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Preparation of Eurogroup and Economic and Finance Ministers Council, Luxembourg 10 and 11 October (Amelia Torres, Jonathan Todd, Oliver Drewes)

European Commission - MEMO/05/359   10/10/2005

Other available languages: none

MEMO/05/359

Brussels, 10 October 2005

Preparation of Eurogroup and Economic and Finance Ministers Council, Luxembourg 10 and 11 October (Amelia Torres, Jonathan Todd, Oliver Drewes)

EUROGROUP

Eurogroup ministers will meet at 19:00 hrs on Monday 10 October. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs, and European Central Bank Governor Jean-Claude Trichet will attend.

Eurogroup ministers are expected to be debriefed on the G7 and IMF meetings on 23-24 of September in Washington since most of them do not attend.

Ministers will later resume their discussions on how to improve the external representation of the euro area so as to strengthen its voice and weight in international financial institutions. This issue was last discussed at the Eurogroup in May.

Before this, they are expected to have an exchange of views on the economic situation, in particular on recent developments in oil prices as well as measures taken in response.

Finally, Ministers are set to resume their discussion on growth differences and the particular issue of price and cost competitiveness adjustment across the euro area

ECOFIN COUNCIL

The European Union's Council of Economics and Finance Ministers will start at 10.00 hrs on Tuesday 11 October. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, Competition Commissioner Neelie Kroes and Internal Market Commissioner Charlie McCreevy.

A press conference is expected to take place at the end of the ECOFIN meeting.

Implementation of the Stability and Growth Pact (AT)

  • Application of the ongoing excessive deficit procedures

On 13 July 2005, the Commission adopted a communication concluding that Hungary had taken effective measures to comply with the Council recommendations regarding the correction of its budget deficit (IP/05/918).
However, the examination of the Commission conclusions was suspended pending the clarification of a number of statistical issues between Eurostat and the Hungarian authorities. Commissioner Almunia is expected to brief ministers orally on the results of these discussions ahead of a new re-assessment by the Commission later this month.

Economic regeneration of the West Bank and the Gaza Strip (AT)
Following up on the discussions in September and July, Commissioner Almunia will update on the Commission’s activities regarding support for Gaza and the West Bank following the withdrawal of Israel. In a recent communication (see IP/05/1224 of 5 October), the Commission set out a medium-term strategy to improve the political and economic viability in the region including the reconstruction of infrastructure and the improvement of the business environment and public finance management. The Commission has already made available a package of €60 million for launching quick-start projects, in the context of the rapid action plan that is to be presented by James Wolfensohn to the Quartet, which brings together mediators from the United States, the United Nations, the EU and Russia to help bring peace to the Middle East. This includes a €40 million facility for infrastructure. The total EU budget for Gaza-West Bank is around €280 million for 2005. The European Investment Bank also continues to look into possible projects in Gaza-West Bank. EIB President Philippe Maystadt is expected to brief ministers on the possible contribution by the EU’s lending institution.

EU-US Economic relationship – follow-up to the June Summit (AT-OD)

Following up to the June summit between the EU and the US, the Ecofin Council will discuss ways to improve their dialogue on macroeconomic and other issues of interest to finance ministers. The Summit declaration on this point says “the EU and the US would explore ways to improve our dialogue on macroeconomic and structural issues of common interest in ways that complement discussions in other fora such as the G-7”.

Commissioner Almunia will tell ministers of the Commission’s support for such a dialogue and intention to explore with the US authorities its possible scope and substance. It could address issues like current account imbalances, exchange rates issues, but also our structural reform agenda. Commissioner McCreevy will highlight the good progress that has been made in the EU-US financial markets relationship over the last years. The Commission has been intensifying its contacts with the US-Treasury, the Securities and Exchange Commission and the Federal Reserve. Since 2002 it has been meeting regularly on all levels in what has come to be known as the Financial Markets Regulatory Dialogue. Progress has been made in a number of difficult areas. A number of informal but nevertheless important regulatory understandings have been reached, for example on allowing auditor oversight bodies on both sides of the Atlantic to cooperate effectively and on the supervision of financial conglomerates. For the future, Commissioner McCreevy wants the agenda between the EU and the US to become more forward looking. He sees the transatlantic relationship as part of the Commission’s wider Better Regulation agenda: tackling existing wasteful regulation and making sure that additional such regulation is not proposed in future.

