Meeting of Euro Area heads of State and government
Brussels, March 12, 2011
EURO AREA SUMMIT/DECISIONS
THE PRESIDENT – As you’ve understood, this summit of Euro Area heads of State and government is very important. We’ve established the economic government of Europe, as France has always demanded. This economic government is a meeting of the heads of State and government – that is, of the Seventeen [Euro Area countries]. We’ve adopted the Pact for the Euro; it’s a decisive phase. This pact will strengthen the convergence of our economic policies and the competitiveness of our economies. (…)
The first political decision was that we agreed to increase the effective lending capacity of the mechanism we call the EFSF [European Financial Stability Facility] to €440 billion. As for the permanent mechanism that will succeed it in 2013, we decided to give it a financial capacity of €500 billion. So we very significantly strengthened our intervention capabilities.
The second decision was that we broadened the range of tools we could use. Our two facilities – the ones before 2013 and the one after 2013 – will act mainly through loans, but we decided to allow them to subscribe to bond issues on the primary market. I know this may seem technical for those less familiar with all this, but ultimately, although this little phrase sounds simple it required a huge amount of work. That’s the flexible thing: the chance for this money to be used. (…)
The third major decision was that we decided to align the interest rate for loans from both mechanisms – pre-2013 and post-2013 – with those of the IMF, as a result of which, and bearing in mind the commitments made by Greece and the excellent implementation of her programme, we took the decision to reduce the loans to Greece by 100 basis points and extend the maturity of those loans to seven and a half years. In other words, Greece will therefore pay back over a longer period – it was four and a half years; it will be seven and a half – and she’ll pay back at a cheaper rate, because we decided to reduce the interest rates charged to Greece by 100 basis points.
Regarding Ireland, we decided to discuss the conditions of her loans again on 24 and 25 March, because a new government has come to power and we must of course continue talking to them.
I’d like you to think about the scale of the decisions we’ve taken since May last year. We’ve supported Greece and Ireland, we’ve created a €140 billion facility, we’ve decided on a change of treaty, we’ve decided to create a permanent facility, we’ve adopted a Pact for the Euro and we’ve created an economic government for the Euro Area.
A year and a half ago, it wasn’t a given that we’d achieve all this, but I’m open to any questions you might have.
IRELAND/CORPORATE TAX RATE
Q. – What guarantee is there – or rather, what indication is there – that Ireland’s corporate tax rate will really be increased in the coming months or years? And what was the nature of the discussions with Ireland this evening?
THE PRESIDENT – It’s a subject that’s very sensitive for our Irish friends, and I understand that. We must understand it perfectly, but at the same time all the Euro Area Member States have emphasized that when you have the same currency it’s natural to converge; that convergence can’t affect every area except fiscal convergence; that convergence first of all requires consideration of tax bases, if only to be able to compare them; that nobody’s asking Ireland to have a rate comparable to that of Europe; but that it’s also difficult to ask the other countries to help Ireland and for her to reply that she intends to keep the lowest corporate tax in Europe. So there’s a discussion in progress.
I understand our Irish friends’ problems, but they too must understand the questions this raises among all the other Euro Area Member States. If you look at Greece, they’ve lowered wages, lowered the level of pensions and increased taxes. If you look at Portugal and Spain, they’ve done the same. We’ve all had to make efforts, and Ireland is certainly convinced she’ll have to make them too, one way or another. I understand the difficulties her government is facing. There’s no certainty, but there’s a pact that explicitly envisages convergence, and there’s a very clear demand from all the Euro Area Member States for at least a gesture. (…)
Q. – From certain reports we’ve heard, it appears that the discussions between you and Angela Merkel on the one hand and the Irish on the other were very frank, or even more than that? (…)
THE PRESIDENT – It’s true there are a few countries that are keen to guarantee their unique tax status – I’m thinking of Malta, Cyprus and Slovakia; that’s perfectly true. Moreover, we agree they should keep it, but you’ll notice that those countries aren’t asking the others to participate in the financing of their plans and that the problem for Ireland isn’t a problem of principle at all. It’s that it’s difficult to ask others to contribute to financing a plan and not worry about the revenue side of that plan. That’s what Mrs Merkel and I stressed very politely to the Irish Prime Minister, who also answered us very politely. (…)
WAGES AND PENSIONS/DEBT DEFAULT
Q. – To what extent did you agree on two very sensitive issues: wages and pensions?
THE PRESIDENT – Things are specified in the pact. You’ll see the details of it. There too, there’s a desire to converge, each in the framework of our national negotiations. But on pensions, it’s a demographic answer to a demographic question; and on wages, we reached a compromise with our Belgian friends to develop wages policy along more or less the same lines. France is no longer affected, because as far as I remember only welfare benefits are index-linked; wages aren’t any more but we’ve found a balance. We’ve also changed the name: it’s the Pact for the Euro in favour of the competitiveness and convergence of our economies. That made it possible to end the debate between those in favour of convergence and those in favour of competitiveness. Now it’s the Pact for the Euro. (…)
Q. – Was Ireland specifically asked to raise her corporate tax, and did she refuse?
THE PRESIDENT - Ireland was specifically asked to make a gesture, and as I speak we haven’t yet obtained satisfaction. Renegotiation of the loans has been undertaken and concluded for Greece but not for Ireland.
Q. – Are you still just as firmly committed and determined not to allow a Euro Area State to default? In other words, is the restructuring of a public debt still just as firmly ruled out, with the markets strongly doubting the chances of Greece, in particular, meeting her obligations?
THE PRESIDENT – There’s no question of our allowing a Euro Area State to default. There’s no question of it, we’ve always said so, we’ve always insisted on it, it would mean serious problems for the euro and we don’t want it at any price. There’s no question of it. Furthermore, everything Greece is doing – bravely and efficiently – shows clearly that the problem doesn’t arise. It’s perfectly clear. (…)./.