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Euro Area/debt crisis

Published on December 12, 2011
Press conference given by Nicolas Sarkozy, President of the Republic (excerpts)

Brussels, December 9, 2011

THE PRESIDENT – I’ll make a brief statement before answering your questions.

Firstly, we’ve just adopted the entire content of the Franco-German letter. All the measures set out in the Franco-German letter regarding the strengthening of the Euro Area will be in the conclusions of our meeting.

Secondly, we had an extremely thorough and tough debate to see what legal form the reforms we adopted would take. As you know, we would have preferred a reform of the treaties among all 27 [EU member states]. That wasn’t possible, given our British friends’ position. So it will be an intergovernmental treaty among the 17 [Euro Area member states], open to all those who would like to join us. As I speak, there are two countries that have clearly said they will stay outside – Hungary and the United Kingdom – and two countries that must consult their parliaments or coalitions: the Czechs and the Swedes. As for the others, they expressed the wish to join the intergovernmental treaty.

The decisions we took early in the morning enable us to move forward, strengthen the euro – we hope – and see all the Franco-German proposals accepted and the legal problem that was being debated resolved: namely, what form the Euro Area’s reform should take; so it’ll be an intergovernmental agreement.

Some very important decisions were taken – for example, ruling out any use of PSI [Private Sector Involvement], i.e. a restructuring of private debt. Each European country has now pledged – as is quite natural – to repay its debt. (…)

Q. – What’s the timetable from now on?

THE PRESIDENT – We agreed, as Mrs Merkel and I had wished, that the text of the intergovernmental agreement will have to be drawn up by March.

Q. – And is it a matter of the states – particularly in the Euro Area – lending money to the IMF so that it, in turn, can help the weakest Euro Area countries?

THE PRESIDENT – Within eight days, we’ve decided to study the possibility of a €200 billion boost [to the IMF]. (…)

Q. – Did you reach an agreement on the status of the ESM [European Stability Mechanism]? In other words, will it be backed by the European Central Bank or not?

THE PRESIDENT – We reached another agreement. I can announce to you that the European Central Bank will run the EFSF [European Financial Stability Facility] and the ESM. There was a proposal by Mr Draghi to put the ECB’s powers at the service of the European Facility; we thought it was a very good idea. So the Facility’s operator will be the ECB, and I’d like to say that this is extremely satisfying for us and a further factor that will strengthen confidence in the Facility.

Q. – What was the problem with our British friends? And about this agreement you’ve just announced on the ECB, who will run the Facility? What does this mean? That there will be more money in the Facility?

THE PRESIDENT – No, that’s not what I said at all. Mr Draghi proposed to put the ECB’s powers at the service of the running and functioning of the European Facility. So it’s the ECB that will run the European Facility. That doesn’t mean a decision was taken by the ECB to increase the Facility’s funding. I’ll stick to the so-called Strasbourg jurisprudence: I won’t comment on what the ECB must or mustn’t do.

Regarding the disagreement with our British friends, it’s very simple: in order to accept a reform of the treaties among all 27, David Cameron asked for what we all regarded as unacceptable: a protocol in the treaty allowing the UK to be exempted from a number of regulations on financial services – which we couldn’t agree to, because we believe, on the contrary, that some of the world’s problems come from the deregulation of financial services and the need for European regulation. If we’d agreed to an opt-out for the UK – I’m not saying it was Mr Cameron’s position – it would have meant undermining some of the work that’s been done to ensure the very necessary regulation of finance.

Q. – Must the intergovernmental agreement be ratified by all the parliaments, including all 27, or the 17?

THE PRESIDENT – We agreed last night about the basic points of the proposals to strengthen the euro: PSI, governance, automatic sanctions, the running of the Facility by the ECB. And we chose the legal route: that of an intergovernmental agreement, known as 17 plus: that is, the 17 European [Euro Area] countries plus those who’d like to join us. (…)

Q. – Now that it’s not a treaty among all 27, what will the role of the different European institutions be: the Commission, the European Court of Justice?

THE PRESIDENT – The Council’s legal unit was very clear about that: if it’s not a question of changing the institutions’ powers but of doing more with them for certain members of Europe, that poses no problem. Take the European Court of Justice. As you know, we didn’t want it to be able to assess the validity of a budget, but we asked it to assess the golden rules’ compliance with the treaty. That’s exactly what is provided for in its powers. So it changes nothing.

On the Commission and automatic sanctions, it’s a political agreement by a number of states to say: “we’ll apply the strictest rules, even before the adoption and ratification of an intergovernmental agreement”. But the Commission’s role is indeed of guardian and possibly of [imposing] sanctions. We’re not changing the Commission’s role, we’re simply saying: “out of political determination, even before the treaty is adopted, we pledge to respect these rules and to ask the Commission to apply these rules”. So according to the Council’s own legal unit, this creates no difficulties. I think each of you, being well aware of how the European institutions work, knows this. Now it would have been quite another thing if we’d changed the institutions’ powers. But that’s not the case. (…)

Q. – Can you tell us more about Mario Draghi’s proposal about the role of the European Central Bank? Will this intergovernmental treaty mean no country will be obliged to hold a referendum?

THE PRESIDENT – First of all, on the referendum, those decisions are up to each country. The intergovernmental agreement doesn’t lead to a convention and doesn’t require a referendum. I don’t see how one could be opposed to anyone wishing to choose that procedure. What the ECB decided is very important, and I’m certain that in the coming days – as always with a bit of a delay – a number of observers will understand what is happening.

So in addition to the second consecutive cut in interest rates, the ECB – and it’s the first time in its history, to my knowledge – has just decided to lend to banks over a period of three years – for the first time ever – with no limits, at an extremely low rate, because I think the rate is 1%. Today, the Italian state borrows at between 6% and 7%. You don’t need to be a great expert to understand that tomorrow, thanks to the ECB’s decision, the Italian state will be able to ask Italian banks to finance some of its debt at rates that are unquestionably lower than today’s market rates, because today’s market rates fluctuate between 6% and 7%. I’m taking Italy, but I could take Spain. I wonder if everyone has properly understood the significance of the decision taken by the ECB: it’s not a small decision, it’s an extremely important decision. (…)

Q. – Will the ESM enjoy a banking licence?

THE PRESIDENT – No, if you mean “is it a bank in the strict sense?” Were you trying to ask me a trick question? The answer is no. (…)

Q. – You’ve talked about the new architecture you’re proposing; you haven’t talked about what was also an important point in your joint letter with the Chancellor: economic convergence – for example, the financial transaction tax.

THE PRESIDENT – On the financial transaction tax, we made no reference to it, because in any case the Commission’s text will arrive on the desk of the Parliament and the European Council in January.

(…) The Commission has made a proposal; it’s coming up for discussion.

Q. – (Inaudible)

THE PRESIDENT – Why did we talk again in the letter about the financial transaction tax? The financial transaction tax is a proposal France and Germany are very keen on, which was the subject of a proposal that will be discussed by the member states and the Parliament in January; so there’s no problem.

On harmonization, on the other hand, it’s set out in the text that will be distributed to you tomorrow; there’s a clear mention of a common economic policy in favour of growth, with harmonization, and the meetings we ask for with Mrs Merkel every month will of course be on the theme of competitiveness each time, and therefore harmonization. The response to the euro crisis isn’t simply budgetary discipline: it’s budgetary discipline but it’s also growth, competitiveness and convergence. (…)./.

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