Roadmap to Stability and Growth - Def Ens Ives

8/3/2019 Roadmap to Stability and Growth - Def Ens Ives

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A Roadmap to Stability and Growth

Last updated: 12 October 2011

Table of Contents

TOP LINE MESSAGE.............................................................................................4Why are you only now presenting a comprehensive response? Commentators

have been calling for stronger action for 18 months. .........................................5Top line on Greece:............................................................................................5Top line on backstops:.......................................................................................6

Top line on banks:..............................................................................................7Top line on growth:.............................................................................................9Top line on governance: ..................................................................................10

.............................................................................................................................111. GREECE...........................................................................................................12

The troika has now completed its review mission. When will the sixth tranchebe disbursed?....................................................................................................12Is the COM now proposing a larger haircut than 21%? What does 'adequate'

PSI mean?.........................................................................................................12What has been achieved by the Task Force for Greece so far?.....................13In which areas is Member States' expertise needed?.....................................14

2. BACKSTOPS (EFSF, ESM).............................................................................16Why are you so worried about contagion?.......................................................16How does the Commission want to leverage the EFSF?................................17Under what circumstances will the EFSF be used to recapitalize banks? Will

the EFSF be able to recap banks directly?.......................................................173. BANKS..............................................................................................................18

How many banks will need to be recapitalised?..............................................18Which banks are being reassessed? ..............................................................18Are there any potential Systemically Important Financial Institutions (SIFIs) in

Europe which are not being tested?..................................................................19Will there be further reassessment of the situation once the reassessment is

finished?............................................................................................................19How is the exercise carried out different to the July stress tests? ..................19Will the results of the re-assessment be published? What is the point of so-

called "full transparency" if you don’t publish the results?................................20When will the exercise be finished?.................................................................20What are the issues being looked at in the new exercise? How is sovereign

debt being tested?.............................................................................................21Why stress sovereign now when it was not done properly in the July tests? .21

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What sovereign debt from which countries is being taken into account?........22Are you really saying that German debt is less "safe" than Tunisian or Libyan

debt which is not being assessed? ..................................................................23Why is extra capital required?..........................................................................23Is 9% or "x"% the new regulatory minimum for all banks?..............................23

Is the Commission's proposal in line with EBA's recommendations?..............25What definition of capital has been used?.......................................................25What are the impacts of accounting for sovereign exposures on the ECB's

assets?..............................................................................................................28What will be the impact on bank lending? .......................................................28Will there be a credit crunch? What is the impact of our proposals on liquidity

in the markets?..................................................................................................28What are you proposing to do to ease the funding difficulties on the markets?

...........................................................................................................................29Would Dexia have met the 9% threshold?.......................................................29How will you get to the amount of capital required?........................................29

What are Cocos? How do they work? How many are there?..........................30What about the banks that already failed in the last stress tests or were in thegrey zone – how do they fit in?.........................................................................30How much state aid money have banks received already?.............................30We now speak about a new round of bank recapitalisations in order to restore

confidence in the banking sector and resume the financing of the economy. Dowe really need to control the state support in this case?..................................32If we see a recapitalisation of banks via the EFSF, does the Commission still

consider this is state aid and needs to be controlled? .....................................34What if the EFSF lends directly to banks?.......................................................34

4. GROWTH..........................................................................................................36

State of play on the Services Directive?..........................................................36State of play on European patent proposals?..................................................37Single Market Act – 12 key actions..................................................................38State of play on Venture Capital proposal?.....................................................38State of play on e-signatures, e-authorisation?...............................................39State of play on Public procurement?..............................................................40State of play on Collective Rights Management?............................................41

5. GOVERNANCE................................................................................................42Why do you want to tie these governance proposals to this plan for banks,

