DG ECFIN The EU Response to the Sovereign Crisis Daniel DACO Head of Unit: Program Design and...
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Transcript of DG ECFIN The EU Response to the Sovereign Crisis Daniel DACO Head of Unit: Program Design and...
DG ECFIN
The EU Response to the The EU Response to the
Sovereign CrisisSovereign Crisis
Daniel DACODaniel DACO
Head of Unit Program Design and SupportHead of Unit Program Design and SupportEuropean CommissionEuropean Commission
Economic and Financial AffairsEconomic and Financial Affairs
Athens 18 April 2011
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
2
Search for a comprehensive approach
Financial repair
Fiscal consolidation Growth and competitiveness
Vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
3
OutlineOutline
OutlineOutline
II Short-term Response Crisis ManagementShort-term Response Crisis Management
11 Financial RescueFinancial Rescue22 Fiscal ConsolidationFiscal Consolidation33 Assistance to vulnerable countriesAssistance to vulnerable countries
11 Balance of Payments AssistanceBalance of Payments Assistance22 EFSM EFSFEFSM EFSF
IIII Systemic Response Crisis Prevention and ResolutionSystemic Response Crisis Prevention and Resolution
11 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester22 European Stability MechanismEuropean Stability Mechanism
33 Pact for the EuroPact for the Euro44 Financial Repairs and SupervisionFinancial Repairs and Supervision
IIIIII Concluding remarksConcluding remarks
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
4
I Short-term Response I Short-term Response
Crisis ManagementCrisis Management
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
5
I Short-term Response1 Financial Rescue
European Economic Recovery plan (EERP) in coordination with national fiscal packages (Nov 2008) Budgetary impulse of euro 200bn Policy Action smart investment car scrapping schemes
employment policies etc
European Global Adjustment Fund (EGF) and European Social Fund (ESF) to alleviate the negative
social effects of the crisis
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
2
Search for a comprehensive approach
Financial repair
Fiscal consolidation Growth and competitiveness
Vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
3
OutlineOutline
OutlineOutline
II Short-term Response Crisis ManagementShort-term Response Crisis Management
11 Financial RescueFinancial Rescue22 Fiscal ConsolidationFiscal Consolidation33 Assistance to vulnerable countriesAssistance to vulnerable countries
11 Balance of Payments AssistanceBalance of Payments Assistance22 EFSM EFSFEFSM EFSF
IIII Systemic Response Crisis Prevention and ResolutionSystemic Response Crisis Prevention and Resolution
11 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester22 European Stability MechanismEuropean Stability Mechanism
33 Pact for the EuroPact for the Euro44 Financial Repairs and SupervisionFinancial Repairs and Supervision
IIIIII Concluding remarksConcluding remarks
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
4
I Short-term Response I Short-term Response
Crisis ManagementCrisis Management
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
5
I Short-term Response1 Financial Rescue
European Economic Recovery plan (EERP) in coordination with national fiscal packages (Nov 2008) Budgetary impulse of euro 200bn Policy Action smart investment car scrapping schemes
employment policies etc
European Global Adjustment Fund (EGF) and European Social Fund (ESF) to alleviate the negative
social effects of the crisis
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
3
OutlineOutline
OutlineOutline
II Short-term Response Crisis ManagementShort-term Response Crisis Management
11 Financial RescueFinancial Rescue22 Fiscal ConsolidationFiscal Consolidation33 Assistance to vulnerable countriesAssistance to vulnerable countries
11 Balance of Payments AssistanceBalance of Payments Assistance22 EFSM EFSFEFSM EFSF
IIII Systemic Response Crisis Prevention and ResolutionSystemic Response Crisis Prevention and Resolution
11 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester22 European Stability MechanismEuropean Stability Mechanism
33 Pact for the EuroPact for the Euro44 Financial Repairs and SupervisionFinancial Repairs and Supervision
IIIIII Concluding remarksConcluding remarks
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
4
I Short-term Response I Short-term Response
Crisis ManagementCrisis Management
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
5
I Short-term Response1 Financial Rescue
European Economic Recovery plan (EERP) in coordination with national fiscal packages (Nov 2008) Budgetary impulse of euro 200bn Policy Action smart investment car scrapping schemes
employment policies etc
European Global Adjustment Fund (EGF) and European Social Fund (ESF) to alleviate the negative
social effects of the crisis
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
4
I Short-term Response I Short-term Response
Crisis ManagementCrisis Management
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
5
I Short-term Response1 Financial Rescue
European Economic Recovery plan (EERP) in coordination with national fiscal packages (Nov 2008) Budgetary impulse of euro 200bn Policy Action smart investment car scrapping schemes
employment policies etc
European Global Adjustment Fund (EGF) and European Social Fund (ESF) to alleviate the negative
social effects of the crisis
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
5
I Short-term Response1 Financial Rescue
European Economic Recovery plan (EERP) in coordination with national fiscal packages (Nov 2008) Budgetary impulse of euro 200bn Policy Action smart investment car scrapping schemes
employment policies etc
European Global Adjustment Fund (EGF) and European Social Fund (ESF) to alleviate the negative
