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Brussels, 30 May 2008
Preparation of Eurogroup and Economic and Finance Ministers Council, Frankfurt 2 June and Luxembourg 3 June 2008 (Amelia Torres, Oliver Drewes, Maria Assimakopoulou, Michael Mann)
The Eurogroup will meet exceptionally in Frankfurt, on Monday 2 June, to mark the 10-year anniversary of the European Central Bank. The meeting will start at 9.00 hrs. A press conference is expected at the end of the morning. Joaquín Almunia, Commissioner responsible for Economic and Monetary Affairs will attend as will European Central Bank Governor Jean-Claude Trichet.
The meeting will start with a presentation of the assessment of the euro area economy by Alessandro Leipold of the International Monetary Fund. Leipold heads the so-called Article IV mission to the euro area. This will be followed by an exchange of views. Eurogroup exchanges views with the IMF on euro-area policies twice a year. In the Summer, this is done in the context of the formal Article IV consultation.
Eurogroup ministers will also continue their discussion, started in their April and May meetings (see MEMO/08/298) on budgetary policies ahead of the preparation of the national budgets for 2009. This exercise, known as the Mid-Term Budgetary Review, is key towards strengthening the coordination of fiscal policies in the euro area and towards ensuring the appropriate policy mix for the zone as well as speedy progress towards sustainable public finances. The April discussion focused on Member States with an early budgetary preparation, namely Germany and the Netherlands. The May discussion led to the adoption by Eurogroup ministers of horizontal, i.e. general fiscal policy orientations for 2008 and 2009, including commitments (i) to rigorously execute the 2008 budgets, by avoiding in particular expenditure overruns; (ii) to use prudence in the design of fiscal policy plans for 2009 to achieve a benchmark adjustment of 0.5% of GDP in structural terms for countries not yet at the medium-term budgetary objective (MTO); and (iii) to pursue efforts to increase the quality of public finances. Today's discussion will focus on national fiscal policies in the remaining euro-area Member States.
Communication on EMU@10: next steps. In view of the discussion in the ECOFIN the following day, Ministers will also have an exchange of views on the main messages that should be sent to the European Council at this stage, as well as on follow up work (see below).
The Council of Economics and Finance Ministers will start at 10.30 hrs on Tuesday 3 June in Luxembourg. It will be preceded, at 09:00, by the annual meeting of the governors of the European Investment Bank - i.e. the EU Finance Ministers and Commissioner Almunia. The night before a ceremony will mark the 50th anniversary of the EIB. The ECOFIN meeting will be attended by 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.
Implementation of the Stability and Growth Pact (AT)
The Council is expected to close the excessive deficit procedure for the Czech Republic, Italy, Portugal and Slovakia following the correction, in 2007, to below 3% of GDP of the budget deficits in the four countries, a correction that the Commission considers sustainable in view of its spring economic forecasts for 2008 and 2009. But all countries should make further progress towards their medium-term objectives (see IP/08/714 of 7 May).
If, as is expected, the Council abrogates the four procedures, for the first time since 2002 no euro-area Member State will be under an excessive deficit procedure. There will be two EU countries left, Poland and Hungary, against a total of 12 in spring 2006. The deadlines for the correction in Poland and Hungary are 2007 and 2009, respectively. Poland submitted in March, a new update of its Convergence Programme, which is expected to be assessed by the Commission next month. Against the background of the 2007 outcome of a deficit of 2.0% of GDP, and in the light of this assessment and the spring forecast the Commission could recommend closing the EDP for Poland as well.
EMU @10 (AT)
The Communication on "EMU@10: successes and challenges after 10 years of Economic and Monetary Union", accompanied by an extensive staff working paper, was adopted by the Commission on 7 May. The Communication puts forward a three-pillar set of policy ideas - on domestic, external, and governance issues - to address the challenges that EMU is likely to face in its second decade and beyond. See IP/08/716 and MEMO/08/288 as well dedicated website containing the Communication and Report as well as documentation on benefits and successes of the euro:
Ministers will discuss the Communication in both Eurogroup and Ecofin formations. The Ecofin Council will hold its first exchange of views on the Communication as a preparatory step towards more in-depth discussions that are foreseen in the Autumn, and in advance of the June European Council that will mark ten years since the creation of the ECB and the countries which first adopted the euro.
