PURPOSE: to implement enhanced cooperation in the area\nof financial transaction tax (FTT).
\nPROPOSED ACT: Council Directive.
\nROLE OF THE EUROPEAN PARLIAMENT: the Council adopts\nthe act after consulting the European Parliament but\nwithout being obliged to take account of Parliament’s\nopinion.
\nBACKGROUND: the recent global economic and financial\ncrisis had a serious impact on Europe’s economies and public\nfinances. The financial sector has played a major role in causing\nthe economic crisis whilst governments and European citizens have\nborne the cost. There is a strong consensus within Europe and\ninternationally that the financial sector should contribute more\nfairly given the costs of dealing with the crisis and the current\nunder-taxation of the sector. In September 2011 the Commission\ntabled a proposal for a Council Directive\non a common system of financial transaction tax\n(FTT) and amending Directive 2008/7/EC. The legal basis proposed\nwas Article 113 TFEU, which requires unanimity in Council. \nThe European Parliament delivered its favourable opinion on 23 May\n2012.
\nHowever, during the Council meetings of 22 June and 10\nJuly 2012, it was ascertained that essential differences in opinion\npersist between Member States regarding the need to establish a\ncommon system of FTT at EU level and that the principle of\nharmonised tax on financial transactions will not receive\nunanimous support within the Council in the foreseeable\nfuture.
\nNonetheless, 11 Member States expressed a strong\nwillingness to proceed with the FTT (Belgium, Germany, Estonia,\nGreece, Spain, France, Italy, Austria, Portugal, Slovenia and\nSlovakia) and the Council authorised enhanced cooperation\nthrough Council Decision 2013/52/EU\nfollowing the European Parliament's consent given on 12 December\n2012.
\nIMPACT ASSESSMENT: the Commission services carried out\nan impact assessment which accompanies its original proposal. Since\nthe scope and objectives of this proposal are based on the\nCommission’s initial proposal, a new impact assessment\ncovering the same subject area has not been considered appropriate.\nHowever, Member States showed interest in the specific mechanisms\nregarding enhanced cooperation and the Commission has undertaken an\nadditional analysis of these areas.
\nLEGAL BASIS: Article 113 of the Treaty on the\nFunctioning of the European Union and Council Decision 2013/52/EU\nauthorising enhanced cooperation in the area of FTT.
\nCONTENT: the proposed directive aims to implement\nthe enhanced cooperation authorised by Decision 2013/52/EU by\nlaying down provisions for a harmonised financial transaction tax\n(FTT) whereby the participating Member States mentioned above\ncharge FTT in accordance with the terms of the proposal. The draft\ndirective is based on the Commission's original proposal of 2011.\nHowever, some adaptations were made in addition to points for\nclarity:
\nEnhanced cooperation:\nsince FTT jurisdiction is limited to participating Member States,\ntransactions carried out within a participating Member State, which\nwould have been taxed under the original proposal, remain taxable.\nCouncil Directive 2008/7/EC concerning indirect taxes on the\nraising of capital, whose modification had been proposed in the\ninitial proposal, remains unaffected.
\nAnti avoidance of taxation: Member States wished to ensure that the FTT would\nnot be avoided through evasive actions, distortions and transfers\nto other jurisdictions.
\nAccordingly, taxation will follow the \"issuance\nprinciple\" as a last resort, complementing the \"residence\nprinciple \", which is maintained as the main principle. This means\nit will be less advantageous to relocate activities and\nestablishments outside the FTT jurisdictions, since trading in the\nfinancial instruments subject to taxation under the latter\nprinciple and issued in the FTT jurisdictions will be taxable\nanyway.
\nLevel of rates: this\nremains the same as the original proposal:
\n\n· \nnot lower than 0.1% for shares and bonds, units\nof collective investment funds, money market instruments,\nrepurchase agreements and securities lending agreements,\nand
\n\n· \nnot lower than 0.01% for derivative\nproducts.
\nParticipating Member States shall apply the same rate\nto all financial transactions
\nBUDGETARY IMPLICATIONS: preliminary estimates indicate\nthat tax revenues could have been between EUR 30 and 35 billion on\na yearly basis in the whole of participating Member States if the\noriginal proposal for EU27 had been applied to EU11. However, when\ntaking account of the net effects of the adjustments made as\ncompared to the original proposal, notably (i) the issue of\nunits and shares of UCITS and AIF is no longer considered not to be\na primary market transaction, and (ii) the anti-relocation\nprovisions of the residence principle as initially defined have\nbeen strengthened by complementing them with elements of the\nissuance principle, preliminary estimates indicate that the\nrevenues of the tax could be in the order of magnitude of EUR 31\nbillion annually.
\nLastly, the Commission proposal on the system of own\nresources of the European Union states that part\nof receipts generated by the FTT shall constitute an own resource\nfor the EU budget. This would imply that the GNI-based resource\ndrawn from the participating Member States would be reduced\naccordingly.
