Brussels, 21 January 2008
Eurogroup ministers will meet at 17:00 hrs on Monday 21 January. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs will attend as will European Central Bank Governor Jean-Claude Trichet. A press conference is expected to take place after the meeting.
Eurogroup ministers will first have a discussion on the working programme for the first six months of 2008. They will then turn to the adoption of the euro in Cyprus and Malta on the 1st of January this year. They will hear presentations by Ministers Michalis Sarris (Cyprus) and Lawrence Gonzi (Malta), who have attended Eurogroup meetings since the euro adoption decision was taken by ECOFIN in July 2007 (for background on changeover details see below ECOFIN agenda).
Ministers also discuss the evolution of the economic situation and outlook since they last met in early December. Euro area industrial production fell in November by 0.5% compared to October. Compared to November 2006 it increased by 2.7%. Industrial confidence, as measured by the European Commission, has lost four points since last summer. In December, the PMI index for both manufacturing and services suggested a decline, confirming a slowing of both industrial and service activity.
Euro-area inflation came in at 3.1% in December for the second month in a row, due to a surge in the food component and more moderate energy price increases. Core inflation paused at 2.3%. Oil prices are about 17% higher in dollar terms and 12% in euro terms than expected in the autumn forecast, pushed up by limited spare capacity, robust demand from emerging economies and continued geo-political and supply risks in several oil-producers countries.
Moving to financial developments, stock markets remain very volatile and tumbled again in the course of last week, particularly in Asia. The euro has continued to appreciate vis-à-vis most currencies. The real effective exchange rate of the euro has appreciated by another 2½% since the finalisation of the forecast and more than 5% over the last twelve months.
Publication of the next Commission's Interim Forecast is foreseen for 21 February and will give an update of the outlook for growth and inflation.
Ministers will also prepare a common position for the 9 February meeting
of G7 finance ministers, in Tokyo.
Ministers will proceed with an orientation debate on the conclusions related to the euro-area dimension of the Commission's Annual Progress Report on the Lisbon Agenda and the revised text accompanying the Integrated Guideline No 6, which focuses on the functioning of the euro area. Progress was made in terms of budgetary adjustment in 2007, the implementation of legislation to foster financial market integration, and rendering wage bargaining systems more conducive to wage flexibility in some Member States. The Commission believes that significant further reforms are necessary to fulfil the micro-economic and employment recommendations. Looking ahead, the progress recorded in 2007 concerning budgetary consolidation needs to be sustained (for Commission analysis see IP/07/1892 of 11 December 2007). The Council will adopt the final version of the Integrated Guidelines after the Spring European Council
The Council of Economics and Finance Ministers will start at 10.30 hrs on
Tuesday 22 January. The European Commission will be represented by Economic and
Monetary Affairs Commissioner Joaquín Almunia and by Internal Market and
Services Commissioner Charlie McCreevy. A press conference is expected to take
place after the meeting.
The ECOFIN meeting will start with a breakfast to which the Slovenian Presidency has invited Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, to exchange views on the IMF quota review and budgetary framework.
Slovenian Presidency Work Programme
Ministers will have a debate following the presentation of the work programme of the Slovenian presidency for the first half of 2008. This point will be shown live on closed-circuit television (EbS).
Introduction of the euro in Cyprus and Malta (AT)
On 1 January 2008 the euro area enlarged to 15 EU Member states with the accession of Cyprus and Malta which followed Slovenia in 2007. Nowadays 320 million EU citizens out of the total of 490 million are using the euro. The euro has quickly become Malta's and Cyprus's currency. All available data suggest that the changeover was very smooth, quick and successful. The period of dual circulation extends from 1 – 31 January 2008 in both countries. The Commission is closely monitoring the changeover process in both countries and will provide a full assessment to the Ecofin of 12 February (see IP/08/1 – IP/08/2- IP/08/6 – IP/08/18 – IP/08/36 ).
Preparation of the European Council (13-14 March 2008)
With a view to spur structural reform against the background of a rapidly changing global economy and the effect of population ageing taking hold, Ministers will have a first overview debate on the Commission's Lisbon Package.