Greece and firewalls?........................................................................................42Isn’t the Euro+ Pact already assessed a part of the European Semester?.....43When will these proposals under Article 136 be presented (clarifying policy

conditionality for euro area programme countries through EU acts andintergovernmental action of ESM; new procedures for MS to becomeprogramme countries to access EFSF/ESM assistance; more intrusivemonitoring of national budgetary procedures?..................................................44We do not have any information as to the timing of these proposals at this

stage. ................................................................................................................44Why has the proposal on Eurobonds been delayed?......................................44

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Wouldn’t enhanced cooperation in the context of euro area governance defeatthe object of more coherent, integrated policies for a single currency area?...44What would be the procedure for Treaty change? When will we see specific

proposals?.........................................................................................................45

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TOP LINE MESSAGE

This roadmap puts forward a comprehensive

response to restore confidence in the euro areaand the EU as a whole.

We need to break the vicious circle betweendoubts over the sustainability of sovereign debt;the stability of the banking system and the EU'sgrowth prospects.

The elements of this roadmap areinterdependent; to have the desired effect theymust be implemented together, not separately:

1. GREECE: a decisive response to theproblems of Greece

2. BACKSTOPS: completing the euro area'scrisis intervention mechanisms

3. BANKS: strengthening our banking system

4. GROWTH: frontloading stability and growth-enhancing policies

5. GOVERNANCE: building robust, integrated

economic governance

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Why are you only now presenting acomprehensive response? Commentatorshave been calling for stronger action for 18

months.

We have taken many far-reaching decisions inthe past 18 months. Many are already in effect.Others still need to be implemented or completed and we are calling for that to be doneas soon as possible.

But in many instances the response has beenpiecemeal, often because constrained bynational political considerations. To restoreconfidence, we need to get beyond that now.

Top line on Greece:

• It is time for decisive action on Greece• We need to remove all doubt about

Greece's economic sustainability.• This must start with the disbursement of the

sixth tranche of financial assistance. TheEurogroup and IMF Board will take adecision as soon as the troika's fullcompliance report is available (in the nextten days or so)

• We then need to agree a second adjustment

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programme, based on adequate financingthrough public and private sector involvement, tied to robust implementation

and monitoring mechanisms• And GR will continue to receive support with

implementation of the programme and withchanneling the available Structural Fundsfrom the Commission's Task Force for GR.

Top line on backstops:

• We need to implement the decisions takenin March and on 21 July without further delay. This is about increasing the lendingcapacity to 440bn EUR and enhancing theeffectiveness/flexibility of the EFSF.

• This is more, not less important, today. It isthe basis for any further steps we decide totake.

• The EFSF will be able to:o provide precautionary loans/credit lines

to euro area countries not already under

programme. This must be subject toconditionality, i.e. graduated adjustmentprogrammes designed in consultationwith the Commission and ECB

o assist MS with bank recapitalisation

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through loans to non-programmecountries, when private sector fundingand national public funding options are

exhaustedo acquire government debt on both the

primary and secondary markets, whereexceptional market circumstances andrisks to financial stability exist (withappropriate conditionality)

• We need find ways to maximise thefirepower of the EFSF, without increasingthe size of national guarantees and withoutbreaching Treaty rules on the monetisationof debt

• We need to accelerate the launch of theEuropean Stability Mechanism from mid

2013 to mid 2012 – so that we can rely onthis more robust, permanent mechanism asas early as possible.

Top line on banks:

• Banks have already considerably improvedthe quantity and quality of their capital base – approx €50bn raised by banks on marketsince start of 2011

• But ongoing uncertainty in sovereign debt

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markets has put banks under huge pressure,makin it hard for them to access the fundingthey need

• That's why today we need a fully coordinatedand targeted recapitalisation effort for Europe's banks

• This must cover all potentially systemicbanks in the EU – namely those tested inJuly 2011, minus some of the smaller

domestic/regional banks• This recapitalisation will be preceded by a

new assessment by supervisory authorities(coordinated by the EBA) of banks' capital,accounting for all exposure to EU sovereigndebt of these banks, for full transparency

regarding asset quality• These banks will be required to increase

temporarily their capital ratio (of highestquality capital) – broadly in line with theBasel III definition

• Banks should first use private sources of

capital, with national governments providingsupport if necessary. If this support is notavailable, recapitalisation should be fundedvia a loan from the EFSF.

