Ecofin gives new impetus to monetary union

EU finance ministers have given new impetus to efforts to complete key elements of European monetary union before the summer.

Ecofin on Tuesday backed EU commission proposals to reinforce a commission "reform delivery tool" to help fund member states' economic reform commitments, and to work to operationalise, by 2019, a "backstop function" for the European Stability Mechanism (ESM) in regard to the Single Resolution Fund (SRF).

A backstop would enhance the capacity of the fund in coping with bank resolutions. It is meant to act as last-resort insurance and is seen as important in strengthening confidence in the European banking system.

Priority

Minister for Finance Paschal Donohoe said it was crucial to prioritise such elements of banking union as they could realistically achieve within the next few months. More far-reaching proposals from the commission, such as the creation of a European Monetary Fund to take the place of the ESM, or the appointment of a European finance minister, strongly supported by the French, were long-fingered.

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Ministers also welcomed what many saw as evidence that their new tax haven blacklist is working. Eight states out of the 17 listed in December were removed on Tuesday from the EU list after providing new “satisfactory” commitments that they will share information on their depositors.

Although welcoming the new compliance, the commission was critical of the EU council of finance ministers for not publishing the letters of commitment. The delisted states will now be asked if they are willing to make their undertakings public.

Barbados, Grenada, the Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the United Arab Emirates are now moved to a separate category of jurisdictions which are subject to close monitoring.

The decision leaves nine jurisdictions on the list of non-co-operative jurisdictions. These are American Samoa, Bahrain, Guam, the Marshall Islands, Namibia, Palau, Saint Lucia, Samoa and Trinidad and Tobago.

The meeting was also an opportunity, Mr Donohoe said, to strengthen the developing alliance in Ecofin between Ireland and like-minded states – the Nordics and the Dutch – with Mr Donohue attending a joint dinner on Monday night with his counterparts.

"Ireland wants to be at the heart of the debate on the future of European Monetary Union, " Mr Donohoe said following the meeting. He emphasised the need for that debate to be "inclusive", involving states such as Sweden and Denmark which were not yet part of the euro.

Future

His priority, the Minister said, was “finalising the future role of the European Stability Mechanism” and getting to the point where the ESM acts as the backstop for the Single Resolution Fund. Ireland remains happy, he said, with retaining the inter-governmental nature of the ESM andits unanimity in decision-making.

On the proposal for an EU finance minister, Mr Donohoe said that Ireland was happy instead to support the development “of the future capacity of the president of the Eurogroup” – the gathering of finance ministers of euro zone states.

In both respects Mr Donohoe is leaning towards those member states who are reluctant to see more of the management of the euro and the euro zone brought under the ambit of community institutions, notably the commission but also the European parliament. Retaining ministerial or intergovernmental control is the subtext of the Irish position on EMU.

Of the commission’s more ambitious, integrating agenda, Mr Donohoe said there are “other more important priority areas at the moment”.