September, we adopted a set of common principles guiding the design and implementation of spending reviews. A topic that is, of course, important to finance ministers. Today, we came back to the issue to take stock of the progress achieved, on the basis of a very good paper provided by the Commission. We have identified remaining challenges and will come back to that next year, working on an exchange of best practices on this topic.

Finally, we discussed the economic and policy challenges for the euro area with the IMF managing director, following the Fund’s regular article IV review. Here good news as well: the Fund confirms the euro area economy is strengthening, with the recovery becoming more and more broad-based. I’ll leave it for Christine to say more about this.