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Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels, 3 and 4 December 2007
(Amelia Torres, Maria Assimakopoulou, Oliver Drewes)

European Commission - MEMO/07/537   03/12/2007

Other available languages: none

MEMO/07/537

Brussels, 3 December 2007

Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels, 3 and 4 December 2007
(Amelia Torres, Maria Assimakopoulou, Oliver Drewes)

EUROGROUP (AT)

Eurogroup ministers will meet at 17:00 hrs on Monday 3 December. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs will attend. A press conference is expected to take place after the meeting.
Eurogroup ministers will hear the latest views of the International Monetary Fund on the economic outlook and policies of the euro area. These views will be outlined by Michael Deppler, IMF Director for Europe. They will then be discussed within the Eurogroup. Twice a year, the Eurogroup exchanges views with the IMF on euro-area policies. In the summer, this is done in the context of the so-called Article IV consultation. The autumn discussions are of a more informal nature. To see the IMF's Staff Report published in Summer go to:

http://www.imf.org/External/Pubs/FT/SCR/2007/cr07260.pdf

Ministers will also assess the economic situation and outlook since the Commission's autumn forecast of 9 November. Ongoing financial market turbulences as well as developments in oil prices, inflation and exchange rates are expected to be the main aspects of the discussion. In this context, ministers will review compliance with their commitments agreed at the 2005 informal Ecofin Meeting, in Manchester, that distortionary fiscal and other policy interventions that prevent the necessary adjustments to oil prices should be avoided. Ministers will also be debriefed on the recent visit to China by Eurogroup President Jean-Claude Juncker, ECB President Jean-Claude Trichet and Commissioner Almunia.

ECOFIN COUNCIL

The Council of Economics and Finance Ministers will start at 9.30 hrs on Tuesday 4 December. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, Internal Market and Services Commissioner, Charlie McCreevy, and Taxation and customs union Commissioner, Laszlo Kovacz. A press conference is expected to take place after the meeting.

Implementation of the Stability and Growth Pact: Poland (AT)

The ECOFIN Council is expected to endorse the European Commission's assessment of the action taken by the Polish authorities to correct the excessive deficit. The Polish authorities expect a deficit of 3% of GDP in 2007 and, according to the Commission’s autumn forecast, it may turn out even better thanks in part to higher economic growth. Consequently, no further steps are needed at present in the excessive deficit procedure of Poland. However additional efforts are necessary to make the correction durable after 2007. In line with the Commission assessment, the Council is expected to invite the new Polish government to take appropriate actions to offset the deficit-increasing measures adopted before the recent elections and to submit, as soon as possible, an updated convergence programme describing additional consolidation measures for 2008 and the following years. The Polish fiscal strategy should be geared towards the country's medium-term objective of a structural deficit of 1% of GDP.

See the Commission's assessment in IP/07/1769 and on following website:

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

Revised Strategy for Growth and Jobs: Multilateral Surveillance (AT)

Lisbon multilateral surveillance is carried out and reported annually by the Member States themselves in the Economic Policy Committee (EPC). Based on preparatory work by the EPC, the ECOFIN Council will adopt conclusions on progress with implementation of structural reforms in three policy areas: i) innovation and SMEs; ii) better regulation and competition; iii) labour markets.

The objective of the exercise is to sketch an early picture of progress made towards the Lisbon objectives, to feed into the Commission’s Annual Progress Report, expected on 11 December, and the Spring European Council conclusions, and to identify best practices and challenges in respective policy areas.
European Commission website on growth and jobs:

http://ec.europa.eu/commission_barroso/president/priorities/growth/index_en.htm

Globalisation : Capital and labour flows (AT)

Following up on their discussions at the November ECOFIN, ministers are expected to adopt conclusions on the economic impact of migration into the EU, as a contribution to the Heads of State for the European Council of December. Ministers are expected to underline the economic and fiscal dimensions of migration, in particular its role to increase growth potential and facilitate economic adjustment. Both highly and lower skilled migration can contribute positively to the dynamism of the EU economy. For the Commission it is important to stress that realising potential gains from immigration depends crucially on the success of integration of the immigrant population. Structural and labour market reforms are important to facilitate such integration. Also, national immigration policies have an impact beyond national borders, which need to be considered when designing migration policies and co-operation among Member States.