Sector Enquiries (JT)

At the request of the UK Presidency, Competition Commissioner Neelie Kroes will make a presentation on the two sector enquiries launched by the Commission in June (see IP/05/716 and IP/05/719). The enquires were launched in the financial services and energy sectors in the European Union to examine whether competition is working in these markets and whether markets are competitive enough to deliver their full benefits to consumers. In carrying out the sector inquiries, the Commission will work closely with market participants and Member State authorities. In the financial services sector, the Commission began its inquiries with an investigation into retail banking, and in particular payment cards. Inquiries into other aspects of retail banking and into business insurance will follow later in 2005. In the energy sector, the inquiry will examine inter alia reasons for recent energy price rises in gas and electricity. The main results of both inquiries will be published in 2006, but there will be an interim report on the energy sector inquiry at the end of 2005.

Financial Services (OD)

Capital Requirements Directive - agreement on first reading

The Council is expected to agree with the legislative resolutions passed by the European Parliament on 28 September, enabling agreement in one reading on this important proposal. It provides a new capital requirements framework for EU banks and investment firms suitable for the 21st century. The Commission presented its proposal in July 2004 (see IP/04/899, MEMO/04/178). The Directive will ensure the coherent application throughout the EU of the new international capital requirements framework agreed in 2004 by the Basel Committee on Banking Supervision (‘Basel II’). Rapid progress has been made under the UK Presidency and the results achieved demonstrate that Europe is capable of moving quickly and effectively to deliver positive benefits. Commissioner Charlie McCreevy will encourage the Council to proceed rapidly with the next important step - to get this piece of legislation implemented in a coherent way across Europe.

Directive on Statutory Audit - agreement on first reading

The Council is expected to agree with the legislative resolutions passed by the European Parliament on 28 September, enabling agreement in one reading on this important proposal, which provides for a modern pan-European legal framework for the conducts of statutory audits. The Commission presented its proposal in March 2004 (see IP/04/340, MEMO/04/60). The Directive's objectives are to restore credibility of financial reporting and to enhance the EU protection against the type of scandals that occurred in the past at companies such as Parmalat and Ahold.

Financial Services - Post-FSAP: Council conclusions

The Council is expected to agree on conclusions on the priorities of the future financial integration strategy by broadly endorsing the approach as set out in the Commission’s Green Paper on Financial Services Policy (2005-2010) which was published in May this year. The Council is expected to conclude that the Financial Services Action Plan (FSAP) has been successful so far and will increase integration in EU financial markets.

Commissioner McCreevy will explain that he expects to present the Commission’s Final Policy Programme on the financial services policy for the next 5 years in the form of a White Paper, which will be published in November. In the coming 5 years there will only be a limited number of well-targeted new initiatives; focusing on three areas: investment funds, retail financial services and (possibly) clearing and settlement. The White Paper will fully take into account all views expressed so far by all stakeholders and that the Council conclusions will be extremely important in this context. The Commission’s approach to Better Regulation is clearly one of the priorities of the push for “Growth and Jobs”. Commissioner McCreevy will emphasise that Better Regulation is a shared responsibility and explain his appreciation for the fact that earlier commitments made by Council: to improve the quality of Community legislation are being honoured, Council will produce impact assessments when tabling substantive amendments to Commission proposals.

Exchange of views with the Chairs of CESR, CEIOPS and CEBS

The Ecofin Council will meet with the Chairmen of the three level-3 Lamfalussy Committees: Arthur Docters van Leeuwen (Committee of European Securities Regulators), Jose-Mariá Roldán (Committee of European Banking Supervisors) and Henrik Bjerre-Nielsen (Committee of European Insurance and Occupational Pensions Supervisors) to discuss progress and opportunities for better regulation in the supervisory field.

The integrating European capital market increases demands on supervisors from all three sectors. To guarantee efficient supervision and financial stability, supervisors have to cooperate closely and apply rules in a consistent manner. Commissioner McCreevy will underline the importance of creating a level playing field in Europe and reducing the regulatory and supervisory burdens for internationally active firms – which are currently too high. More streamlined supervisory standards and powers are needed to carry out effective supervision of financial groups with cross-border activities. In the coming years, the three Committees of European Supervisors will play a crucial role in the process towards convergence of supervisory practices and more unified European regulatory culture.


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