Please find below a short briefing on the outcomes of the recent Council of the European Union Autumn Summit, with government representatives from all 27 EU countries, which took place on Thursday 18 and Friday 19 October.
The focus of the Summit was on the economic crisis, specifically on the mutually dependant issues of job creation and bank stability in the Eurozone area. In this respect, the leaders present examined the progress made on creating an Economic and Monetary Union, the main element of which is a banking union incorporating the European Stability Mechanism (ESM). This is a permanent Eurozone fund aiming to refinance banks directly instead of granting aid to governments, who in practice act as intermediaries. Learn more about the ESM here.
However, the establishment of the ESM is conditional on the creation of a unified bank supervisory programme, which will be run by the European Central Bank. This will be called the Single Supervisory Mechanism (SSM).
During the Summit, the Council invited the Commission to start working on the legislation that will establish this mechanism, and it was agreed that a detailed roadmap to creating the ESM and its contingent Single Supervisory Mechanism, will be presented at the December Summit.
Impact for Ireland
The final outcomes of the Summit backtracked slightly on the draft conclusions that EU leaders were presented with at the start of the Summit, which contained a more concrete and accelerated outcome to the establishment of the Single Supervisory Mechanism. Some creditor nations and non-Eurozone countries pushed for a change of language in the draft, away from establishing the Supervisory Mechanism by 1January 2013, to simply agreeing to completion of the legislative framework by that date. This January deadline was considered a disappointment to countries such as France, Spain and Ireland, who had pushed for quick establishment of the Supervisory Mechanism, due to the fact that its establishment is necessary in order for banks to be able to draw recapitalisation aid directly, via the ESM.
In light of the Summit’s outcomes, the ‘board of management’ of the Supervisory Mechanism itself, will now not be established until late in 2013. Once it is set-up, however, banks can be recapitalised directly. Importantly, the Council believes that this will finally break the link between bank and sovereign debt.
After the Summit concluded, some controversy ensued when German Chancellor, Dr. Angela Merkel, stated that there would be “no direct” assumption of historical debt by the ESM. There was consternation over what this would mean for Ireland, and whether or not this backtracked on promises made to Ireland at previous Council meetings.
However, following a scheduled phone-call between An Taoiseach, Enda Kenny TD, and Chancellor Merkel, a joint communiqué was issued affirming that Ireland’s debt circumstances are unique, particularly given the conditions under which Ireland was frozen out of the bond markets and that, following this, Ireland has adjusted very well economically. The communiqué went on to state that such improvement must now be sustained, and all of this will be taken into account at future Council meetings. Irish experts have speculated that this means there may be better opportunities for “indirect” refinancing for current debt, and if further financing is required in future, it can come from the ESM directly.
Growth and Jobs
If Irish banks eventually manage to obtain a certain amount of financing via the ESM, this will improve lending conditions, creating better economic space for employment here. To this end, the Council reviewed the implementation of the Compact for Growth and Jobs. The substantive aims of the Compact are reflected in Ireland’s Presidency agenda, namely; deepening the single market, improving digital market conditions, removing red tape for entrepreneurs and encouraging research and innovation, to name a few. The Council welcomed progress made in these areas so far, and called for action to ensure its full and rapid completion.
Other Policy Outcomes
The Summit also adopted conclusions on the political situation in Syria, the nuclear stance of Iran, and the relationship between the EU and its strategic partner, China, in light of the recent EU-China Summit.
This document is available to download as a PDF by following this link: Council of EU Summit Economic Policy – Oct 2012
If you would like any further information on any of the above, please do not hesitate to contact the EM Ireland team or visit our new website at www.europeanmovement.ie.