Financial Services (OD)

  • Directive on the solvency of insurance companies (Solvency II)

The proposal for a Directive on the solvency of insurance companies is a ground-breaking revision of EU insurance law designed to improve consumer protection, modernise supervision, deepen market integration and increase the international competitiveness of European insurers. Under the new system, known as 'Solvency II', insurers would be required to take account of all types of risk to which they are exposed and to manage those risks more effectively. In addition, insurance groups would have a dedicated 'group supervisor' that would enable better monitoring of the group as a whole.

An orientation debate will take place to take stock of the good progress made on this important proposal since it was tabled in July 2007.

  • Lamfalussy review

The launch of the Lamfalussy process in 2001 aimed at putting in place an efficient mechanism to begin converging European financial supervisory practice and enable Community financial services legislation to respond rapidly and flexibly to developments in financial markets. This four-level, comitology-based regulatory approach for financial services has been in place for more than five years in the securities sector and for more than two years in banking and insurance. The Council conclusions will take stock and indicate possible changes.

Ministers will be invited to adopt Council conclusions on the Lamfalussy review

  • Risk Capital

Risk capital investments have a critical role to play in promoting European growth and competitiveness. Member States should help removing obstacles in this area. In parallel, the Commission has developed a strategy aiming to ensure the best framework conditions for risk capital and to implement concrete projects aiming at improving its provision.

Ministers will be invited to adopt Council conclusions on risk capital

Taxation (MA)

  • Reduced VAT rates
  • The Portuguese Presidency will seek political agreement from the Council on the extension of certain derogations for reduced rates expiring at the end of 2007 or in 2008 and granted to Member States which joined the EU after 1 January 1995 (see IP/07/1017).
  • With regard to the broader debate for a comprehensive reform of the VAT reduced rates (see also IP/07/1017), the Presidency will try to reach Council conclusions that would guide the Commission legislative proposals on reduced VAT rates (expected in 2008).
  • VAT package

The Portuguese Presidency will seek political agreement on the overall package and in particular on the last remaining issue which is the change of the place of supplies for telecom, radio and television broadcasting and electronic services to final consumers (B2C).

The VAT package is composed of interlocking elements intended to establish clear cut rules for determining the place of taxation for services and minimizing regulatory burdens on business engaged in cross border trade.

  • two elements of the "VAT simplification proposal", namely the one stop shop (which aims to provide a simplified system for registration and declaration of VAT in Member States where a business is not established) and the simplified rules for the refund of value added tax to taxable persons not established in the territory of the country but established in another Member State;
  • the proposals concerning the place of supply for services both B2B (Business to Business) and B2C (Business to Consumers).
  • Capital duty Directive

The Portuguese Presidency will seek political guidance from the Council on the Commission's proposal for a recast of the Capital Duty Directive (see IP/ 06/1673). The Directive regulates the levying of capital duty and other similar indirect taxes on the contribution of capital to companies, for instance the contribution of share capital to a limited company. Today only seven MS continue to levy it.

  • Combating Tax Fraud

The Portuguese Presidency has suggested conclusions providing political guidance from the Council on the Commission's communication of 23 November 2007 (see IP/07/1754) aiming at improving the administrative cooperation in the fight against VAT fraud.

The Council is expected to adopt these conclusions which confirm the orientation of the work taken up at technical level.

The Commissions communication contains a number of key elements for improving Member States' capacity to tackle VAT fraud, in particular missing trader fraud (carousel fraud)

  • Code of Conduct on Harmful Tax Competition

The President of the Code of Conduct Group, Ms. Kennedy will report on the work undertaken under the Portuguese Presidency.

Some discussion is expected on the Group's future work program.


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