social effects of the crisis
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
6
I Short-term Response1 Financial Rescue
Stabilising the banking system through targeted rescues
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
7
I Short-term Response2 Fiscal consolidation
Heavy legacy of the crisis on public finances But no-consolidation scenario is unsustainable Significant efforts
needed to restore sustainable public finances Excessive Deficit Procedure (EDP) in abeyance fine-tuned with
national recovery path
0
10
20
30
40
50
60
70
80
90
t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7
EU-27EU-15Big 5 industrial country-crisesBig 8 emerging market-crisesTOTALEU 27 Current crisis
Gross public debt in crises episodes ( of GDP) Debt path in different scenarios ( of GDP)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
8
I Short-term Response3 Assistance to vulnerable countries BoP facility BoP facility
The BoP programmes (with the IMF) are producing good The BoP programmes (with the IMF) are producing good results with implementation of conditionalityresults with implementation of conditionality
Regained Market confidenceRegained Market confidence Fiscal consolidation well underwayFiscal consolidation well underway Enough breathing room for structural reformsEnough breathing room for structural reforms
BoP facility
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
Hungary Latvia1 Romania
Total assistance package euro20 bn euro75 bn euro20 bn
EU (Art 143) euro65 bn euro31 bn euro5 bn
IMF euro125 bn euro17 bn euro1295 bn
Other multilaterals euro1 bn euro05 bn euro2 bn
Bilaterals hellip euro 22 bn1 hellip
1 Contributions by SE DK FI NO CZ PL EE
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
9
I Short-term Response3 Assistance to vulnerable countries Greece Greece
No financial support instrument available for EANo financial support instrument available for EA Failures in fiscal reportingFailures in fiscal reporting Huge fiscal imbalances + banking problems + loss competitivenessHuge fiscal imbalances + banking problems + loss competitiveness Important financing needs + high market borrowing costsImportant financing needs + high market borrowing costs Risks to financial stability for the EA as a wholeRisks to financial stability for the EA as a whole
Evolution of spreadsEvolution of spreads
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
10
I Short-term Response
3 Assistance to vulnerable countries GreeceGreecePooled loans ndash general features ndash Ad hoc instrumentPooled loans ndash general features ndash Ad hoc instrument EU legal basisEU legal basis
ConditionalityConditionality
BeneficiaryBeneficiary
MechanismMechanism
Guaranteed byGuaranteed by
DurationDuration
Precautionary usePrecautionary use
IMF involvementIMF involvement
ECB involvementECB involvement
SizeSize
Intergovernmental decision (May 2 2010)Intergovernmental decision (May 2 2010)
Yes programme covering 2010-13Yes programme covering 2010-13
GreeceGreece
Bilateral loans from EA MS pooled by COMBilateral loans from EA MS pooled by COM
Direct loans MS budgetDirect loans MS budget
75 years (extension agreement in principle)75 years (extension agreement in principle)
Not applicableNot applicable
YesYes
YesYes
Payment agent liaison on program design review Payment agent liaison on program design review disbursement implementationdisbursement implementation
euro euro 80bn (euro 384 bn disbursed)80bn (euro 384 bn disbursed)
+euro 30bn (IMF euro 146 bn disbursed) +euro 30bn (IMF euro 146 bn disbursed)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
11
Creating new financial instruments EFSM amp EFSFCreating new financial instruments EFSM amp EFSF
Temporary nature (to be replaced by a permanent mechanism Temporary nature (to be replaced by a permanent mechanism in 2013) in 2013)
Strict policy conditionalityStrict policy conditionality
High accessHigh access
Lending rates close to those of the IMF to avoid facility Lending rates close to those of the IMF to avoid facility shoppingshopping
Combined lending capacity euro 500 bnCombined lending capacity euro 500 bn
Ireland and Portugal ()Ireland and Portugal ()
I Short-term Response3 Assistance to vulnerable countries
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
12
II Systemic Response II Systemic Response
Crisis Prevention and ResolutionCrisis Prevention and Resolution
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
13
September 2010 Commission presented six legislative proposals
preventive and corrective arms SGP budgetary frameworks prevention and correction of imbalances enforcement
15 March Ecofin Council agreed on ldquogeneral approachrdquo
+- 20 April Parliament (Econ Committee) determines its negotiating position Four proposals in co-decision (not corrective arm and budgetary frameworks)
April ndash June trilogues with aim of agreement by end June 2011
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
14
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive arm
Two co-existing criteria for assessing adjustment
the structural balance as the reference
and an analysis of expenditure net of discretionary revenue measures
Corrective arm
Need for quantitative benchmark for debt reduction
Operationalisation of the debt criterion of the EDP through a numerical benchmark for sufficiently diminishing debt
A strengthened Stability and Growth Pact
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
15
National fiscal frameworks basic rationale of minimum requirements
EU rules necessary but not sufficient
Consistency of domestic frameworks rules with EU rules required
Defining minimum standards for domestic budgetary frameworks aims at
- fostering national ownership of the EU budgetary framework
- strengthening national structures to promote budgetary discipline
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
