20 June 2013

Remarks by VP Rehn at Eurogroup press conference

Rehn said that with the progress made on the rules for direct bank recapitalisation, another step had been taken towards fulfilling the commitment made at the Euro Area Summit a year ago to break the vicious circle between banks and sovereigns.

In this context, another important task lies before the ECOFIN Council tomorrow, which is to reach an agreement on the Bank Recovery and Resolution Directive so as to pave the way for discussions on this to be taken forward swiftly with the European Parliament.

It is, in fact, hard to overestimate the importance of these steps and of the wider efforts to complete the clean-up of our banking system in Europe for the sake of the real economy in Europe. These efforts will be taken forward in the coming six to 12 months with the asset quality, or balance sheet review, and the stress tests that will precede the launch of the Single Supervisory Mechanism. On this point, it should be recalled that a strong fiscal backstop for financial institutions in the eurozone is already there today. We have a combination of national fiscal backstops and we have the European Stability Mechanism, which has already been effectively used for this purpose in Spain.

We must remove the uncertainty that has been hanging over the banking system in Europe for too long, to reinforce confidence and get credit flowing to where it is needed for the sake of sustainable growth and job creation.

Affordable credit is needed, first and foremost, by Europe’s SMEs, especially those in southern Europe. This brings me to my second point. The Commission has been working intensively with the European Investment Bank to find ways and means to address the financing trap in which too many of Europe’s small businesses find themselves today, and which is holding back investment and job creation. We have prepared a joint report for the European Council of next week setting out concrete options for restoring normal lending to the real economy, and creating an incentive for private sector lending to SMEs. We will make the report pubic tomorrow after the ECOFIN discussions. This initiative has the potential to leverage up to €100 billion in funding for SMEs, which will depend on a number of factors, not least the option selected, the scale of participation by Member States and the response of the markets. I can only call for a very high level of ambition by the EU Member States in order to support this very important SME funding and lending initiative.

Third and finally, tomorrow morning I expect another important step will be taken in support of Ireland and Portugal with the formal adoption of the decision to extend the maturities of these two countries’ EFSM and EFSF loans by a further seven years on average. This extension will make a real difference by further enhancing both countries’ prospects for a sustainable return to market financing as they exit their programmes this autumn, in the case of Ireland, and next spring in the case of Portugal.

I want to underline that a successful exit from EU-IMF programme of economic reform and adjustment will benefit not only Ireland and Portugal, but the entire euro area. In the coming review missions, we will take forward the discussions on how best to further support this transition, provided of course that both countries continue with steadfast and determined implementation of the agreed reform programmes.

Press release

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