Today, the Eurogroup and the informal Economic and Financial Affairs (ECOFIN) meetings are taking place in at Zappeio Megaron Conference Centre in Athens on April 1-2. Fostering growth and job creation, especially for younth, is high on the agenda of the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) ministerial meeting as well, where the European Investment Bank (EIB), will present its Roadmap 2020 to Finance Ministers, outlining its new strategy for the Mediterranean.
- The ECOFIN agenda includes discussions on key issues of pan-European importance, such as the state of play of Banking Union – especially after the approval by COREPER of the compromise agreement reached by the Greek Presidency in its negotiations with the European Parliament on the Single Resolution Mechanism – the social aspects of growth and financial stability in Europe, the long term financing of the economy, especially the enhancement of SME financing, as well as the preparation of the IMF/World Bank Spring and G20 Finance Ministers meetings.
The banking union is one of the biggest challenges and goals on the road towards monetary unification since the introduction of the euro currency.” Completion of a banking union is one of the preconditions to restore liquidity and credibility in European economy and in the banking sector, along with safeguarding economic stability.
Over the years, financial regulation has become largely determined at the EU level, even though national differences persist. The financial sector itself has increasingly transcended national borders. Supervision of the sector had not followed this trend, as it remained a national prerogative. The same holds true for the management of problems and crises in the financial sector.
Before the crisis there was little willingness in the Member States to grant the EU a large role in economic policy-making, which was thus limited to surveillance and non-binding recommendations. The lack of more compulsory European control proved problematic, as large economic imbalances between eurozone countries emerged.
The European control over the financial sector will actually be stronger than its control over fiscal and economic policies. From November 2014 onwards, a Single Supervisory Mechanism (SSM) will be in place in which the eurozone and potentially other Member States will participate.
Supervision of the banks in the SSM will be jointly exercised by the national supervisors and the European Central Bank (ECB), with the latter having the final say on supervisory decisions.
The ECB is a relatively autonomous EU institution. The ECB has very significant influence over economic conditions in the persistently conflict with the preferences of national governments and that it attempts to expand its competencies still further by acquiring additional influence over, say, the supervision and regulation of financial markets and the formulation of European fiscal policies.
As for fiscal and economic policy-making, the eurozone crisis has demonstrated the weaknesses of this system. National supervisors paid insufficient attention to the inter-linkages in the European financial sector and cross-border supervisory cooperation was flawed. When problems occurred, the cost of bailing out banks proved very large for some Member States, leading to questions about their own solvency.
This approach to financial supervision and crisis management will be radically altered with the launch of a European Banking Union. The bail-in mechanism would stabilise a failing institution so that it could continue to provide essential services, without the need for bail-out by public funds. The European Central Bank (ECB), in cooperation with national supervisors, will soon oversee the financial health of banks.
In terms of crisis management, a similar system will be put in place through the creation of a Single Resolution Mechanism (SRM). This Memo sets out what has been done so far to create a robust financial framework for all 28 Member States in building the banking union. The banking union is specifically for countries which share the euro, although it is also open to all non-euro EU Member States who want to join. The European Parliament is due to confirm at the April plenary agreement on an important text for the protection of deposits, which completes the single rulebook on crisis management.
The financial market situation in Europe remains stable now and the positive long-term momentum is continuing.
This is being supported by sustained accommodative monetary policy, expectations of continuing economic recovery and confidence in the positive effects of the banking union. Vice-President Olli Rehn Speaking at the Eurogroup Press Conference.
The Governor of the Bank of Greece Georgios Provopoulos also addressed the conference, and said that a second phase of a bank recapitalisation plan will play a significant role in restoring confidence towards Greece and the healthy funding of the economy. Commenting on a new bank restructuring mechanism, the central banker said the outcome of recent negotiations were satisfactory as they safeguarded the creation of a sustainable banking system in the Eurozone through a smooth restructuring of problematic banks to protect financial stability.
Discussions on what ought to be the role of the ECB in mitigating sovereign debt risks will remain central. The conditionality and the type of support from the ESM will also be the focus of discussions if eurozone countries require help once again. In countries with high public debt, political and social forces pushing for radical ways of reducing their debt burden – i.e. debt restructuring or partial defaults – may gain ground in years to come. More immediately, concrete steps involving solidarity are to be discussed in the setting-up of the Banking Union.
- Much closer to the real agenda for Greece’s recovery has been the EU Commission’s Taskforce for Greece. Led by Horst Reichenbach, this was created in a later phase of the Greek crisis.
- Greece to Get Next Bailout Loans by End of Month – Finance ministers from the 18-nation eurozone, known as the Eurogroup, agreed to release a long-delayed installment of bailout funds, saying Greece will receive the 8.3 billion euros ($11.4 billion) in three doses. The first batch of 6.3 billion euros will be disbursed by the end of April, in time for a bond repayment in May.
Altogether, Greece has already received more than 200 billion euros in rescue loans, out of a total of 240 billion euros it has been promised. The bailout program, including the regular reviews of its reforms, is due to finish at the end of 2014, though the IMF will continue issuing some loans until 2016.
- In their Tuesday meeting, Eurogroup ministers also discussed Portugal, another eurozone country which has been in a bailout program, but is due to exit it in mid-May. ABC News 1 April – 2014.
Last update 14-04-2014
ANA-MPA –Greek banks significantly reduced their dependence from the European Central Bank and the Emergency Lending Assistance mechanism in March, the Bank of Greece said on Monday.
In a monthly report, the central bank said that Greek banks’ dependence from these mechanisms dropped to 60.7 billion euros in March, from 67.96 billion euros in the previous month. More analytically, Greek banks drained 57.8 billion euros from European Central Bank’s lending facilities in March, from 59.4 billion in February, while borrowing from ELA fell to 2.9 billion euros in March from 8.56 billion in the previous month.
The successful exit of Greek banks to international markets, with Piraeus Bank selling a 500-million-euro bond loan recently, is expected to further reduce Greek banks’ dependence from European lending mechanisms in the following months.