On 11 December 2007 the European Commission adopted a single "Strategic Report" package on the renewed Lisbon Strategy for growth and jobs agreed at the 2005 Spring European Council. It concluded that three years after it was re-launched, the strategy is working. The report demonstrates that the Lisbon Strategy is contributing to the recent much improved performance of the EU economy. Structural reforms are also starting to raise potential future growth, improving the long-term prospects for prosperity. However, some Member States have responded more robustly than others and some signs of "reform fatigue" have become apparent over the last twelve months. Europe will need to press ahead with further economic reforms at both Community and national level in the next cycle of the Lisbon Strategy to help it weather the impacts of global financial turmoil and higher commodity prices. The report sets out a series of new policy initiatives to respond to this challenge and to reinforce Europe's efforts to shape and respond to globalization (see see IP/07/1892).
The "Strategic Report" package consists of several elements: a Communication from the Commission to the European Council on launching the new Lisbon cycle, a proposal for an update of country-specific recommendations and "points to watch" targeting individual Member States, a proposal for an update of the Integrated Guidelines and a proposal for a new Community Lisbon Programme. The ECOFIN Council meeting will discuss the Commission's proposals, and their discussions will feed into the agreement that will be reached on the new cycle at the forthcoming Spring European Council.
The renewed Lisbon Strategy for growth and jobs agreed at the 2005 Spring European Council introduced a three-year cycle. The first three-year cycle (2005-08) ended at the beginning of 2008. At the end of the cycle, progress with structural reform in the Member States is supposed to be reviewed and necessary adjustments made to the Strategy's underlying instruments: notably the Broad Economic Policy Guidelines and the Community Lisbon Programme. The point of the exercise is to improve the Strategy's performance in the next cycle by comparison with the one that has just ended.
In the same vein, and in preparation of the 2008 Spring European Council, the ECOFIN Council will express its general views on the draft Key Issues Paper prepared by the Slovenian Presidency. The Paper should provide the broad strategic outlines for ECOFIN work over the next year. The Slovenian draft highlights the importance of implementing structural reforms in the Member States, welcomes the Commission's Strategic Report, stresses ECOFIN's commitment to ensuring full implementation of the Stability and Growth Pact, devotes significant attention to the efficiency and stability of the EU financial system, and acknowledges the key role played to European integration by EMU.
In November 2007 the European Commission set out a package of initiatives to modernise the European single market and to bring more benefits to Europeans, building on past successes. The single market has already helped create competitive companies, reduced prices, more choice for consumers and a Europe attractive for investors. They will ensure that the single market does even more to take advantage of globalisation, empower consumers, open up for small businesses, stimulate innovation and help maintain high social and environmental standards. Among the most important policy actions set out in the single market package are initiatives to: help consumers to exercise their contractual rights and get redress across borders; provide better information for consumers and small businesses; respond to weaknesses in sectors where the single market should deliver more; propose a Small Business Act; and introduce a "researcher passport"; and clarify how EU rules apply to services and social services of general interest; and promote the quality of social services across the EU. Ministers are expected to adopt conclusions on the "Single market review" An important chapter of the conclusions is dedicated to Commission initiatives to improve the competitiveness and efficiency of European retail financial services markets, which should lead to concrete benefits for consumers and businesses alike.
Financial Services (OD)
The Single Euro Payments Area (SEPA) is an initiative of the European banking industry that will make all electronic payments across the euro area – e.g. by credit card, debit card, bank transfer or direct debit – as easy as domestic payments within one country are now. The proposed Payment Services Directive is intended to provide the necessary legal framework for SEPA, as well as for better payments in all EU countries. On a practical level, SEPA means that you will be able to make fast and secure transfers between bank accounts anywhere in the euro area, while if you are shopping abroad you will be able to use your bank debit card to make a payment in euro, just like at home.SEPA will also help to improve all payments, whether they are domestic payments or cross-border payments between two euro area countries. All consumers will benefit from new rules ensuring transparent pricing and prompt transfer. Ministers are expected to adopt conclusions on the Single Euro Payments Area. The conclusions call for a rapid and smooth migration to SEPA, and encourage public authorities to be early adopters of SEPA payment instruments, subject to the principle of non-deterioration compared to existing schemes.