The Eurogroup is an informal body where the finance ministers of the eurozone discuss matters relating to their shared responsibilities related to the euro. It is a slightly smaller version of the Economic and Financial Affairs Council (“Ecofin”), which is the configuration of the Council of the European Union comprising the finance ministers of all 27 EU member states.
The Eurogroup’s role was set out in Protocol No 14 to the Lisbon Treaty, which entered into force on 1 December 2009. It also has political control over the single currency. This is in contrast to more technocratic decisions (such as setting interest rates) which are handled by the European Central Bank (ECB).
Why is the Eurogroup needed?
All Member States participate in the Economic and Monetary Union (EMU), meaning they coordinate their economic policymaking and treat economic decisions as a matter of common concern to all.
However, not all Member States have joined the euro area and adopted the single currency, the euro. Some have chosen not to join at present, while others are still preparing their economies to meet the criteria for euro area membership.
Euro area Member States need to cooperate closely and are also subject to the single monetary policy run by the European Central Bank.
Therefore, the euro area Member States require a forum to discuss and decide on policies for the euro area.
This cannot be the Economic and Financial Affairs Council (“Ecofin”) as this comprises all Member States. And some Member States don’t use the euro.
The solution is the Eurogroup, which consists of the ministers of economy and finance of the euro area members. It acts to promote economic growth and financial stability in the euro area by coordinating economic policies.
As only Ecofin can formally make decisions on economic matters, the Eurogroup meets informally on the day before Ecofin meetings, roughly once a month.
The next day, the agreements reached in the informal Eurogroup gathering are formally decided upon in the Ecofin meeting by the Eurogroup members.
What does the Eurogroup do?
Its main task is to ensure close coordination of economic policies among the euro area member states. It also aims to promote conditions for stronger economic growth.
The Eurogroup is also responsible for preparing the Euro Summit meetings and for their follow-up.
Policy coordination among the euro area countries is crucial for ensuring stability in the euro area as a whole.
The Eurogroup’s discussions, therefore, cover specific euro-related matters as well as broader issues that have an impact on the fiscal, monetary, and structural policies of the euro area member states.
It aims to identify common challenges and find common approaches to them.
It is also responsible for preparing the Euro Summit meetings and for their follow-up.
What does the Eurogroup discuss?
The Eurogroup regularly discusses:
- the economic situation and outlook in the euro area
- the budgetary policies of the euro area member states
- the macroeconomic situation in the euro area
- structural reforms that have the potential to increase growth
- matters related to maintaining financial stability in the euro area
- preparations for international meetings
- Euro-area enlargement
In addition, the Eurogroup may hold preliminary discussions on Council decisions that would apply only to the euro area member states.
When the Council adopts such decisions, only the ministers from the euro area member states vote at the Council.
The Eurogroup also discusses the terms of financial assistance for euro area countries experiencing severe financial difficulties.
When does the Eurogroup meet?
The Eurogroup usually meets once a month, on the eve of the Economic and Financial Affairs Council meeting.
If necessary, additional meetings or teleconferences can also be held. The meetings are informal, and the discussions are confidential.
The participants of the Eurogroup meetings are:
- the euro area ministers with responsibility for finance
- the president of the Eurogroup
- the vice president of the Commission responsible for economic and monetary affairs and the euro
- the president of the European Central Bank (ECB)
The managing director of the European Stability Mechanism is invited to participate in the meetings too. The IMF is invited to participate in discussions on the economic programs in which it is involved.
The outcome of the meeting is presented to the public by the Eurogroup president at a press conference. The Eurogroup may, in addition, the issue is written public statements. The president also debriefs the Ecofin Council.
The commissioner for economic and financial affairs, taxation and customs, and the president of the European Central Bank also participate in the Eurogroup meetings.
The first informal meeting of finance ministers of the euro area countries took place on 4 June 1998 at the Château de Senningen in Luxembourg.
How is the Eurogroup leader chosen?
It elects its president for a term of 2.5 years by a simple majority of votes. If the president is prevented from fulfilling his or her duties, he or she is replaced by the finance minister of the country that holds the presidency of the Council.
If the presiding country is not a member of the Euro area, the finance minister of the next Euro area country to hold the presidency of the Council takes over.