Good evening and welcome to this press conference.
We had a extra dedicated Eurogroup meeting today to talk about Draft Budgetary Plans (DBP) and we also took stock of the discussions on Greece. Of course all this happened under the dark cloud of the migration issue and on the top of all that – the terrorism attacks in Paris and the acute situation here in Brussels. I am happy that we could meet today and that we didn’t have to call it off. I think that’s a good signal and I want to express my strong appreciation for the Belgian authorities for keeping us safe today.
First on Greece. Before the Eurogroup, a Board of Directors of the ESM meeting took place to take the formal decision on disbursement. There are two elements here, first of all of course there is this situation with the first set of milestones which now have been implemented. One issue has been moved on to the second set of milestones which is linked to the pension reform, but all the other issues have been dealt with and that opens up the possibility to transfer the €2 billion disbursement. Connected to that is of course the money reserved for the recapitalization of the banks. The formal decision on the transfer of the required funds for the recapitalisation of banks will be taken by the ESM Board of Directors – we don’t know the exact figures yet – following the relevant state aid decision which the Commission will have to take on a case-by-case basis. So we can’t prejudge that.
We made quite clear that the recapitalisation exercise is being carried out the way that we have agreed, so in line with BRRD but also in line with the Eurogroup statement of 14 August 2015.
We underlined that the precautionary recapitalisations are of a temporary nature and the proceeds stemming from the future disposal of the HFSF participations will be used to repay the ESM as soon as such proceeds become available. I think those were some of the key elements we underlined today in our discussion. Also an important point is the strong implementation of the NPL strategy. This is crucial for the success of the whole recapitalisation process. It is also crucial for and was underlined by the IMF. The IMF participated in our meeting today via telephone. The process of the coming weeks will focus of course on the actual implementation of the recapitalisation process but also on designing the second set of milestones. The EWG will already this week continue to work on that and we have welcomed the commitment by the Greek authorities that they will implement the second set of milestones by mid-December 2015 as well as take all necessary decisions needed to remove bottlenecks on key projects co-funded by the EU and the EIB.
Then on DBPs, of course where fiscal policy is concerned we made a lot of progress in the euro area over the last years, just to highlight one element of it – the number of member states in the corrective arm was 15 in 2010 and on the basis of the projections that we have now, that number will be reduced to three in 2016. Also the aggregate debt-to-GDP ratio has started to decline this year and will be brought on a declining path in line with the debt rule. Obviously a lot more work needs to be done there.
Returning to the different groups of countries – the first remark I would like to make is that Portugal did not submit a draft budgetary plan, which is not in line with the rules, so we have to be firm there. Yet the current caretaker government in Portugal is for constitutional reasons not allowed to now put forward the draft budgetary plan and submit it, so we will have to wait for the new government to come in. Second of course Cyprus and Greece which are in macroeconomic adjustment programmes and were also not a part of our discussions today.
Then we distinguished three groups, the first as you know are five countries compliant with the pact, seven countries broadly compliant and we have welcomed from those countries their commitment to take any necessary steps to make sure that they stay within the rules of the pact.
And finally a group of four – which are all at risk of non-compliance. We distinguished countries under the preventive arm which are Austria, Italy and Lithuania. We discussed in more detail the problems in these countries, the challenges that they have and the underlying assumptions.
Let me distinguish country-by-country. Austria has committed to implement measures necessary to insure that its 2016 budget will be compliant with the rules of the preventive arm. Italy – there are couple of issues which Commissioner Moscovici will probably say more about, it having to do with the eligibility for different kinds of flexibility. That is still open and the Commission will make an assessment in the spring of 2016. There is also the issue, also in Austria but also in Italy, of the costs of the asylum crisis at the moment. As you know, the Commission will take that case-by-case into consideration ex post. Also here, Italy has given its commitment to implement any measures necessary to ensure the budget will be compliant. Lithuania – I can’t give you much detail there – also the Finance Minister has given his strong commitment to implement measures if and when necessary to ensure that the budget will be compliant.
Finally, Spain. As you know, Spain had sent its budget early, and we had a first discussion already in September-October 2015. The Spanish government itself did not take any action, it will be left up to the next government to make sure that the budget, where necessary, will take on the new measures, to make sure that it is compliant with the rules of the SGP.
So for these countries more work needs to be done and more discussions with the Commission will have to take place. We also are looking ahead to the spring and we will come back to those countries for sure in discussions at the beginning of the next year.
Compliments of the European Council