- Ireland, Portugal post-lending programme surveillance shows both on track
- Ireland Central Bank Governor Philip Lane nominated to ECB executive board
- First exchange of views on EMU following December summit
Stockholm (Ekonamik) – The Eurogroup, the informal body where ministers of the eurozone member states discuss matters in terms of shared responsibilities in relation to the euro, held its second meeting of 2019 on February 11.
The Eurogroup ensures close coordination of economic policy among member states and promotes conditions for stronger economic growth; it is also responsible for preparing Euro Summit meetings. Besides finance ministers of member states, meetings are attended by the Commissioner for economic and financial affairs, taxation and customs and the president of the European Central Bank.
The group discussed the Winter 2018 Interim Economic Forecast, the nomination of a new member to the European Central Bank executive board, post-programme surveillance missions to Ireland and Portugal, and held an exchange of views on the deepening of the Economic and Monetary Union.
Biannual post-programme surveillance (PPS) missions, which begin automatically after the end of financial assistance programmes to individual countries, continue until at least 75% of loans received have been repaid. The group discussed the results of the missions undertaken to Ireland and Portugal in the fall of 2018.
The PPS for Ireland found that private consumption and construction investment are expected to sustain domestic growth momentum in the short term, but risks remain. The fiscal position is close to balance, with vulnerabilities also remaining. Non-performing loans (NPLs) have been declining although long-term arrears remain relatively high, while the comprehensive macroprudential framework primarily aims to promote the resilience of banks in a forward-looking manner. Despite accelerating supply, the housing shortage in Ireland persists and affordability indicators remain above their long-term average. The risks for Ireland’s capacity to service the European Financial Stability Mechanism (EFSM) and the European Financial Stability Facility (EFSF) debt remain low.
The PPS for Portugal found that the short-term economic and financial situation remains largely favourable, despite the increase of external risks due to the uncertain global environment. Portugal’s repayment capacity remains strong, as economic growth continued in 2018 (albeit more moderately than in 2017), but a prudent fiscal policy remains essential to strengthening the sustainability of public finances. Portuguese banks have steadily reduced their stock of non-performing loans while keeping their capital broadly stable. In short, sovereign financing and Portugal’s capacity to repay remain sound.
In addition, Ireland Central Bank governor Philip Lane received the support of the Eurogroup to replace Peter Praet as a new member of the ECB’s executive board for a non-renewable 8-year term starting June 1st 2019. The support acts as a recommendation to the European Council, which will then consult both the European Parliament and the Governing Council of the ECB, which is expected to adopt its final decision at its meeting of March 22-23.
Ministers also held a first exchange of views on the deepening of the Economic and Monetary Union (EMU) and a “way forward” for convergence and competitiveness in the euro area and European Exchange Rate Mechanism ERM II, following a mandate received by EU leaders at the 14 December Euro summit.
Image: Eurogroup meeting in “Inclusive Format”, February 11 2019. Source: consilium.europa.eu