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Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels, 9 and 10 March 2009

European Commission - MEMO/09/101   09/03/2009

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MEMO/09/101

Brussels, 9 March 2009

Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels, 9 and 10 March 2009

EUROGROUP (AT)

Eurogroup ministers will meet at 17:00 hrs on Monday 9 March. 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.

Ministers will assess the economic situation and outlook in the euro area, in light of recent economic and financial developments. Data released since the cut-off date for the Commission's January interim forecast shows that the down side risks to economic activity have increased. Globally, world trade and industrial production deteriorated sharply by end-2008. Exchange rate markets have shown much volatility and the overall situation in financial markets remains fragile. Within the euro area, hard data have continued to send worrying signals, while recent survey indicators deteriorated further after some signs of a stabilisation at the beginning of the year. Euro-area inflation marked a pause in its downward trend in February, but is likely to ease further in the coming months on account of weakening economic activity and large energy-related base effects.

The March 2009 macroeconomic projections of the European Central Bank place the euro area annual real GDP growth in a range of -3.2% to -2.2% in 2009, and between -0.7% and +0.7% in 2010. This represents a downward revision of the December ECB staff projections and also compare with the Commission's own forecasts of 19 January of -1.9% in 2009 and +0.4% in 2010.

For the latest key indicators for the euro area go to:

http://ec.europa.eu/economy_finance/publications/publication12486_en.pdf

Eurogroup ministers will also discuss, ahead of formal decision at the Ecofin, the Commission's opinions on all euro area national Stability Programmes except Austria, Belgium, Cyprus and Slovakia that have not been examined yet (see below).

ECOFIN COUNCIL

The Council of Economics and Finance Ministers will formally start at 09.30 hrs on Tuesday 10 March. It will be preceded by a working breakfast at 08:30. The ECOFIN meeting will be attended by Commissioner Joaquín Almunia and Commissioner László Kovacs. A press conference is expected to take place after the meeting.

Economic situation and outlook (AT)

Over breakfast, Ministers will discuss the economic and the financial markets situation. Data released since the cut-off date of the Commission interim forecast (13 January 2009) largely confirm a bleak outlook. On the external side, world trade and industrial production deteriorated sharply by end-2008. On the domestic side, hard data have continued to send worrying signals, while survey indicators stand at record lows. Moreover, the overall situation in financial markets remains fragile. Member States and the EU itself are putting in place a considerable set of measures to boost demand, channelling 400 billion euros of fiscal support to their economies – representing 3.3% of the EU's GDP. The results of this massive stimulus plus the significant easing in monetary policy should start to feed through in the next months. They are also taking measures to restore confidence in the financial sector by getting banks to disclose impaired assets on their balance sheets, according to a set of guidelines put forward by the Commission. The discussion on the economic and financial discussion will be pursued under different headings during the Council itself.

Implementation of the Stability and Growth Pact (AT)

  • Assessment of Stability and Convergence Programmes

The Council is expected to give its opinion on the updated stability/convergence programmes on the basis of recommendations put forward by the Commission on 18 February 2009 for Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Hungary, the Netherlands, Poland, Sweden, Finland, the United Kingdom, Ireland, Greece, Spain, France, Latvia and Malta (see IP/09/273 and IP/09/274) and on 25 February 2009 for Italy, Luxembourg, Lithuania and Portugal (see IP/09/311).

While the priority number one is to make the recession as short as possible, the Stability and Growth Pact remains a key asset in the present juncture as stated by EU heads of government at the Summit in December and again at last Sunday's informal gathering. "The Pact will help the governments and the Member States fight the recession in the short term while preserving the sustainability of the public finances in the medium term and promote an exit strategy once the recession is over to avoid putting too big a burden on future generations," Commissioner Almunia said at the press conference on 18 February.

Preparation of the European Council (19-20 March 2009)

  • Key Issues Paper

Following the orientation debate held by the Council on 10 February where the draft outline of the Key Issues Paper was endorsed, the Council will adopt the Key Issues Paper for the Spring European Council as prepared by the Presidency and the EFC. The paper follows up to the European Economic Recovery Plan (EERP) in line with the Commission Communication on 4 March on Driving a European Recovery (see IP/09/351). It contains messages on the reform of Europe's financial system, the preparation of the G20 summit in London, ensuring public finances sustainability, improving quality and effectiveness of the short-term structural measures, as well as ensuring a well-coordinated EU response to the crisis and a political follow-up to the EERP.

  • Country-Specific Integrated Recommendations

The Council is expected to adopt a report on the national recommendations for reform to make Europe more competitive and resilient, according to the Lisbon Growth and Jobs Strategy. The Commission, on 28 January, adopted country-specific recommendations for the economic policies of the Member States and for the euro area as a whole (see IP/09/146). The recommendations, issued every year, specify the reform priorities in the domains of macro- and micro-economic, as well as employment policies and provide assessment of progress with implementation of structural reforms.

