On the tenth anniversary of the financial crisis, the European Union will definitively turn the page on the worst economic crisis in its history with the closure of the Greek rescue programme and the last excessive deficit procedures, while adopting the biggest overhaul of its financial sector in years.
The fall of Lehman Brothers in September 2008 marked the peak of a financial crisis that drove two recessions in Europe and forced a long list of banks and five eurozone countries to request bailout programmes.
Ten years on, the EU is aiming to conclude a banking union to improve the resilience of its banks against future crises and return Greece, the last of the rescued countries, to the financial markets in summer, after receiving more than €300 billion from its European partners.
The completion of the banking union is a priority for the next few months. It includes finalising the Single Resolution Fund and the controversial European Deposit Insurance Scheme to protect savings at EU level.
French president Emmanuel Macron has convinced German Chancellor Angela Merkel to pursue bolder changes this Spring. Paris and Berlin will make a joint proposal for strengthening the eurozone in March.
Despite the political paralysis in Berlin since the inconclusive elections held last September, Macron is pushing hard to progress towards establishing a fiscal union, with a budget for the eurozone and a new European minister to manage it.
Some of the most difficult issues this year, such as the eurozone reform of the renegotiation of Greek debt that will come at the end of its programme, will depend on the outcome of the coalition talks in Berlin.
Once the Franco-German proposal is unveiled, EU leaders want to agree on a new roadmap to strengthen the economic and monetary union by June.
The European Commission will also contribute to the debate with a proposal for a fiscal stabilisation instrument in May. The executive has already warned that this will not meet Macron’s expectations and would be included as part of the EU budget.
The MFF battle
The Commission’s paper will be part of its draft proposal for the next multi-annual financial framework – the EU’s long-term budget – after 2020.
The MFF will be one of the biggest political battles to occupy this mandate which ends with the European elections in Spring 2019.
Before that, the Commission will decide whether Spain and France, the two remaining member states breaching the bloc’s rules on budget deficits, could exit the excessive deficit procedure. In April, Eurostat, the EU’s statistical office, will confirm the deficit figures for both countries in 2017.
EU officials say that both countries may exit the ‘red zone’ at that time.
As the buoyant economic situation helped national economies to balance their public finances, the focus for the executive would focus on structural reforms. In particular, how to prepare European workers and welfare systems for the unfolding digital revolution.
Commission President Jean-Claude Juncker also made the enlargement of the eurozone a priority in his state of the union address last autumn. Some voices, including French Finance Minister Bruno Le Maire and his compatriot Pervenche Berès MEP have warned that this could not be done at the expense of deepening of the euro area.
While the European economy continues to beat expectations, the bloc will bolster its financial system with the implementation of the new Markets in Financial Instruments Directive (MiFID II).
Despite concern about the entry into force of this large piece of regulation – which runs to 7,000 pages – legislators and regulators have been relieved that the implementation process has been smooth. However, several components of MiFID II are still pending as they were postponed due to the lack of preparation or insufficient information provided by market players.
- 3 January onwards: Implementation of MiFID rules.
- March: Franco-German proposal on the future of the eurozone
- May: European Commission proposal for the multi-annual financial framework, including a financial capacity for the eurozone.
- Spring: decision on the excessive deficit procedure of France and Spain.
- June: EU leaders expect to agree on a roadmap to deepen the economic and monetary union.
- August: conclusion of Greece's third bailout programme.
- September: 10th anniversary of the fall of Lehman Brothers.