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MEMO/05/466

Brussels, 5 December 2005

Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels 5 and 6 December (Amelia Torres, Oliver Drewes, Gregor Kreuzhuber, Maria Assimakopoulou, Friso Roscam Abbing, Ferrán Tarradellas)

EUROGROUP

Eurogroup ministers will meet at 19:00 hrs on Monday 5 December. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs, and European Central Bank Governor Jean-Claude Trichet will attend.
The meeting will start with a presentation by International Monetary Fund Director Michael Deppler, followed by an exchange of views, of the Fund’s interim mission to the euro area. The Fund follows the economic and monetary developments of the euro area since its creation (so-called Art IV mission). Its latest (June) Concluding Statement can be seen at:

http://www.imf.org/external/np/ms/2005/052905.htm

Ministers will then have a more in depth discussion on the economic situation and recent developments, also in the light of the Commission autumn economic forecasts published last 17 November (IP/05/1436). Xavier Musca, who replaced Caio Koch-Weser as President of the Economic and Financial Committee at the end of November, will present the views of the EFC on this issue.

Eurogroup ministers are expected to be debriefed on the G7 which took place last 3 and 4 December in London.

Commissioner Almunia will also inform about the implications of the Commission autumn economic forecasts for budgetary surveillance. Ministers will have an exchange of views on the assessment of the situation and possible next steps.

Finally, Ministers will review the main work priorities for the Eurogroup in the coming months.

ECOFIN COUNCIL

The European Union's Council of Economics and Finance Ministers will start at 10.00 hrs on Tuesday 6 December. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, , Internal Market Commissioner Charlie McCreevy, Taxation and Customs Union Commissioner Lazlo Kovacs and Energy Commissioner Andris Piebalgs.

Economic reform

  • Responding to the challenges of Globalisation (AT)

Following the informal ECOFIN in Manchester of September 2005, the Council will hear about the policy measures necessary to respond to the challenges raised by globalisation. The measures are aimed at increasing labour market flexibility through further reforms, equipping individuals to move into new jobs; completion of the Internal Market including in relation to services; further regulatory reform; and greater external openness to trade. The Economic Policy Committee has provided a report and the Commission has also recently addressed the issue in its EU Economy 2005 Review, see press IP/05/1461 and full review on

http://ec.europa.eu/economy_finance/publications/european_economy/the_eu_economy_review2005_en.htm.

  • Report on Lisbon National Reform Programmes (GK)

The Council will take stock of the advancement in the Lisbon Strategy for Growth and Jobs, following the submission by the Member States of the national reform programmes. The Commission intends to adopt a annual progress report on the subject next January. ( IP/05/1491).

Regulatory Reform (GK)

Ministers will continue their work regarding the simplification of the EU’s regulatory on the basis of a paper by the UK, Austria and Finland. The Commission has given a high priority to better regulation and put forward an ambitious work plan in a Communication of March 2005 entitled ‘Better regulation for Jobs and Growth’
(see IP/05/311). The Commission has subsequently launched a programme for simplification of existing regulation, carried out the screening exercise of pending legislation and adopted a methodology for the measurement of administrative costs (see IP/05/1343).

Taxation (MA)

  • Value Added Tax (VAT) reduced rates

Ministers are due to continue their discussions with the aim of reaching a political agreement on reduced rates of VAT.

Commissioner László Kovács will welcome the UK Presidency compromise text on this subject which will form the basis of the discussion. He will state that the Commission will support an agreement along the lines of this text which goes some way towards providing a balance between the positions of those Member States pressing for more national flexibility in this area and those that wish to restrict the scope of reduced rates across the EU. The compromise also aims at improving equal treatment of all Member States. Above all it would be better than the absence of any decision before the end of the year. The absence of any decision will mean that the reduced rates of VAT currently applicable to specified labour-intensive services such as renovation of private dwellings, hairdressing, window-cleaning and small repairs will expire at the end of the year (see IP/03/1693).