Convergence Report /Slovakia (AT)
Ministers will discuss the Commission recommendation to introduce the euro in Slovakia on 1 January 2009 (see IP/08/715). The proposal prepared by the Commission was based on reports published by the Commission and the ECB in May 2008 in which the two institutions assessed the progress with convergence towards the requirements of EMU in ten Member States with a so-called derogation, including Slovakia. The Commission concluded that Slovakia fulfils the conditions for the adoption of the euro. The final decision on the introduction of the euro in Slovakia should be taken by the ECOFIN Council on 8 July, after consultation of the European Parliament and a discussion by the Heads of State or Government at their meeting in Brussels on 19-20 June 2008.
Preparation of the European Council – Food prices (MM)
On 20 May, the European Commission adopted a Communication (see IP/08/763) setting out potential policy responses to mitigate the effects of rising global food prices. The document will be discussed at the European Council on 19-20 June. The Communication analyses structural and cyclical factors and proposes a three-pronged policy response, including short-term measures in the context of the Health Check of the Common Agricultural Policy (see IP/08/762) and in the monitoring of the retail sector; initiatives to enhance agricultural supply and ensure food security including the promotion of sustainable future generations of biofuels; and initiatives to contribute to the global effort to tackle the effects of price rises on poor populations.
The Council will exchange views on food prices, including short-term and mid- and long-term measures. The 20 May EPC and 23 May EFC prepared a Note to this end. This Note will serve as a basis to the ECOFIN President's report to the President of the EC which will also take into account the outcome of the Council's discussion.
Financial Services (OD)
Ministers are expected to adopt conclusions on clearing and settlement. In these conclusions, the Council acknowledges progress in certain key areas while stressing the need for continued efforts to ensure timely, proper and full implementation of the ongoing initiatives: Code of conduct on clearing and settlement, TARGET-2 Securities, removal of the legal and fiscal barriers identified in the "Giovannini Reports" and joint work of the European System of Central Banks and the Committee of European Securities Regulators on the safety and the soundness of the post-trading infrastructure.
Ministers are expected to exchange views on a report prepared by the Slovenian Presidency on the state of play in relation to Solvency II proposal. The report presents in particular the progress made so far and identifies the major issues remaining open.
Ministers are expected to hold a discussion on the functioning of EU Deposit guarantee schemes in relation to banking institutions. This debate will take place as a follow-up of the general debate on financial stability and crisis management which took place at the Informal ECOFIN of Brdo of 4 and 5 April.
VAT on financial and insurance services (MA)
The Presidency will report on the work undertaken on the Commission's proposal to modernise and simplify the VAT rules applied on financial and insurance services. These services are generally exempt from VAT but the exemption dates from 1977 and the legislation has not kept abreast of developments since then.
This proposal aims to update the definitions of exempt financial services and insurances. It will also introduce measures on cost sharing relief to enable financial and insurance institution to benefit from economies of scale in procurement. In addition, the existing option for taxation whose use is restricted to only a few Member States will be extended to allow equal access for all businesses in the Community (see IP/07/1782).
Excise duties: proposal for a Directive concerning the general arrangements for excise duty(MA)
The Presidency will report on the work undertaken on the Commission's proposal to provide a legal framework for the use of a computerised system to monitor the movement of excise goods (alcoholic beverages, tobacco products and mineral oils) in duty suspension. This new system is aimed at strengthening the fight against excise duty fraud (see IP/08/241).
The President of the Code of Conduct Group, Mrs. Kennedy will report on the work undertaken under the Slovenian Presidency.