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European summit supports the possibility of direct recapitalisation of banks by the ESM once a single bank supervisory mechanism, with ECB involvement, is established, agrees on "Compact for Growth and Jobs"
On 29 June, Heads of State and Government of the euro area agreed on the possibility to recapitalise directly banks once a single supervisory mechanism for financial institutions is established based on Article 127(6). Once
it is established, the ESM would have the possibility to directly recapitalise banks subject to strict conditionality and in compliance with state aid rules. At the European Council meeting of 28 June, EU leaders decided on a “Compact for Growth and Jobs” that encompasses actions worth EUR 120 billion to be taken by both the Member States and the EU, with the aim of re-launching growth, investment and employment as well as making Europe more competitive. In addition, EU leaders endorsed the country-specific recommendations made by the Commission under the 2012 European Semester, and emphasised the role of the forthcoming Multiannual Financial Framework for strengthening growth and employment. On a longer-term note, EU leaders also discussed the report “Towards a genuine Economic and Monetary Union" which Herman Van Rompuy, President of the European Council had prepared in cooperation with President Barroso and the Presidents of the ECB and the Eurogroup.
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“…this European Council and Euro area summit have delivered
what our citizens, our international partners and investors
have been asking for. It has delivered a robust set of answers
which should significantly strengthen confidence in Europe's
financial stability.
José Manuel Barroso, President of the European Commission |
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European Council endorses country-specific recommendations,
concluding European Semester
European leaders have endorsed the country-specific
recommendations formulated by the Commission under
the 2012 European Semester. The recommendations
approved at the European Council meeting on 28-29
June address issues such as national targets for
implementing the EU's “Europe 2020” strategy for
growth and jobs, structural reforms, and measures
for concentrating growth-enhancing initiatives in
the short term, as well as the budgetary position
of each country. They cover all 27 Member States
and the euro area as a whole. Member States will
now translate the recommendations into their forthcoming
national decisions on budgets, structural reforms
and employment policies.
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Ambitious report defines architecture for a stronger EMU
A report issued on 26 June and discussed at
the European Council on 28 June presents a vision
for a strengthened Economic and Monetary Union (EMU)
that would ensure stability and sustained prosperity.
The report “Towards
a genuine Economic and Monetary Union” was prepared
by Herman Van Rompuy, President of the European
Council, in collaboration with José Manuel Barroso,
President of the European Commission, Jean-Claude
Juncker, President of the Eurogroup, and Mario Draghi,
President of the European Central Bank. It proposes
four building blocks: integrated financial, budgetary
and economic policy frameworks, as well as an approach
to ensuring the necessary democratic legitimacy
and accountability of decision-making. Following
the initial discussion, EU leaders invited the four
Presidents to develop a specific and time-bound
roadmap in consultation with the European Parliament
and Member States. An interim report is foreseen
for October 2012 and a final report will be submitted
to the December European Council.
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Troika mission returns to Greece
In his statement of 21 June, President Barroso
welcomed the formation of the new Greek government
and underlined that its broad parliamentary support
sends a clear signal of Greece's determination to
honour its commitments and stay in the euro area.
To take stock of the current economic situation,
on 4 July the Troika of the European Commission,
the European Central Bank, and the International
Monetary Fund resumed its mission in Athens. On
the basis of their assessment, an updated Memorandum
of Understanding is expected to be agreed upon.
The last Memorandum of Understanding between Greece
and the euro area Member States had been signed
on 14 March, the same day when euro area finance
ministers approved the second adjustment programme
for an amount of up to EUR 130 billion until 2014,
as a basis to foster growth, prosperity and jobs
for the Greek people.
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Vice President Rehn and Eurogroup welcome Spain’s
request for financial assistance for its banking
sector
In separate statements issued on 25 and 27 June
respectively, Olli Rehn, Vice-President for Economic
and Monetary Affairs and the Euro, and euro area
finance ministers (the Eurogroup) tentatively agreed
to a request by the Spanish Government for financial
assistance from euro area Member States. Partly
based on estimates by two private firms, the additional
capital needs of the Spanish banking sector as a
whole are currently estimated to be in the range
of EUR 51-62 billion, well within the envelope defined
by the Eurogroup of up to EUR 100 billion in total.
