Redemptions will cease to be ordered by the troika

Portugal's biggest creditor, the European Stability Mechanism (ESM), formerly known as the Facility (EFSF or EFSF), wants to have more weight and a voice in the direct control of deficits and public accounts in the countries euro in future adjustment and repayment programs.

And the "troika" format – ECB, EC and IMF – should become the main coordinating body for these buy-outs, resulting in a double-format mission: European Commission and the European Mechanism. The ECB and the IMF still participate, but as advisers.

Portugal owes more than 27 billion euros to this European facility. It was one of the loans that, as of 2011, helped save the country from bankruptcy.

In total, the rescue amounted to about 78 billion euros. The IMF's share is almost paid for, but it still has to pay for the European share of the rescue (in addition to the 27 billion MES, there is another loan put in place by the Commission in 2011, whose current value is around 24, 3 billion according to IGCP.).

The ESM loan, the most important, is still subject to a moratorium: it will only be repaid in 2025, making the Eurozone Mechanism the largest lender of the next seven years.

During a meeting with journalists promoted by European Investment Bank (EIB), at the headquarters of the MES in Luxembourg, the director general of this institution, the German Klaus Regling, explained, in answer to the questions raised by living money, the role and the functions of his institution which are being negotiated, following the reform of the euro area, In preparation.

The reform is based on several pillars, including how economic and financial adjustment programs will be developed and coordinated, for example. How redemptions will be monitored and operationalized.

In the past, see the recent example of Portugal, Greece and Ireland, the programs were led by the troika. Teams from the European Commission, the European Central Bank and the International Monetary Fund have visited (and are still moving in countries due to post-program evaluations) states in the process of adjustment.

This week follows another visit: the seventh evaluation after the program, in which budgetary targets are monitored, debt, structural reforms (pension rationalization, labor market, labor market, expenditure and public management).

In the near future, all this work – during and after the rescue – will no longer be done as a troika; the starting points will become two: Commission (for structural reforms) and Mechanism (for more financial and budgetary aspects).

The idea, Regling explained, is that "we are creditors and we want to be paid someday, we focus on that", so we need to keep a close eye on the public finances of countries benefiting from aid and evaluate and design the deficit and long-term debt. to see if these rulers can make what they owe.

The remaining balance is the amount you have to pay. Source: IGCP

ECB and IMF, but with a secondary role

"In the future, adjustment programs will be mainly coordinated by the Commission and the European Stability Mechanism," said the MES official.

However, Regling believes that the ECB should "continue to give advice on issues related to the financial sector, it will not go away but will not have a broad mandate." [como aconteceu nos programas passados]".

And that "the IMF will perhaps also be our partner in the future, but it will be mainly the EC and the ESM which will coordinate".

Countries in the euro area have already agreed that the basic model is the following: a pair of institutions, but details remain to be clarified. In general, we already know what the EC will do and what the ESM will do in future programs.

Regling says, "We have to organize our work because we do not want to duplicate the tasks, we have the point of view of the creditor because we borrow money and want to get it back one day."

"Just like a bank that lends money to someone who buys a home wants to know if the customer is able to repay, that's our kind of interest," he said. -he declares.

"The Commission is a think tank on gender"

The European Commission, on the other hand, "has a much wider interest in that sense, it is like a think-tank that examines the situation of Europe as a whole." It is very important, but it is very important. is a different perspective, "said the director of the Mechanism.

"I think we can work together productively, with different visions, and we, as creditors, also know what is happening in the markets because we are here every day, which the Commission does not do. issue bonds, notes [dívida de curto prazo]we have a trading room here at our head office, "said Regling.

In addition, "we have to invest our effective capital, the 80 billion euros that we have granted the euro area member states.This money is not used for loans, it is there to protect the bondholders [quem compra as obrigações do ESM]".

On the other hand, "the EC has a program to do a lot of things.If you look at programs in Portugal or Greece, we see that the EC specialty is in many areas in which we are not at all, in labor market reforms, pensions, in the energy sector. "

According to the maximum representative of the official creditor of Portugal, "we will not reproduce that, we will not enter into structural reforms, we must be particularly attentive to the budgetary side, the budget deficits, the fiscal trajectory of the next decades. "We have very limited interest in areas that are important for assessing a country's ability to repay the loan," he said.

• * In Luxembourg. The journalist went to the invitation of the European Investment Bank (EIB).

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