Eurogroup pushes to work out rules for direct ESM aid

Eurogroup chief Jeroen Dijsselbloem says eurozone finance ministers will return to their push to work out rules for channelling aid from the European Stability Mechanism directly to banks.

“What has been agreed in the main points must be worked out,” Mr Dijsselbloem said in an interview yesterday en route to Larnaca, Cyprus. “Several elements are under discussion.” He didn’t set out a timeframe for the talks.

Progress toward enabling direct bank recapitalisations — which could shore up lenders without piling more debt on to their home country’s governments — has been sidelined this year as ministers pushed to complete a bank resolution law.

The European Central Bank has insisted that the eurozone’s €500bn firewall fund needs to have the mechanism for direct bank aid in place by November, when the central bank becomes supervisor for the 18-nation bloc’s financial system.

Eurozone finance ministers meeting in Athens today aren’t expected to reach agreement on the ESM’s direct bank recapitalisation mechanism, an EU official told reporters in Brussels last week.

The topic isn’t on the meeting’s formal agenda so will be discussed on the sidelines, the official said.

Nations still disagree on some elements of the measure, including the rules for the period before EU legislation on dealing with failing banks comes into effect in 2016.

German finance minister Wolfgang Schaeuble has said that allowing the ESM to aid banks directly would require changes to German law.