March 22, 2018 / 11:01 PM / a year ago

Euro zone leaders give new push to reforms of single currency area

BRUSSELS (Reuters) - Euro zone leaders gave fresh impetus on Friday to reforms to make the bloc more resilient to economic crises, with renewed pledges to complete a banking union and develop a bailout fund after months of delay in the absence of a German government.

FILE PHOTO - Mario Centeno holds a news conference at the European Council headquarters in Brussels, Belgium, December 4, 2017. REUTERS/Yves Herman

Leaders of the 19 countries sharing the single currency did not take any decisions at what the chairman of their finance ministers, Mario Centeno, called a “pit stop” summit, but promised to come up with concrete solutions by June.

“We are experiencing the most favorable situation since the introduction of the euro, which makes this a very good time to reflect strategically on our long-term ambitions,” Donald Tusk, chairman of the European Council, told a news conference.

After the formation of a new government in Berlin last week, France and Germany will take the lead on shaping the changes, German Chancellor Angela Merkel told a joint news conference with French President Emmanuel Macron after the summit.

“It is totally clear that we need progress, very rapid progress, on the banking union in order to clear the path,” Merkel said, adding the euro zone also needed a capital markets union and changes “in the architecture” of the currency area.

“Germany and France began this work last week. The two of us will meet in April and we will have a meeting with ministers in May and then in June come with a common position,” she said.

She said Paris and Berlin already had ideas on the transformation of the ESM bailout fund into a European Monetary Fund and its role in sovereign debt restructuring if a government is forced to ask for help.


Some countries, including Germany, want restructuring to be automatic on asking for a bailout, while others want discretion.

“I think we are on a good path” Merkel said.

Governments also remain divided over how and when to introduce the last element of their banking union project — a pan-euro zone deposit guarantee scheme to prevent future bank runs.

To launch the scheme, many euro zone countries insist that banks first have to reduce the risks they take in lending to private and government borrowers. But there is no agreement yet on how to measure if risks have fallen sufficiently.

The leaders also discussed a euro zone fiscal capacity — a pool of money just for the euro area — an idea that Macron supports but Merkel is cool about.

“Many of the themes we discussed, like the fiscal capacity in the euro area, are controversial, but I see avenues to be explored,” said Tusk, who chairs EU summits.

“In June we will come back to take concrete decisions and provide guidance on the way forward.”

Reporting By Jan Strupczewski and Noah Barkin; Additional reporting by Richard Lough; Editing by Gareth Jones

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