EU agrees for new responsibility to ESM bailout fund
EU finance ministers agreed on Tuesday to give the eurozone ESM bailout fund new responsibilities, but delayed decisions on a eurozone budget and a deposit guarantee scheme after failing to reach an agreement.
The ministers discussed deeper economic integration of the 19 countries sharing the euro to prepare the single currency bloc for the next potential crisis.
But after a year of negotiations, fraught with political difficulties, little of the original ambition, championed by French President Emmanuel Macron, remained.
"We have agreed to enhance the role of the ESM to further strengthen the crisis prevention and resolution capabilities of the euro area," the chairman of euro zone finance ministers Mario Centeno told a news conference.
Two flagship ideas - a separate budget for euro zone countries and a European Deposit Insurance Scheme (EDIS) to make all eurozone bank deposits safe - proved too controversial and will be worked on further.
In the case of the deposit guarantee scheme, mistrust among eurozone countries is so great that they could not agree on a roadmap for beginning political negotiations, as mandated by EU leaders.
"More work is ... needed on EDIS before we can agree on a roadmap to begin political negotiations. The news here is that we will establish a high-level working group with a mandate to work on next steps and report back in June 2019," Centeno said.
The Macron idea of a large eurozone budget of hundreds of billions of euros, financed by dedicated taxes and national contributions to stabilising the eurozone in case of a crisis, was also shelved.
The ministers said that, if asked by EU leaders on Dec 14, they were ready to work on a Franco-German proposal of a eurozone budget for greater "competitiveness and convergence" of eurozone economies that would be part of the overall European Union budget. Its size would be determined by leaders.
There was no agreement to use such a budget for the stabilisation of the eurozone through an unemployment insurance scheme.
The ministers agreed for the ESM bailout fund to lend to the eurozone bank resolution fund (SRF) in an emergency should a potential crisis use up all of the SRF's resources.
The ESM loans would be available from 2024, or earlier if a review in 2020 showed risks of bank collapse had fallen so much, that the backstop won't be needed.
The ministers would also allow the ESM to lend to a eurozone government that conducts fundamentally sound policies but has been hit by an economic shock, not of its own making.
But to be eligible for such a loan, the eurozone government could not break any EU budget rules, have sustainable debt and an economy that has no excessive imbalances.
To make debt restructuring easier, the eurozone will introduce single limb collective action clauses (CAC) by 2022, the ministers said in a statement.
Finally, the ministers acknowledged the possibility of the ESM playing a role in a potential sovereign debt restructuring in the future but dressed in a language that would limit its involvement to a minimum.
"When appropriate and if requested by the Member State, the ESM may facilitate the dialogue between its Members and private investors. This involvement would take place on a voluntary, informal, non-binding, temporary, and confidential basis," the statement said.
(With inputs from agencies.)