Sélecteur de langues
Brussels, 10 May 2004
Preparation of Eurogroup and Council of Economics and Finance Ministers, Brussels, 10-11 May 2004
Eurogroup Finance Ministers are due to meet in Brussels at 19h00 on Monday 10th May. A press conference is due at the end of the Eurogroup meeting. The meeting will be preceded by the Macroeconomic Dialogue meeting at political level where representatives of the Council (Troika), the Commission, the European Central Bank and the Social Partners will exchange views on monetary, fiscal and wage policies. There will also be a meeting between the Troika and European Parliament representatives. On Tuesday Ministers will start with a working breakfast meeting on the management of health care expenditure. The European Union's Council of Economics and Finance Ministers will meet at 10h00 on Tuesday 11th May. The European Commission will be represented at the Council by Economic Affairs Commissioner Joaquín Almunia, Internal Market and Taxation Commissioner Frits Bolkestein, Budget Commissioner Michaele Schreyer, Commissioner Siim Kallas and Commissioner Markos Kyprianou.
The Eurogroup will start with a debriefing of the G7 and the IMF/World Bank meeting followed by an exchange of views on the economic situation and policy stance. Ministers will then discuss budgetary developments and procedures. Commissioner Almunia is expected to inform Ministers about the latest Commission decisions on budgetary surveillance (IP/04/552). Ministers will also discuss procedural issues related to ERM II preparations of new member states.
Council of Economics and Finance Ministers
Broad Economic Policy Guidelines (GT)
Ministers will have a first Orientation Debate on the Commission's recommendation for the 2004 update of the Broad Economic Policy Guidelines (BEPGs). Discussions on country specific recommendations and final approval are due in the next Ecofin meeting on 2nd June in Luxembourg.
The European Commission adopted a recommendation for the 2003-2005 BEPGs update on the 7th of April (IP/04/467). As part of the new streamlined procedure the 2004 update. The first update reaffirms the economic policy strategy adopted by the European Council last June and confirms that this strategy is also appropriate for the acceding countries. While the challenges facing the new Member States are similar to those of the EU-15, the scale of these challenges is, in some cases, much greater. Overall unemployment and the budget deficit are both around double that of the EU-15, while income per capita is less than half that in the EU-15. But the situation varies considerably between the new Member States. Taking due account of their different performances, country-specific recommendations are presented to each of them.
Budgetary surveillance (GT)
Ministers are expected to discuss the Commission recommendation for an abrogation of the excessive deficit in Portugal (IP/04/552). The Portuguese deficit, which exceeded the 3% of GDP threshold in 2001, was below 3% of GDP in both 2002 and 2003, in line with the Council recommendation addressed to Portugal in November 2002. The Portuguese case demonstrates that the excessive deficit procedure can be terminated when member states take the necessary budgetary consolidation measures. Moreover, Ministers are expected to discuss the Commission's recommendation for an early warning to Italy. Italy's budget deficit is forecast to exceed the 3% reference value in 2004 on the basis of current policies. Moreover, the pace of debt reduction in Italy is a source of major concern and coming to a halt. The early warning is the preventive instrument of the Stability and Growth Pact aiming to help the country concerned to take appropriate additional budgetary measures and thereby avoid entering into an excessive deficit position.
Potential output and output gaps (GT)
A key element in the annual surveillance exercise of Member States budgetary policies is the assessment of their cyclically adjusted budget balances. The calculation of potential output / output gaps is an essential part of this process.
The 15 July 2002 ECOFIN, on the basis of a report from the EPC, endorsed the production function (PF) approach as the reference method when assessing the stability and convergence programmes. For a short transition period the previously used statistical method HP filter - should be applied as a backup.
During this transition period, work continued in the EPC's Output Gaps Working Group on addressing the statistical problems in implementing the PF approach in one country (Spain) and on refining the method to allay the reservations which two countries (Germany and Austria) had about using the PF approach as the sole method for assessing output gaps. In addition, efforts were made to find an acceptable approach for the new Member States.
The Commission warmly welcomes the progress which has been made. As the EPC's report makes clear, sufficient progress has now been achieved to basically apply the PF method to Germany, Austria and Spain in the next round of budgetary assessments i.e. as the reference method for Germany and Austria and in parallel with the HP filter method in the case of Spain. Thus, all 15 Member States have now endorsed the PF method.
The new Member States would like to have the PF method applied to their economies as soon as possible. However due to the lack of sufficiently long time series for these countries, the Commission supports the view that for the time being the PF and HP filter methods should be used in parallel for these Member States.
The Commission services will actively support the EPC in its efforts to further refine the PF methodology. Work will now also focus on settling issues related to the linking of output gaps and cyclically adjusted budget balances and their use in assessing fiscal policies.
Preliminary draft budget for 2005 (E W)
Comissioner Schreyer will present the main features of the Commission's proposal for the budget 2005, which was adopted on 28 April 2004 (see IP/04/554).
Financial perspectives 2007-2013 (EW)
The Irish Presidency has committed to keep Ministers regularly informed about the state of discussions in the Council on this subject. This point and the preliminary draft budget for 2005 will be attended by Commissioners Michaele Schreyer and Markos Kyprianou.
