Cyprus hosts on September 14 and 15 the Euro area’s Finance Ministers meeting (Eurogroup) and the Informal Economic and Financial Affairs Council (ECOFIN) organized in Nicosia under the Cypriot Presidency of the Council of the EU.
The two meetings take place at the backdrop of the European Central Bank’s decision to launch the Outright Monetary Transactions progamme allowing the unlimited purchase of sovereign bonds in a bid to ease the pressure on states facing high borrowing costs, the German Constitutional Court decision to clear the implementation of the European Stability Mechanism, as well as the European Commission’s proposals for a Single Supervisory Mechanism (SSM) for the banks of the euro area.
The two meetings will be attended by the International Monetary Fund’s Managing Director Christine Lagarde and the ECB Chairman Mario Draghi.
The Eurogroup meeting, under Jean Claude Juncker will focus on the situation of the economies of the euro area member states that applied for or received EU financial support, i.e. Greece, Ireland, Portugal, Spain and Cyprus. The discussion on Spain is considered as most crucial, as Spain Prime Minister, Mariano Rajoi has repeatedly overruled an appeal for a fully-fledged EU bailout, noting that Spain considers resorting to the ECB bond purchasing programme (OMT). The Eurozone has already approved a 100-billion rescue package for the Spanish Banks.
Furthermore, Greek Finance Minister Yiannis Stournaras will present an outline of the new austerity package drafted worth of 11.9 billion EUR drafted by the Greek government in the framework of the ongoing negotiations with its creditors (European Commission, European Central Bank and the IMF).
The developments in the banking sector are expected to dominate the two-day informal ECOFIN convened under the Chairman of the Council, Cypriot Minister of Finance Vassos Sharly.
EU Commissioner for Internal Market and Services Michel Barnier will present the EU Commission’s proposals for a Single Supervisory Mechanism (SSM), which confers "strong powers" to the ECB for the supervision of the banks in the Euro area.
The Commission believes that given the risks in the euro area in terms of cross-border spill-over effects in the event of bank crises, “coordination of national banking supervision is no longer an option for the euro area."
The launch of an effective European supervisory mechanism was set as a precondition for the implementation of the 29 June Euro area Summit decision for the possible direct recapitalisation of banks by the European Stability Mechanism (ESM).