\nDELEGATED ACTS: the proposal contains provisions\nempowering the Commission to adopt delegated acts in accordance\nwith Article 290 of the Treaty on the Functioning of the European\nUnion.
\nPURPOSE: to implement enhanced cooperation in the area\nof financial transaction tax (FTT).
\nPROPOSED ACT: Council Directive.
\nROLE OF THE EUROPEAN PARLIAMENT: the Council adopts\nthe act after consulting the European Parliament but\nwithout being obliged to take account of Parliament’s\nopinion.
\nBACKGROUND: the recent global economic and financial\ncrisis had a serious impact on Europe’s economies and public\nfinances. The financial sector has played a major role in causing\nthe economic crisis whilst governments and European citizens have\nborne the cost. There is a strong consensus within Europe and\ninternationally that the financial sector should contribute more\nfairly given the costs of dealing with the crisis and the current\nunder-taxation of the sector. In September 2011 the Commission\ntabled a proposal for a Council Directive\non a common system of financial transaction tax\n(FTT) and amending Directive 2008/7/EC. The legal basis proposed\nwas Article 113 TFEU, which requires unanimity in Council. \nThe European Parliament delivered its favourable opinion on 23 May\n2012.
\nHowever, during the Council meetings of 22 June and 10\nJuly 2012, it was ascertained that essential differences in opinion\npersist between Member States regarding the need to establish a\ncommon system of FTT at EU level and that the principle of\nharmonised tax on financial transactions will not receive\nunanimous support within the Council in the foreseeable\nfuture.
\nNonetheless, 11 Member States expressed a strong\nwillingness to proceed with the FTT (Belgium, Germany, Estonia,\nGreece, Spain, France, Italy, Austria, Portugal, Slovenia and\nSlovakia) and the Council authorised enhanced cooperation\nthrough Council Decision 2013/52/EU\nfollowing the European Parliament's consent given on 12 December\n2012.
\nIMPACT ASSESSMENT: the Commission services carried out\nan impact assessment which accompanies its original proposal. Since\nthe scope and objectives of this proposal are based on the\nCommission’s initial proposal, a new impact assessment\ncovering the same subject area has not been considered appropriate.\nHowever, Member States showed interest in the specific mechanisms\nregarding enhanced cooperation and the Commission has undertaken an\nadditional analysis of these areas.
\nLEGAL BASIS: Article 113 of the Treaty on the\nFunctioning of the European Union and Council Decision 2013/52/EU\nauthorising enhanced cooperation in the area of FTT.
\nCONTENT: the proposed directive aims to implement\nthe enhanced cooperation authorised by Decision 2013/52/EU by\nlaying down provisions for a harmonised financial transaction tax\n(FTT) whereby the participating Member States mentioned above\ncharge FTT in accordance with the terms of the proposal. The draft\ndirective is based on the Commission's original proposal of 2011.\nHowever, some adaptations were made in addition to points for\nclarity:
\nEnhanced cooperation:\nsince FTT jurisdiction is limited to participating Member States,\ntransactions carried out within a participating Member State, which\nwould have been taxed under the original proposal, remain taxable.\nCouncil Directive 2008/7/EC concerning indirect taxes on the\nraising of capital, whose modification had been proposed in the\ninitial proposal, remains unaffected.
\nAnti avoidance of taxation: Member States wished to ensure that the FTT would\nnot be avoided through evasive actions, distortions and transfers\nto other jurisdictions.
\nAccordingly, taxation will follow the \"issuance\nprinciple\" as a last resort, complementing the \"residence\nprinciple \", which is maintained as the main principle. This means\nit will be less advantageous to relocate activities and\nestablishments outside the FTT jurisdictions, since trading in the\nfinancial instruments subject to taxation under the latter\nprinciple and issued in the FTT jurisdictions will be taxable\nanyway.
\nLevel of rates: this\nremains the same as the original proposal:
\n\n· \nnot lower than 0.1% for shares and bonds, units\nof collective investment funds, money market instruments,\nrepurchase agreements and securities lending agreements,\nand
\n\n· \nnot lower than 0.01% for derivative\nproducts.
\nParticipating Member States shall apply the same rate\nto all financial transactions
\nBUDGETARY IMPLICATIONS: preliminary estimates indicate\nthat tax revenues could have been between EUR 30 and 35 billion on\na yearly basis in the whole of participating Member States if the\noriginal proposal for EU27 had been applied to EU11. However, when\ntaking account of the net effects of the adjustments made as\ncompared to the original proposal, notably (i) the issue of\nunits and shares of UCITS and AIF is no longer considered not to be\na primary market transaction, and (ii) the anti-relocation\nprovisions of the residence principle as initially defined have\nbeen strengthened by complementing them with elements of the\nissuance principle, preliminary estimates indicate that the\nrevenues of the tax could be in the order of magnitude of EUR 31\nbillion annually.
