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MEMO/06/20

Brussels, 23 January 2006

Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels 23 and 24 January (Amelia Torres, Maria Assimakopoulou, Ferran Tarradellas Espuny)

Eurogroup

Eurogroup ministers will meet at 19:00 hrs on Monday 23 January. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs, and European Central Bank Governor Jean-Claude Trichet will attend.

The meeting will start with an exchange of views on the economic situation and policy stance.

Commissioner Almunia will inform that the euro area economy continued to experience robust growth in the last few months of 2005 and is likely to continue to do so in the beginning of 2006. GDP growth accelerated to 0.6% in the third quarter of 2005 compared to 0.4% in the second quarter. The Commission’s autumn forecasts predict 1.9% growth in 2006 (2.1% in the EU as a whole). Industrial production grew strongly (1.3%) in November and most business indicators improved in December suggesting a strengthening of the recovery. Employment grew by 0.3% in the third quarter of 2005, and the latest unemployment figures and employment expectation indicators suggest a sustained improvement in labour market conditions. The inflation rate fell to 2.2% in December. Core inflation was 1.4% in December, down from 1.5% in November.

Ministers will then review budgetary developments in euro area countries in particular those in excessive deficit procedure.

Ministers will also discuss the Commission’s recommendation of 11 January for a Council opinion on the updated stability programme of Finland ahead of its formal consideration by the Ecofin the following day. The Commission has praised Finland for continuing to plan for a comfortable budgetary surplus for the programme’s period of 2005-2009. Although the surplus has been revised down the risks attached to the budgetary targets appeared broadly balanced. (For more details see IP/06/18).

Ecofin council

The European Union's Council of Economics and Finance Ministers will start at 10.00 hrs on Tuesday 24 January. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, and Taxation and Customs Union Commissioner Lazlo Kovacs.

Application of the Stability and Growth Pact

  • Assessment of the updated stability and convergence programmes

The Council is expected to give its opinion on the first group of updated stability/convergence programmes on the basis of recommendations put forward by the Commission on 11 January for Finland, Czech Republic, Denmark, Slovakia and Sweden (for details on the Commission’s assessment see IP/06/18).

The next group of programmes will be examined by the Commission on the 1st of February and are expected to concern Austria, Belgium, Luxembourg, Estonia, Lithuania and Slovenia)

  • Application of the ongoing excessive deficit procedure

The Council is also expected to endorse the Commission opinion adopted last 11 January, in accordance with Article 104.5 of the Treaty, concerning the excessive deficit situation of the United Kingdom. The Council is also due to adopt the Commission recommendations under Article 104.6 and Article 104.7 of the Treaty (see IP/06/17 and

http://ec.europa.eu/economy_finance/about/activities/sgp/edp/edpuk_en.htm)

Preparation of the European Council (23-24 March 2006)

  • Lisbon Strategy – Communication Annual Progress Report

The Council wishes to have a discussion on the procedural follow-up of the first Annual Progress Report on the new Partnership for Growth and Jobs (the revised Lisbon Strategy). The Report itself will be adopted by the Commission on Wednesday.

  • Quality of Public Finances

Ministers will take stock of the reflection of both the Economic Policy Committee and of the Commission on the quality of public finances. While the Stability and Growth Pact focuses mainly on budgetary balance, it is necessary to pay greater attention to the quality of public spending with a view to increase public finances contribution to raising long-term growth and employment and to address the pressure resulting from an ageing population.

Taxation (MA) – VAT reduced rates

It is hoped that during this ECOFIN Council Ministers will find a common position on this file. Taking into account that the application of reduced rates to labour intensive services ended on 31 December 2005, it is an absolute necessity to find an agreement on this issue in order to avoid legal uncertainty.

The Commission will go to this meeting with an open mind and will do its best to help to reach a reasonable compromise.

In case of no agreement at ECOFIN the Commission, as guardian of the Treaties, will have to take the necessary measure in order to ensure that community law is applied in all Member States.

Energy (FTE)

The French finance minister has announced a contribution to the ongoing debate on Europe’s energy policy following ideas put forward by, among others, the UK at Hampton Court, the Austrian presidency and members of the European Parliament. These contributions will be taken into account in the Green Paper on European Energy Policy that the Commission will present at the March European Council. On Tuesday, Commissioner Piebalgs will also present the results of a Eurobarometer survey on the subject.


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