Eurogroup meeting of 6 November 2017

Eurogroup

Remarks by J.Dijsselbloem following the Eurogroup meeting of 6 November 2017

Good evening everyone and welcome to the Eurogroup press conference. Today we held a regular Eurogroup on a number of topics, but also a second part of the meeting was in an inclusive format. 27 ministers were in the room to prepare the Euro Summit of December. As you know, President Tusk invited also 27 heads of governments and states to the Eurozone Summit of December. To our discussions we welcomed two new ministers, one is the Minister from the Netherlands, Wopke Hoekstra, who presented the economic priorities of the new government in the Netherlands, and we welcomed the acting German Finance Minister Peter Altmaier, with whom I had the pleasure to speak in Dutch which is quite remarkable because it does not happen that often. Let me first turn to our regular meeting, where we were joined by Danièle Nouy of the ECB Supervisory Board and Elke Koenig of the Single Resolution Board. They join us regularly to inform us on developments in the financial sector, on the work they are doing and any challenges they are facing. The banking sector is in a much better shape and that is very good news. There are still elements missing from our frameworks, from the bank union. There are still legacy issues to be dealt with and which are being dealt with in this period of time. The SSM and the SRB are working on both the open issues and the legacy issues. They have given us some input for our legislative work and have told us on some of the challenges they are facing. One of which was dealing with NPLs and we were informed by Danièle Nouy on the recent SSM guidance on NPLs and the provisioning for building up of possible future NPLs. We commended both Ms. Nouy and Ms. König for their excellent work. We encouraged them and the Commission to work on the issues that there are before us and we will meet again in Spring. Secondly, we had a thematic discussion dedicated to investment in human capital. As you know, a significant share of our national budgets goes to education and finance ministries have a particular interest in improving the efficiency of public spending also on education. So, today we shared some experiences and best practices on possible ways to improve the "value for money" in the field of education policies. We will come back to it early next year. We had quite a lively discussion and ran out of time, given the fact that we had the other ministers waiting to join us. So we have decided to continue this discussion, perhaps already in January. A few ministers gave us some insights on their national experiences, in education reforms or tax measures to improve the participation race in the economy, so there was an interesting exchange of experiences and ideas. We also had a short debrief from the institutions on the recent mission to Greece. I am sure Commissioner Moscovici will say more about this. This is of course in the context of the third review. Very positive signals, work ongoing but of course a lot of work still needs to be done, very much about implementation but everyone has a very strong will and commitment to get it done, preferably before the end of the year. Finally, as you know, we have scheduled to elect a new President of the Eurogroup, in the Eurogroup of December 4th. Ministers wishing to put forward their candidacy will be invited to do so later this month. We will send a letter to the ministers outlining the exact procedures, and the dates, etc… so everyone knows in advance how it will take place. That will follow later. We did not spend any time on that today. Let me turn to the second part of the Eurogroup in which we welcomed a number of ministers from non-euro countries. We had two topics: one was the completion of the banking union and the other one was fiscal policy. About the completion of the Banking Union, as you remember, during the Dutch presidency in 2016, we had agreed on a roadmap which outlined the topics that have to be dealt with and how they interact. We introduced the connection between risk-sharing and risk-reduction. Both should be work on, in a particular order, and both are being worked on as we go along. We had an interesting debate. I think there was general agreement that it is useful to take stock of the exact work: where are we? what have been done, for example, when dealing with NPLs or other issues on risk reduction? And building up on the roadmap that we already have, to be more precise on what is then the next step, what more do we require in terms of risk reduction and how does that click into the next step on risk sharing. And that is the work that we will have to do: make more precision on how the process will continue from here on using that roadmap from 2016. Of course, we have to take into consideration the political situation where the new German government is still to be formed and that will work into our political timeline. This topic, and the same goes for the fiscal issues, will come back on the agenda of the Eurogroup of 4th December where we will try to boil it down, so that we can report to the government leaders at the Euro Summit in December. The second topic in that second part of our meeting was the fiscal framework. Let's distinguish the current rules as we have them - are they efficient? are they effective? are they doing what they should do? - and the debate on the need for more fiscal instruments, a fiscal capacity or other ideas on that. First of all, it's good to establish the fact that we don't just have rules, we also have institutions that play an important part in fiscal policy, and we have markets that give off incentives that create outside pressure for politicians to do the right thing. But there immediately, there is a word of caution to be used: 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. On institutions, there was quite little discussion. Everyone fully acknowledges the fact that the Commission is the guardian of the Pact and needs to keep playing that role also in the future. I didn't hear any discussion on that. On the rules themselves, the returning issue is that they are complex, they are not predictable, they are 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, we all know why the rules are complex: because we want to take into account all different circumstances that may arise and we have allowed for a number of flexibilities. This has also made the rules more complex. There is a trade-off between having simple rules and having rules that fit everyone. I think we have to be realistic there: when people say let's make rules much more simple, I am not sure that they want accept that they could also become much more harsh, in difficult circumstances. So that is a trade-off that we must realise. There was a general agreement that reducing debt levels would become more and more important, and is already if you realise that fiscal deficit in the eurozone is now less than 1,5% and will continue to go down, looking forward. So debt will become a bigger issue. Of course to the extent that we are more successful in reducing debt in our member states, national governments will also be able to absorb shocks better and that is very useful, for example in the case of an asymmetric shock. That brings me to new instruments, such as the fiscal capacity. Lot of debate there still: about the function of it, what should it do? How can member states make use of it? What is the actual character of the instrument? Is it funding, is it financing, is it transfer, etc? So lots of debate there, but quite a large number of ministers feel that to complement our toolkit, a fiscal capacity as a stabilisation tool would be useful. So more work to be done there, but some convergence perhaps can be foreseen. As I said, all of those topics will come back next month. We will also return to the topic we discussed last month, which was the future of the ESM. So then we have the three blocks: future of the ESM, completing the banking union and fiscal policy, including possible instruments. We will bring those three together next month to prepare the Eurozone summit later on. Main results

