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It's incremental progress day again in Eurozoneland: The #Eurogroup agrees to ESM reform, unfortunately unchanged. Yet, there will finally be a backstop for the Single Resolution Fund - and it will be introduced already in 2022.
Short assessment: https://www.consilium.europa.eu/en/press/press-releases/2020/11/30/statement-of-the-eurogroup-in-inclusive-format-on-the-esm-reform-and-the-early-introduction-of-the-backstop-to-the-single-resolution-fund/
Short assessment: https://www.consilium.europa.eu/en/press/press-releases/2020/11/30/statement-of-the-eurogroup-in-inclusive-format-on-the-esm-reform-and-the-early-introduction-of-the-backstop-to-the-single-resolution-fund/
1/ First things first: The EG did not go back to the drawing board to heed the lessons of the pandemic and to use ESM reform as an opportunity to make the crisis management framework viable in the long run. Huge missed chance, will bite us in the butt one day.
2/ Instead, there was obviously little appetite to revisit any of the substance. With this reform, the ESM becomes more complicated to operate and its precautionary lending instruments harder to access. Not a particularly great move if your customers already don't trust you.
3/ But there is the silver lining of incremental progress: Only seven years after it was agreed first, the ESM finally becomes the backstop to the Single Resolution Fund - and it even gets introduced earlier than planned, namely in 2022. That is a very important step.
4/ To make that step, the EG makes a *very* exhaustive and convoluted list of things that should happen between now and the introduction of the backstop. But there is no additional political decision that has to be taken.
5/ The statement also contains some clarifications on the interpretation of resolution rules. Others (e.g. @SebastianMack_ @nicolas_veron @jeuasommenulle) are better placed to analyse the fineprint here, but it doesn't exactly sound like a very liberal interpretation.
6/ All in all, this is a typical, sobering EU mixed bag: We get a backstop that brings us one step closer to completing banking union in exchange for a largely useless and probably counterproductive change in the ESM's functioning. At this juncture, I'd still say: Take it.
7/ But it is also clear that this reform brings us no closer to a crisis management framework that is politically and economically viable in the long run. The real ESM reform is still (hopefully) ahead of us and political capital will need to be spent on it before it's too late.