• Pending this recapitalisation, these banks

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would be prevented by national supervisorsfrom distributing dividends or bonuses.

Top line on growth:

• We need to speed up growth-enhancingpolicies, including:

o Ensuring all MS swiftly and fully

implement the Services Directive

o Completing the internal market for

energy

o Fully implementing the FTA with Korea

o Accelerating proposals under discussion – such as on European patentprotection; simplified accounting for micro-enterprises; increased co-financing for Structural Funds; theenergy savings directive

o Fast-tracking pending Commission

proposals, including those that form part

of the Single Market Act (e.g. on venturecapital, mutual recognition of e-signatures; simpler public procurementrules)

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o Boosting investment in key infrastructure

including through the Europe 2020Project Bond initiative we will present

next week

Top line on governance:

• The Six Pack must be rigorously andeffectively implemented as soon as possible

• The European Semester must be intensified,and fully integrate the Euro Plus Pact

• But we must go still further, through:

• Provisions to strengthen economic andbudgetary surveillance of euro area Member States requesting financial assistance. Wewill present a proposal under Article 136

• Stronger monitoring of national budgetarypolicies of euro area Member States, so thatCommission/Council cd examine draftnational budgets before they are adoptedrequest a second reading and in serious

cases suggest amendments in the course of the year. We will present a proposal under Article 136.

• We will present a proposal for a more unified

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external representation for the euro area.

• Enhanced cooperation should be envisagedin all cases where otherwise decisive action

would be held back.

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1. GREECE

A decisive response to the problems in Greeceis a fundamental element and a key driver of thestrategy to resolve the current crisis.

The troika has now completed its review mission. When will the sixth tranche bedisbursed?

This will need to be decided by the Eurogroupand the IMF board once the full compliancereport by the troika has been published.

A Eurogroup will take place shortly before theEuropean Council and the euro area summit on

23 October.

Is the COM now proposing a larger haircut than 21%? What does 'adequate' PSI mean?

Several developments since the 21 July

agreement call for an update the parameters of the agreement. These developments notablyinclude:

• changes in economic and financial

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conditions, in particular lower growthforecasts and lower interest rates andsecondary market bond prices;

• the postponement of the start of a new 3-year programme for Greece from mid-2011to the beginning of 2012, with implicationsfor fiscal needs, maturing debt and theprivatisation plan

But it is premature to speculate on the scenariosfor an adjustment of the second programme for Greece.

The Troika concluded the fifth review of the GRprogramme on October 10 and will now prepareits "compliance report" that will be then

circulated to euro area Member States, together with an update of the debt sustainabilityanalysis. These documents will form the basisfor the decisions by the Eurogroup.

What has been achieved by the Task Forcefor Greece so far?

The Task Force was set up in July and startedits work last month. Its work so far has focusedon the identification of the expertise needed to

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implement key reforms in Greece.

Cooperation with the Greek authorities has been

very constructive so far. The conference withMember States, international organisations andexperts on 12 October provided us with a clear picture of the most pressing needs.

In parallel, Commission Hahn has worked withthe Greek authorities to select top growthenhancing measures to be finance with theunspent EU funds. These reprogrammingoperations would amount to €15 million till 2013.It should directly boost Greek growth potential,in order to enhance competitiveness and create jobs in Greece.

In which areas is Member States' expertiseneeded?

Together with the Greek authorities, MS andinternational organisations, we have identifiedthree concrete areas for technical assistance:

- a major plan in tax, budget and publicexpenditure areas, with several MS and theIMF

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- concrete administrative reforms, based onOECD report and with possible support from

several Member States,

- kick-starting 100 high level priority structuralfund projects that enable best use of theremaining €15bn.

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2. BACKSTOPS (EFSF, ESM)

Why are you so worried about contagion?

