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Preparation of Eurogroup and Informal Economic and Finance Ministers Council, Porto 14 and 15 September

European Commission - MEMO/07/354   13/09/2007

Other available languages: none

MEMO/07/354

Brussels, 13 September 2007

Preparation of Eurogroup and Informal Economic and Finance Ministers Council, Porto 14 and 15 September

EUROGROUP (AT)

Eurogroup ministers will meet at 8:30 hrs on Friday 14 September. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs will attend as will European Central Bank Governor Jean-Claude Trichet. Finance Ministers from Cyprus and Malta will also attend as observers. A press conference is scheduled to take place after the meeting.
Eurogroup ministers will discuss the revised economic outlook for the euro area on the basis of the latest interim forecast, released by the Commission on 11 September (see IP/07/1295). According to the revised forecasts, economic activity in the euro area is expected to hold up firmly in 2007, with GDP growth forecast at 2.5%. This is 0.1 pp. below the spring forecast, partly due to weaker than expected GDP growth in the second quarter and a more cautious second half of the year as tighter financing conditions weigh on growth. The inflation outlook has been revised upwards slightly to 2% this year, mainly reflecting expectations of higher commodity prices. A pick-up in labour productivity, well behaved wage-inflation and intense international competition should contribute to keep inflation in check. Overall, the economic fundamentals of the euro area economies remain essentially sound. This will help cushion the impact of the financial market turbulence while downside risks to the outlook for 2008 have clearly increased.

Eurogroup Ministers are also expected to resume their discussion on the French medium-term budgetary review which, following the change in government, was on the agenda in July when President Sarkozy joined the group. In the Commission Spring forecast (see IP/07/615), based on unchanged policies, the budget deficit was expected to fall to 2.4% of GDP in 2007 and 1.9% in 2008.
With less than five months to go before Cyprus and Malta adopt the euro, Eurogroup Ministers will take stock of the current state of preparations in the two countries. In its last report on the practical preparations for the introduction of the euro, on July 16, the Commission had concluded that Cyprus had made good progress but should speed the preparations while work in Malta was well advanced (see IP/07/1073). The Ecofin Council agreed in July that Cyprus and Malta fulfilled the criteria and could adopt the adoption the euro on 1 January 2008 (see IP/07/1040).

ECOFIN COUNCIL

The Informal Council of Economics and Finance Ministers will start around 13:00 hrs with a working lunch on Friday 14 September. The afternoon session will start at 15:00 hrs. and should run to 18:00 hrs. The meeting will continue the following morning, Saturday 15 September, from 9:00 hrs to 12:30 hrs. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia and Internal Market Commissioner Charlie McCreevy. A press conference is expected to take place at the end of the meeting.

Institutional aspects of the quality of public finances (AT)
Continuing EU Finance Ministers' ongoing work on the quality of public finances, the Portuguese Presidency has proposed the modernisation of public administration as the main topic for discussion. Ministers are invited to share experiences with regard to improving the performance and accountability of the public sector as well as to stimulate overall economic competitiveness. The Commission considers that efficient and modern national public administrations are a crucial component for the conduct of sound budgetary policies in line with the principles of the Stability and Growth Pact and for delivering higher growth and more jobs.

Economic situation and financial stability (AT--OD)

The Ecofin ministers will discuss the outlook for the European economy on the basis of the latest interim forecast (see IP/07/1295). The outlook for the EU economy has been slightly revised downwards compared to the spring forecast. This is mainly the result of a weaker than expected GDP growth in the second quarter, possibly reinforced by current uncertainties stemming from the recent turbulence in financial markets. GDP growth in 2007 is forecast at 2.5% in the euro area and 2.8% in the EU, thus only 0.1 pp. below the spring forecast. Despite the heightened risks related to the financial market turmoil, economic fundamentals of the EU remain solid and the region should, therefore, be capable of weathering the current uncertainties. However, downside risks have increased, not least due to the uncertainties related to the US outlook and the increased financial markets volatility. More generally, ministers are expected to discuss lessons to be drawn from the recent turmoil on financial markets as well as crisis management and EU financial stability arrangements. For a preliminary analysis of the financial turbulence and its impact on the real economy see Commissioner Amunia's intervention at the European Parliament on 5 September on (SPEECH/07/507) as well as this week's interim forecasts http://ec.europa.eu/economy_finance/index_en.htm

Developing EU arrangements for financial stability (AT-OD)

Ministers and Governors will also discuss EU financial stability arrangements in the context of the ongoing process of financial integration. Last September in Helsinki, they agreed on further work on the management of cross-border financial crisis and the discussion today will focus on the conclusions of this work and possible course of future action in light also of the recent turbulence in the financial markets.

Clearing and settlement (OD)

Commissioner McCreevy will give an overview of where European post-trading is currently standing.

Third Euro-Med ECOFIN Ministerial (AT)

On Saturday afternoon, after the Ecofin meeting, EU finance ministers will meet with their colleagues from the Southern Mediterranean rim to discuss ways to achieve higher sustainable growth and create more jobs in the Mediterranean. The Euro-Med partners are Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia and West Bank and Gaza. Turkey is also represented. The 3rd Euro-Med ministerial meeting will share experiences on public finance and economic reforms as well as on building efficient financial markets.

For background on Euro-Mediterranean relations see Commission website: http://ec.europa.eu/external_relations/euromed/conf/index.htm
Information on recent economic developments in the European Neighbourhood Partner countries, in particular in the Mediterranean countries, can be found in:

http://ec.europa.eu/economy_finance/publications/occasional_papers/2007/occasionalpapers30_en.htm


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