Savings taxation (JT)
Taxation Commissioner Frits Bolkestein will provide an up-date to the Council in restricted session concerning the negotiations on savings taxation with certain third countries.
In addition, the UK will be invited to comment on the state of play of the savings taxation discussions in which it is engaged with its dependent and associated territories in the Caribbean. The objective is to arrive at a model agreement that can be used to conclude bilateral savings tax agreements between Member States and these territories. The UK already presented to the Council on 9 March a model draft agreement with its Crown Dependencies (see MEMO/04/52) and agreements between each of the EU Member States and these Crown Dependencies are in the process of being finalised according to this model. The Netherlands has also achieved a similar successful result with respect to model agreements with the Dutch Caribbean territories.
The Commission has been engaged in intensive negotiations with Andorra, Liechtenstein, Monaco and San Marino to reach agreement on the application by those four countries of savings tax measures "equivalent" to those agreed within the EU concerning interest income of EU residents. The Council of Ministers in June 2003 (see IP/03/787) agreed on a Directive to ensure effective taxation of interest income from cross-border investment of savings that is paid to individuals within the EU and agreed that this Directive should be implemented into Member States' national laws from 1 January 2004 and be applied from 1 January 2005. The Council also approved a draft agreement with Switzerland concerning the taxation of savings income. The Council agreed that the four elements of this agreement with Switzerland should also constitute the basis for agreements between the EU and Liechtenstein, Andorra, Monaco and San Marino. The Council must decide before 30 June 2004 whether sufficient guarantees have been met concerning savings taxation measures in the third countries and dependent and associated territories to allow the Directive to enter into force on 1 January 2005.
Alcohol taxation (JT)
Commissioner Bolkestein is due to indicate, in response to a request from Sweden, the envisaged time table for the adoption of the Commission's report on excise duties on alcohol and alcoholic beverages.
The Commissioner will state that the report is still being debated within the Commission and that it is not possible to give an exact date for its adoption at present.
As the Commission has not yet taken a final decision on this report, he will not be in a position to enter into detail on its possible content. However, the report will not be accompanied by a proposal to modify the existing system of minimum rates.
The minimum rates of excise duty on alcoholic drinks currently in force came into effect in 1993 (Council Directive 92/84/EEC). Above these minima Member States are free to set excise duty rates at levels that they consider appropriate. This has resulted in a great diversity within the Community in the levels of taxation applied, reflecting varying national policy considerations.
The Directive requires the European Commission periodically to review the rates and produce a report, together with proposals if appropriate, that takes into account the proper functioning of the Internal Market, competition between the different categories of alcoholic drinks, the real value of the rates of duty and the wider objectives of the EU Treaty.
Transparency Directive (JT)
The Council is due to reach political agreement on the Commission's proposal for a Directive on transparency requirements for securities issuers. The Council text incorporates the amendments suggested by the European Parliament in its first reading in March 2004 (see IP/04/398), thereby allowing Council to approve the Directive without the need for a second reading by Parliament or Council. However, formal adoption of the Directive is only due to take place in the autumn because of delays in translating the Directive into the 20 official languages. The proposal, a key part of the Financial Services Action Plan, aims to make the European financial market place more attractive, upgrading the information available to investors and helping them allocate their funds more efficiently, thus boosting the economy as a whole. Among its key achievements will be that investors will in future receive interim management statements from those share issuers who do not publish quarterly reports and will get half-yearly financial reports from issuers of new bonds. In addition, all securities issuers will have to provide annual financial reports within four months after the end of their financial year. The proposed Directive will also lead to better dissemination of information on issuers across Member States. The Commission will, under the proposal, establish a mechanism for assessing at EU level the equivalence between international accounting standards and third country accounting standards.
Measures to improve regulation of banking, insurance and investment funds (JT)
The Council is due to reach political agreement on a proposal for a Directive to allow the EU to respond far more quickly to developments in the financial sector. Formal adoption is only due to take place in the autumn because of delays in translating the Directive into the 20 official languages. Once the Directive is formally adopted, six Commission Decisions will also enter into effect to form a package creating a modern and streamlined decision-making structure for financial services with the aim of improved regulatory and supervisory co-operation (see IP/03/1507). The package aims to extend the committee structure and approach already used in the securities sector since 2002 (see IP/02/195) to banking, insurance and investment funds (UCITS). Once agreed and implemented, the measures will produce real benefits by allowing greater and more detailed co-operation between supervisors and much greater convergence in day-to-day regulation and supervision.
The package would create four new committees. The first two, the European Banking Committee (EBC) and European Insurance and Occupational Pensions Committee (EIOPC) would like the European Securities Committee (ESC) for securities - assist the Commission in adopting implementing measures for EU Directives.
The EBC and EIOPC would replace the existing Banking Advisory Committee (BAC) and the Insurance Committee (IC). Meanwhile, responsibility for overseeing the implementation of EU law on collective investment funds - so-called UCITS - would be transferred from the UCITS Contact Committee to the existing European Securities Committee (ESC) and Committee of European Securities Regulators (CESR).