Although a fuller assessment will only be possible once the details of the facilitated access to euro rescue funds have been worked out at the next Eurogroup meeting on 9 July, in our view the following aspects are significant:
• The mandate to the EU Commission to swiftly present proposals for a single banking supervisory mechanism is to be welcomed unreservedly.
• The decision that, following installation of this supervisory regime, banks can be recapitalized directly from the ESM is of considerable significance and is also positive. It severs the negative loop between banking crisis and rising government debt.
• Departing from current rules, loans from the ESM will no longer enjoy seniority over private sector loans. This is necessary to revive private investor willingness to buy government bonds.
• Facilitated access to the rescue funds – with countries in future only having to fulfill their commitments within existing procedures – is fundamentally understandable as it reduces the stigma of applying for assistance. But if the aim is to allow the ESM to buy government bonds directly, as is evidently intended, it is not an efficient instrument. ESM funds would be quickly exhausted, the impact would fizzle out. It would be far more efficient to use the instrument of partial insurance coverage on government bonds, which the ESM has at its disposal.
• Agreement on the EUR 120bn growth pact sends the signal that, alongside budgetary consolidation, boosting growth is also essential to overcome the crisis. However, given the difficulties involved in reallocating unused structural funds, it is uncertain whether the money can be deployed quickly and extensively.
The summit decisions have bought time. But, in the long term, playing for time is not a recipe for success.
Pivotal elements for the future of the euro – fleshing out the banking union, establishment of a fiscal and political union – still have to be worked out. There is no eluding a cogent road map for the future of the euro, complete with a clear timetable.