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MEMO/08/483

Brussels, 7 July 2008

Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels 7 and 8 July 2008 (Amelia Torres, Oliver Drewes)

EUROGROUP (AT)

Eurogroup ministers will meet at 17:00 hrs on Monday 7 July. 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 discuss the economic situation and outlook in light of the latest developments, particularly with regard to financial markets and inflation. Economic growth was very strong in the first quarter of 2008 (0.8% for the euro area as a whole; 2.2% in annualised terms), but the 28 April Commission forecast put the second and following quarters at much lower levels (see table p138 of the Spring forecasts). (For memory, the first information on economic growth in the second quarter will be published by Eurostat on 14 August). Recent survey data showed a deterioration in the business sentiment and headline inflation more than doubled during the past year, increasing from 1.9% in June 2007 to 4.0% in June this year. Also for memory, the Commission will issue its next interim forecast for the EU and the euro area on 11 September.

For a full view on the latest economic indicators and survey data on the euro area go to:

http://ec.europa.eu/economy_finance/db_indicators/db_indicators9237_en.htm

Ministers will also hold a discussion on the analysis and proposals contained in the EMU@10 Communication and Report on the Successes and Challenges after 10 years of Economic and Monetary Union, published by the Commission in May. In those the Commission argues that EMU is a great success but more needs to be done to ensure that the member countries fully reap the benefits of having a single, stable currency shared by 320 million people. Monday's discussion will focus on the domestic agenda proposals, namely deepening and broadening of the surveillance process[1]. This involves improving the 'preventive arm' of the Stability and Growth Pact, in other words running sound finances as a rule to avoid excessive deficits, and broadening the surveillance beyond fiscal issues to address macroeconomic imbalances such as competitiveness losses, divergent current account positions and the potentially unsettling developments in housing markets.

ECOFIN COUNCIL

The Council of Economics and Finance Ministers will start at 09.30 hrs on Tuesday 8 July. The ECOFIN meeting will be attended by Commissioner Joaquín Almunia, and Internal Market and Services Commissioner Charlie McCreevy. A press conference is expected to take place after the meeting.

French Presidency Work Programme

Ministers will have a debate following the presentation of the work programme of the French presidency for the second half of 2008. This point will be shown live on closed-circuit television.

Implementation of the Stability and Growth Pact (AT)

  • Assessment of stability and convergence programmes for Belgium and Poland and abrogation of the excessive deficit for Poland (AT)

The Council will give its opinion on the latest updates of the stability programme of Belgium and the convergence programme of Poland on the basis of recommendations by the Commission (see IP/08/914). This will close the 2007/08 round of assessments of stability and convergence programmes which started in February this year. The Council is expected to encourage Belgium to meet its objective of a balanced budget in 2008, to achieve its medium-term objective (MTO) of a general government surplus of 0.5% of GDP in structural terms by 2009 and, in view of the risks to the long-term sustainability of public finances, to achieve high structural primary surpluses and implement structural reforms.

Poland reduced the government deficit significantly below the reference value of 3% of GDP in 2007 and is expected to maintain the deficit below this ceiling in 2008 and 2009, in line with the Council recommendations of February 2007. Consequently, the European Commission recommended that the Council abrogates the excessive deficit procedure (EDP). Regarding Poland's Convergence Programme up to 2010, the Commission asks the Council to encourage Poland to exploit the favourable growth conditions to strengthen the pace of structural adjustment towards its MTO of a structural deficit of 1% of GDP. After a significant reduction in 2007, the headline deficit is widening in 2008 to the extent that the distance vis-à-vis the 3% Treaty threshold is no longer very large.

  • Existence of an excessive deficit in the United Kingdom (AT)


The Council will decide whether an excessive deficit exists in the United Kingdom on the basis of the Commission report adopted on 11 June (see IP/08/915) and on the basis of the Commission opinion and recommendation issued on 2 July (see IP/08/1089). The data notified by the UK authorities in March 2008 and subsequent policy announcements indicate that the UK plans, in the financial year 2008/09, to exceed the 3% of GDP deficit threshold as laid down in the Treaty. If the Council decides that the deficit is excessive, it is expected to issue a recommendation to the UK authorities to take effective action to correct it by the financial year 2009/10.

Adoption of the euro in Slovakia (AT)

The Council is expected to agree that Slovakia meets the conditions for adopting the euro on 1 January 2009 and to adopt the necessary legal texts, most importantly the one fixing the conversion rate for the Slovak koruna. The Commission, in May, proposed that Slovakia adopts the euro, based on Convergence Reports published by the Commission and the ECB (see IP/08/715). The European Parliament adopted a favourable opinion 17 June and the Heads of State and/or Government supported the proposals at the European Council of 19-20 June. The regulations on the introduction of the euro and on the conversion rate shall be adopted by the Council by unanimity of euro area Member States and Slovakia, following consultation of the ECB. The ECB has delivered a favourable opinion on both proposals.

Evolution of fuel prices (AT)
ECOFIN ministers will discuss oil price developments since they last met and since the European Council. As oil prices continue to increase it remains important to refrain from distortionary policies that could hinder or delay the adjustment to the new price levels, as agreed in September 2005 in Manchester and confirmed by Ministers at recent ECOFIN meetings. This does include short-term targeted policy measures to help alleviate the impact of high prices on the most vulnerable groups.

Gouvernance du Conseil international des normes comptables-IASB (OD)

Ministers are expected to adopt conclusions on the governance of the International Accounting Standards Board (IASB) and of the International Accounting Standards Committee Foundation (IASCF). These conclusions acknowledge the efforts made by the IASB and the IASCF to enhance the IASCF's governance since the completion of the last constitutional review and to strengthen the ability of the IASB to better take into account the public interest. They recall the need however to enhance the public accountability of the IASCF through the creation of an effective Monitoring Board. The conclusions also emphasise the urgency of enhancing the EU's ability to contribute in a timely and consistent manner to the international accounting debate through the the European Financial Reporting Advisory Group (EFRAG).

Financial Markets (OD)

Ministers are expected to review recent market developments and progress made in the implementation of the road map on the financial market turmoil. They will adopt conclusions in relation to market transparency and the role of rating agencies. These conclusions welcome in particular the initiatives undertaken by the industry to improve transparency for investors, markets and regulators of securitized markets. They also support the objective of introducing a strengthened oversight regime for rating agencies on the basis of an European approach, and the objective of strengthening international cooperation to ensure a stringent implementation of internationally approved principles.


[1] See IP/08/716 and EMU@10 Communication and Report on successes and challenges after 10 years of Economic and Monetary Union at http://ec.europa.eu/economy_finance/emu10/reports_en.htm


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