\nLastly, the Commission proposal on the system of own\nresources of the European Union states that part\nof receipts generated by the FTT shall constitute an own resource\nfor the EU budget. This would imply that the GNI-based resource\ndrawn from the participating Member States would be reduced\naccordingly.
\nDELEGATED ACTS: the proposal contains provisions\nempowering the Commission to adopt delegated acts in accordance\nwith Article 290 of the Treaty on the Functioning of the European\nUnion.
\nThe Committee on Economic and Monetary Affairs adopted\nthe report by Marisa MATIAS (GUE/NGL, PT) on the 2011 Annual Report\nof the European Central Bank.
\nThe report commends the proactive stance of the ECB\nduring 2011 and 2012 both in regard to its monetary policy and its\nactions to stabilise the financial markets, in a context in which\nrisks to eurozone stability increased considerably.
\nMembers consider that the decisions of April and July\nto increase the key ECB interest rates may have contributed, among\nother factors, to increasing the policy-induced risk premia of\nfinancial intermediaries and, therefore, to slowing down credit\ngrowth, weakening further the already anaemic economic recovery\nobserved in early 2011. They welcome the subsequent decision to\nreverse these decisions at the end of 2011.
\nECB initiatives: the\nreport looks at the efforts taken by the ECB to help stabilise\nmarkets, in particular the Securities Markets Programme (SMP),\nthe Longer-term Refinancing Operation (LTRO) and the Outright\nMonetary Transactions (OMT), but points out that a structural\nsolution to the crisis is not yet in sight. However, while the\ntwo three-year LTROs have been effective in avoiding a credit\ncrunch, Members consider that questions remain as to the ability\nof the financial sector to return the loans received by the\nECB.
\nThe report points out that the results, in terms of\ncredit growth, have been unsatisfactory and note that\nthe decision to launch the first three-year LTRO in December 2011\ncoincided with the winding down of the SMP programme, hinting at\nthe existence of a trade-off between the support of financial\ninstitutions and that of sovereign creditors.
\nMembers highlight a number of issues of concern in\nrelation to the situation in 2011:
\nCredit available to\nbusinesses and households: Members\nnote that the credit available to businesses and households is\nstill far below the pre-crisis levels and has slowed down its\ngrowth in 2011. They take note of the measures of the ECB on the\nlowering of collateral requirements and the stance on collateral\nrules for asset-backed securities (ABS), as these are deeply\ncorrelated with loans to households and SMEs.
\nCollateral: Members are\nworried about the significant levels of non-marketable assets and\nasset-backed securities put forward as collateral to the Eurosystem\nin the framework of its refinancing operations and ask the ECB to\nprovide information on which central banks have accepted\nsuch securities, and to disclose detailed information on the\nvaluation methods regarding all assets, including\nimpaired ones. They believe that, on collateral rules, the same\nstandards should apply for sovereign as for regional government\nbonds in those cases where regions have legislative and tax powers,\nas both types of bond have relevant influence on the good\ntransmission of the ECB monetary policy.
\nConditionality: Members\nunderline that institutions which have benefited from extraordinary\ncentral bank liquidity support should be subject to conditionality,\nincluding the commitment by institutions benefiting from such\nsupport to increase the levels of credit by establishing\nloan targets to the real economy, and especially to SMEs\nand to households.
\nThe ECB is asked to explore, in close cooperation with\nMember State governments, competent national supervisory\nauthorities and the Commission, the possibility of implementing a\nframework, such as the MERLIN programme elaborated by the Bank of\nEngland in partnership with the UK treasury, regarding\nconditionalities attached to the access to central bank\nnon-conventional facilities such as targets on loans granted to\nSMEs.
\nThe economic crisis and the ECB: Members call on the ECB to make public the legal\ndecision concerning the OMT programme in order to be able to\nanalyse more deeply its details and implications.
\nThey point out that the ongoing crisis is a matter of\nconcern as it threatens the substantial efforts made by Member\nStates regarding their budgetary consolidation and crisis response\nstrategies. They note that the current severe economic downturn in\nseveral eurozone Member States has negative economic and fiscal\nconsequences, further deteriorating their public debt\nproblems.
\nMembers point out that sovereign bonds and\nfinancial institutions show persistent vulnerabilities and that\nthe negative feedback loop between sovereign bonds and banks\ncan only be broken through fiscal consolidation and banking\nsector capitalisation in an economic growth environment.\nMembers consider that a cause of public accounts\nunsustainability in some countries of the eurozone is the\nongoing economic recession, causing rising unemployment and falling\ntax revenues. They affirm, therefore, that policies to foster\ngrowth and job creation must be a key priority for the\nUnion.
\nThe report encourages ECB President Mario Draghi to\nresume a tradition initiated by his predecessor, who at the\nEurogroup meetings persistently raised the issue of macroeconomic\nimbalances, especially the differentials between productivity\nand wage increases, which led to a marked divergence between\ncompetitiveness levels between the Member States.
