Minister sets out French vision for Euro Area’s future

European Union – Euro Area – Statements by M. Bruno Le Maire, Minister of the Economy and Finance, following the Ecofin Council meeting

Luxembourg, 10 October 2017

Q. – What do you think of Germany’s proposal on the future of the Euro Area?

THE MINISTER – There are proposals from many countries, proposals from Germany, Italy too, and we had a very open, very interesting initial discussion on the Euro Area. But it’s too soon at the moment to be laying down guidelines. I think this is the moment when everyone begins by setting out their vision for the future of the Euro Area. The President did this a few days ago in his speech at the Sorbonne, which presented a very clear vision of the Euro Area’s future; Germany presented its own positions and we’ll enter into discussions at the beginning of next year.

I think some things can be achieved quickly: banking union, capital markets union, fiscal convergence – on corporation tax, in particular – between Germany and France. We’ll be able to achieve all this quickly and for me the timetable should take us no further than the end of 2018 for these issues: banking union, capital markets union and fiscal convergence with Germany on corporation tax.

Then there are tougher questions, which are going to require more time. I’m thinking in particular of the way the European Stability Mechanism has functioned. We had a very good discussion on this, but saw that there were differences of opinion too. There will be the question of the budget, what level of budget, what purpose it will serve and how it will work. These are obviously very tough questions which are central to the Euro Area’s transformation.

And at the very end will come the question of a Euro Area finance minister, but as far as I’m concerned this should come last because it assumes that we’ll have resolved all the problems first.

Finally, let’s not forget the meaning we give this Euro Area. As far as I and the President are concerned, it’s about transforming the Euro Area, a monetary area, into a genuine integrated economic continent. An economic continent as powerful as China and the United States, capable of defending our economic interests and our businesses, and creating jobs for all European citizens who are members of the Euro Area. Let’s never forget in our technical discussions the political meaning we want to give this Euro Area. It must no longer be just a monetary area, but a powerful, respected economic continent.

Q.* – What is your opinion on the preliminary compromise that seems to have been reached on Basel? Second, on the guidance issued by the ECB issued last week on non-performing loans: do you think the ECB went a little bit beyond its powers since there is a discussion on new rules that is now in the Council, and the Commission should make a proposal in the next year apparently, and there is also a letter from the European Parliament President saying the ECB went a little bit far?

THE MINISTER* – For your first question, as you know, it is the central banks who are leading this discussion. We have a mandate that is clear; we do not want any major increase on capital requirements. This has been the constant position of the French government. It is then up to the central banks to enter into the negotiations and to pursue the negotiations this week in Washington. But our position is clear: no extra major increase in capital requirements.

Q.* – Is the current compromise acceptable?

THE MINISTER* – We will have new discussions in Washington; it will be up to the central banks to try to build a compromise on that; as I told you, our position is quite clear: no major increase on capital requirements.

Q.* – Second question: did the ECB go a little too far in its guidance on non-performing loans?

THE MINISTER* – I am not here in Luxembourg to make any criticisms against the ECB.

Q. – Does France agree that the ESM can encroach on European Commission territory and control the European budgets or have greater power at that level?

THE MINISTER – I think the basic question concerning the ESM is whether it’s an automatic mechanism exclusively governed by market rules, which may or may not lead to debt restructuring. We aren’t in favour of this. I said very clearly that I think the European Stability Mechanism protects our economies and our citizens’ savings, so it’s a very important mechanism, vital in our eyes for the smooth running of the Euro Area; it has proved how effective it is.

Secondly, how should it develop? Do we want a totally automatic mechanism, which is governed only by market rules, which could lead to automatic debt restructuring? We’re against this. And we’re saying so very clearly: it’s a real red line for the French government because we think it could make the Euro Area vulnerable, raise doubts for investors and so call into question all that’s been achieved in terms of solidity and stability which we’ve managed to bring to the Euro Area for several years.

That’s the position I very clearly stated yesterday during the Eurogroup meeting; afterwards we’re open to any improvement to the European Stability Mechanism. I think there are other options which are on the table and can be envisaged. We can improve the system but we can’t rely solely on market forces for the European Stability Mechanism to work.

Q. – Is there strong opposition with Germany?

THE MINISTER – There’s a difference of view. We do occasionally have differences of view with Germany. At the end of the day, we always find a compromise. And I’m a man of compromise, I know that Europe can move forward only by finding compromises between everyone’s positions, but it’s also good for everyone to demonstrate clarity and frankness in a discussion, and say what their red lines are. The idea of possibly having a European Stability Mechanism functioning automatically, without any political steering or adjustment capacity, seems dangerous to us. Dangerous for the very stability of the Euro Area.

Q.* – Mr Dijsselbloem is going to leave. You are said to have ambitions too. When will you pronounce your candidacy?

THE MINISTER* – Mr Dijsselbloem is going to stay, as you know. We have taken that very wise decision to allow Mr Dijsselbloem to stay in office until the end of the year. And I think this is a wise decision and a good decision for the stability of the Eurogroup. Then there will be of course an election because, as you know, the President of the Eurogroup must be elected by the members of the Eurogroup. It will be at the end of the year so let’s wait until the end of 2017./.

* These questions and answers were given in English.

Published on 12/10/2017

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