EuroGroup President Summing-up latter meeting of 11 February

Eurogroup The President The Hague, 19 February 2016

Eurogroup of 11 February 2016 I would like to share with you the main content and course of our discussions at the Eurogroup meeting of 11 February 2016 in Brussels. Besides Vice-President Valdis Dombrovskis, Commissioner Pierre Moscovici, Member of the ECB's Executive Board Benoît Cœuré, ESM Managing Director Klaus Regling, we welcomed Poul Thomsen, Director of the IMF's European Department, who joined us for the discussions on Greece and Portugal. 1.

Economic situation in the euro area – Commission winter forecast

We discussed the economic situation in the euro area, on the basis of the recently published Commission Winter Forecasts. The Commission presented the main results of its forecasts, according to which the euro area is experiencing a mild recovery, surrounded by risks stemming mostly from the economic situation outside the euro area (notably in emerging economies) as well as domestic downside risks. Given the intensifying headwinds, we were advised to be particularly vigilant. The ECB and Ministers broadly concurred with the Commission assessment. The Commission also reported on the possible implications of the forecasts for fiscal surveillance in euro area Member States, which will be reviewed later this year. We also exchanged views on the recent volatility in the stock markets worldwide, which has affected the euro area too, particularly bank shares. We agreed that this instability is partly the consequence of heightened uncertainty regarding global growth, and therefore affecting banks more broadly and not only in the euro area. We agreed with the ECB assessment that the European banking sector still faces the challenges of low profitability and high levels of NPLs, but is structurally in a much better position now than some years ago, since capital positions have been strengthened by the banks, the quality of the banks’ capital has been substantially improved, supervision has been strengthened, and we have now clear and common rules for resolution within the Banking Union, which require consistent implementation. At the same time, we agreed on the need to be vigilant in the current situation and reaffirmed in this context the importance of implementing ambitious structural reforms at national level to boost the potential growth of our economies, and of fully abiding to our common rules and regulatory framework of the Banking Union. 2.

Thematic discussion on growth and jobs – the quality of public finances

We exchanged views on the quality of public finance in the euro area; in particular we looked at education spending on the basis of a presentation by the Commission. The aim of the discussion was notably to look at ways to make the composition of public expenditures as growth-friendly as possible, and to assess the efficiency and performance of public spending. We concurred with the view that this is a relevant topic for the euro area, in particular in the current situation where several Member States have limited or no fiscal space. Moreover, we agreed that the use of composite indicators presents some methodological limitations, which would require further work. In terms of the next steps, we agreed to pursue discussions on this topic by zooming in during the coming months on specific spending areas in more detail, such as 1/4

investment, healthcare and ageing related expenditure. In addition, we concluded that possible ways to better link the conclusions and possible policy implications of thematic discussions on growth and jobs with the Country Specific Recommendations of the European Semester should be further explored. 3.

International role of the euro

Following-up our initial discussion last year, we had another short exchange of views on the drivers and obstacles to the use of the euro in international trade, on the basis of a Commission presentation. The Commission explained that according to their findings there were no obstacles to the use of the euro in international trade. Overall, we agreed with the Commission assessment that sound macroeconomic policies and the strengthening of the Economic and Monetary Union are the key drivers for encouraging the use of the euro in international trade. 4.

Greece – state of play

We were informed by the institutions and the Greek authorities of the state of play of the first review of the Greek ESM programme, following the visit of mission chiefs to Athens in early February. Overall, we welcomed that there is good cooperation between institutions and the Greek authorities and that progress has been achieved on substance on some important issues such as the independent revenue agency and the appointment of managers in the public sector. However, we acknowledged that further work is still needed in a number of key areas before a staff level agreement can be reached. This includes among other things the pension reform, the measures to address the fiscal gap and the establishment of the Privatisation Fund. We called on the Greek authorities and the institutions to continue the discussions on the first review with a view to reach a staff level agreement as soon as possible. 5.

