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Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels, 4 and 5 May 2009
Commission Européenne - MEMO/09/214 04/05/2009
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Brussels, 4 May 2009
(Amelia Torres, Maria Assimakopoulou, Oliver Drewes, Cristina Arigho)
Eurogroup ministers will meet at 17.00 hrs on Monday 4 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.
Ministers will discuss the economic situation and financial market developments, on the basis of the Spring forecasts presented by Commissioner Almunia earlier today. The euro area economy is forecast to contract by -4.0% in 2009 and -0.1% in 2010. (see IP/09/693). The downward revision reflects a worsening of the global financial crisis, a sharp contraction in world trade and ongoing housing market corrections in some Member States. However, as the impact of the fiscal and monetary stimuli gain momentum, the fall in GDP is forecast to level off towards the end of this year, with modest growth resuming in the course of 2010. This view is supported by tentative signs that financial markets are stabilising and that the global economy is no longer in free fall.
Indeed, the situation in financial markets is improving somewhat. In particular, money markets are moving gradually towards more stable conditions (although the pre-crisis level is still a long way away). Several financial indicators are showing first tentative signs of increased risk taking on the part of financial market participants. For instance, there has been a rebound in stock and bond markets. However, this recovery is fragile and it remains to be seen whether it will be sustainable, as further stress in the banking sector is likely.
Regarding currency markets, risk aversion has decreased somewhat since the last Eurogroup meeting, though it remains elevated.
For the latest key indicators for the euro area go to:
Eurogroup ministers are also expected to review the outcome of the Washington G7 and IMF meetings, to hear a presentation on, and discuss, the supplementary budget recently adopted in Ireland and to review the economic performance of the services sector and its importance for competitiveness developments .
Divergence in competitiveness positions within the euro area is a major source of concern and it is generally accepted that more flexible and efficient services sectors could help correcting these imbalances. Despite the creation of the European single market more than 15 years ago, the market for services, which accounts for around three quarters of the EU's total value added and employment, remains relatively fragmented, which in some cases may be linked with regulatory obstacles. In a time of crisis, reform in services could bring in benefits in terms of lower prices that can help preserve consumer purchasing power, and by creating new employment prospects for workers laid off in other sectors. The Services Directive agreed in 2006 is expected to be implemented by the end of the year.
For background information and analysis on this subject you may consult :
The Council of Economics and Finance Ministers will start at 10.00 hrs on Tuesday 5 May. It will be preceded by a working breakfast at 09.00 hrs. The ECOFIN meeting will be attended by Commissioner Joaquín Almunia, Internal Market and Services Commissioner Charlie McCreevy and Taxation and Customs Union Commissioner Laszlo Kovacs. A press conference is expected to take place after both sessions.
Ministerial dialogue with candidate countries (AT-KN)
ECOFIN Ministers will have their annual meeting with the Ministers of candidate countries (Croatia, former Yugoslav Republic of Macedonia and Turkey) to briefly discuss the 2009 Pre-accession Economic Programmes that these countries submit to the Commission, comprising a macroeconomic scenario, a fiscal framework and a structural reform agenda. Ministers are due to endorse joint conclusions, based on the Commission's assessment of the programmes and the following discussion with representatives from Member States and Candidate Countries. For more background information on the economics of enlargement, see http://ec.europa.eu/economy_finance/int_economic_issues/enlargement194_en.htm
Current economic and financial situation (AT)
Facility providing medium-term financial assistance for MS's balances of payments (AT)
- Ministers are expected to reach an agreement on the Commission's proposal to increase to €50 billion euros the ceiling in the balance-of-payments financial support that the EU can grant to EU, non-euro area, countries, from a current ceiling of €12 billion. The European Parliament has already given a positive opinion to the proposal. For the Commission's proposal of April 8 see IP/09/559
- Ministers are also expected to approve the Commission's to grant €5 billion in financial assistance to Romania following a request by the Romanian government. The assistance is part of a broader assistance package to which have also contributed the International Monetary Fund and the European Investment Bank and the European Bank for Reconstruction and Development. See IP/09/611
Quality and sustainability of public finances (AT)
On 29 April 2009, the Commission adopted a Communication on the impact of an ageing population in the EU, accompanied by an extensive analytical report (2009 Ageing Report (see IP/09/559).
The report reveals the vast majority Europe's citizens will be able to lead active, healthy and participative lives well into old age. However, the combination of ageing and low birth rates also poses major economic, budgetary and social challenges. Europe has started to prepare for these challenges, and encouraging progress has been made by some Member States, notably through reforms of pension systems. However, without further policy changes, demographic trends are expected to transform our societies considerably, impinging on intergenerational solidarity and creating new pressures on future generations.