The Commission could accept the Presidency's ideas that local services, as restaurant services, housing, domestic care services or small repair services, to be included in Annex H of the 6th VAT Directive and thereby be allowed a reduced VAT rate ( where Member States so choose). However, as the risk of creating distortions of competition is high, and given the strong objections of a number of delegations and of the Commission itself, the Commission will support the Presidency that no additional goods should be allowed a reduced VAT rate. The Presidency Proposal would also provide for an extension of the transitional derogations authorising the new Member States to apply reduced VAT rates in specific circumstances. These derogations will otherwise expire between 2007 and 2008 although those applicable to certain older Member States are not time-limited.

The Commission presented a proposal in July 2003 for simplifying and rationalising the rules on reduced rates of VAT (see IP/03/1024 and MEMO/03/149).

Company taxation: Report of Code of Conduct Group (MA)

The Council is due to have a discussion on the bi-annual report that the Code of Conduct Group (Business Taxation) provides on the implementation by EU Member States of rollback and standstill in the business tax area. The Code of Conduct that the Council formally implemented as part of a tax package in 2003 (see IP/03/787) requires Member States to refrain from introducing any new harmful business tax measures ("standstill") and amend any laws or practices that are deemed to be harmful in respect of the principles of the Code ("rollback"). The Code covers tax measures (legislative, regulatory and administrative) which have, or may have, a significant impact on the location of business in the Union.

Financial Services (OD)

  • Post-FSAP

Commissioner McCreevy will present Ministers with his priorities for financial services policy for the next 5 years. These priorities are included in the Commission's White Paper on Financial Services Policy (2005-2010) published on 5 December 2005. (IP/05/ _). Although much progress has been made through the successful completion of the Financial Services Action Plan (FSAP), the Commission has concluded that the EU financial services industry (banking, insurance, securities, asset management) still has strong untapped economic and employment growth potential. The new strategy explores the best ways to effectively deliver further benefits of financial integration to industry and consumers alike. Priority No 1 is to dynamically consolidate progress and ensure sound implementation and enforcement of existing rules. No 2 is to drive through the better regulation principles into all policy making. No 3 is to enhance supervisory convergence. No 4 is to create more competition between service providers, especially those active in retail markets. No 5 is to expand EU's external influence in globalizing capital markets. The new strategy closely parallels the earlier consultative Green Paper, published on 3 May 2005 (IP/05/527), which was strongly supported by the ECOFIN Council in its conclusions on 11 October 2005 and received broad support from all stakeholders

Action on Combating Terrorism

  • Update on the EU Plan of Action Plan (FRA)

Since the terrorist outrage which struck Madrid and the European Union as a whole on 11 March 2004, the EU’s counter-terrorism efforts have been guided by a regularly updated Plan of Action on Combating Terrorism. In this respect, very strong progress has been made in the counter-terrorism field over the last six months, showing true commitment and perseverance in the EU’s ambitious and multidimensional fight against terrorism.

Concerning the prevention of terrorism, the Commission has contributed to the development of an EU strategy on violent radicalization and terrorist recruitment and has put forward several instruments to help disrupt terrorist financing. In the protection field, new tools to help increase the security of critical infrastructures in Europe and stemming the misuse of explosives and detonators have been put forward. The prosecution of terrorists is crucial for the long-term success over terrorism and the Commission has developed several mechanisms which can make this process more efficient including a proposal concerning the “principle of availability” and the retention of telecommunication data. Finally, the response to terrorism must be swift, coordinated and efficient. With this in mind the Commission has been developing a true crisis management capacity in the form of the ARGUS system.

The second half of 2005 has witnessed formidable progress on the issues identified in the Action Plan and in the Council Declaration of 13 July 2005. The Commission is committed to combating terrorism in all its forms and will continue working fulltime and overtime in order to get the job done.

Oil market and related energy issues (FT)

Commissioner Piebalgs will report of the situation in the oil market and on the measures the Commission has taken since last September, when it announced a five point plan. The five areas for action were:1) increasing transparency and predictability of oil markets, 2) increasing the supply of oil and gas, 3) greater energy efficiency; 4) developing other forms of energy; 5) further developing the dialogue with oil producing countries. Furthermore, the Commissioner will inform the Council on the forthcoming Green Paper on a European energy policy, which is a direct response to the call by the Heads of State and Government in Hampton Court for a reinvigorated European energy policy."


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