While Greece is the epicentre of the currentcrisis, signs of contagion to other sovereignsand to the banking sector are clearly visible.These pose a serious threat to euro area

financial stability.

The two main channels of contagion fromGreece to other Member States are:

• spillover effects on liquidity conditions insovereign debt markets

• the implications of exposure to vulnerablesovereigns for bank balance sheets

In order to contain contagion via these twochannels, we need to build credible "firewalls",adequate both in size and flexibility. The existing

crisis management mechanisms – EFSM, EFSF – provide a good basis for putting in place thesefirewalls.

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How does the Commission want to leveragethe EFSF?

Discussions on how to leverage the EFSF areongoing.

We must find ways to manage the existinglending capacity most efficiently and to increasethe supply of EFSF lending, without breaching

the Lisbon Treaty rules on monetary financingand without asking Member States to further increase their guarantees.

Under what circumstances will the EFSF be used to recapitalize banks ? Will theEFSF be able to recap banks directly?

Under the July 21 agreement, EFSF funding canbe used to help recapitalise banks under certaincircumstances – essentially, when private sector solutions and national backstops are insufficient.But the EFSF would not provide capital directly

to banks. Loans would go to states, which wouldthen be able to use the money to recapitalisebanks as required.

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3. BANKS

How many banks will need to berecapitalised?

All those in the agreed sample who do not meetthe agreed benchmark capital ratio under thenew reassessment being carried out by theEuropean Banking Authority.

It is for the EBA to disclose which banks theyare re-assessing, using which criteria, and whatbenchmarks they are using. The EBA arecommitted to finalising their reassessment intime for the emergency meeting of finance

minister on Friday 21st

October.

[Numbers circulated by others (IMF, banks etc)cannot be directly compared because they usedifferent assumptions.]

Which banks are being reassessed?

For EBA to disclose but the important issue hereis to focus on potentially systemic banks, i.e.whose actions have consequences on the

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European financial sector at large.

Are there any potential Systemically

Important Financial Institutions (SIFIs) inEurope which are not being tested?

No. Although the definition of a SIFI is not yetcompletely concluded, there are no Europeanbanks which could be classified as SIFI which

are not being re-assessed.

Will there be further reassessment of thesituation once the reassessment is finished?

EBA will continue its ongoing monitoring role,

including coordinating the national supervisoryauthorities in implementing the necessary follow-up measures.

How is the exercise carried out different tothe July stress tests?

The exercise carried out is not a new panEuropean stress test exercise but a re-evaluation and updating of certain elements of the 2011 stress tests. A full stress test requires

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many months. The exercise currently underwayis more targeted. It should be seen not as astand-alone exercise but part of the wider

roadmap to get Europe set out today.

Will the results of the re-assessment be published? What is the point of so-called "full transparency" if you don’t publish theresults?

The exercise being carried out it not a stresstest, and it's not about passing or failing. It is toprovide the information necessary to move tothe next step: increasing capital, by creatingadditional capital buffers in order to reassuremarkets about the ability of the EU banks to

withstand pressures in the sovereign debtmarkets.

When will the exercise be finished?

In the coming days. The EBA intends to present

the results to the ECOFIN Council taking placebefore the 23rd October European Council (verylikely on Friday 21 October).

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What are the issues being looked at in thenew exercise? How is sovereign debt being tested?

The detail of the exercise is for the EBA todisclose.

[Off the record: In particular, the EBA is

collecting new data for sovereign exposure: it isassessing exposure to sovereign debt in moredetail than what was previously done. Thepurpose of the exercise is to use a prudentvaluation of sovereign debt, which would reflectmore accurately current market prices. Thepurpose of this is to then enable banks to buildup sufficient buffers.]

Why stress sovereign now when it was not done properly in the July tests?

We are doing what is necessary to bring backstability in financial markets.

It is sensible to strengthen the banking sector tohelp restore confidence on the markets.

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The objective of this exercise is a prudentialone: it is to enable supervisors to determine how

much extra capital some banks would need inorder to withstand ongoing pressures in thesovereign debt markets.