Portugal – state of play

We were first debriefed by the institutions on the main findings of the 3rd Post-Programme Surveillance (PPS) mission in Portugal, which took place in early February. We concurred with the assessment of the institutions that whilst the situation of the Portuguese economy has been making progress over the past years, there are still a number of important challenges to tackle in particular with regards to macroeconomic imbalances and rigidities in labour and product markets. In this context, we have been reassured by the commitments of the Portuguese authorities to fully abide by the European rules and to pursue an ambitious structural reform agenda, which is of particular relevance in the current situation of volatility in the financial markets. In addition, the Portuguese authorities committed not to reverse past reforms undertaken during the EFSF programme before a complete evaluation of those reforms is made. We also discussed the Portuguese draft budgetary plan (DBP), on the basis of the Commission Opinion which was published on 5 February, and we adopted a Eurogroup statement on this issue (see annex). As made clear therein, following our discussion we welcomed the commitments of the Portuguese authorities to prepare as of now additional measures to be implemented when needed to ensure that the 2016 budget will be compliant with the SGP. We agreed to revert to the implementation of the commitments by Portugal on the basis of Eurostat validated data for the 2015 budgetary outcome, Portugal's forthcoming Stability Programme and the Commission 2016 spring forecast. 6.

Miscellaneous – transparency of Eurogroup meetings

Finally, we discussed the initiative I had tabled to increase the transparency of the Eurogroup meetings, informed by the work done by the EWG following the mandate we gave at our January meeting. Most 2/4

ministers expressed support in principle for the initiative, though there was also a call for further reflection on the operational aspects of the change in regime, particularly for meeting documents, and to be mindful of preserving the quality and frankness of Eurogroup discussions. More specifically, there was general support to make public the Eurogroup agendas in annotated format as well as the summing-up letters that recapitulate the main content and course of our discussions at Eurogroup meetings. For meeting documents, it was considered that further preparatory work is warranted before an agreed approach can be reached. We then mandated the EWG to work on this and to report back to the Eurogroup. Yours sincerely, Jeroen Dijsselbloem

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Annex Brussels, 11 February 2016

Eurogroup Statement on the Draft Budgetary Plan of Portugal for 2016 Today, the Eurogroup discussed the Draft Budgetary Plan (DBP) of Portugal, submitted on 22 January, on the basis of the Commission's Opinion, which was published on 5 February. We take note that, according to the Commission Opinion, the Portuguese DBP initially planned a significant deviation from the required adjustment path towards the medium-term budgetary objective. We therefore welcome the set of additional fiscal measures publicly announced by the Portuguese authorities on 5 February 2016 following fruitful contacts with the Commission. We note that, according to the Commission Opinion, Portugal's planned structural fiscal effort in 2016, taking into account the measures announced, is between 0.1 and 0.2% of GDP, which implies a difference below 0.5% of GDP with respect to the 0.6% of GDP required to fully comply with the Council recommendation of 14 July 2015. We acknowledge that as a consequence, the DBP submitted by Portugal was not found to be in particularly serious non-compliance with the obligations of the Stability and Growth Pact and no resubmission of the DBP was requested by the Commission. At the same time, the Eurogroup agrees with the Commission's assessment that, even taking into account those additional measures, the budget remains at risk of non-compliance with the requirements of the SGP. In particular, we note that the macroeconomic scenario for 2016 in the DBP is more optimistic than the Commission 2016 winter forecast. In this context, the Eurogroup welcomes the commitments of the Portuguese authorities to prepare as of now additional measures to be implemented when needed to ensure that the 2016 budget will be compliant with the Stability and Growth Pact. The Eurogroup intends to come back to the implementation of today's commitments by Portugal on the basis of Eurostat validated data for the 2015 budgetary outcome, Portugal's forthcoming Stability Programme and the Commission 2016 spring forecast.

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