\nMembers point out that Parliament has called for an\nincreased budgetary capacity for the EMU, in the framework\nof the EU budget and based on specific own-resources. It\nconsiders that such a budgetary capacity would significantly\nimprove the policy-mix in the EMU.
\nMembers note that the economic situation in some\neconomies is generating severe capital flows that worsen those\neconomies’ funding difficulties and that are unsustainable in\nboth the short and long term. These imbalances can only be dealt\nwith if a comprehensive and far-reaching solution to the eurozone\ncrisis is implemented that is built on an approach combining\nsolidarity and responsibility.
\nBanking union: Members\nconsider it urgent to create the banking union. In their\nview, to overcome the structural deficiencies inherent in the EMU,\nand to effectively curb the pervasive moral hazard, the proposed\nbanking union should draw on the earlier reform of the Union\nfinancial services sector and on the strengthened economic\ngovernance, and new budgetary framework, of the European Semester\nto ensure greater resilience and competitiveness of, and\nincreased confidence in, the Union banking sector, and to\nsecure enhanced capital reserves in order to prevent Member\nStates’ public budgets from having to bear the costs of future\nbank bail-outs.
\nMembers welcome the current impetus aiming at building\na single supervisory system (SSM) which should increase the\ncredibility of the Eurozone banking system. They point out that\nenhanced proposals on banking recovery and a single European\nresolution authority, and on deposit guarantee schemes, are\nnecessary in order to complete the broad set of legal instruments\nrequired for a banking union.
\nThey call on the Commission to put forward proposals\nfor a new European resolution fund and a European deposit\nguarantee scheme that complement the supervisory functions of\nthe ECB.
\nMembers deem that it is of the utmost importance that\neffective safeguards are introduced to avoid that\nconflicting agendas are reflected in the ECB’s monetary\npolicy and its supervisory powers. They stress that any possible\nerosion of the ECB’s authority for monetary policy, as well as\nany erosion of its supervisory powers due to monetary policy\nimperatives, need to be addressed by means of a suitable\nmechanism set up to identify and resolve potential\nconflicts.
\nInstitutional matters: Members regret the lack of transparency of the\nworking method as well as the lack of accountability of and\ndemocratic control over the Troika. They believe that any such\nbody, current and future, involving the ECB and/or the Commission\nshould be accountable both to the European Parliament and to\nnational parliaments at their respective levels. They stress the\nimportance of making the regular monetary dialogue between\nthe ECB and Parliament much more effective. Members stress that\nParliament will fully play its role as legislator in all\nmatters involving a banking supervision.
\nIn this context, Members consider that a Treaty\nrevision, including a revision of the ECB statutes reflecting\nthe ECB’s new tasks, should not be excluded.
\nThe Committee on Economic and Monetary Affairs adopted\nthe report by Marisa MATIAS (GUE/NGL, PT) on the 2011 Annual Report of the European Central\nBank.
\nThe report commends the proactive stance of the ECB\nduring 2011 and 2012 both in regard to its monetary policy and its\nactions to stabilise the financial markets, in a context in which\nrisks to eurozone stability increased considerably.
\nMembers consider that the decisions of April and July\nto increase the key ECB interest rates may have contributed, among\nother factors, to increasing the policy-induced risk premia of\nfinancial intermediaries and, therefore, to slowing down credit\ngrowth, weakening further the already anaemic economic recovery\nobserved in early 2011. They welcome the subsequent decision to\nreverse these decisions at the end of 2011.
\nECB initiatives: the\nreport looks at the efforts taken by the ECB to help stabilise\nmarkets, in particular the Securities Markets Programme (SMP),\nthe Longer-term Refinancing Operation (LTRO) and the Outright\nMonetary Transactions (OMT), but points out that a structural\nsolution to the crisis is not yet in sight. However, while the\ntwo three-year LTROs have been effective in avoiding a credit\ncrunch, Members consider that questions remain as to the ability\nof the financial sector to return the loans received by the\nECB.
\nThe report points out that the results, in terms of\ncredit growth, have been unsatisfactory and note that\nthe decision to launch the first three-year LTRO in December 2011\ncoincided with the winding down of the SMP programme, hinting at\nthe existence of a trade-off between the support of financial\ninstitutions and that of sovereign creditors.
\nMembers highlight a number of issues of concern in\nrelation to the situation in 2011:
\nCredit available to businesses and\nhouseholds: Members note that the\ncredit available to businesses and households is still far below\nthe pre-crisis levels and has slowed down its growth in 2011. They\ntake note of the measures of the ECB on the lowering of collateral\nrequirements and the stance on collateral rules for asset-backed\nsecurities (ABS), as these are deeply correlated with loans to\nhouseholds and SMEs.