The exercise should not be interpreted ashaving an impact on accounting rules and thefinancial statements. The exercise is a "paper exercise" and implies no change to the level of loss incurred by a bank.

[For background: If accounting value changed,that would entail changes to the profit and lossaccount of the bank. It would mean banks would

be incurring a loss. If there was a loss whichwere set out, it would be viewed as a verynegative signal of the health of the banks andwould lead to its share price tumbling andensuing vicious spiral.]

What sovereign debt from which countries isbeing taken into account?

This is for the EBA to disclose.

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[Off the record: The reassessment accounts for all exposures to all EU countries sovereign debtof the banks concerned.]

Are you really saying that German debt isless "safe" than Tunisian or Libyan debt which is not being assessed?

No. But the markets' concern is around EU

sovereign debt so the exercise is focussing onthat. It's a very broad approach already.

Why is extra capital required?

Extra capital is required for the EU systemic

banks to reflect what is needed to deal with thedifficult temporary circumstances we currentlyfind ourselves in.

The required additional capital buffer will reflectmore appropriately the possible risks coming for

the sovereign markets.

Is 9% or "x"% the new regulatory minimumfor all banks?

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No. Any new level required will be a supervisory(Pillar 2) benchmark – not a new regulatoryminimum level.

And it applies to those banks which aresystemic, i.e. whose failure could have a wider impact on the EU financial sector.

These systemic banks are asked to hold anadditional capital buffer on top of the regulatoryminimums to cope with current risks in thefinancial sector.

It's about having banks which are better able toresist to and absorb shocks.

The exercise is being done for prudentialreasons to identify banks which need to takefurther measures to increase the level of thehighest quality capital. For these purposes (andexclusively for these purposes), the value of thesovereign bonds held by the banks covered bythis exercise is adjusted and brought more in

line with the market prices/expectations. It'swhat it called a "prudential filter".

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Is the Commission's proposal in line withEBA's recommendations?

Yes, the Commission has worked very closelywith the EBA and inspired itself heavily from theEBA's ongoing work.

What definition of capital has been used?

It is for the EBA to say which definition of capitalit has used.

[Off the record: The definition of capital used isthe same one use by EBA in its 2011 stress

tests. This definition of capital, proposed by theEBA, is stricter than existing applicable Basel 2 /existing CRD 3 definitions, but less strict thanwhat Basel 3/CRD4 will require at the end of theforeseen transition period in 2019.]

What we want to do – within the wider

framework of Basel 3/CRD 4 – is to accelerateits full implementation for banks identified assystemic – i.e. early implementation (exacttimelines TBC, but they need to be soon to becredible) both for the quantity and quality of

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capital required.

[For background only: The definition of Common

Equity Tier 1 as required by the CRD 4 propsoal,gets tougher from 2013. Very broadly, 9%capital as defined by the EBA in the 2011 stresstests equals 12% capital as defined in CRD 4 asapplicable from 2013, equals 7.2% capital asdefined in CRD 4 as applicable from 2015].

Why the differences? Because the definition of capital gets stricter and stricter in the future.

How many banks will fail the ratio and how much capital will banks need in total?

Too early to say. And it's not about failing a ratiobut building extra capital buffers.

But we are confident the overall levels of capitalwhich will be required are manageable, throughinternal resources, market investment and

retaining dividends and bonuses.

How will the requirements to hold morecapital work in practice?

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National supervisors will require extra capitalfrom their banks through existing supervisory

powers.

This requirement will be made via Pillar 2measures – i.e. national supervisors assess thesituation and take action for individual banks.This is a different approach to imposing oneharmonised rule on all banks.

The requirement will take the form of temporarybuffers, the concept of which is broadly inspiredby the so-called "conservation capital buffer" asrequired by CRD 4.

It means that until the banks have not met the9% target, they cannot distribute discretionarypayments such as dividends or bonuses. Therewill not be a retroactive application of theproposals: this is legally impossible.

