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Preparation of Eurogroup and Economic and Finance Ministers Council, Luxembourg 8 and 9 October

European Commission - MEMO/07/400   08/10/2007

Other available languages: none

MEMO/07/400

Brussels, 8 October 2007

Preparation of Eurogroup and Economic and Finance Ministers Council, Luxembourg 8 and 9 October

Eurogroup

Eurogroup ministers will meet at 17:00 hrs on Monday 8 October. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs, and European Central Bank Governor Jean-Claude Trichet will attend. A press conference is expected to take place at the end of the meeting.
In the context of an increasingly integrated world economy, Eurogroup Ministers will exchange views on the euro area trade performance since the beginning of the decade. For some background on the subject, consult the Quarterly Report on the Euro Area, of 5 July, which had a section on the effect of the euro appreciation on domestic prices and the trade performance:

http://ec.europa.eu/economy_finance/publications/quarterly_report_on_the_euro_area_en.htm

Eurostat also publishes monthly figures on trade, including on the euro area with its main trading partners. On the occasion of recent summits between the EU, on the one hand, and the United States and Japan, on the other hand, it also published press releases on the evolution of trade with the two partners since the beginning of 2000 (see Eurostat 72/2007 of May 31st for Japan and 57/2007 of April 27 for the US). A similar press release is expected on EU trade with China ahead of the EU-China summit of 28 November, 2007. But the monthly trade releases can also be consulted in the meantime.
Ministers will also discuss the economic situation and other relevant subjects, with a view to adopting a common approach for the G7 meeting on Oct 19 and the Annual Meeting of the International Monetary Fund and World Bank on October 20-21, in Washington. For background on the economic situation see the last Quarterly Report on the Euro Area published October 4 (same weblink as above) and the Interim Forecasts of September 11:

http://ec.europa.eu/economy_finance/about/activities/activities_keyindicatorsforecasts_en.htm

With respect to budgetary surveillance, ministers will take a look at budgetary developments, including the 2008 draft budgets that have been presented since they met a month ago, in Porto.
Finally, ministers will have an exchange of views on progress to reform labour markets to increase the growth potential of the euro area economy and to make economic adjustment in EMU more efficient. Labour market reforms have been identified as one of the priorities for the euro area as a whole in the specific Integrated Guidelines adopted for the euro area at the beginning of the year. The guideline specifically invites governments to improve flexibility and security of labour markets by aligning wage and productivity developments, and enacting measures to promote labour mobility across borders and between occupations. This will be the first follow-up discussion to stake stock of the progress on one of the euro area recommendations. For the euro area Integrated Guidelines, which are part of the Lisbon Strategy for Growth and Jobs go to:

http://ec.europa.eu/growthandjobs/index_en.htm

Ecofin Council

The European Union's Council of Economics and Finance Ministers will start at 9.30hrs on Tuesday 9 October. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, and Internal Market Commissioner Charlie McGreevy. A press conference is expected to take place at the end of the ECOFIN meeting.

Economic situation (AT)
Over breakfast, Ministers will discuss the outlook for the European economy. The Commission's analysis is that whilst the downside risks have increased, overall economic fundamentals remain solid in the European economy. The world economy is expected to remain fairly robust despite the slowdown in the US thanks to dynamic growth in emerging market economies, which have been little affected by the ongoing market turbulence so far. Stability-oriented macro-economic policies are of the essence, in this context, to continue to promote the environment for structural reforms and, ultimately, for growth and jobs.

Implementation of the Stability and Growth Pact (AT)

  • Abrogation of the excessive deficit procedure for the United Kingdom

The Council will discuss the public finance situation in the United Kingdom, and is expected to endorse the Commission's recommendation to abrogate the Excessive Deficit Procedure (EDP), which had been initiated in September 2005 on the basis of a general government deficit of 3.2% of GDP in 2004/05 (subsequently revised upward to 3.4%) (see IP/07/1303). In the financial year 2006/07, the United Kingdom's general government deficit decreased to 2.7% of GDP from 3.2% in 2005/06. The structural balance also improved by 0.7% of GDP, in line with the structural adjustment of at least 0.5% of GDP recommended by the Council in January 2006. General government debt has increased in recent years, but it remains well below 60% of GDP. Although the projected retrenchment of the deficit during 2007/08 and 2008/09 cannot be considered ambitious, it nevertheless suggests that the excessive deficit has been corrected in a durable manner.

  • Application of the ongoing excessive deficit procedure (Czech Republic)

The Council is due to adopt a new recommendation confirming the original deadline of 2008 for the correction of the excessive deficit in the Czech Republic. The recommendation follows a Council opinion, of 10 July 2007, which stated that the Czech Republic was not on track to correct its excessive deficit by 2008 based on the Commission's assessment of its latest convergence programme of March 2007. Following the adoption of the Council opinion, the Czech Republic has taken measures to reduce the excessive deficit by 2008. The stabilisation package of the new government, passed by the Chamber of Deputies on 21 August 2007, aims to significantly reduce overall expenditure (seeIP/07/1304). The budget for 2008, adopted by the government on 3 September 2007, targets a deficit of below 3% of GDP for 2008, with further consolidation planned for 2009 and 2010. Growth in the Czech economy is much stronger than forecast when the Czech Republic entered the EU and the deadline for the correction of the deficit was set. Hence, there continues to be ample opportunity to consolidate public finances.

