Brussels, 13 May 2008
Eurogroup ministers will meet at 17:00 hrs on Tuesday 13 May. 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.
The meeting is expected to start with a presentation by Commissioner Almunia of the Commission Spring forecasts published on 28 April (see IP/08/649). Ministers will then discuss the economic situation, including the latest developments in exchange rates and prices. The recent decline in business and consumer survey results is in line with the Spring forecast. The weaker economic outlook follows from continued distress in the financial markets, a marked slowdown in the US, soaring commodity prices and a resulting cooling of global growth. According to Eurostat’s flash estimate, HICP inflation was 3.3% in April, down from 3.6% in March.
The ministers will also be presented, and are expected to provide first reactions and comments to, the Commission Communication on EMU@10: Successes and challenges of nearly 10 years of Economic and Monetary Union.
As has become usual at this time of the year, ministers will have an orientation debate on budgetary policies and appropriate budgetary stance for this year and next. The discussion will focus on horizontal i.e. general orientations. The 2007 outcomes and Spring economic forecasts show that most euro area countries have reached or are close to reaching their medium-term budgetary objectives. In a small number of countries, however, more ambition is needed to make progress towards achieving sustainable fiscal positions and avoid putting too high a burden on the next generations arising from an ageing society. In all countries, the risk that windfall revenues that accrued in the past years might unwind, as well as the upward risks to price stability, argues for vigilance in the implementation of 2008 budgets and prudent planning of 2009 budgets. The background for the budgetary discussions is provided in the 2005 reform of the Stability and Growth Pact which states that the Eurogroup should discuss, at least once a year before the summer, a horizontal assessment of national budgetary developments and their implications for the euro area. The purpose is twofold: firstly to ensure a proper coordination of national fiscal policies in the euro area and secondly to provide peer support for sound fiscal policies at national level and from a euro area perspective.
Ministers will then have an exchange of views on wage developments in the euro area. Wage developments are crucial elements for price and cost competitiveness in the context of monetary union. Overall, the analysis available including in the Spring forecasts, shows that aggregate wage increases in the euro area over the past years have been moderate, which contributed to job creation. Nominal unit labour costs were also supportive of the goal of price stability. However, there are important differences between Member States and the current round of energy price rises poses challenges to all. For the latest considerations on the evolution of the euro area's labour market and of wages see pages 37-40 ("Labour markets still solid, softening ahead ") of the Spring economic forecasts (on http://ec.europa.eu/economy_finance/publications/publication12530_en.pdf).
Ministers will also have an exchange of views on the issue of executive pay, which is attracting growing public interest. In 2007 the Commission issued a report on the application of the 2004 Commission Recommendation on directors' remuneration, which provides for high standards of disclosure on directors' pay and recommends a greater involvement of shareholders in the decisions relating to remuneration.
Ministers will exchange views on legislative measures in place and voluntary commitments undertaken dealing with executive pay elements and their effectiveness, possibly identifying best practices, having in mind that a number of countries are currently revisiting their framework or rules to deal with these issues.
The Council of Economics and Finance Ministers will start at 10.00 hrs on Wednesday 14 May. 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 László Kovács. A press conference is expected to take place after the meeting.
Meeting with candidate countries (AT)
Ministers will meet together with their counterparts from the three Candidate countries, Croatia, the former Yugoslav Republic of Macedonia and Turkey. They will discuss the medium-term Pre-accession Economic Programmes (PEPs) for 2008-2010 submitted by each candidate country in December 2007. Based on the Commission's assessment of the programmes, joint ministerial conclusions will be adopted outlining the main features of the programmes, policy challenges, as well as actions needed in the area of statistics. PEPs are medium-term planning exercises submitted annually by Candidate countries to the Commission comprising a macroeconomic scenario, a fiscal framework, and a structural reform agenda. This exercise was initiated in 2001 and informs the Pre-Accession Fiscal Surveillance Procedure, which aims at preparing countries for the participation in the multilateral surveillance and economic policy co-ordination procedures currently in place in the EU.
Overall, the 2007 PEP submissions are based on fairly consistent macroeconomic and fiscal frameworks. Candidate countries expected annual output growth of between 5.5% and 7% over the programme period. However, at the time of drafting, the economic environment still looked markedly better and, with the advantage of hindsight, those frameworks today look rather optimistic.
Quality of Public Finances: efficiency and effectiveness of social spending (AT)
As a follow up to the fruitful discussions at the informal ECOFIN meeting in Brdo, Ministers will discuss the way forward on the issue of the quality of public finances with a particular focus on social transfers. Over the coming decades, dramatic changes in the size and age-structure of European populations (see IP/06/150 and IP/06/1356) and accompanying reports on ageing and its impact on public finances), changing work and family patterns, expanding globalisation and rapid technological change will all contribute to tremendously increase the potential demands for insurance of new risks and the pressure on the social spending component of public budgets. Against this backdrop, Ministers are expected to recall the importance of policies aimed at making work pay, enhancing active inclusion and fostering human capital formation throughout the life cycle, to help maintain the current high levels of social protection while securing the long term sustainability of European social models.
In their previous discussions on the quality of public finances, Ministers had already focussed on the role of national fiscal rules and institutional arrangements in meeting budgetary targets and improving the efficiency of public expenditure (ECOFIN Conclusions, 10.10.2006), and on the importance of modernising public administrations to enhance competitiveness, achieve better value-for-money and ensure the control of government expenditure (ECOFIN Conclusions of October 2007). In June 2007, the ECOFIN invited the Economic Policy Committee and the Commission to deepen their analysis of efficiency and effectiveness of public expenditures for individual spending areas, notably R&D and education, healthcare and social transfers.
