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Eurogroup Takes Stock Of Eurozone Crisis

by Ulrika Lomas,, Brussels

27 June 2012

Luxembourg’s Prime Minister and Eurogroup President Jean-Claude Juncker and the country’s Finance Minister Luc Frieden have recently attended the latest Eurogroup meeting in Luxembourg, with the talks focussing on the budgetary and financial situation in the eurozone and in debt-ridden southern eurozone member states.

Following the meeting, Eurogroup President Juncker explained that ministers were in “broad agreement” with the findings of the International Monetary Fund’s (IMF) annual report on the budgetary and financial situation in the eurozone, notably as regards the attention that must be given to strengthening the perspectives of long-term growth and the priority that must be attached to the implementation of structural reforms.

Alluding to the situation in Greece, following the formation of the new government, the Eurogroup took note of "the determination of the new Greek Prime Minister and coalition government to maintain the euro and to honour Greece’s commitment to the European Union and to the eurozone".

The new government in Greece is expected to invite the troika (the European Commission, the European Central Bank (ECB), and the IMF) to Athens in the coming days to take stock of the situation.

On the basis of this work, a full troika mission is to reach a consensus in Athens on the conditionality to be reflected in an updated Memorandum of Understanding (MoU), including any fiscal measures to be implemented before any future disbursements of international financial aid are made.

In the meantime, the European Financial Stability Fund (EFSF) is to settle the EUR1bn (USD1.25bn) outstanding from the first tranche of the second international assistance programme to Greece before the end of June. Part of this sum will be used by Greece to honour its commitments to the level of capital to be paid into the European Stability Mechanism (ESM).

Updating the Eurogroup on the findings of independent audits on the capital needs of the Spanish banking sector, Spain’s Economy Minister Luis de Guindos said that between EUR51bn and EUR62bn is needed.

Urging Spain to continue to rapidly implement and clearly communicate its “ambitious strategy”, Juncker explained that following receipt of a formal demand for financial assistance by Spain, the European Commission, together with the ECB and European Banking Authority (EBA) will negotiate with the Spanish authorities on the political conditions for the financial sector, including restructuring plans.

The Eurogroup has decided that financial assistance will initially be provided by the EFSF before being subsequently provided by the ESM, as soon as the permanent euro rescue mechanism is operational.

Following examination of the budgetary and financial situation in Cyprus, Portugal and Ireland, Juncker welcomed the implementation of the Portuguese assistance programme, which is still on track and due to meet the objectives for this year, and welcomed measures taken by the Irish government to strengthen the budgetary framework, as well as the results of the recent referendum on the stability treaty. Ireland has made impressive progress towards restructuring and strengthening its banking sector, the Eurogroup said.

Concluding his remarks, Juncker emphasized that the implementation of the assistance programmes for Ireland and Portugal clearly show that Europe is heading in the right direction, thanks to the efforts of both the people and governments.

TAGS: tax | economics | European Commission | Ireland | Portugal | fiscal policy | banking | budget | Luxembourg | Cyprus | Greece | Spain | Europe

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