Euro Summit statement

26 October 2011

The ratification by 17 Member States of the euro area of the measures related to the EFSF significantly strengthens the capacity to react to the crisis. Agreement by all three institutions on a legislative package within the EU structures on better economic governance represents a major achievement.

Sustainable public finances and structural reforms for growth

All Member States of the euro area are fully determined to continue their policy of fiscal consolidation and structural reforms. A particular effort will be required of those Member States who are experiencing tensions in sovereign debt markets.

We welcome the important steps taken by Spain to reduce its budget deficit, restructure its banking sector and reform product and labour markets, as well as the adoption of a constitutional balanced budget amendment.

We commend Italy's commitment to achieve a balanced budget by 2013 and a structural budget surplus in 2014, bringing about a reduction in gross government debt to 113 per cent of GDP in 2014, as well as the foreseen introduction of a balanced budget rule in the constitution by mid 2012.

Countries under adjustment programme

We welcome the decision by the Eurogroup on the disbursement of the 6th tranche of the EUIMF support programme for Greece. We look forward to the conclusion of a sustainable and credible new EU-IMF multiannual programme by the end of the year.

The Private Sector Involvement (PSI) has a vital role in establishing the sustainability of the Greek debt. Therefore we welcome the current discussion between Greece and its private investors to find a solution for a deeper PSI. Together with an ambitious reform programme for the Greek economy, the PSI should secure the decline of the Greek debt to GDP ratio with an objective of reaching 120 per cent by 2020. To this end, we invite Greece, private investors and all parties concerned to develop a voluntary bond exchange with a nominal discount of 50 per cent on notional Greek debt held by private investors. The eurozone Member States would contribute to the PSI package up to €30 billion. On that basis, the official sector stands ready to provide additional programme financing of up to €100 billion until 2014, including the required recapitalisation of Greek banks. The new programme should be agreed by the end of 2011 and the exchange of bonds should be implemented at the beginning of 2012. We call on the IMF to continue to contribute to the financing of the new Greek programme.

Stabilisation mechanisms

We agree on two basic options to leverage the resources of the EFSF:

• providing credit enhancement to new debt issued by Member States, thus reducing the funding cost. Purchasing this risk insurance would be offered to private investors as an option when buying bonds in the primary market;
• maximising the funding arrangements of the EFSF with a combination of resources from private and public financial institutions and investors, which can be arranged through Special Purpose Vehicles. This will enlarge the amount of resources available to extend loans, for bank recapitalisation and for buying bonds in the primary and secondary markets.

Economic and fiscal coordination and surveillance

More specifically, building on the legislative package just adopted, the European Semester and the Euro Plus Pact, we commit to implement the following additional measures at the national level:

• a) adoption by each euro area Member State of rules on balanced budget in structural terms translating the Stability and Growth Pact into national legislation, preferably at constitutional level or equivalent, by the end of 2012;
• b) reinforcement of national fiscal frameworks beyond the Directive on requirements for budgetary frameworks of the Member States. In particular, national budgets should be based on independent growth forecasts;
• c) invitation to national parliaments to take into account recommendations adopted at the EU level on the conduct of economic and budgetary policies;
• d) consultation of the Commission and other euro area Member States before the adoption of any major fiscal or economic policy reform plans with potential spillover effects, so as to give the possibility for an assessment of possible impact for the euro area as a whole;
• e) commitment to stick to the recommendations of the Commission and the relevant Commissioner regarding the implementation of the Stability and Growth Pact.

Further integration

The euro is at the core of our European project. We will strengthen the economic union to make it commensurate with the monetary union.

We ask the President of the European Council, in close collaboration with the President of the Commission and the President of the Eurogroup, to identify possible steps to reach this end. The focus will be on further strengthening economic convergence within the euro area, improving fiscal discipline and deepening economic union, including exploring the possibility of limited Treaty changes. An interim report will be presented in December 2011 so as to agree on first orientations. It will include a roadmap on how to proceed in full respect of the prerogatives of the institutions. A report on how to implement the agreed measures will be finalised by March 2012.

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