The Eurogroup meeting took place in two formats: the first part was a regular meeting of the euro area ministers, while the second part was a meeting of the ministers of 27 EU member states with the aim of preparing the December Euro Summit.

In September, President Tusk announced that the Euro Summit, which is expected to discuss matters related to the Economic and Monetary Union (EMU), would take place in an inclusive format. This includes the euro area member states and the non-euro area member states which have signed the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). The Czech Republic and Croatia have been invited as observers.
Letter from President Donald Tusk to EU leaders ahead of their informal dinner in Tallinn (press release)
Meeting in euro area format
Banking union - euro area aspects

The Chair of the European Central Bank's Supervisory Board, Danièle Nouy, presented an overview of the ECB Supervisory Board's activities since April 2017.

Ms Nouy gave an overview of the recent supervisory work and highlighted the recent addendum to the March 2017 ECB guidance to banks on non-performing loans (NPLs), possible risks related to Brexit, and other key activities, such as supervisory stress tests.

The ECB Supervisory Board's activities are presented at the Eurogroup biannually.

The Chair of the Single Resolution Board (SRB), Elke König, informed the Eurogroup about the SRB's activities over the past months: progress on resolution planning and priorities in this area, implementation of the minimum requirements for own funds and eligible liabilities (MREL) and the status of the building-up of the single resolution fund (SRF).
Single Supervisory Mechanism (background information)
Single Resolution Mechanism (background information)
Thematic discussion on growth and jobs: investment in human capital

Ministers exchanged national practices related to public investment in human capital and, more concretely, efficient spending on education systems.

This discussion is linked to the common principles to promote investment, on which agreement was reached by the Eurogroup in April 2017. According to one of these principles, the euro area needs to ensure high-quality public investment to boost knowledge-intensive and sustainable growth.

The debate is also related to the Eurogroup's discussion on the quality of public finances and spending reviews.

Ministers are expected to continue the debate in early 2018.
Commission note: Investment in human capital
Eurogroup statement on common principles to promote investment (press release)
Eurogroup statement - thematic discussions on growth and jobs: common principles for improving expenditure allocation (press release)

Greece

The institutions (the European Commission, the European Central Bank, the International Monetary Fund and the European Stability Mechanism) briefly informed the Eurogroup about the constructive talks they have had so far with the Greek authorities in the context of the ongoing third review of Greece's macroeconomic adjustment programme.

The Eurogroup is expected to discuss the third review in more detail at its meeting on 4 December 2017.
Greece: the third economic adjustment programme (background information)
Eurogroup Presidency

The incumbent President, Jeroen Dijsselbloem, briefly outlined the envisaged process for electing a new Eurogroup President. Interested ministers will be able to put forward their candidacy later in November. The Eurogroup is scheduled to elect a new president at its meeting on 4 December 2017.
Meeting in inclusive format
Completing the banking union

The ministers of 27 EU member states discussed possible steps towards the completion of the banking union. The Commission presented the main elements of its recent communication on this topic.

In June 2016, the Council concluded a roadmap to complete the banking union. In June 2017, the Council Presidency presented a progress report on the ongoing work on measures to strengthen the banking union and reduce risks in the banking sector.
Commission Communication: Completing the banking union
Further steps in the banking union: risk reduction and deposit protection (background information)
Fiscal capacity and fiscal rules for the EMU

Ministers exchanged views on the future of fiscal governance in the euro area, including issues related to fiscal rules and ideas for possible new euro area fiscal policy instruments.