Verbatim report of proceedings

Tuesday, 6 July 2010 - Strasbourg

12. European Financial Stability Facility and European financial stabilisation mechanism and future actions (debate)

  President. – The next item is the debate on the oral question to the Commission by Mrs Bowles, on behalf of the Committee of Economic and Monetary Affairs, on the European Financial Stability Fund, a European financial stabilisation mechanism and future action (O-0095/2010 - B7-0318/2010).

  Sharon Bowles, author. – Mr President, in so many matters nowadays, the expression ‘the devil is in the detail’ is quoted. At times, this is becoming too much of an excuse for pronouncing conclusions aimed at markets, without realising that a less than fulsome follow-up negates the conclusions, or even does more harm than good.

I said this about the banks’ stress tests, where we need transparent and credible assumptions, as well as results, published. I said it earlier when it was taking too long to come up with the detail on the Greek rescue, and the committee has, in fact, been demanding more details for months. We are the devils that look at the detail, and we want more of it.

On 11 May, the European Stabilisation Mechanism was established utilising the EU budget. It had taken so long to deliver on the earlier promises that this was not enough, so, on 7 June, the more general European Financial Stability Facility was created. A bit more haste would have been useful, and perhaps cheaper.

There are potential knock-on effects, as a result of these new instruments, for the EU budget and also for borrowing by other EU institutions, such as the EIB. It will be damaging if, once again, there has, in effect, been a bailout arranged for banks holding sovereign debt, and lending to SMEs in the real economy is what pays the price. So what plans are there to mitigate such an effect, given that growth is so important to recovery and SMEs will be in the vanguard of that?

Concerning the Special Purpose Vehicle itself, in the interests of EU solidarity, those countries that are not in the eurozone but wish to join the Stabilisation Mechanism should be able to do so. Can you confirm that the rules of the SPV are being changed to permit this? Indeed, more generally, as was raised in committee yesterday, we would like to know more about this off-balance-sheet vehicle, Member States’ accounting treatment of it and the advice for setting it up.

There remain many other questions. How will the coordination between the stabilisation fund and the IMF operate? Will allocation be made on the 2:1 basis, reflecting the pledged amounts, and what is the relationship between the respective interest rates? Will the EU and IMF loans rank pari passu or will only the IMF loans benefit from exclusion in any eventual restructuring of the borrowers’ obligations. Is this all the right way around? Should the IMF be topping up an EU rescue, or should it be the other way round? Is the SPV active now or must first calls use the EU budget mechanism?

I would now like to turn to Eurobonds. There is a fundamental question to face here, that if there is a general Eurobond with a common interest rate, then one of the most powerful incentives for fiscal discipline – market forces – is lost. Market forces are not popular right now. They were, in fact, sleeping as Greece and others ratcheted up debt much earlier on, but there are reasons for that embedded in the zero-risk weight applied to sovereign debt in the Capital Requirements Directive.

Had that not been there, banks would progressively have been weaned off riskier bonds and spreads would have reflected better the fiscal positions of Member States and we would not be bailing banks out again via the Stabilisation Mechanism and, indeed, the forthcoming stress tests would be a whole lot less stressful.

As part of the new economic governance, surely this has to be fixed in the longer term and I would say automatically, not as part of a politically determined excess deficit procedure that takes away the zero-risk weight. But I think that here we have the opportunity to turn what is a problem in the Capital Requirements Directive into a useful tool in the future.

Since writing this oral question, I am pleased that the Commission has indicated its intention to involve Parliament in economic governance, surveillance procedures and forthcoming legislation, and the committee looks forward to participating wholeheartedly in that involvement.

IN THE CHAIR: SILVANA KOCH-MEHRIN
Vice-President

  Michel Barnier, Member of the Commission. – (FR) Madam President, as you have understood, I will be answering on behalf of my colleague Olli Rehn, who, incidentally, may have used a bit more of my time on the final response. Mrs Bowles mentioned angels. I do not know if there are many angels when we talk of financial services. I would like to say to Mrs Bowles that the devil is always in the detail, and I will respond in as much detail as possible to the questions that she has asked.

The first question: what amount are we talking about when we talk of this European stabilisation mechanism? What is the link with the ceiling on own resources? Madam President, the conclusions of the Ecofin Council mention a sum of EUR 60 billion for the European financial stabilisation mechanism, but the legal limit is given in Article 2(2) of Council Regulation (EU) No 407/2010, which limits loans to the margin available in the ceiling of own resources.

The decision on own resources limits the possibilities for the European Union budget to call for payments from own resources by the Member States to 1.23% of European Union GNI. This means that the combined total of the ceiling of the Multiannual Financial Framework and the total amount of the flow of debt services on the loans guaranteed by the European Union budget cannot exceed 1.23% during a given budgetary year. That is the precise response that Mr Rehn wanted to give to you on this point.