\nCollateral: Members are\nworried about the significant levels of non-marketable assets and\nasset-backed securities put forward as collateral to the Eurosystem\nin the framework of its refinancing operations and ask the ECB to\nprovide information on which central banks have accepted\nsuch securities, and to disclose detailed information on the\nvaluation methods regarding all assets, including\nimpaired ones. They believe that, on collateral rules, the same\nstandards should apply for sovereign as for regional government\nbonds in those cases where regions have legislative and tax powers,\nas both types of bond have relevant influence on the good\ntransmission of the ECB monetary policy.
\nConditionality: Members\nunderline that institutions which have benefited from extraordinary\ncentral bank liquidity support should be subject to conditionality,\nincluding the commitment by institutions benefiting from such\nsupport to increase the levels of credit by establishing\nloan targets to the real economy, and especially to SMEs\nand to households.
\nThe ECB is asked to explore, in close cooperation with\nMember State governments, competent national supervisory\nauthorities and the Commission, the possibility of implementing a\nframework, such as the MERLIN programme elaborated by the Bank of\nEngland in partnership with the UK treasury, regarding\nconditionalities attached to the access to central bank\nnon-conventional facilities such as targets on loans granted to\nSMEs.
\nThe economic crisis and the ECB: Members call on the ECB to\nmake public the legal decision concerning the OMT programme in\norder to be able to analyse more deeply its details and\nimplications.
\nThey point out that the ongoing crisis is a matter of\nconcern as it threatens the substantial efforts made by Member\nStates regarding their budgetary consolidation and crisis response\nstrategies. They note that the current severe economic downturn in\nseveral eurozone Member States has negative economic and fiscal\nconsequences, further deteriorating their public debt\nproblems.
\nMembers point out that sovereign bonds and\nfinancial institutions show persistent vulnerabilities and that\nthe negative feedback loop between sovereign bonds and banks\ncan only be broken through fiscal consolidation and banking\nsector capitalisation in an economic growth environment.\nMembers consider that a cause of public accounts\nunsustainability in some countries of the eurozone is the\nongoing economic recession, causing rising unemployment and falling\ntax revenues. They affirm, therefore, that policies to foster\ngrowth and job creation must be a key priority for the\nUnion.
\nThe report encourages ECB President Mario Draghi to\nresume a tradition initiated by his predecessor, who at the\nEurogroup meetings persistently raised the issue of macroeconomic\nimbalances, especially the differentials between productivity\nand wage increases, which led to a marked divergence between\ncompetitiveness levels between the Member States.
\nMembers point out that Parliament has called for an\nincreased budgetary capacity for the EMU, in the framework\nof the EU budget and based on specific own-resources. It\nconsiders that such a budgetary capacity would significantly\nimprove the policy-mix in the EMU.
\nMembers note that the economic situation in some\neconomies is generating severe capital flows that worsen those\neconomies’ funding difficulties and that are unsustainable in\nboth the short and long term. These imbalances can only be dealt\nwith if a comprehensive and far-reaching solution to the eurozone\ncrisis is implemented that is built on an approach combining\nsolidarity and responsibility.
\nBanking union: Members\nconsider it urgent to create the banking union. In their\nview, to overcome the structural deficiencies inherent in the EMU,\nand to effectively curb the pervasive moral hazard, the proposed\nbanking union should draw on the earlier reform of the Union\nfinancial services sector and on the strengthened economic\ngovernance, and new budgetary framework, of the European Semester\nto ensure greater resilience and competitiveness of, and\nincreased confidence in, the Union banking sector, and to\nsecure enhanced capital reserves in order to prevent Member\nStates’ public budgets from having to bear the costs of future\nbank bail-outs.
\nMembers welcome the current impetus aiming at building\na single supervisory system (SSM) which should increase the\ncredibility of the Eurozone banking system. They point out that\nenhanced proposals on banking recovery and a single European\nresolution authority, and on deposit guarantee schemes, are\nnecessary in order to complete the broad set of legal instruments\nrequired for a banking union.
\nThey call on the Commission to put forward proposals\nfor a new European resolution fund and a European deposit\nguarantee scheme that complement the supervisory functions of\nthe ECB.
\nMembers deem that it is of the utmost importance that\neffective safeguards are introduced to avoid that\nconflicting agendas are reflected in the ECB’s monetary\npolicy and its supervisory powers. They stress that any possible\nerosion of the ECB’s authority for monetary policy, as well as\nany erosion of its supervisory powers due to monetary policy\nimperatives, need to be addressed by means of a suitable\nmechanism set up to identify and resolve potential\nconflicts.
\nInstitutional matters: Members regret the lack of transparency of the\nworking method as well as the lack of accountability of and\ndemocratic control over the Troika. They believe that any such\nbody, current and future, involving the ECB and/or the Commission\nshould be accountable both to the European Parliament and to\nnational parliaments at their respective levels. They stress the\nimportance of making the regular monetary dialogue between\nthe ECB and Parliament much more effective. Members stress that\nParliament will fully play its role as legislator in all\nmatters involving a banking supervision.
