Meeting Minister Kaag with Eurogroup president Donohoe

Minister of Finance Sigrid Kaag and the President of the Eurogroup, Paschal Donohoe, met in The Hague on Wednesday. They discussed the economic situation in the Netherlands, Ireland and the euro area as a whole. Their exchange focused in particular on the Banking Union and the future of European fiscal rules, as enshrined in the Stability and Growth Pact (SGP). The appointment of a new director of the European Stability Mechanism (ESM) was also on the agenda. The Netherlands has nominated former State Secretary for Finance and former executive director at the IMF Menno Snel as a candidate for this position.

European fiscal framework

In October 2021, the European Commission launched a consultation on the future of the economic governance framework. Finance ministers have actively engaged through the Eurogroup and Ecofin to coordinate economic and fiscal policies across the euro area.

The Dutch government recently informed parliament about how the SGP can be reformed in the Netherlands’ view. ‘The Netherlands will take a constructive approach regarding how the SGP can be improved. We are ambitious and want to work together for the future of Europe’, said Minister Kaag.

Eurogroup President Donohoe welcomed the Netherlands’ commitment to a broad search for a compromise acceptable to all: ‘An effective economic governance framework, based on national ownership, simplification and enforcement, will enhance budgetary coordination in the euro area at a time when it is really needed. I am heartened by Minister Kaag’s commitment to looking for constructive solutions that will strike the right balance between fostering growth-friendly investments and ensuring fiscal sustainability.’

Banking Union

Completing the Banking Union has been a longstanding European objective since this major project was set in motion more than a decade ago in response to the financial crisis. On the basis of a mandate given by EU leaders, the President of the Eurogroup presented in early May a proposal for a work plan on all outstanding elements needed to complete the Banking Union. The President of the Eurogroup said, ‘Agreeing on a Banking Union work plan will bring a positive, forward-looking focus to our banking system. It will ensure our banking system is supported by common safety nets, is agile and competitive on the global stage, protects taxpayers and depositors, and supports European strategic autonomy.’

The Netherlands is positive about the President of the Eurogroup’s efforts to quickly arrive at a new work plan for the completion of the Banking Union. Minister Kaag said, ‘There is still work to be done here and Paschal is working hard on this. A strong Banking Union is crucial for the Netherlands and Europe. It will make banks financially healthier, so that savers and society as a whole run fewer financial risks.’

European Stability Mechanism

Next Monday, finance ministers in the Eurogroup will discuss the process for selecting a new Managing Director of the ESM, to succeed Klaus Regling, who will retire as of October. There are four candidates from Italy, Luxembourg, Portugal and the Netherlands. The Netherlands has put Menno Snel forward. ‘We think he is an extremely good candidate with a firm grasp of policy detail,’ says Kaag. ‘He is an economist who can build bridges and combines expertise and experience.’