Meeting Of Heads Of State Or Government Of The Euro Area, Brussels, 7 May 2010- the President of the European Council, Mr. van Rompuy, has convened Heads of State or Government of the Euro area for a meeting on the evening of 7 May in order to finalise the adjustment programme negotiated by the Commission, the ECB and the IMF with the Greek government and the financial support to Greece, as well as to draw the first conclusions on this crisis for governance of the Euro area.
Statement By The Heads Of State
• During the implementation Of The Support Package For Greece in February and in March, we committed to take determined and coordinated action to safeguard financial stability in the euro area as a whole.
• Following the request by the Greek government on April 23 and the agreement reached by the Eurogroup on May 2, we will provide Greece with 80 billion euros in a joint package with the IMF of 110 billion euros. Greece will receive a first disbursement in the coming days, before May 19.
• The programme adopted by the Greek government is ambitious and realistic. It addresses the grave fiscal imbalances, will make the economy more competitive, and will create the basis for stronger and more sustainable growth and job creation.
• The Greek Prime Minister has reiterated the total commitment of the Greek government to the full implementation of these vital reforms.
• The decisions we are taking reflect the principles of responsibility and solidarity, enshrined in the Lisbon Treaty, which are at the core of the monetary union.
Response To The Current Crisis
• In the current crisis, we reaffirm our commitment to ensure the stability, unity and integrity of the euro area. All the institutions of the euro area (Council, Commission, ECB) as well as all euro area Member States agree to use the full range of means available to ensure the stability of the euro area.
• Today, we agreed on the following :
• First, consolidation of public finances is a priority for all of us and we will take all measures needed to meet our fiscal targets this year and in the years ahead in line with excessive deficit procedures. Each one of us is ready, depending on the situation of his country, to take the necessary measures to accelerate consolidation and to ensure the
sustainability of public finances. The situation will be reviewed by the Ecofin Council on the basis of a Commission assessment by the end of June at the latest. We have asked the Commission and the Council to strictly enforce the recommendations addressed to Member States under the Stability and Growth Pact.
• Second, we fully support the ECB in its action to ensure the stability of the euro area.
• Third, taking into account the exceptional circumstances, the Commission will propose a European stabilization mechanism to preserve financial stability in Europe. It will be submitted for decision to an extraordinary ECOFIN meeting that the Spanish presidency will convene this Sunday May 9th.
• we have decided to establish a European stabilization mechanism. The mechanism is based on Article 122.2 of the Treaty and an intergovernmental agreement of euro area Member States. Its activation is subject to strong conditionality, in context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF.
• "Article 122.2 of the Treaty foresees financial support for Member States in difficulties caused by exceptional circumstances beyond Member States' control. We are facing such exceptional circumstance today and the mechanism will stay in place as long as needed to safeguard financial stability. A volume of up to 60 billion euro is foreseen and activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to "In addition, euro area Member States stand ready to complement such resources through a Special Purpose Vehicle that is guaranteed on a pro rata basis by participating Member States in a coordinated manner and that will expire after three years, respecting their national constitutional requirements, up to a volume of 440 billion euros. The IMF will participate in financing arrangements and is expected to provide at least half as much as the EU contribution through its usual facilities in line with the recent European programs.
Last week Asymptotix pleaded for a European Debt Bank, or European Union Debt Office, which the Swedes would call it.
ReplyDeleteJohn A Morrison said:
• We are where we are, capital has transitioned to the state, we need public institutions
which can properly manage us through this second phase sovereign debt crisis and
develop a roadmap for free markets beyond a properly constituted European "Bretton
Woods" style "Public Debt Bank" (its not for me to coin the name); philosophically in line with Keynes' thinking.
• During the weekend Asymptotix read through a paper that our contributor Robert
McDowell sent us. That paper triggered us to write this post. Any state like Sweden and
the UK has the following structure (bodies) to manage finance:
• A Ministry of Finance (Swedish Ministry of Finance, UK HM Treasury)
• A National Bank (Swedish Riksbank, UK Bank of England)
• A Financial Supervisory Authority (Swedish FI Finansinspektionen, UK FSA Financial
Services Authority)
• A Debt Office (Swedish Debt Office Riksgälden, UK Debt Management Office)
• So what do we have at EU level? We can try our best to map this:
• The European Commission basically have three "Directorate Generals" that handle policy related to financial affairs: DG Internal Market and Services. Its main role is to
coordinate the Commission’s policy on the European Single Market and to seek the
removal of unjustified obstacles to trade, in particular in the field of services and financial markets. The Directorate General for Economic and Financial Affairs (DG
ECFIN) strives to improve the economic wellbeing of the citizens of the European Union, by developing and promoting policies that lead to sustainable economic growth, a high
level of employment, stable public finances and financial stability. DG Competition works to enhance competition in Europe’s banking, insurance and securities markets.
• The ECB is the European Central Bank for the eurozone countries, but not for non-eurozone countries such as Denmark, Sweden and the UK.
• There is no complete European Financial Supervisory Authority, until the European Banking Authority as proposed by DG McCreevy proposed sits alongside C-ebs and ECB, non-Euro central banks and other new agencies established by the G20 agenda.
• There is no European Debt Office (because there is no ‘European debt’?)
FT LEX 23 Sept.2010
ReplyDeleteEuropean Financial Stability Fund
What do you call a cross between a supranational, a sovereign and a structured derivatives product? Until somebody comes up with a more elegant name, you can call it the European Financial Stability Facility. This is the new funding vehicle for eurozone countries which find themselves on the brink. It has office space (in Luxembourg), the staff (no more than 12) of a minnow and the borrowing powers of a behemoth (perhaps €350bn in practice). The good news is that it does not yet have any customers.
A creature of the eurozone crisis, the EFSF is paradoxical; it is a creation designed to pre-empt its own use, and is a bureaucratic vehicle that investors are supposed to believe is financially stronger and more politically unified than the eurozone. Politically and operationally, it required – and received – a triple A rating. Since only two of its top four guarantors (Germany and France) enjoy that status, the facility was constructed as a blend; top-rated sovereigns, top-rated institution (such as the European Investment Bank) and a multi-tiered, multi-rated collateralised debt obligation.
The top rating may not matter much if the EFSF ever actually lends. The facility is not meant to be a source of cheap funding, but to tide over countries which have been effectively excluded from the capital markets. Greece has been there, but Ireland and Portugal are not (yet) in that position: the weighted average cost of Irish borrowing in 2010 is a relatively low 4.7 per cent, the same as 2009, according to the National Treasury Management Agency.
The EFSF is a sort of European Monetary Fund – any loans will come with stringent conditions set by the eurozone. That makes it more likely to succeed, and less likely to be used. Form an orderly queue.