\nIn this context,\nMembers consider that a Treaty revision, including a\nrevision of the ECB statutes reflecting the ECB’s new tasks,\nshould not be excluded.
\nThe Committee on Economic and Monetary Affairs adopted\nthe report by Marisa MATIAS (GUE/NGL, PT) on the 2011 Annual Report of the European Central\nBank.
\nThe report commends the proactive stance of the ECB\nduring 2011 and 2012 both in regard to its monetary policy and its\nactions to stabilise the financial markets, in a context in which\nrisks to eurozone stability increased considerably.
\nMembers consider that the decisions of April and July\nto increase the key ECB interest rates may have contributed, among\nother factors, to increasing the policy-induced risk premia of\nfinancial intermediaries and, therefore, to slowing down credit\ngrowth, weakening further the already anaemic economic recovery\nobserved in early 2011. They welcome the subsequent decision to\nreverse these decisions at the end of 2011.
\nECB initiatives: the\nreport looks at the efforts taken by the ECB to help stabilise\nmarkets, in particular the Securities Markets Programme (SMP),\nthe Longer-term Refinancing Operation (LTRO) and the Outright\nMonetary Transactions (OMT), but points out that a structural\nsolution to the crisis is not yet in sight. However, while the\ntwo three-year LTROs have been effective in avoiding a credit\ncrunch, Members consider that questions remain as to the ability\nof the financial sector to return the loans received by the\nECB.
\nThe report points out that the results, in terms of\ncredit growth, have been unsatisfactory and note that\nthe decision to launch the first three-year LTRO in December 2011\ncoincided with the winding down of the SMP programme, hinting at\nthe existence of a trade-off between the support of financial\ninstitutions and that of sovereign creditors.
\nMembers highlight a number of issues of concern in\nrelation to the situation in 2011:
\nCredit available to businesses and\nhouseholds: Members note that the\ncredit available to businesses and households is still far below\nthe pre-crisis levels and has slowed down its growth in 2011. They\ntake note of the measures of the ECB on the lowering of collateral\nrequirements and the stance on collateral rules for asset-backed\nsecurities (ABS), as these are deeply correlated with loans to\nhouseholds and SMEs.
\nCollateral: Members are\nworried about the significant levels of non-marketable assets and\nasset-backed securities put forward as collateral to the Eurosystem\nin the framework of its refinancing operations and ask the ECB to\nprovide information on which central banks have accepted\nsuch securities, and to disclose detailed information on the\nvaluation methods regarding all assets, including\nimpaired ones. They believe that, on collateral rules, the same\nstandards should apply for sovereign as for regional government\nbonds in those cases where regions have legislative and tax powers,\nas both types of bond have relevant influence on the good\ntransmission of the ECB monetary policy.
\nConditionality: Members\nunderline that institutions which have benefited from extraordinary\ncentral bank liquidity support should be subject to conditionality,\nincluding the commitment by institutions benefiting from such\nsupport to increase the levels of credit by establishing\nloan targets to the real economy, and especially to SMEs\nand to households.
\nThe ECB is asked to explore, in close cooperation with\nMember State governments, competent national supervisory\nauthorities and the Commission, the possibility of implementing a\nframework, such as the MERLIN programme elaborated by the Bank of\nEngland in partnership with the UK treasury, regarding\nconditionalities attached to the access to central bank\nnon-conventional facilities such as targets on loans granted to\nSMEs.
\nThe economic crisis and the ECB: Members call on the ECB to\nmake public the legal decision concerning the OMT programme in\norder to be able to analyse more deeply its details and\nimplications.
\nThey point out that the ongoing crisis is a matter of\nconcern as it threatens the substantial efforts made by Member\nStates regarding their budgetary consolidation and crisis response\nstrategies. They note that the current severe economic downturn in\nseveral eurozone Member States has negative economic and fiscal\nconsequences, further deteriorating their public debt\nproblems.
\nMembers point out that sovereign bonds and\nfinancial institutions show persistent vulnerabilities and that\nthe negative feedback loop between sovereign bonds and banks\ncan only be broken through fiscal consolidation and banking\nsector capitalisation in an economic growth environment.\nMembers consider that a cause of public accounts\nunsustainability in some countries of the eurozone is the\nongoing economic recession, causing rising unemployment and falling\ntax revenues. They affirm, therefore, that policies to foster\ngrowth and job creation must be a key priority for the\nUnion.
\nThe report encourages ECB President Mario Draghi to\nresume a tradition initiated by his predecessor, who at the\nEurogroup meetings persistently raised the issue of macroeconomic\nimbalances, especially the differentials between productivity\nand wage increases, which led to a marked divergence between\ncompetitiveness levels between the Member States.
\nMembers point out that Parliament has called for an\nincreased budgetary capacity for the EMU, in the framework\nof the EU budget and based on specific own-resources. It\nconsiders that such a budgetary capacity would significantly\nimprove the policy-mix in the EMU.
