Tuesday

23rd Oct 2018

Eurozone leaders agree on Franco-German bail-out mechanism

  • The document is dominated by German demands say diplomats (Photo: European Communities)

France and Germany have brokered an emergency financing mechanism to help Greece, following extensive bilateral negotiations between the two sides earlier on Thursday (25 March).

Under the deal, approved by eurozone leaders after late evening talks, a funding package will be created, made up of voluntary contributions from euro area countries and cash from the International Monetary Fund.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

With the document dominated by German thinking, France is claiming a reduced IMF role as its negotiating victory.

"As part of a package involving substantial International Monetary Fund financing and a majority of European financing, euro area member states are ready to contribute to co-ordinated bilateral loans," says an earlier Franco-German text.

Diplomats suggested the pot for Greece could total €22 billion, with Athens reportedly welcoming the deal.

However, the mechanism is theoretically open to all 16 euro area states, not just Greece, with any disbursements requiring further unanimous eurozone approval. In addition, payouts will be subject to "strong conditionality and based on an assessment by the European Commission and the European Central Bank."

Echoing earlier demands made by Germany Chancellor Angela Merkel, the one-page document says the mechanism must be considered as a last resort, a bid to help the German leader persuade her citizens ahead of crucial regional elections that support for Greece is also in their interest.

While contributions are to be made on a voluntary basis, its authors say they "expect euro-member states to participate on the basis of their respective ECB capital key," an index which relates to a country's GDP.

Loans provided from the fund will also be subject to non-concessional interest rates, "i.e., not contain any subsidy element", in a bid to encourage borrowers to return to capital markets as quickly as possible.

Analysts have suggested in recent weeks that Ms Merkel's earlier reluctance to agree to a mechanism stemmed in part from concerns over potential legal challenges regarding EU Treaty and German constitutional rules.

"Decisions under this mechanism will be taken in full consistency with the [EU] Treaty framework and national laws," says the text.

The plans also envisage greater European economic co-ordination in the future, and provide for the European Council under Herman Van Rompuy to play a greater role.

"We consider that the European Council should become the economic government of the European Union and we propose to increase its role in economic surveillance," says the document.

German finance minister Wolfgang Schaeuble recently called for eurozone rules to be significantly tightened, including the possibility of expelling members that repeatedly flaunt restrictions.

"For the future, surveillance of economic and budgetary risks and the instruments for their prevention, including the excessive deficit procedure, must be strengthened. Moreover, we need a robust framework for crisis resolution," says the text.

Mr Van Rompuy has been asked to form a task force composed of representatives from the member states, the ECB and the European Commission to present plans by the end of the year regarding the need for legal changes in this area.

It was only at the last minute however that the presence of the commission was added into the mix.

EU leaders worried about Italy's budget

Some EU leaders warned that Italy's plan to boost its budget spending despite the second largest debt in the eurozone, could hamper efforts to reform the single currency's framework.

News in Brief

  1. EU commission sends back Italy's budget plan
  2. French CEO attends Saudi forum despite journalist murder
  3. Sacked Polish judges urged to return to work
  4. Italy's budget defence arrived in Brussels
  5. EU warns of nuclear race as US pulls out of treaty
  6. Spain and Sweden not stopping arms sales to Saudi Arabia
  7. Piedmont and Copenhagen named top tourist destinations
  8. Bayer to compensate for carcinogenic weed killer

Airbnb agrees to clarify pricing for EU

The justice commissioner says the accommodation-rental website will better inform users about prices, and about the legal status of their 'hosts'. Facebook, however, could face sanctions if it doesn't comply with EU rules.

Stakeholders' Highlights

  1. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  2. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  3. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  4. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  5. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  6. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  7. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  8. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  9. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  10. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  11. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  12. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All

Latest News

  1. EU commission rejects Italy's budget plans
  2. Poland's liberal prodigy to take on EU populists
  3. Italy's M5S to unveil new EU group in January
  4. Cities are frontrunners in fight for social rights for all
  5. 'Integration' - the missing factor in new EU migration fund
  6. Unelected EU parliament official blocks release of #Metoo papers
  7. 'The kids aren't alt-right'
  8. Lone Merkel declares Saudi arms ban

Join EUobserver

Support quality EU news

Join us