The second question: will the Commission carry out an impact analysis for these two instruments? According to the regulation on the European stabilisation mechanism, the Commission is required to prepare, six months after the creation of this mechanism and, if necessary, every six months, a report on its functioning. This report will be transmitted to the Economic and Financial Committee and the Council. Notably, it will include an impact evaluation of the text. As for the European Financial Stability Facility, this is an intergovernmental structure whose functioning is not subject to the evaluation requirements applicable to European Union texts.

The third question: what is the impact on the financial capacities of the EIB? The European stabilisation mechanism and the European Financial Stability Facility will have no direct impacts on the borrowing and financing activities of the EIB. The EIB will only manage liquidities, provide logistical support and carry out certain back office functions for the European financial stabilisation mechanism. It will not lend or borrow on behalf of this mechanism.

The fourth question: when will there be a legislative proposal for permanent crisis management on sovereign debt, and on what legal basis? Madam President, the Commission is working on potential proposals in close cooperation with the working group presided over by President Van Rompuy. No exact choice of legal basis has yet been made. You have just mentioned the question of the role of the European Parliament. The European Parliament will be kept informed of any change regarding all of these new procedures. The legal nature of the European Parliament’s participation will depend on the legal basis of the legislative proposals, as provided for by the treaty.

The sixth question: what is the coordination with the International Monetary Fund? The political conditions for a potential programme of aid to a Member State will be decided by a joint agreement with the International Monetary Fund when there is a joint package from the European financial stabilisation mechanism and the IMF, as is usually the case.

The seventh question, which you went into some detail on: how should we respond to the potential needs of countries which are not members of the euro area? Member States not participating in the euro can, if necessary, appeal to the existing rules on assistance with balance of payments. Last year, the ceiling for the aid which can be given through this facility was increased by EUR 25 billion to EUR 50 billion, of which EUR 15 billion has already been committed for loans to Hungary, Latvia and Romania. In addition, the conditions on borrowing relating to the rules on balance of payments are more favourable than those established by the rules on the European financial stabilisation mechanism.

The eighth and final question relates to the choice of legal bases. Article 122(2) of the treaty has been used as the legal basis of the rules for this financial stabilisation mechanism, because the Commission and the Council have acted in emergencies in which a number of Member States were seriously threatened by grave difficulties caused by exceptional events outside their control. The Commission and the Council, which were placed under extreme pressure, in particular from the financial markets, had to act very quickly to safeguard the euro. This would have been difficult to reconcile with a long procedure involving an important role for some national parliaments. I would add that the European Parliament itself, Madam President, had called on the Commission, in a resolution adopted in April 2009, to adopt a regulation on financial aid to Member States on the basis of Article 122.

That is the most detailed reply I can give to Mrs Bowles on the basis of the detailed questions that she put.

  Othmar Karas, on behalf of the PPE Group. – (DE) Madam President, Commissioner, unfortunately I am unable to go into detail now on the disregard for parliamentary rights and the basis for the safety net. However, I wish to say the following on the subject. In our view, the financial stabilisation mechanism is not a substitute for developing a European monetary fund. I believe that we need a European bank levy which should be used, primarily, to raise the necessary capital for a European rating agency and, secondly, to develop a European monetary fund.

The financial stabilisation mechanism illustrates the urgency of financial market reforms. However, it also indicates a lack of any crisis mechanism, as well as the fact that we need a political, economic and social union, and a stronger Europe in general.

The best stabilisation mechanism, in my view, is to comply with the Maastricht criteria and the Stability and Growth Pact, implement the internal market and devise a competition policy based on a dynamic education, research and investment campaign, so that we can achieve growth and employment without us having to dip into taxpayers’ pockets in an emergency.

  Anni Podimata, on behalf of the S&D Group. – (EL) Madam President, Commissioner, without doubt, the decision taken on 9 May to create the European financial stabilisation mechanism was of crucial importance in protecting the single currency and the stability of the euro area in general. That is why Parliament, which asked the Council to proceed in that direction a long time ago, immediately welcomed it.

That decision, like the decision to create a European Financial Stability Facility, finally sent an – albeit belated – message of unity and solidarity in the euro area to the international markets. The European Central Bank demonstrated the same willingness and solidarity in its decision on temporary intervention in the secondary bond market, a practice which is fully in keeping with the more general spirit of the decision by the finance ministers in the euro area.

However, these are mechanisms and measures of a provisional nature and, if we really want to learn lessons from the current crisis, obviously we should not wait for the next crisis to highlight the shortcomings and weaknesses in the euro area and the Union before we decide to intervene. Now is the right time to create permanent economic coordination and supervision mechanisms that will function as both prevention and cure.