The economic crisis could make the challenges created by ageing more acute. The deployment of a targeted and well-coordinated policy response to the crisis, as outlined by the European Economic Recovery Plan (EERP must therefore be seized as an opportunity for concerted efforts to overcome the recession by supporting economic activity in the short run and through reforms geared at strengthening investment in a more sustainable economy and society and putting age-related spending on a sustainable path.
Five years of an enlarged EU (AT-KN)
Preparation of the Employment Summit (AT/CH)
Over lunch, Ministers will discuss the ECOFIN contribution to the Employment Summit, which will take place in Prague on 7 May. The aim of this Summit is set out a common framework and concrete proposals to address the employment impact of the crisis and its social consequences and prepare the exit from the crisis, through a consensus with the social partners and other stakeholders, there including on how to modernise social policies to the mutual benefit of employees and employers
Dialogue with third countries (AT)
Ministers will have an exchange of views on the progress made in the regulatory dialogues with third countries, mainly with the United States, China, Japan and Russia, also in the G20 context, with regard to work on the reform of the regulation and supervision of the financial system.
Following last March's political agreement, the ECOFIN will adopt a Directive amending the VAT Directive as regards reduced rates.
On 10th March 2009, the ECOFIN Ministers reached a political agreement to apply, on an optional basis, reduced VAT rates for some specific sectors (in particular labour intensive services and locally supplied services) on a permanent basis (Council press release). This agreement also contains a derogation for Malta to continue applying zero rate on foodstuff and pharmaceuticals and for UK to continue apply reverse charge to mobile phones and other electronic devices for two more years.
Commissioner Kovács will present to the Ministers the recent Commission's communication on promoting good governance in tax matters (IP/09/650). In this framework, he will also inform the ECOFIN on the state of play of the discussions with the Principality of Liechtenstein regarding the conclusion of an anti-fraud agreement and he will express the Commission's views on future negotiations with third countries regarding anti-fraud agreements.
The Czech Presidency will try to seek a political agreement on a compromised text based on the Commission's proposal to amend the current EU excise duty legislation on tobacco. (IP/08/1149)
The Commission's proposal aims to narrow differences between Member States' tobacco taxation levels and so helps to reduce cross border shopping and smuggling. In addition the proposal aims at modernising the current community arrangements for tobacco taxation and creating a level playing field for the economic operators.
By increasing minimum taxation rates, it also contributes to health objectives and to reducing tobacco consumption by 10% within the next 5 years.
EU Budget - Preliminary draft budget for 2010 (CA)
The Commission will present its Preliminary Draft Budget for 2010, which will be the basis for the Council's first reading planned for July 10th.
Financial Services regulation (OD)
Agreement has been reached on four legislative initiatives of crucial importance for the strengthening of the regulatory framework for financial services in the EU. These are: Solvency II, Credit rating agencies, e-money and cross border payments. As usual in such cases, Ministers will have the opportunity to comment on the outcome of the negotiations in the form of a public deliberation.
The European Commission has welcomed the respective approvals from the European Parliament and from the Council on the proposed Regulation on credit rating agencies (CRAs). TheRegulation will have a major impact on the activity of credit rating agencies, which issue opinions on creditworthiness of companies, governments and sophisticated financial structures. Credit rating agencies will be expected to comply with strict standards of integrity, quality and transparency and will be subject to ongoing supervision of public authorities. Users of credit ratings in the EU will be in a better position to decide if the opinions of a specific credit rating agency are trustworthy and to what extent those opinions should impact their investment choices.
The new Regulation on cross-border payments in the Community extends the principle of equal charges for national and cross-border payments to direct debits, in addition to credit transfers, electronic payments (including card transactions) and ATM cash withdrawals, which are already covered by the current version of the Regulation. It strengthens the supervisory and complaint-solving role of the competent national authorities and provides for the establishment of out-of-court redress procedures. It also removes, up to EUR 50.000, the payments-based statistical reporting obligations that hinder the smooth flow of cross-border transactions.
The European Commission has welcomed the European Parliament’s approval of the proposed Directive on the taking-up and pursuit of the business of Insurance and Reinsurance, also known as the Solvency II Directive. Solvency II is a ground-breaking revision of EU insurance and reinsurance law designed to improve consumer protection, modernise supervision, deepen market integration and increase the competitiveness of European insurers. Under the new system, insurers and reinsurers would be required to take account of all types of risk to which they are exposed and to manage those risks more effectively and with increased transparency. In addition, insurance groups would have a dedicated 'group supervisor' that would enable better monitoring of the group as a whole.
The agreement on the revised E-Money Directive is to be welcome as it provides the market with a clear and balanced framework, both legally and prudentially. The new directive will make the business of electronic money issuance more attractive, thus fostering genuine and effective competition between market participants. This will be an additional boost for the creation of a successful e-money market in the EU.
 COM (2008) 800 final.