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Growth – Greece – Eurobonds – Deposit guarantee fund – Growth compact

Published on May 29, 2012
European Union/informal meeting of heads of state and government – Press conference given by M. François Hollande, President of the Republic (excerpts)

Brussels, May 23, 2012


THE PRESIDENT – (…) I was taking part for the first time in a European Council; it was informal in the sense that its only purpose was to prepare for the meeting to be held at the end of June, where – if the work is done to that effect – a growth pact should be prepared that could be an extra dimension to what’s been built to date. I reiterated at the meeting what my idea of growth is. It’s not a question of pitting it against genuine budgetary discipline. Genuine budgetary discipline can enable us to return to growth, and growth can facilitate budgetary consolidation.

I also gave an idea of growth that must be global. There are the structural reforms each of the member countries can carry out to improve their competitiveness. There’s what Europe can do, what it’s already doing to encourage the single market and therefore allow more trade between member countries. But there’s not enough of an incentive for investment, which could enable the European countries to return to higher growth rates. It’s all the more harmful because today European growth for 2012 is zero and even in slight recession for the Euro Area, and the forecasts for 2013 are relatively pessimistic because the growth rate over the EU as a whole is barely 1%. So the challenge is really to put some energy back into the growth engine.

On the proposals, there are some there can already be consensus about – and that in itself isn’t so bad – on so-called project bonds, on the recapitalization of the European Investment Bank [EIB], on the mobilization of structural funds, currently lying dormant, and on the focus of the European budget.

But I suggested we go further still, particularly on the fact that European projects should be more targeted to new technologies, to the energy transition, to industrial projects and particularly through the globalization of the EIB. I also expressed the wish for the idea of Eurobonds to be incorporated, which would be an additional step in integration. Once there’s a determination to share budgetary policies and once there’s a monetary policy conducted by the [European] Central Bank, it’s legitimate for there to be new tools, and Eurobonds can be part of this integration path. I also reaffirmed France’s commitment to the financial transaction tax, not because the tax itself would be a growth factor – it’s rare for a tax to create growth itself – but because the revenue from the financial transaction tax would enable a fund to be allocated that could be useful for investment.

Finally, I stressed the use that could be made of the European Stability Mechanism, which isn’t yet completely established because the ratifications planned for 1 July haven’t occurred, but in any case the European Financial Stability Facility could already play this role, in order for the mechanism to be of use in recapitalizing the banks, in conjunction with the European Central Bank.

So it was an exchange of views. Not all the member countries necessarily share my way of thinking, I must admit, but a number of them were talking along the same lines, and others put forward ideas about the best way of taking account of investment spending in the calculation of the Stability Pact.

What I wanted was for new tools to be proposed: Eurobonds, financial transaction taxes, and the European Stability Mechanism for recapitalizing the banks. Even so, I’m looking at what’s already been consensually proposed, which the President of the European Council summed up in a document. So it was a necessary first stage, but it’s not yet the end of June and there’ll still be some persuading to be done.


On Greece, a text was adopted recalling the determination of the EU member countries – not simply those of the Euro Area – for Greece to remain in the Euro Area while respecting her commitments; and while highlighting the effort the Euro Area has already made to come to Greece’s support, it stated that structural funds would be released to support the Greeks’ growth effort and thus give Greek voters confidence about what may happen after 17 June. (…)


Q. – Did you get the feeling that a majority emerged during these talks, for example on the subject of Eurobonds?

THE PRESIDENT – There wasn’t any such precise way of measuring things. I understood certain countries were totally hostile, others envisaged it over the very long term, and others believed things could be done sooner. But if your question is: “Was I alone in championing Eurobonds?” then no, I wasn’t alone.

Q. – Let me pursue the question: what was Germany’s position, because it’s Germany who counts in this debate, because she’ll have the most to lose, so did Germany express to you her total, absolute and definitive opposition to the creation of Eurobonds? (…)

THE PRESIDENT – (…) It’s not for me to speak on Germany’s behalf. But the sense I got was that Mrs Merkel doesn’t regard Eurobonds as a growth factor but as a distant option for integration. (…) I look at it a different way: Eurobonds aren’t simply the final point at the end of an integration process, they can be an opportunity to pool not a past debt but a future debt, in order to allow states that today borrow at 6% interest rates to gain easier access to the market and also to use Eurobonds for investment projects or projects directly carried out by the EU. This would justify changing the treaties – I accept that. I make a distinction with project bonds, which seem to me now to have now been broadly accepted but which are more securities than new loans, more a public-private partnership than a European initiative taken by the EU.