Within this framework, the recent Commission communication on stronger economic coordination is certainly a move in the right direction, but we should not forget that our basic objective is the stable and viable recovery of the European economy and that is why we need a framework of economic governance which focuses not solely on the pillar of financial restructuring, but also on protecting employment and on growth and social cohesion.

In order to achieve this, our priority should not be sanctions; it should be incentives and preventive measures which will safeguard equal treatment for all the Member States of the Union and their citizens.

  Pervenche Berès (S&D). – (FR) Madam President, Commissioner, as you know, in this Parliament, we were very happy that solidarity has finally been introduced, even if some of us regretted that this was done many months after the initiative by President Van Rompuy to convene an extraordinary European Council on these questions on 11 February. In the meantime, the markets have done their job.

While we address this European solidarity initiative, I believe that we must also look at where we are coming from and recognise that, if this situation has been created, it is because we do not really have the right elements in place in terms of the governance of the euro area. Our fellow Member, Othmar Karas, spoke of the Stability Pact. It seems to me that the simple application of the Stability Pact is not enough, and that fundamentally, we have, from the start, underestimated these risks of divergence on the evaluation of the sovereign debt ratings of the Member States.

Today, we have a mechanism that was put together in an emergency, as you reminded us. You also reminded us that, in this Parliament, since October 2008 – that is, since the implementation of the facility concerning the balance of payments – some people have spoken up to ask that Article 122 be looked into. We did this in an emergency. Emergency is never the best counsel, and you mentioned that you would study the potential proposal for making such a mechanism permanent. I hope that you will come forward with more attacking proposals in this area, because we are sure that an area like the euro area does not just need good governance to avoid such situations arising in future, but should this happen, it also needs a permanent mechanism in place.

Next, I would simply say that I regret the fact that, rather than appealing to Eurobonds, the Member States preferred to introduce the special purpose vehicle at a time when we are also asking ourselves questions about the functioning of this type of structure in the markets.

One final point: I think that in responding to Mrs Bowles regarding the EIB…

(The President cut off the speaker)

  President. – This is a good course of action. As we then still have time, this is the best way to do it as we will stay within the rules and not take away any speaking time. Thank you for your understanding.

We now move on to the speakers in the catch-the-eye procedure.

  Elena Băsescu (PPE). – (RO) On 9 May, Member States’ finance ministers decided to create a European financial stabilisation mechanism. This is part of a package of legislative measures envisaged to protect the euro and support the recovery of the financial situation in the European Union.

I believe that the new mechanism will have to provide a prompt, well coordinated response if a state is unable to finance its public debt off its own bat. In fact, this will be able to contribute to the sustainability of the public finances of the beneficiary Member State. The EU has already responded to a crisis situation using the European financial stabilisation mechanism which it was not adequately prepared for.

Finally, I would like to ask you the following question, Commissioner Barnier: given the temporary nature of this mechanism lasting three years and taking into account the EU’s need to respond promptly in crisis situations, when do you reckon that this mechanism will become permanent and where would the relevant sources of funding come from?

  Franz Obermayr (NI). – (DE) Madam President, in the event of a crisis in other Member States, EU countries should now no longer bail them out with direct financial packages, as has been the case until now, but stand surety for them. This sounds a really good idea, but it does not by any means get rid of the basic problem.

The problem is that countries in the euro area, with far-reaching differences in terms of financial policy and difficult financial policy conditions, are naturally faced with extremely tricky situations. In such cases, the problem is just shifted, and the guarantor himself is quickly made into a debtor. Besides, the issue arises concerning the dependency of rating agencies. To be able to secure capital at the lowest possible interest rate, the European Financial Stability Facility would therefore have to achieve the best rating from the rating agencies, which would make this instrument particularly dependent on US agencies.

Consequently, it does not make sense to create a public company, entrust it with such important duties and then put it under the huge influence of private rating agencies. However, with a European version of the agency, the question arises as to how to guarantee a neutral rating. I find, therefore, that this measure has not been thought through well enough. It poses the risk again of Member States running up debts at the expense and liability of others.

  Paul Rübig (PPE). – (DE) Madam President, Commissioner, I am interested in the question of stabilisation and how we can achieve economic growth. My question is: given that the 2011 budget is in the midst of being negotiated, are you aware of any budget lines which can really boost employment? How can we provide better support to small and medium-sized enterprises, and how we can get more and better entrepreneurs? I believe that this is the crux of stabilisation. If we generate more profit, we can, in turn, distribute more resources and also make Europe a fairer place.

The Competitiveness and Innovation Programme, CIP, is precisely the kind of measure which would be a huge help to us making further progress in the future. Any reduction of this programme would be totally counterproductive. During the analysis, we ought to look out for which budget lines totally discourage employment, which are neutral and which create new jobs. Would you have a suggestion to make on this?

  Pervenche Berès (S&D). – (FR) Madam President, regarding the EIB, I think that one of the questions asked was what the conditions are in which it will be able to borrow on the markets, alongside these mechanisms which are being introduced, and if there will be an impact on interest rates.

