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Thursday, 28.03.2024, 20:05
Financial situation in the EU’s eurozone: urgent issues for 19 states
Two
newly appointed finance ministers were present at the Eurogroup meeting: the
Minister from the Netherlands, Wopke Hoekstra, who presented the economic
priorities of the new government in the Netherlands, and the acting German
Finance Minister Peter Altmaier.
Besides,
some other officials were present: Danièle Nouy of the ECB Supervisory
Board and Elke Koenig of the Single Resolution Board; they regularly
inform Eurogroup on developments in the financial sector, on the work they are
doing and any challenges they are facing.
Main financial problems in the eurozone
Firstly,
President of the group, Mr. J. Dijsselbloem
mentioned very good news: that the
banking sector has been in a much better shape; however, there are still
elements missing from the EU’s bank union, e.g. legacy issues which are being
dealt with the work of SSM and the SRB. They have informed about some legislative
work and the challenges they were facing. One of which was dealing with NPLs: Danièle
Nouy informed on the recent SSM guidance on NPLs and the provisions for
building up NPLs future.
Secondly,
the group had a thematic discussion dedicated to investment in human capital: a
significant share of the member states budgets goes to education and finance
ministries have a particular interest in improving the efficiency of public
spending on education. The group shared some experiences and best practices on
possible ways to improve efficiency in the field of education policies. Some ministers
provided insights on their national experiences, in education reforms or tax
measures to improve professional education for the benefits of economy.
Finally,
the group discussed institutional issues: it has been scheduled to elect a new
President of the Eurogroup on December 4th; ministers wishing to put
forward their candidacy will be invited to do so later in November. A letter will
be sent to the ministers outlining the exact procedures, and the dates, so
everyone knows in advance how it will take place.
The
Eurogroup also welcomed a number of ministers from non-euro countries; two
topics were discussed: one on the completion of the banking union and the other
one on fiscal policy. EU President D. Tusk invited also 27 heads of governments
and states to the Eurozone December’s Summit.
Completion of the Banking Union and other issues
During
the Dutch presidency in 2016, the group had agreed on a roadmap which outlined
the topics to deal with concerning the completion of the Banking Union. Some
connections were introduced between risk-sharing and risk-reduction: both
should be work on, in a particular order. There was general agreement that it
is useful to take stock of the exact work when dealing with NPLs or other
issues on risk reduction and building up on the agreed roadmap.
Of
course, political situation has to be taken into consideration when dealing
with the fiscal issues and the second part of Eurogroup meeting was the fiscal
framework, the fiscal instruments and fiscal capacity. It is not enough to have
just rules and institutions that play important role in fiscal policy; besides,
there are markets that give off incentives that create outside pressure for
politicians to do the right thing. But there is a word of caution to be used,
underlined the group’s president, J. Dijsselbloem: “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”.
Reference:
http://www.consilium.europa.eu.
Everyone
fully acknowledged the fact that the Commission had been the guardian of the Union’s
fiscal issues, with the needs to keep playing that role also in the future.
Concerning the rules, the participants agreed that they were complex, not
predictable and 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, the ministers know why the rules are complex: because the rules
take into account all different circumstances that may arise with a number of
flexibilities, which has also made the rules more complex. There is a trade-off
between having simple rules and having rules that fit everyone; a realistic
approach is needed: when people want simpler rules, it doesn’t mean they want
accept that they could also become much harsher in difficult circumstances; so
certain trade-off must be realised.
There
was a general agreement at the group, that reducing debt levels would become
more and more important: fiscal deficit in the eurozone is now less than 1, 5
per cent and will continue to go down, so debt will become a bigger issue. To the
extent that eurozone states are more successful in reducing debt, national
governments will also be able to absorb shocks better; e.g. it is very useful in
the cases of an asymmetric shock. That brings the issue to new instruments,
such as the fiscal capacity: debates are still going on about the capacity’s functions
in the member states’ abilities and usage, about funding (whether of financial
or “transferring” character, etc. Quite a large number of ministers feel that
to fiscal capacity as a stabilisation tool would be useful with some convergence
in the future.
In
the conclusion, the group’s president, J. Dijsselbloem said, that the
perspective items in the group’s discussion would be the three blocks: future
of the ESM, completing the banking union and fiscal policy, including possible
instruments. These issues will be brought together in December for the next Eurozone
summit.
Reference: Remarks by J. Dijsselbloem following the Eurogroup meeting, 6th November 2017, in: http://www.consilium.europa.eu/en/press/press-releases/2017/11/06/remarks-by-jdijsselbloem-following-the-eurogroup-meeting-of-6-november-2017/