Public finances in EMU – improving the effectiveness of the preventive arm of the Stability and Growth Pact (AT)

Based on the Commission Communication of 13 June 2007 (see IP/07/811), Ministers will discuss ways to ensure the effectiveness of the preventive arm of the Stability and Growth Pact. They are expected to adopt respective conclusions, underlining the importance for Member States to make rapid progress towards sustainable fiscal positions.

Quality of Public finances – the modernisation of public administration and its impact on expenditure control and competitiveness (AT)

As a follow up to the very good exchange of experiences with modernising public administrations at the informal ECOFIN, Ministers will discuss the way forward. In Porto, Ministers acknowledged the relevance of the modernisation of public administration for both expenditure efficiency and overall competitiveness. The ECOFIN will look for a follow up in terms of regular analysis and exchange of best practices. Reforms to modernise public administrations can contribute to meet the objectives of both the Stability and Growth Pact (SGP) and the Lisbon Strategy.

Financial markets situation: follow-up actions (OD-AT)

Also following up to the informal discussion in Porto, ministers will pin point the key issues to be addressed to enhance transparency, improve valuation standards and reinforce the prudential framework and supervision in the financial sector without forgetting the role of the rating agencies.

Better regulation – Improving competitiveness (TvL)

The Council will discuss the issue of Better Regulation, and in particular the progress made with the reduction of administrative burdens in the EU. This is a follow-up to the 2007 Spring European Council that fixed a joint target of reducing administrative stemming from EU legislation and its transposition by 25% in 2012. Based on a text prepared by the Economic Policy Committee and agreed by the Economic Financial Committee, the ministers of Economy and Finance are expected to adopt a set of council conclusions.

In January 2007, the Commission presented an Action Programme for Reducing Administrative Burdens by 25% in 2012. The Action Programme was endorsed by the March 2007 European Council, including the target to reduce the administrative burden arising from EU legislation and its transposition by 25% by 2012. At the same time, the European Parliament and the Council were invited to assign priority to adopting a list of 10 fast track actions in a fast and efficient manner. Member States were also invited to set their own national targets of comparable ambition within their spheres of competence by 2008.

Flexicurity – Economic aspects (KvS)

The Council will discuss the Commission Communication on 'Flexicurity' issued in June 2007 (see IP/07/919). Flexicurity is an integrated strategy to enhance, at the same time, flexibility and security in the labour market. It is seen as a way to make people more adaptable to changing labour market conditions while guaranteeing access to support when really needed. An efficient system of integrated, individualised, active and passive policies and an effective life-long learning and educational system are key in providing this support. Ministers are expected to express their broad support to the flexicurity principles. The Commission will underline the following aspects:

  • Reforms inspired by the flexicurity approach should be financially sustainable. Reforms of the tax and benefits should strengthen the eligibility criteria and the job-search conditionality, along the "rights and duties" principle, while providing appropriate support during temporary periods of unemployment.
  • Since Member States differ in their institutional set up, policies inspired by the flexicurity approach should take into account the country-specific configurations, as there is no one-size-fits-all measure.

Dialogues with Third Countries: economic, financial and regulatory aspects (AT / OD)

The Commission will inform Ministers on the ongoing macroeconomic and financial bilateral dialogues with strategic partners of the EU. The macroeconomic dialogues and the financial regulatory dialogues, which are respectively conducted by the services of Commissioner Almunia and Commissioner McCreevy, complement each other. Dialogues with the US (on financial and regulatory issues), Japan, China, Russia, and India are well established. The possibility of launching macroeconomic dialogues with Brazil and South Africa are being explored. The Commission will stress the importance of these bilateral dialogues for strengthening contacts and building trust with key partners, which allows addressing also delicate political issues, including exchange rate policies.

Investment in the Mediterranean region (AT)

Over lunch, ministers will discuss the issue of investments in the Mediterranean area. This will also cover coordination and enhancement of the different European financial instruments and relation and coordination with the EIB and other bilateral and multilateral financial institutions active in the region.

Investments needs in the Mediterranean countries for both infrastructure and productive sector are estimated to be very substantial. For example, for water supply and sanitation alone, priority projects in the Southern Mediterranean countries total €7 billion. EU support to the region is granted, through the EU grant budget by the European Neighbourhood and Partnership Instrument (ENPI) and, through loan and grant resources of the FEMIP (Facilité Euro-Méditerranéenne d'Investissement et de Partenariat), of the European Investment Bank. The FEMIP was reinforced in 2006 (see: IP/06/1469 of 25 October 2006). These instruments will mobilise some €18 billion in financing for the region over 2007-2013. This will contribute to match part of the needs but further investments are necessary. It is important to leverage additional resources from the Member States.

Financial Services (OD-AT)

  • Clearing and Settlement (OD)

Ministers are expected to adopt conclusions on clearing and settlement, relating to ongoing initiatives to achieve competitive, efficient and safe pan-European post trading arrangements.

  • EU arrangements for Financial Stability (OD-AT)

Ministers are expected to endorse conclusions on EU financial stability arrangements following work carried out by the Economic and Financial Committee since September 2006. It sets out the need for further cooperation among Member State authorities as financial integration advances. The conclusions include a working program.


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