\nMembers note that the economic situation in some\neconomies is generating severe capital flows that worsen those\neconomies’ funding difficulties and that are unsustainable in\nboth the short and long term. These imbalances can only be dealt\nwith if a comprehensive and far-reaching solution to the eurozone\ncrisis is implemented that is built on an approach combining\nsolidarity and responsibility.
\nBanking union: Members\nconsider it urgent to create the banking union. In their\nview, to overcome the structural deficiencies inherent in the EMU,\nand to effectively curb the pervasive moral hazard, the proposed\nbanking union should draw on the earlier reform of the Union\nfinancial services sector and on the strengthened economic\ngovernance, and new budgetary framework, of the European Semester\nto ensure greater resilience and competitiveness of, and\nincreased confidence in, the Union banking sector, and to\nsecure enhanced capital reserves in order to prevent Member\nStates’ public budgets from having to bear the costs of future\nbank bail-outs.
\nMembers welcome the current impetus aiming at building\na single supervisory system (SSM) which should increase the\ncredibility of the Eurozone banking system. They point out that\nenhanced proposals on banking recovery and a single European\nresolution authority, and on deposit guarantee schemes, are\nnecessary in order to complete the broad set of legal instruments\nrequired for a banking union.
\nThey call on the Commission to put forward proposals\nfor a new European resolution fund and a European deposit\nguarantee scheme that complement the supervisory functions of\nthe ECB.
\nMembers deem that it is of the utmost importance that\neffective safeguards are introduced to avoid that\nconflicting agendas are reflected in the ECB’s monetary\npolicy and its supervisory powers. They stress that any possible\nerosion of the ECB’s authority for monetary policy, as well as\nany erosion of its supervisory powers due to monetary policy\nimperatives, need to be addressed by means of a suitable\nmechanism set up to identify and resolve potential\nconflicts.
\nInstitutional matters: Members regret the lack of transparency of the\nworking method as well as the lack of accountability of and\ndemocratic control over the Troika. They believe that any such\nbody, current and future, involving the ECB and/or the Commission\nshould be accountable both to the European Parliament and to\nnational parliaments at their respective levels. They stress the\nimportance of making the regular monetary dialogue between\nthe ECB and Parliament much more effective. Members stress that\nParliament will fully play its role as legislator in all\nmatters involving a banking supervision.
\nIn this context,\nMembers consider that a Treaty revision, including a\nrevision of the ECB statutes reflecting the ECB’s new tasks,\nshould not be excluded.
\nThe Committee on Economic and Monetary Affairs adopted\nthe report by Marisa MATIAS (GUE/NGL, PT) on the 2011 Annual Report\nof the European Central Bank.
\nThe report commends the proactive stance of the ECB\nduring 2011 and 2012 both in regard to its monetary policy and its\nactions to stabilise the financial markets, in a context in which\nrisks to eurozone stability increased considerably.
\nMembers consider that the decisions of April and July\nto increase the key ECB interest rates may have contributed, among\nother factors, to increasing the policy-induced risk premia of\nfinancial intermediaries and, therefore, to slowing down credit\ngrowth, weakening further the already anaemic economic recovery\nobserved in early 2011. They welcome the subsequent decision to\nreverse these decisions at the end of 2011.
\nECB initiatives: the\nreport looks at the efforts taken by the ECB to help stabilise\nmarkets, in particular the Securities Markets Programme (SMP),\nthe Longer-term Refinancing Operation (LTRO) and the Outright\nMonetary Transactions (OMT), but points out that a structural\nsolution to the crisis is not yet in sight. However, while the\ntwo three-year LTROs have been effective in avoiding a credit\ncrunch, Members consider that questions remain as to the ability\nof the financial sector to return the loans received by the\nECB.
\nThe report points out that the results, in terms of\ncredit growth, have been unsatisfactory and note that\nthe decision to launch the first three-year LTRO in December 2011\ncoincided with the winding down of the SMP programme, hinting at\nthe existence of a trade-off between the support of financial\ninstitutions and that of sovereign creditors.
\nMembers highlight a number of issues of concern in\nrelation to the situation in 2011:
\nCredit available to\nbusinesses and households: Members\nnote that the credit available to businesses and households is\nstill far below the pre-crisis levels and has slowed down its\ngrowth in 2011. They take note of the measures of the ECB on the\nlowering of collateral requirements and the stance on collateral\nrules for asset-backed securities (ABS), as these are deeply\ncorrelated with loans to households and SMEs.
\nCollateral: Members are\nworried about the significant levels of non-marketable assets and\nasset-backed securities put forward as collateral to the Eurosystem\nin the framework of its refinancing operations and ask the ECB to\nprovide information on which central banks have accepted\nsuch securities, and to disclose detailed information on the\nvaluation methods regarding all assets, including\nimpaired ones. They believe that, on collateral rules, the same\nstandards should apply for sovereign as for regional government\nbonds in those cases where regions have legislative and tax powers,\nas both types of bond have relevant influence on the good\ntransmission of the ECB monetary policy.
