European Union

On March 2016, Cyprus became the fourth out of the five Eurozone Member States under European Union (EU) – International Monetary Fund (IMF) financial assistance to end its program – a so called ‘exit’ (IMF on the 7th). Despite appearances and terminology, however, this is actually not a whole-out, true program exit. What does it really mean to end an EU-IMF program, and is it really an ‘exit’?

Cyprus requested financial assistance on 25th of June 2012.  The request came amid growing problems within the Cypriot banking sector, primarily due to its exposure to Greek debt and Private Sector Involvement (PSI) Greek bond ‘haircut’ process. However, the program was entered into almost a year after (29th of April 2013), on account of differences that arose during the negotiations between the Troika and the Cypriot government. Because of the prolonged negotiating period and the consequent increasing flight of capital from Cypriot banks, a bank holiday was imposed for almost two weeks and ensuing capital controls continued for two years until April 2015. Cyprus borrowed a total of up to €10 bln from the EU-IMF financial assistance: €9 bln from ESM and €1 bln from IMF (equal to 563 per cent of Cyprus’ IMF quota).

What of the process of EU-IMF financial assistance? The financial assistance program consists of two parts: (1) the financial assistance or loan agreement, and (2) the policy adjustment that this assistance is conditional upon, outlined in the now infamous Memorandums of Understanding (MoUs). This policy conditionality is monitored by the so-called Troika: The European Commission (EC), the European Central Bank (ECB) and the IMF. The MoUs, as well as the intrusive monitoring capacity that the Troika has in the Member States under this policy conditionality framework that cover an extensive amount of policies that are key to a State (e.g. budget or taxation), have raised concerns in terms of the democratic process. The end of the program is often portrayed as the long awaited remedy and redemption of democratic process. But is this really the case?

The process of ending a financial assistance program is similar for the EU and the IMF. For the IMF, after the program concludes, and provided that the State concerned owes more than the amount of the assistance equivalent to 100 per cent of its IMF quota (or should it be deemed necessary by the IMF regardless of the amount owed), the process of Post-Program Monitoring (PPM) is initiated. The process was introduced in 2000 and is provisioned under the IMF’s operating principles. PPM aims at ensuring that the State concerned returns the amount owed to the IMF regularly and on time, by monitoring policies and circumstances of that State in order to identify and address risks that could jeopardize its progress to external viability and thus impair repayment of the IMF.  PPM is conducted normally twice a year.

For the EU, there has been a similar process instituted, termed Post-Program Surveillance (PPS), under Article 14 of Regulation 472/2013. PPS applies as long as the Eurozone Member State concerned has repaid less than 75% of the financial assistance under the ESM (or the previous EFSM and EFSF SA). Under PPS, the EC and ECB conduct regular review missions to the State concerned to assess its economic situation and, where applicable, report on corrective measures, which the Council can then request be adopted by that State. It is also worth noting that the voting procedure in the Council is reverse qualified majority (RQMV), i.e. the Commission’s report is deemed adopted unless a blocking majority is formed, making it easier to adopt the report and harder to reject it.

In essence, then, the ending of the program only refers to the ability of the State concerned to procure capital through the markets on its own. The policy monitoring and conditionality aspects remain very much in place for a substantial amount of time after financial assistance has ended, as does the Troika monitoring and supervision.

As such, it is clear that Cyprus is a long way from actually exiting its EU-IMF program, as are the rest of the Eurozone Member States that received assistance. While Cyprus is able to procure financial resources on its own, policy conditionality and monitoring is still in place, and will be for a substantial amount of time. The EU’s PPS will last at least until 2029, i.e. 13 years from now, while the IMF’s PPM will last until Cyprus has repaid more than €820 mln to the IMF.

The democratic repercussions of this in the political realm are considerable. Through the EU-IMF financial assistance process, Cyprus will have been under close policy monitoring and conditionality effectively for close to 20 years! And this is considering Cyprus’ limited financial assistance; consider, for example, the rest of the Eurozone Member States which have received considerably more assistance (e.g. Greece through the EU).

The post When does a Eurozone Member State actually exit its EU-IMF bailout? appeared first on Ideas on Europe.

Britain: 2016

Should an extraterrestrial land on Earth tomorrow and decide to base his decision on where to live solely on economic forecasts provided by the European Commission, there’s a fair chance they’d pick the UK.

In country-specific recommendations published yesterday for almost all EU countries, Britain comes out looking pretty good, with a “dynamic” economy, “strong” household balance sheets and a banking sector whose resilience “continues to improve.” Even the risks to the economic outlook are presented as being contained, or mitigated by the government’s “wide-ranging” reform agenda.

All well and good. The only perplexing thing is, how does this fit with the altogether less peppy assessment that the EU Commission made this time last year? What could be happening to change their view?

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Donald TUSK, President of the European Council, visits Denmark and Greenland on 17 and 18 May 2016.

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Welcome to Wednesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Jean-Claude Juncker promised to lead a political European Commission and boy did he deliver. Compared to some politburo-like lifeless debates of the past, his college of commissioners have made a fair few touch-and-go decisions and late-turns (one mini-proposal on visas this month was commissioned and written within 12 hours of the meeting).

Today’s college clash over EU budget rules could be the most contentious yet. The issue is whether to start a process to fine Spain and Portugal for breaching their remedial deficit targets — a sanction never used since the creation of the single currency. What is at stake though is the Commission’s credibility as guardian of the EU’s fiscal regime. How far can it bend the rules?

There is little dispute over the economics. The vast majority of commissioners agree both countries took insufficient action to fix excessive deficits, a judgement that triggers a sanctions proposal. The question is when to announce it, and whether to signal that the fines, once set, may be tiny or indeed zero.

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In a hurry? Twitter is the fastest way to get updates about decisions taken by the European Parliament. With its 140 character messages, the social network has become the platform of choice for politicians, journalists and other news junkies. But how do you find the best account to follow for you among the nearly 100 official Twitter accounts run by the Parliament? Our interactive and newly updated Twitter map shows the way.

Source : © European Union, 2016 - EP

Welcome to Tuesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Europe’s leaders have squabbled over nearly every policy aspect of the refugee crisis, apart from one: deportation.

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Welcome to Monday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

By Aleksandra Wisniewska

In March, Europe’s leaders gambled their political futures, diplomatic credibility and the lives of hundreds of thousands of migrants on a deal with Turkey.

After two months of raking over the terms of the deal, a simple question can be asked: has it worked on the ground? These four charts demonstrate the good, the bad and the ugly of the situation on the frontline of Europe’s refugee crisis.

The refugee crisis, at least when it comes to the Aegean, shows signs of abating. Arrivals to Greek islands dropped significantly from an average of 2,000 per day to under 100.

This does not mean Europe’s migration crisis has gone away.

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