The #Eurogroup has one deliverable today: Signal to markets that 🇪🇺 has the tools and the political commitment to stick together in the coming months. This requires above all clear communication instead of ambiguous Brussels lingo.
Thread:
1/ Market volatility in recent days has shown that the risk of fragmentation is real. This is a symmetric shock that hits all member states, but its impact could very well be very asymmetric, also on bond markets.
2/ No member state needs an ESM programme at this stage. What member states need is insurance - a safety net as @hemker_h and I have called in our proposal. This safety net has to be provided by the ESM via the #Eurogroup and by the @ecb.
delorscentre.eu/en/publication…
3/ The #Eurogroup today does not need to go into the details of which ESM instruments could be used for which situation or how EMU can be further strengthened. These are important considerations, but not for now.
Instead, it should make a few things very clear:
4/ First, we have all the instruments we need to deal with the fallout of this crisis. Second, we have the unanimous political determination to use these instruments if necessary. And third, access to ESM instruments will be free of political costs, i.e. no conditionality.
5/ These three elements would make an important contribution to anchor market expectations about the Eurozone's collective response. But this requires extreme clarity: The #Eurogroup has specialised in constructive ambiguity in recent years. This needs to stop today.
6/ But clarity is not only important vis-à-vis markets, but also for domestic audiences: It needs to be crystal-clear that this time signing an MoU would be a mere formality that does not mean submission to conditionality and a troika-style regime.
7/ This is essential for any government to be able to eventually request ESM assistance and hence for the safety net to be credible in the first place. This is a crisis that does not emanate from policy mistakes and the ESM treaty gives us the flexibility to cater for that.
8/ The #Eurogroup needs to show today that 🇪🇺 is now in full crisis mode and can deliver fast and with determination. This is what the #Eurogroup was built for - it's time to show that it is still up to the task.
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