I would simply like to ask you a question, Commissioner. In this context, do you not think that within the Van Rompuy working group, you or Commissioner Rehn should propose studying the idea of pooling part of the sovereign debt? This is not a proposition which is on the table, but it is much debated outside the working group. It might be worthwhile if this pooling of part of the sovereign debt were taken into account in the proposals which could be developed by this working group.

  Michel Barnier, Member of the Commission. – (FR) Madam President, if you will allow me, I would suggest to you that Mr Rehn respond to you directly on the important question of Eurobonds, in particular, and on the final points that Mrs Berès mentioned a moment ago. He will do this in writing in the next few days.

In her initial speech, Mrs Bowles mentioned the stress tests, which are tests of resistance to events which have not yet happened, and which perhaps will not happen. We must therefore understand properly what the question is here, and in the Commission, we thought quite early on – President Barroso has expressed his feeling on this subject, as has Olli Rehn – that transparency would have great benefits. I refer you to the quite comprehensive response that President Barroso gave on this question.

Mr Karas mentioned a very important point which was raised in the preceding debate on prevention and precaution and, in particular, the idea that it is the banks that must pay for the banks, and not the taxpayers. I would like to confirm that, besides the communication that I have given on this subject, we will propose legislation at the start of 2011 which provides for the creation of these precaution or bank resolution funds to implement the principle of ‘the polluter pays’ while emphasising another idea, which I would repeat here, namely, that prevention always costs less than cure. However, this is only a tool, Mr Karas. This bank resolution fund, this tax or bank levy, is only a tool in a toolbox which contains others, the objective being to identify the risks early enough to prevent them turning into a crisis and this crisis turning into a catastrophe.

Regarding the credit rating agencies, we are examining all the questions, including those of sovereign debt ratings mentioned a moment ago by Mrs Berès. I confirm that we are working on the diversification of this market, which is excessively concentrated in a few hands, and, in particular, on the possibility of a European agency. These ideas will also be turned into legislative proposals at the end of 2010 and the start of 2011. Mrs Berès mentioned the application of the Stability Pact. Like you, I think that we must go further. As you have understood, we introduced this European financial stabilisation mechanism in a time of emergency. As I said earlier on – and here I am also responding to Mrs Băsescu – we are working on more permanent mechanisms, and the Commission, together with the working group led by the President of the European Council, has not yet chosen the legal basis on which we will establish these proposals relating to a more permanent mechanism for crisis management.

I would like to conclude, Mrs Podimata, by mentioning the work that Greece has done, which you know well. We must take into account the very important commitment of the Greek Government to playing its part in this work. I would like to remind you that this recent crisis which has affected your country, though not only your country, and the risks of contagion associated with it, have provided good evidence of the interdependence of the Member States, especially in the euro area. This crisis has also emphasised, in my view, the need for Europe to demonstrate its determination to undertake fundamental reforms to ensure the smooth running of the European Union and the euro area as a whole. In its decisions on the creation of these two instruments, the Ecofin Council of 9 May plainly showed that the European Union was capable of responding quickly and efficiently to the great political and economic challenges. I believe, however, that it is clearly necessary to improve this economic and budgetary coordination, and I know that we can go beyond the word ‘coordination’ and go further when it comes to the Union.

I would also like to say to Mr Rübig that, just like him, I think that we have learned the lessons in the current situation – and it is not over: we have spoken of supervision and we must follow through with the decisions taken relating to supervision and regulation – from the jolts on the euro and Greece, thanks to the proposals for governance and coordination and this system of response and stabilisation. The Commission has also made important proposals relating to budgetary surveillance. I think that we must do all this, but we must do even more to talk to the citizens, who expect us to deal with the economic situation, in terms of growth and employment. While on the subject of surveillance, stabilisation, efforts, regulation and rules, I think that we must also talk about initiatives in the context of the Europe 2020 strategy in order to regain growth and employment.

This is why, in the second part of my portfolio, I attach importance to the proposal I am working on with a dozen of my colleagues, which I will present at the start of October, on this idea of a Single Market Act in order to make the fundamental basis – the platform of the entire European economy that is the single market – work better. This is a market of 500 million citizens in which small businesses, of which there are very many, citizens and consumers are not doing well. Yet we know that if this market functioned better for small and medium-sized businesses, citizens and consumers, we could find 2% of growth in this market, in ourselves.

In summary, then, I think that we must continue with this discussion while taking the action necessary to respond to all the questions which our citizens our currently asking.

  President. – A motion for a resolution⁽¹⁾ to wind up this debate has been tabled by the Committee on Economic and Monetary Affairs.

The debate is closed. The vote will take place on Wednesday, 7 July 2010 at 12:00.

(1) See Minutes