Eurozone financial stability materials

Eurozone financial stability continues to be of interest to readers. Here is a part recap of sources regarding Euro area defence measures.



Official materials

There are some official EU (Eurozone) level materials on the European financial stabilisation mechanism (EFSM) and the European Financial Stability Facility (EFSF):



COUNCIL REGULATION (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism; published OJEU 12.5.2010 L 118/1



Terms of reference of the Eurogroup European Financial Stability Facility (7 June 2010)



Grahnlaw blog posts

Without going back to the beginnings of the series on tracking eurozone crisis measures, or related posts, here are some of the Grahnlaw entries presenting sources related to Greece and the EFSM and the EFSF:



Tracking eurozone crisis measures: Activating financial support for Greece (29 May 2010)



Tracking eurozone crisis measures: Barbarians at the gate (30 May 2010)



Tracking eurozone crisis measures: Stabilisation mechanism and transparency (30 May 2010)



European financial stabilisation mechanism – a ray of transparency (3 June 2010)



European Financial Stability Facility Agreement EFSF (8 June 2010)


Where democracy and transparency in eurozone rescue? (8 June 2010)



Commission tasks: European Financial Stability Facility Agreement (EFSF) (8 June 2010)



European Financial Stability Facility in Finland (21 June 2010)



European Financial Stability Facility Framework Agreement (EFSF) (21 June 2010)


These superficial presentations may be of some help to financial service providers, researchers and EU policy bloggers who want to dig deeper.




Ralf Grahn



P.S. It is easier to understand a language than to use it correctly, and as Eurobloggers we should promote interaction among Europeans. Grahnlaw has adopted a multilingual comment policy:

I do my best to read comments in Danish, Dutch, English, Finnish, French, German, Italian, Norwegian, Portuguese, Spanish or Swedish, even if the Grahnlaw blog and my possible replies are in English.

EU: Stability programme Belgium

Stability programmes for eurozone countries on the one hand, convergence programmes for member states still without the euro; you can start by reading the background remarks on economic policy coordination in the European Union, in the blog post EU: Useful stability and convergence programmes? (3 June 2010).



You can then move on to the EU Council opinion on the stability programme of the euro area country Belgium, published in the Official Journal of the European Union (OJEU):



COUNCIL OPINION on the updated stability programme of Belgium, 2009-2012; OJEU 2.6.2010 C 143/1



Economic background


On 26 April 2010 the Council examined the updated stability programme of Belgium, which covers the period 2009 to 2012. The assessment began with a short description of the economic situation:

The collapse of world trade together with decreasing confidence, wealth effects and tighter credit conditions led to a sharp contraction of the Belgian economy around the turn of 2008. While the downturn was very sharp, it was followed by a relatively strong rebound in the second half of 2009, which was partly the result of temporary factors, including the (domestic and foreign) stimulus packages and a positive contribution from inventories.

Continued headwinds stemming from the restructuring of financial institutions and a further rise in unemployment together with low capacity utilisation are expected to slow down growth again in the first half of 2010. While due to the high degree of openness of the Belgian economy the recovery could benefit considerably from the rebound of world trade, the extent of this impulse may be limited as a result of Belgium's loss of cost competiveness in recent years. The downturn has had a significant adverse impact on public finances. The general government deficit deteriorated from 1.2 % of GDP in 2008 to 5.9 % of GDP in 2009. Moreover, while the government debt-to- GDP ratio declined between 2000 and 2007 on the back of overall cautious fiscal policies, the ratio started to increase again in 2008 as a result of the interventions in the financial sector (to 97.9 % in 2009). The Council decided on 2 December 2009 that an excessive deficit existed in Belgium and issued a recommendation to correct the deficit by 2012 through an average annual fiscal effort of 0.75 % of GDP. The strong deterioration of public finances in combination with the above-average budgetary impact of population ageing and significant contingent liabilities following the operations to stabilise the financial system translate into a need for continued budgetary consolidation and structural reforms to ensure the long-term sustainability of public finances.

Council recommendation


After a detailed discussion, and in the light of the recommendation under Article 126 TFEU of 2 December 2009, the Council of the European Union invited Belgium to:

(i) ensure that the 2010 deficit target of the programme is met; specify the measures underlying the budgetary targets from 2011 onwards in order to achieve the recommended average annual fiscal effort of 0.75 % of GDP in line with the Article 126(7) Recommendation; and stand ready to strengthen the fiscal effort in case risks related to the fact that the programme scenario is more favourable than the scenario underpinning the Article 126(7) Recommendation materialise; seize as prescribed in the EDP recommendation any opportunity beyond the fiscal efforts, including from better economic conditions, to accelerate the reduction of the gross debt ratio towards the 60 % of GDP reference value;

(ii) ensure high primary surpluses over the medium term and undertake structural reforms in order to improve the long- term sustainability of public finances;

(iii) improve the quality of public finances by adopting a more stringent budgetary framework, encompassing the creation of enforceable, multi-annual expenditure ceilings.

Eurozone financial stability



On 31 May the European Central Bank (ECB) published its Financial Stability Review June 2010, which assesses the stability of the euro area financial system both with regard to the role it plays in facilitating economic processes and with respect to its ability to prevent adverse shocks from having inordinately disruptive impacts (page 7).

The Financial Stability Review (225 pages) offers a view of the inter-related financial markets and the consolidation measures of eurozone governments.




Ralf Grahn