\nConditionality: Members\nunderline that institutions which have benefited from extraordinary\ncentral bank liquidity support should be subject to conditionality,\nincluding the commitment by institutions benefiting from such\nsupport to increase the levels of credit by establishing\nloan targets to the real economy, and especially to SMEs\nand to households.
\nThe ECB is asked to explore, in close cooperation with\nMember State governments, competent national supervisory\nauthorities and the Commission, the possibility of implementing a\nframework, such as the MERLIN programme elaborated by the Bank of\nEngland in partnership with the UK treasury, regarding\nconditionalities attached to the access to central bank\nnon-conventional facilities such as targets on loans granted to\nSMEs.
\nThe economic crisis and the ECB: Members call on the ECB to make public the legal\ndecision concerning the OMT programme in order to be able to\nanalyse more deeply its details and implications.
\nThey point out that the ongoing crisis is a matter of\nconcern as it threatens the substantial efforts made by Member\nStates regarding their budgetary consolidation and crisis response\nstrategies. They note that the current severe economic downturn in\nseveral eurozone Member States has negative economic and fiscal\nconsequences, further deteriorating their public debt\nproblems.
\nMembers point out that sovereign bonds and\nfinancial institutions show persistent vulnerabilities and that\nthe negative feedback loop between sovereign bonds and banks\ncan only be broken through fiscal consolidation and banking\nsector capitalisation in an economic growth environment.\nMembers consider that a cause of public accounts\nunsustainability in some countries of the eurozone is the\nongoing economic recession, causing rising unemployment and falling\ntax revenues. They affirm, therefore, that policies to foster\ngrowth and job creation must be a key priority for the\nUnion.
\nThe report encourages ECB President Mario Draghi to\nresume a tradition initiated by his predecessor, who at the\nEurogroup meetings persistently raised the issue of macroeconomic\nimbalances, especially the differentials between productivity\nand wage increases, which led to a marked divergence between\ncompetitiveness levels between the Member States.
\nMembers point out that Parliament has called for an\nincreased budgetary capacity for the EMU, in the framework\nof the EU budget and based on specific own-resources. It\nconsiders that such a budgetary capacity would significantly\nimprove the policy-mix in the EMU.
\nMembers note that the economic situation in some\neconomies is generating severe capital flows that worsen those\neconomies’ funding difficulties and that are unsustainable in\nboth the short and long term. These imbalances can only be dealt\nwith if a comprehensive and far-reaching solution to the eurozone\ncrisis is implemented that is built on an approach combining\nsolidarity and responsibility.
\nBanking union: Members\nconsider it urgent to create the banking union. In their\nview, to overcome the structural deficiencies inherent in the EMU,\nand to effectively curb the pervasive moral hazard, the proposed\nbanking union should draw on the earlier reform of the Union\nfinancial services sector and on the strengthened economic\ngovernance, and new budgetary framework, of the European Semester\nto ensure greater resilience and competitiveness of, and\nincreased confidence in, the Union banking sector, and to\nsecure enhanced capital reserves in order to prevent Member\nStates’ public budgets from having to bear the costs of future\nbank bail-outs.
\nMembers welcome the current impetus aiming at building\na single supervisory system (SSM) which should increase the\ncredibility of the Eurozone banking system. They point out that\nenhanced proposals on banking recovery and a single European\nresolution authority, and on deposit guarantee schemes, are\nnecessary in order to complete the broad set of legal instruments\nrequired for a banking union.
\nThey call on the Commission to put forward proposals\nfor a new European resolution fund and a European deposit\nguarantee scheme that complement the supervisory functions of\nthe ECB.
\nMembers deem that it is of the utmost importance that\neffective safeguards are introduced to avoid that\nconflicting agendas are reflected in the ECB’s monetary\npolicy and its supervisory powers. They stress that any possible\nerosion of the ECB’s authority for monetary policy, as well as\nany erosion of its supervisory powers due to monetary policy\nimperatives, need to be addressed by means of a suitable\nmechanism set up to identify and resolve potential\nconflicts.
\nInstitutional matters: Members regret the lack of transparency of the\nworking method as well as the lack of accountability of and\ndemocratic control over the Troika. They believe that any such\nbody, current and future, involving the ECB and/or the Commission\nshould be accountable both to the European Parliament and to\nnational parliaments at their respective levels. They stress the\nimportance of making the regular monetary dialogue between\nthe ECB and Parliament much more effective. Members stress that\nParliament will fully play its role as legislator in all\nmatters involving a banking supervision.
\nIn this context, Members consider that a Treaty\nrevision, including a revision of the ECB statutes reflecting\nthe ECB’s new tasks, should not be excluded.
\n