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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Remarks by Vice-President Olli Rehn at the Eurogroup press conference
14 October, 2013
I would like to make two points this evening.
First, on Ireland and Spain. We are now two months from the end of the Irish programme and three months from the end of the Spanish financial sector programme. Both programmes are on track for a successful conclusion. The conditional financial support has helped to deliver an economic turnaround in the two countries concerned.
Ireland has posted positive growth every year since the beginning of the programme. Exports have remained resilient and there are signs that domestic demand is picking up. In Spain, exports have reached record levels and bold structural reforms are helping to transform the country’s competitiveness. In both cases, unemployment has begun to fall in recent months, although it still remains much too high.
In the coming weeks, the Central Bank of Ireland will complete its balance sheet assessment and the Bank of Spain will carry out its forward-looking exercise to analyse the resilience of the banking sector in these two countries. Without prejudging the outcome of these exercises, we can say that both countries have a very good chance of successfully concluding their programmes in a sustainable manner.
The second point I wish to make is in relation to the construction of a Banking Union. The guiding principles behind our approach to bank restructuring and resolution are that taxpayers should be protected and financial stability be maintained. In this context, there is a clear pecking order to be followed in case next year’s balance sheet assessments reveal capital holes. The bill should be footed first via private solutions and internal resources, in other words via shareholders and junior creditors. Only then can there be recourse to public backstops, first at the national and if needed, finally at the European level, in line with the Spanish model. Where state support is necessary, the new state aid rules in force since 1 August will apply.
Last week, I wrote to Finance Ministers of the EU to clarify the treatment of capital injections under EU fiscal rules. I explained that these are normally considered as "relevant factors for financial stability" and/or as so-called one-off, or temporary, measures. This means they are not included in the structural balance and thus do not count against the Member State in the context of the Excessive Deficit Procedure. As such, our fiscal rules create no disincentive to effective public backstops, even if these could only be needed as a last resort, when other options are exhausted.
So it is, indeed, essential that we maintain the momentum for the completion of the Banking Union. This means, in particular, working constructively to agree rules for the Single Resolution Mechanism, on the basis of the Commission’s legislative proposal. This was, in fact, a key messages delivered by our international partners at the IMF annual meetings in Washington this past weekend, and it is a message with which the Commission fully agrees.
Finally, let me conclude by congratulating Eurogroup President Jeroen Dijsselbloem, and the Netherlands for being able to agree on difficult but necessary consolidation measures a few days ago, which will help ensure the sustainability of its public finances. This was, in a nutshell, a victory for responsibility over brinkmanship and with this in mind one can say that it is high time for US politicians to go Dutch. We urgently need to see a similar victory for responsibility in Washington in order not to inflict serious damage on the world economy and jeopardise the nascent recovery underway now in Europe.