So in these talks I really see clarification first of all, progress and also ongoing debates.


On Greece, first of all, I haven’t been told of any simulations by this or that group or sub-group of what might cause Greece to leave the Euro Area. I’m not saying there can’t be any work being done on it – there must be some; each country can do its own studies, too. At any rate, as far as France is concerned, I haven’t been told of this kind of simulation work, and France isn’t directly working on this type of scenario. Why not? Because I give priority to keeping Greece in the Euro Area, which was also the position expressed this evening.

What would happen if the new government that emerges from the Greek elections refused the memorandum and didn’t comply with the obligations Greece must agree to today? Without necessarily sharing that viewpoint, I think the Euro Area’s attitude would be to demand strict respect for the commitments. But pending and in the hope of another situation, I argue that – in addition to what the Greeks must implement, namely the memorandum, and in addition to what the Euro Area has already done for Greece – it must be possible to mobilize the structural funds rapidly so that Greece’s growth can be encouraged very soon, so that the Greeks can have confidence in the Euro Area’s solidarity and can tell themselves they have obligations to comply with but also prospects of a return to growth and an improvement in their standard of living. (…)


Q. – What chance do you give the summit at the end of June of achieving a convergence of views between France and Germany, particularly on this issue of Eurobonds?

THE PRESIDENT – For the moment there’s the idea on Germany’s part – to give the most optimistic version – that Eurobonds can be only an end point, whereas we think they should be a starting-point. That’s what the respective positions are. But it’s true there’s a difference, and it was noted by the President of the European Council. It’s nothing new, moreover. I respect Mrs Merkel’s viewpoint when she says Eurobonds aren’t a tool for growth as such. But they’re a tool that may allow growth under certain conditions. So we’ll have this discussion, which will continue. (…)


Q. – At the centre of the crisis is the link between banking risk and sovereign risk, and to tackle this problem discussions are under way at the level of the central banks on the possibility of a European banking union. Mr Monti mentioned in the United States the possibility of creating a European deposit guarantee fund, to prevent contagion in the event of a banking crisis in Spain or Greece; what do you think of that?

THE PRESIDENT – That’s also my position. In other words, Mr Monti and I upheld this proposal at the informal Council. I myself said I want financial supervision mechanisms, deposit guarantees and crisis resolution to be integrated. So that’s a point we’ll come back to. The more you coordinate and centralize, the better the response is on supervision, crisis resolution and above all deposit guarantees. Moreover, I was in agreement with Mr Monti on many points this evening. (…)


Q. – Two questions: firstly, you said your European colleagues agreed on the principle of a growth compact and on the terminology; what’s the legal status of this growth compact? Will it be as binding as the fiscal compact? Secondly, during the presidential campaign you announced your goals for Europe. This was the first time you’d set out your goals to your partners. So are you more pessimistic or more optimistic about those goals? Did you get an idea of whether it’s more or less difficult than you imagined?

THE PRESIDENT – Will everyone be using the word “compact”? Some people might talk about about a growth strategy or a growth approach. At the end of the month we’ll know whether it’s a real compact with a package of measures, the legal nature of which we can’t yet second-guess.

On the difficulty of the exercise, I had foreseen it, actually. The make-up of the European Council is well-known. But what was important – beyond the different political approaches and the countries’ situations, which aren’t the same – [was that] after all, there was the idea on all sides that we must make an effort for growth. Now, let’s be fully aware of the situation. Some people take the word “growth” to mean structural reforms, competition, the Services Directive, the flexibility of the labour market, and trade agreements with geographical regions other than Europe. That’s one vision, and then there’s a vision that consists in focusing not on more public spending – everyone knows the state of the public finances – but on instruments that can enable additional funds to be raised. And that’s where you find the EIB, project bonds and [other] instruments, even if there isn’t consensus on them, as with the financial transaction tax.

There you are – thank you very much for your patience, and I’ll see you in June./.

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