The European Commission, in close consultation with
the European Central Bank (ECB), European Banking
Authority (EBA) and the International Monetary Fund
(IMF), will provide a proposal for policy conditionality
for the financial sector to accompany the financial
assistance. After an agreement has been reached
with the Spanish authorities in the form of a Memorandum
of Understanding, the financial assistance would
need to be endorsed by the Eurogroup, in line with
national procedures. The euro area summit of 29
June confirmed that the EFSF would provide financial
assistance until the ESM is in place to take over
however the EFSF's senior status would not be transferred.
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Finance ministers accept Cypriot request for
financial assistance
Euro area finance ministers have welcomed Cyprus’
request for financial assistance from euro area
Member States and the International Monetary Fund
(IMF). In a statement issued on 27 June, the finance
ministers called on the European Commission, in
liaison with the European Central Bank (ECB), Cypriot
authorities and the IMF, to agree on a programme,
including the financing needs, and to take appropriate
action to safeguard financial stability. The financial
support would be provided in the framework of a
comprehensive adjustment programme, building on
measures already taken by the Cypriot authorities
and recommendations made by the Commission on 30
May under the European Semester. To that end, on
3 July a Troika of the European Commission, the
European Central Bank, and the International Monetary
Fund went to Cyprus for a fact-finding and scoping
mission to last until the end of this week.
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Excessive Deficit Procedure for Bulgaria and
Germany closed, Cohesion Fund suspension for Hungary
lifted
European finance ministers agreed on the abrogation
of the Excessive Deficit Procedure for Bulgaria
and Germany, and the lifting of Cohesion Fund suspension
for Hungary. Meeting on 21-22 June, the finance
ministers responded to recommendations made on 30
May by the European Commission. The Commission had
concluded that the correction of the excessive deficits
of Germany and Bulgaria is ensured, and that Hungary
has taken the necessary corrective action to justify
the lifting of the suspension of its Cohesion Fund
commitments.
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Commission proposes financial sector legislation
to protect consumers and rebuild trust in financial
markets
On 3 July, the European Commission presented
a three-part legislative package dedicated to rebuilding
consumer trust in financial markets. It includes
a proposal for a regulation on transparency in packaged
retail investment products (PRIPS), a revision of
the Insurance Mediation Directive (IMD), and a proposal
for an amendment to the Undertakings for Collective
Investment in Transferable Securities (UCITS) Directive.
A wide range of investment and insurance products
are available for purchase across the EU. The new
rules are designed to help consumers compare them
or understand the risks involved before deciding
which one to buy. The rules will offer investors
the same level of protection in all EU countries.
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BEF 2012 Euro Taxi video interviews - leading
economists talk about growth strategies
The annual Brussels Economic Forum (BEF) is
the main EU platform for debate on economic issues.
In 2012, the 13th BEF concentrated on the sources
of sustainable economic growth and debated growth
models in the EU. The video produced on this occasion
features short interviews with key figures from
the conference, including Pier Carlo Padoan (Deputy
Secretary-General, Chief Economist, OECD), Jong-Wha
Lee (Senior Advisor for International Economy to
the President of South-Korea), Marco Buti (Director-General,
DG ECFIN), Philippe Aghion (Professor of Economics,
Harvard University), Danuta Hübner (Member of the
European Parliament), Benjamin Friedman (Professor
of Political Economy, Harvard University), as well
as informal interviews with citizens.
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Macroeconomic imbalances. European Economy. Occasional
Papers 99 – 110. July 2012.
On 14 February 2012, the European Commission
presented its first Alert Mechanism Report (AMR)
in accordance with Regulation
(EU) No. 1176/2011 on the prevention and correction
of macroeconomic imbalances. The AMR serves
as an initial screening device to identify Member
States that warrant further in depth analysis into
whether imbalances exist or risk emerging. According
to Article 5 of Regulation No. 1176/2011, these
country-specific “in-depth reviews” should examine
the nature, origin and severity of macroeconomic
developments in the Member State concerned, which
constitute, or could lead to, imbalances. On the
basis of this analysis, the Commission concludes
whether it considers that an imbalance exists or
not, and if so whether it is excessive or not, and
what type of follow-up it will recommend to the
Council to address to the Member State. See the
in-depth reviews DG ECFIN published in its series
"European Economy – Occasional Papers" for
Belgium,
Bulgaria,
Cyprus,
Denmark,
Spain,
Finland,
France,
Hungary,
Italy,
Sweden,
Slovenia,
United Kingdom.
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Directorate-General for Economic and Financial Affairs
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