  • The Commission proposal for recommendations Reduced VAT rates (MA).

The Czech Presidency will again try to reach a political agreement on the application of reduced VAT rates. The discussion will be on a compromise proposal put forward by the Presidency and which is in line with the Commission's proposal (IP/08/1109). The aim is to agree on the application of reduced VAT rates for some specific sectors in particular labour intensive services and locally supplied services, on a permanent and optional basis.

  • International financing of climate change (AT/BH)

Following discussion at their January meeting, further discussion of climate change at today’s Ecofin shows the priority being given to achieving an ambitious and comprehensive international agreement on global action to tackle climate change. Negotiations are set to be finalised at the Copenhagen UN climate change conference, which will take place from 7 to 18 December 2009. Additional financial support from developed countries to help developing countries face up to the challenge of climate change will be a key part of the Copenhagen agreement. The current economic situation is hardly an ideal time to ask finance ministers to dip even deeper into the public purse, but the major effort should not be needed before 2013, when the new UN agreement should take effect. By then the economic picture should be much rosier than it is today. Ministers agreed on the importance of effective management of all public financial support to developing countries. They invited the Economic and Financial Committee, the Economic Policy Committee and the European Commission to continue to work on the international financial dimension of climate change as preparation for the UN conference in Copenhagen.

  • Progress Report on better regulation (TvL)

The strategic review on Better Regulation in the European Union tabled by the European Commission on 28th of January, shows that better regulation is a core component of Europe's response to the economic and financial crisis. The review shows that citizens and companies, in particular small and medium sized enterprises (SMEs), already benefit from simplified measures and savings in administrative costs. Thanks to radical simplification some 1,300 acts, representing around 10 % of the acquis or 7800 pages of the Official Journal, have been proposed for removal so far. The administrative burden reduction measures already presented (or foreseen) represent possible savings in excess of €30billion. The Commission's leadership on administrative burdens has inspired most Member States, and 21 of them have put in place ambitious national programmes to reduce administrative burdens. Finally the Commission will continue to improve the quality of all new legislation it produces by further upgrading the quality of its impact assessments (see IP/09/131).  

The Czech Presidency prepared a Progress Report on Better Regulation, which has been discusses at the Competititveness Council on the 5th March 2009, and takes stock of recent progress in Better Regulation. The report also sets out the Czech Presidency’s views on how the Better Regulation policies can be developed further in the EU. The Presidency will prepare a set of draft Council Conclusions for the meeting of the Competitiveness Council on 28th /29th May 2009.

General budget of the European Union – priorities for 2010 (CA)

The 2010 budget will be the fourth budget of the 2007-2013 financial framework, playing an important role in helping the EU reach its objectives as many EU programmes launched at the start of this programming period reach cruising speed. The 2010 budget comes at a time where the European Union is facing unprecedented economic and financial challenges and, in this context, the Commission underlines the importance of the European economic recovery plan. The Council's adoption of its conclusions on the guidelines for the 2010 budget is the starting position of the Council in the 2010 budget procedure. The first discussion between the European Parliament, the Council and the Commission on 2009 priorities will take place at the trialogue on 15 April 2009. The Council stresses the importance of respecting the principles of budgetary discipline and sound financial management. For Dalia Grybauskaite, Commissioner for Financial Programming and Budget, a good spirit of cooperation between the two arms of the budgetary authority and the Commission, as in previous years, is essential to reach a satisfactory agreement on the 2010 budget – this is especially important as the 2010 budgetary procedure takes place in the last year of this Commission's mandate and the election of a new European Parliament. As for previous budgets, the 2006 Inter-institutional Agreement (IIA 17/05/06) on budgetary discipline and sound financial management will continue to be the basis for 2010.

Sharing of costs for the collection of customs duties (MA)

In view of the introduction of the modernised Community Customs Code and the application of customs centralised clearance, the Ministers of Finance will sign a convention on sharing the costs of the collection of customs duties. The convention is an inter-governmental agreement between the Member States. National customs administrations can retain 25% of customs duties to cover their collection costs. The remaining 75% is to be allocated to the EU budget. The Centralised Clearance offers a trader the possibility to lodge its electronic customs declarations at the customs office of the place where he is established, irrespective of the place where the goods enter, leave or are presented in the customs territory. The place of declaration is dissociated from the place where the goods are physically presented and responsibilities are divided between the different customs offices involved. Where these two customs offices are in two different Member States, the workload is shared between them, but the customs duties are collected by only one of them (the Member State who has received the customs declaration). In order to make this concept acceptable, Member States have agreed in Council to share the collection costs between them (50/50). The Convention provides a legal basis for this.


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