16
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
Preventive dimension to avoid the build-up of imbalances
bull annual review
bull alert mechanism based on set of indicators (risk thresholds) and
expert analysis
bull in-depth country-specific analysis where warranted
bull country-specific recommendations to tackle imbalances (Art 121(2))
1048766
Corrective dimension with strong enforcement mechanismsbull Member States with serious imbalances are placed in anldquoexcessive imbalances positionrdquo
bull stricter surveillance on basis of more prescriptive recommendation to tackle imbalances
bull deadlines for taking corrective action
bull possible sanctions for euro-area Member States in case of repeated non-compliance (02 GDP channelled though EFSMEFSF)
A new framework to prevent and correct macro-economic imbalances
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
17
Enforcement Key innovation Preventive arm of the SGP interest-bearing deposit in case of failure to
correct significant deviation from MTO or adjustment path towards it
Corrective arm of the SGP
(i) non-interest-bearing deposit when EDP opened (Art 1266 TFEU) in case of lsquoparticularly serious non-compliancersquo
ii) fine in case of no effective action (Art 1268 TFEU)
Reverse QMV voting Commission recommendation for sanctions considered adopted unless Council rejects by QMV within ten days
Distribution of fines fines channelled to EFSFESM (instead of non-EDP countries)
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
18
II Systemic Response1 Strengthened Surveillance and the European SemesterStrengthened Surveillance and the European Semester
The European Semester procedures and timelinesThe European Semester procedures and timelines
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
19
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
bull ObjectiveObjective address liquidity crises and safeguard financial stability in the euro area address liquidity crises and safeguard financial stability in the euro area
bull NatureNature Treaty-based intergovernmental organisation Treaty-based intergovernmental organisation
bull ImplementationImplementation
Macroeconomic adjustment programme (strict policy conditionality)Macroeconomic adjustment programme (strict policy conditionality)
Intergovernmental financing instrument Intergovernmental financing instrument
Case-by-case private sector involvementCase-by-case private sector involvement
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
20
Capital size and structure Effective lending capacity euro 500 bn Paid-in capital callable capital guarantees AAA rating
Instruments Loans Bond purchases on primary market ldquoas an exceptionrdquo
Pricing Funding costs + risk mark-up in line with IMF pricing also taking into account MS debt sustainability
Governance Unanimity Contribution key ESM + EFSF package submitted to national parliaments before
Summer
II Systemic Response 2 Permanent crisis resolution European Stability Mechanism 2 Permanent crisis resolution European Stability Mechanism
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
21
II Systemic Response 3 3 Pact for the Euro
bull Content
- Competitiveness wage setting opening sheltered sectors improving education RampD and the business environment
- Employment flexicurity life long learning tax reforms
- Fiscal sustainability pension reforms national fiscal rules
- Financial stability national legislation for banking resolution stress tests
- Tax policy coordination structured discussion proposal for a common corporate tax base
bull Governance Political leadership from heads of State making use of and strengthening existing instruments integrated into the European Semester
bull Role of Commission ldquostrong central rolerdquo in the monitoring of the implementation of commitments
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
22
II Systemic Response 4 4 Financial repair and Supervision
European System of Financial Supervision (ESFS) European Systemic Risk Board (ESRB) macro-financial stability
(Nov 2010)
European Supervisory Authorities (ESAs) new financial regulation capital requirements (Jan 2011)
Commission will take recommendation of ESRB into account in Economic Imbalances Procedures (EIP) as it complements macro-financial monitoring
Implementation of financial reforms to be continued including a reinforcement of the regulatory and supervisory framework
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
23
II Systemic Response Crisis Prevention and Resolution 4 4 Financial repair and Supervision
Creation of the European Banking Authority (EBA) in Jan 2011 Regular stress tests Latest results
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
24
III Concluding remarksIII Concluding remarks
Adjustment and overcoming the crisis will take timeAdjustment and overcoming the crisis will take time
The adjustment is progressing but has not yet convinced The adjustment is progressing but has not yet convinced
markets due to looming concernsmarkets due to looming concerns
Comprehensive response implemented should remove these Comprehensive response implemented should remove these
concerns concerns
11 Renewed commitments by MS to implement reformsRenewed commitments by MS to implement reforms
22 Improvements in fiscal governance at Member State and EU levelsImprovements in fiscal governance at Member State and EU levels
33 Fixing banking sector issues (stress tests address problems)Fixing banking sector issues (stress tests address problems)
44 Credible financial backstops (EFSF pricing ESM)Credible financial backstops (EFSF pricing ESM)
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA
DG ECFIN
Daniel Daco Daniel Daco European Commission Economic and Financial AffairsEuropean Commission Economic and Financial Affairs
25
Thank you for your attention
QampA