[For background: Pillar 1 measures would

require changes to existing legislation and takemuch longer. Requirements via pillar 2 is themost efficient way to make a difference to bankscapital levels quickly].

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What are the impacts of accounting for sovereign exposures on the ECB's assets?

None.

What will be the impact on bank lending?

We are making banks more robust and thus

more resilient to resist shocks.

Once banks are stronger and safer, it will makeit easier for them to lend.

Will there be a credit crunch? What is the

impact of our proposals on liquidity in themarkets?

No there will not be a credit crunch. We aremaking banks stronger. This should send areassuring signal to the markets. If a bank hashigher capital, it can afford to lend morebecause it has higher buffers.

In the immediate term, the ECB will alsocontinue to play its role at providing liquidity to

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ease funding difficulties.

What are you proposing to do to ease the

funding difficulties on the markets?

In the immediate term, we trust the ECB willcontinue to play its role.

In the longer term, restoring trust on markets

and making banks stronger will make the realdifference.

Would Dexia have met the 9% threshold?

You would need to ask the EBA.

How will you get to the amount of capital required?

First, via the private sector. This means:

o restructuring: for example, a bank sellscertain assets or subsidiaries

o conversion of debt to equity instruments:

for e.g. Cocos, hybrid etc

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What are Cocos? How do they work? How

many are there?

Cocos are instruments that are debt but if equityfalls below a certain threshold, this debt can beautomatically converted to equity.

It's basically about converting lower quality

instruments into higher quality ones.

[It's one part of a wider solution to increasingquality and quantity of capital.]

What about the banks that already failed in

the last stress tests or were in the grey zone – how do they fit in?

These are 2 separate exercises. But systemicbanks who failed in July or were in the grey zonewill also need to meet any new benchmarksaccording to the same timelines as other banks.

How much state aid money have banksreceived already?

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Overall, the aid effectively granted by Member States from October 2008 to December 2010amounted to €1,240 bn (1.2 trillion).

Most of the aid used – €757 billion, or 61% of the total – was in the form of guarantees [Thisfigure only takes into account the guaranteedbonds issued by aided banks. It does not cover other forms of liabilities that may have beenguaranteed on a case-by-case basis such as

blanket guarantees]. Over €400bn was grantedin the form of capital injections and impairedasset measures.

The aid was concentrated in few Member States.At national level, the top three banking markets –the United Kingdom, Germany and France –received 60 % of the total amount of aid.

The aid was also concentrated on a limitednumber of banks. 10 banks received more thanhalf of the total aid; the next 20 received onequarter; and all the other beneficiaries – about190 banks – shared the remaining quarter among themselves.

Attention: The figures above are much smaller than the total aid put at the disposal of banksby MSs (= the backstops) and approved bythe Commission. They are nevertheless a

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better gauge of support received. It should alsobe borne in mind that banks remunerate theState for loan guarantees received.

We now speak about a new round of bank recapitalisations in order to restoreconfidence in the banking sector and resume the financing of the economy. Do wereally need to control the state support in

this case?

Yes, we do and for a number of reasons:

• First, state aid control plays an importantrole in ensuring the long-term viability of thefinancial sector. If there was no control and

strings, banks might simply continue askingfor more and governments would find it hardto resist, including because of fin stabilityconcerns. Whilst many of the banks that aresuffering from the sovereign debt crisis maybe viable, and probably simply need help toovercome the lack of market confidence inthe short term, as proposed by the EBA, it isin everybody's interest that the long-termviability analysis is carried out. Suchanalysis involves an in-depth assessment,

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which can only be done on a case-by-casebasis. The rules allow the Commission totake full consideration of all relevant

elements and adopt decisions that areproportional, balanced and fair.

• Secondly, one should not forget that thereare banks that are not aided, but operate inthe same adverse economic and financialenvironment. It is essential that banks thatrecapitalise (or have already recapitalised)from private-sector sources are not put ata disadvantage. We need to ensureadequate remuneration for state support andappropriate incentives for paying the aidback to the state as soon as possible. Only

the Commission can ensure an equaltreatment and limit the distortions of competition in this regard.

