The team at European Movement Ireland (EMI) have provided a useful summary of the outcomes from the recent Council of the European Union Autumn Summit, held last Thursday and Friday.
Leaders at the Summit 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), a permanent Eurozone fund aiming to refinance banks directly instead of granting aid to governments, who in practice act as intermediaries.
In relation to the Economic and Monetary Union, the main element of which is a banking union incorporating the European Stability Mechanism (ESM), EMI note that the Council last week 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.
Discussing the impact of this development for Ireland, EMI notedthat 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”. Additionally, some creditor nations and non-Eurozone countries pushed for a change of language in the draft, away from establishing the Supervisory Mechanism by January 1 2013, to simply agreeing to completion of the legislative framework by that date, a deadline “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”.
Subsequently, the ‘board of management’ of the Supervisory Mechanism itself, will not be established until late in 2013. Upon its establishment banks can be recapitalised directly. Importantly, the EMI add “the Council believes that this will finally break the link between bank and sovereign debt”
Furthermore, there was debate over a statement by German Chancellor, Dr Angela Merkel, that there would be “no direct” assumption of historical debt by the ESM. A joint communiqué was subsequently issued between the Chancellor and the Taoiseach, Enda Kenny TD assuring 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”. “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.”
On the issue of growth and jobs, the EMI note that “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.” During the Summit, 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.
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