Financial Services (OD)
Following the discussions which took place at the Informal ECOFIN of Brdo pri Kranju of 4-5 April 2008, Ministers are expected to adopt conclusions on EU Supervisory Framework and Financial Stability Arrangements. These conclusions aim, notably, to take new steps to achieve a full and timely implementation of the roadmap agreed in December 2007 on the Lamfalussy review in order to achieve further concrete results by the end of 2008. These include improvements to the functioning of the EU Committees of Supervisors and to the supervision of EU-wide financial groups. In addition, the conclusions aim to enhance EU arrangements for financial stability and crisis management, notably via a EU Memorandum of understanding on cross-border financial stability.
In December 2007 the Commission adopted a Communication on Financial Education. It stresses the importance of increasing the ability of Europe's citizens to understand and engage with financial products and services. Enhancing financial education has substantial benefits for consumers, the economy and society. The paper set out some basic principles to guide providers of financial education, based on existing best practices. These include a call to make financial teaching available throughout citizens' lives, starting at school; the need to ensure impartiality and objectivity when delivering financial education; and a recommendation to tailor programmes to the real needs of the target audience. Discussions in the Council have been supportive of the proposal. Ministers are expected to adopt conclusions. which will acknowledge the importance of enhancing the financial education of consumers, in particular because of the complexity of financial products, the importance of financial decisions for households and the speed at which the financial services industry is proposing more options for consumers. As financial education is the responsibility of Member States, the Council is expected to invite them to step up their efforts to provide financial education to their citizens, and encourage the Commission to continue raising awareness and provide its support in this field.
The Commission White Paper on the Integration of EU Mortgage Markets was published in December 2007. It summarises the conclusions of a comprehensive review of European residential mortgage markets and presents a balanced 'package' of measures to improve the efficiency and the competitiveness of these markets, to the benefit of consumers, mortgage lenders and investors alike. This is to be achieved in particular through improvement in the areas of cross-border supply, product diversity, consumer empowerment and customer mobility. Ministers are expected to adopt conclusions on the White Paper and to support the overarching objective of the Commission and the four general objectives to achieve this. The overall objective is to achieve competition and efficiency of EU mortgage credit markets by facilitating the cross-border supply and funding of mortgage credit; increasing product diversity, combined with strong consumer protection and adequate financial stability; improving consumer confidence and facilitating customer mobility.
Dialogue with Third countries (AT)
The Ministers will discuss the status of the bilateral macroeconomic and financial regulatory dialogues that the EU conducts with third countries. They will take stock of developments in these dialogues since last September and will look at the priorities for the next 12 months. The discussion will focus on the dialogues with strategic partners. In view of the up-coming EU-US Summit (10 June 2008), Ministers are expected also to discuss possible Ecofin contribution to the Summit.
The EU conducts regular dialogues at high level on macroeconomic and financial regulatory issues with major economic partners such as the United States, China, Japan, India and Russia, as well as with some key country groupings, notably in Asia and the Mediterranean. These dialogues are increasingly being used to convey the Community or the euro area's views on salient issues discussed in the multilateral fora, including global imbalances, sovereign wealth funds and the response to the international financial crisis. Also, an effort is being made to strengthen and upgrade some of these dialogues. For example, last November a euro area troika consisting of the Eurogroup President, the President of the European Central Bank and the Commissioner for Economic and Monetary Affairs visited China to discuss the economic policy issues, including the contribution of China and the EU to the reduction of global imbalances.
Commissioner McCreevy will also present Ministers with an update on the state of play of the European Union's dialogues with third countries, principally China, Japan, Russia and the US, in relation to financial services and to the regulatory field.
Fight against VAT fraud (MA)
Commissioner Kovács will report on the ongoing work in the Commission's expert group on the anti-tax fraud strategy. He will recall the measures recently proposed to improve the fight against VAT carousel fraud, without modifying substantially the VAT system (conventional measures) and he will present in an oral report of the proposals that are still in the pipeline, to be transmitted to the Council later this year.
The Presidency will try to reach Council conclusions that would provide guidance for future work on both the conventional and the more far reaching measures. (IP/08/454)
Good governance in the tax area (MA)
The Presidency is expected to reach conclusions on the need to promote the principle of good governance in the tax area (principles of transparency, exchange of information and fair tax competition) when the Community and its Member States conclude agreements with third countries.
Taxation of savings (MA)
Commissioner Kovács, following the March ECOFIN request, will make an oral report on the functioning of the savings directive (MEMO/05/228) and identify ways in which its effectiveness could be improved.
The purpose of this report will be to inform the Ministers on the loopholes in the coverage of the measures laid down in the Directive and to draw attention and seek advice on possible solutions.
The oral report will be based on a working document prepared by the services of the Commission.
Strategy for the evolution of the Customs Union (MA)
Commissioner Kovács will shortly present the Commission's Communication on the future evolution of Customs beyond 2013 (IP/08/492). After recent progress made at EU level to modernise customs with the adoption of the New Community Customs Code and the Electronic Customs initiative, it is time to reflect on a long term strategy in order to maintain the high performing EU customs.
The Presidency is expected to reach Council conclusions that would guide the Commission in preparing such a long term strategy.
Preliminary draft General Budget 2009 (CA)
The Commision will present to the Ministers the Preliminary Draft Budget (PDB) 2009 as it was adopted by the Commission on 6th May (IP/08/695).
The budget will grow by some 3% compared to 2008 in commitments reaching a total of €134.4 billion. Payments will reach €116.7 billion. Long-term economic progress and employment remain firmly at the top of European Union spending, taking the biggest share – nearly 45% - of the proposed 2009 budget.
This presentation by the Commission will launch the work within the Council and the next stage in the budget procedure for 2009 will be the Council's preparation of its first reading – due to be taken at the ECOFIN of 17 July.