• Thirdly, the requirement to submit arestructuring plan also creates the rightincentives for banks to choose private-sector

solutions wherever possible. It is essential,both to protect public money and to limitharm to competition, that banks onlyrecapitalise from public funds if they areunable to do so privately. The incentive to

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raise private-sector capital may be weak if banks expect public intervention to comewithout strings attached.

If we see a recapitalisation of banks via theEFSF, does the Commission still consider this is state aid and needs to be controlled?

The legal situation is very clear: EFSF money is

State aid. This is because the EFSF would granta loan to a Member State, which in turn wouldgrant recap to a bank. From the state aid controlpoint of view, this is no different from a countryhaving to raise money on the market to be ableto rescue a bank. It still needs to reimburse themoney. In this case the EFSF.

The same also already applies to countries thatbenefit from EU-IMF assistance. TheCommission also exerts control.

What if the EFSF lends directly to banks?

The EFSF will not be lending directly to banks.Loans would be made to the Member State,which would use the money to recapitalise thebanks in question. State aid control rules would

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still apply.

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4. GROWTH

S tate of play on the Services Directive?

24 Member States have adopted their horizontal legislation to transpose theDirective.

In one other Member State (Austria), the draftlegislation is currently being examined by theParliament.

Next round of infringements (October), referralto Court (Article 258) proposed for Austria,Belgium, Germany and Greece for non-communication.

Work is ongoing in the Member States onadapting their sectoral legislation, with delaysin certain Member States. The Commission hasbeen working with the Member States to

improve this situation.

The single market for services is important for reviving the European economy (estimatedgrowth: figures of between 60 and 140 billion

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euro have been mentioned, i.e. an increase inGDP of up to 1.5%).

S tate of play on European patent proposals?

As part of the Single Market Act and presentedon the same day, the European Commissiontabled a package of two legislative proposals,under enhanced cooperation, that will radically

reduce the cost of patents in Europe by up to80%. This will allow any company or individualto protect their inventions through a singleEuropean patent which is valid in 25 Member States.

The proposed regulations lay down the terms

and conditions for obtaining unitary patentprotection, its legal effects and the applicabletranslation arrangements. Discussions arecontinuing in the Council and Parliament and itis hoped to reach political agreement on thepatent package before the end of the year.

Reducing the costs and complexity of theexisting European patent system will have asubstantial impact on innovation and growth.

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Single Market Act – 12 key actions

Three of the 12 legislative proposals set out in

the Single Market Act have already beenpresented: unitary patent protection; thestandardisation package and the revision of theenergy taxation directive.

State of play on Venture Capital proposal?

The proposal is the first priority of the SingleMarket Act. Its objective is to promoteinnovation, job creation and economic growth byfacilitating access to venture capital finance for SMEs which are responsible for the creation of two out of three jobs in the European privatesector. In particular, the objective of the proposalis to eliminate administrative and legal obstaclesto the cross-border activity of venture capitalfunds and managers that operate in the EU.

(from the State of the Union speech) "The Union

and its Member States should urgently consider how to allow our own policy-driven bank, theEuropean Investment Bank to do more – andpossibly much more – to finance long-terminvestment.

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To do so, we need to explore ways to reinforcethe EIB's resources and capital base so that it

can lend to the real economy.

In the year 2000, there was € 22 billion of venture capital in Europe. In 2010 there wasonly € 3 billion. If we want to promoteentrepreneurship we must reverse this declineand we need that support namely for SMEs."

State of play on e-signatures, e- auth orisation?

The Commission will propose in 2012 a pan-

European framework for electronic identification,authentication and signature that will include therevision of the eSignature Directive and themutual recognition of eID. These will be strongand comprehensive legislative proposals whichwill have a real impact on the digital singlemarket.

Secure access to cross-border online serviceswill make it easier for EU citizens to move, work,study, travel, set-up and conduct businessacross Europe. We also need the guarantee that

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electronic transactions are secure, cheap andeasy to carry out. Businesses, consumers andour economy need this confidence boost.

