5 Financial assistance for non-eurozone
Member States
| (a)
(34077)
12201/12
COM(12) 336
(b)
(34657)
5477/13
—
|
Draft Regulation establishing a facility for providing financial assistance for Member States whose currency is not the euro
ECB Opinion on a draft Council Regulation establishing a facility for providing financial assistance for Member States whose currency is not the euro (CON/2013/2)
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| Legal base | (a) Article 352 TFEU; consent; unanimity
(b) ¯
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 3 October 2013
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| Previous Committee Reports | (a) HC 86-xi (2012-13), chapter 15 (5 September 2012) and HC 86-xxxviii (2012-13), chapter 7 (17 April 2013)
(b) HC 86-xxxv (2012-13), chapter 13 (13 March 2013) and HC 86-xxxviii (2012-13), chapter 7 (17 April 2013)
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| Discussion in Council | Not known
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared; further information requested
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Background
5.1 Council Regulation (EC) 332/2002 established a medium
term financial assistance facility for Member States whose currency
is not the euro, known as the EU balance of payments facility.
Decisions to grant such financial assistance, by way of conditional
loans, are made by the Council and the total of loans outstanding
may not exceed €50 billion (£41.8 billion).
5.2 In June 2012 the Commission presented this
draft Regulation, document (a), seeking to develop the facility,
primarily in four ways:
- introducing two new instruments
¯
enhanced conditions credit lines (ECCL) and precautionary conditioned
credit lines (PCCL) to the facility, which can currently provide
a "loan or appropriate financing facility";
- specifying the form of monitoring to apply throughout
a programme and potential suspension of programme and other EU
funds resulting from non-compliance with programme conditionality
¯
this includes eliminating duplicate reporting requirements under
the European Semester and for countries under the Excessive Deficit
and the Macro-economic Imbalances Procedures;
- increasing the involvement of relevant institutions
(European Parliament, European Central Bank (ECB), European Supervisory
Authorities (ESAs)) in the agreement, surveillance and progress
of programmes; and
- simplifying and codifying existing activation
procedures, not provided for in the current Regulation.
5.3 The total amount available would remain unchanged,
with decision making remaining with the Council.
5.4 In this Opinion, document (b), the ECB shows
itself broadly supportive of the draft Regulation and does not
highlight any areas of real concern.
5.5 When, in September 2012, we considered the
draft Regulation, although acknowledging the Government's support
for the intentions of the proposal, we noted that it was considering
the implications for the UK. Most importantly, we assumed that
the Government was considering the implication of the use of Article
352 TFEU for the provisions of Section 8 of the European Union
Act 2011. So before considering the matter further we asked to
hear about the outcome of those considerations.
5.6 When, last March, we considered the ECB Opinion
we noted that:
- the Government had not commented
directly on the Opinion; and
- it had told us that there was currently no agreed
timetable for the draft Regulation and that the Irish Presidency
work programme did not include any reference to it.
5.7 We said that we assumed that the response
to our earlier requests in relation to the draft Regulation would
take into account any relevant aspects of the ECB Opinion.
5.8 Last April we heard that:
- the timetable had still not
been agreed and there was no indication that the dossier was to
be taken forward in the near future;
- there was also as yet, no clarity on the read
across to the Banking Union proposals that would influence the
draft Regulation;
- we would have an assessment of the proposal and
the Government's position on it, taking into account relevant
aspects of the ECB Opinion, when the issue was to be taken forward;
and
- given the legal base of Article 352 TFEU, the
proposal, as and when it proceeds, would require not only unanimous
support from the Member States in the Council but also an Act
of Parliament.
5.9 We, while noting this latest information,
looked forward to having in due course an assessment of the draft
Regulation and the Government's position on it, taking into account
relevant aspects of the ECB Opinion. Meanwhile the documents remained
under scrutiny.[19]
The Minister's letter
5.10 The then Financial Secretary to the Treasury
(Greg Clark) tells us that the Lithuanian Presidency has indicated
that it intends to progress the draft Regulation during its Presidency,
with the aim of reaching a Council General Approach by the end
of the year.
5.11 The Minister therefore now gives us details
of the Government's position on this proposal. First, recalling
that the draft Regulation would introduce the possibility for
financial assistance to be available in the form of precautionary
credit lines, a PCCL or an ECCL, similar to the precautionary
instruments already available from the IMF, the Minister says
that:
- these precautionary programmes
would allow Member States meeting a set of pre-qualification eligibility
criteria to access a credit line with lighter conditionality than
that of a full macroeconomic adjustment programme;
- precautionary programmes can provide a safety
net to help countries, with sound economic fundamentals but moderate
vulnerability, to cope with adverse shocks in order to prevent
a crisis from occurring or deepening;
- their availability would complement the crisis
resolution function of traditional programme types with more effective
tools for crisis prevention;
- precautionary programmes also avoid the stigma
sometimes associated with more traditional programme types;
- countries would be encouraged to make approaches
for assistance in a more timely fashion, reducing the risk of
contagion in order to help prevent a deeper, more damaging, crisis
developing;
- the Government has welcomed the reforms to the
IMF's precautionary credit lines in recent years, as the IMF's
lending frameworks need to be flexible enough to deal with individual
country problems and systemic shocks, while providing the right
incentives for countries to adopt sound policies in the good times;
and
- the proposed introduction of the PCCL and ECCL
would allow the EU to provide precautionary assistance alongside
the IMF.
5.12 The Minister says secondly that:
- the proposal as currently drafted
extends the participation of the ECB beyond what has been the
practice under the existing Regulation;
- this role is not justified in the case of those
Member States who do not intend to adopt the euro and have no
obligation to do so — in negotiations the Government will
seek for it to be removed; and
- the ECB itself in its Opinion argued that it
should have less involvement than envisaged in the draft Regulation
— in addition, it is important that arrangements for the
monitoring of any financial sector conditionality included in
a programme, such as stress tests or assessment of supervisory
capacity, are consistent across Banking Union Member States and
those Member States that are not part of the Banking Union.
5.13 Next the Minister says, with respect to
the roles of other institutions, that:
- it is the established practice
for EU balance of payments assistance to be provided alongside
an IMF programme and for the Commission and IMF to cooperate on
programme design and monitoring (with the involvement of the ECB
for Denmark, Latvia and Lithuania); and
- having considered the role foreseen for the ESAs
and the European Systemic Risk Board, the Government believes
they have useful expertise in the areas identified by the draft
Regulation and that the proposal is consistent with the existing
remit of those bodies.
5.14 The Minister also comments that it is important
that throughout the negotiations the role established for the
Council in the existing Regulation is preserved.
5.15 Finally the Minister reminds us that the
draft Regulation is not only subject to unanimity, but, being
based on Article 352 TFEU, would require, for the UK, an Act of
Parliament.
Conclusion
5.16 We are grateful to the Minister for this
explanation of the Government's view of the substance of the draft
Regulation, on which we have no further questions to ask. However,
we should be grateful for an indication soon, given the Presidency's
intention to seek a General Approach before the end of the year,
of the Government's timetable for the Bill which will need to
be enacted before the Government can acquiesce in adoption of
the draft Regulation.
5.17 Meanwhile both documents remain under
scrutiny.
19 See headnote. Back
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