State of play on Public procurement?

Also one of the twelve key projects set out in theSingle Market Act, the Commission will presenta communication setting out possible options for the modernisation of the EU public procurementlegislative framework in line with EU2020 goalsbefore the end of the year. At the same time itwill present an initiative on the access of thirdcountry companies and goods to the EU publicprocurement market.

The whole public procurement market in the EUis worth around 17% of EU GDP. A recentevaluation of public procurement legislationfound that EU public procurement Directiveshave helped to establish a culture of transparency and outcome-driven procurement

in the EU. This has triggered competition for public contracts, and generated savings andimprovements in the quality of procurementoutcomes. Open and competitive publicprocurement has driven down costs by around

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4%, generating savings of approximately €20billion. This far exceeds the costs generated bythe regulatory framework, which are estimated

to be €5 billion.

State of play on Collective RightsManagement?

The Commission will present a legislative

proposal in early 2012 to improve the collectivemanagement of copyright including by increasedtransparency and better governance of collecting societies, and thus to ensure thatcollective management evolves and responds tothe needs of multi-territorial licensing.

As regards audiovisual works where licensingdirectly through a one stop shop (the producer)is often possible, this framework to facilitate thecollective licensing of rights may be particularlyimportant for certain aspects such as theclearing of rights for music incorporated in theaudiovisual work.

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5. GOVERNANCE

Why do you want to tie these governance proposals to this plan for banks, Greece and firewalls?

Because the longer-term solution to the problemof public debt sustainability lies in the pursuit of sound economic and financial policies in allMember States within a reinforced euro-areagovernance framework.

For a smooth functioning of EMU, it is of crucialimportance that Member States consider their economic policies as a matter of common

concern, contribute to the objectives of theUnion and reinforce the coordination of their policies accordingly.

To this end, the European Semester and thenew "six-pack" legislation already provide astrong governance framework.

But the greater interdependence of euro-areaMember States suggests that there is a need togo further. To prevent policies that harm other Member States or the financial stability of the

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euro area as a whole, there should be a stronger euro-area dimension in the planning,implementation and ex-post assessment of

Member State policies.

Isn’t the Euro+ Pact already assessed a part of the European Semester?

The Euro+ Pact does already feature in the

European Semester. Commitments made under the Pact are presented by the 23 participatingMember States when they submit their NationalReform Programmes and their Stability or Convergence Programmes. These commitmentsare then assessed by the Commission when itissues its Country-Specific Recommendations.

But there may be ways to strengthen andstreamline this (specifics are not available at thisstage).

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When will these proposals under Article 136 be presented (clarifying policy conditionality for euro area programme countries through

EU acts and intergovernmental action of ESM; new procedures for MS to become programme countries to access EFSF/ESM assistance; more intrusive monitoring of national budgetary procedures?

We do not have any information as to the timing

of these proposals at this stage.

Why has the proposal on Eurobonds beendelayed?

The green paper on Eurobonds will bepresented by the end of the year. Beyond this,we have never given a firm commitment to aparticular date for the presentation of the greenpaper on Stability Bonds. Work on the options tobe presented is underway.

Wouldn’t enhanced cooperation in the

context of euro area governance defeat theobject of more coherent, integrated policiesfor a single currency area?

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Enhanced cooperation is not envisagedspecifically for the euro area. Of course,enhanced cooperation would have to be

assessed on a case-by-case basis. Our aim is toachieve deeper integration for more effectivegovernance and greater discipline in the euroarea but also in the EU as a whole.

What would be the procedure for Treaty change? When will we see specific

proposals?

It is too early to speculate on this. The first stepis to build a consensus on what we policy goalswe wish to achieve. Then we can assesswhether Treaty change is required. We believethat the EU must be open to this possibility.

But Treaty change is not required to address thecurrent crisis, and there are many further improvements to our economic governance thatwe can make without needing to change our Treaties.

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