Brussels, 1 December 2009
(Amelia Torres, Oliver Drewes, Ton Van Lierop)
Eurogroup ministers will meet at 17.00 hrs on Tuesday 1 December in Brussels. 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 will be preceded at 13.00 hrs by the Troika meeting with the European Parliament.
Ministers will discuss the economic and financial situation. Recovery in the euro area economy has begun. Recent data indicate that the Commission's autumn forecast is broadly on track. The results for GDP in the third quarter, while slightly below expectations, confirm the start of the recovery. Moreover, data on industrial production and business confidence point to continued improvements during the fourth quarter of the year. However, as projected in the autumn forecast, growth can still be expected to slow somewhat in the first half of 2010 and to remain relatively muted for some time thereafter. The recent, continued increases in unemployment, for instance, are in line with such a cautious outlook.
The situation in the financial markets remained broadly positive in November on the back of encouraging corporate results and macro-economic data confirming the gradual economic recovery. The continuous recovery of financial markets, although justified by positive economic and financial news, continues to price in a sustained economic recovery.
For the latest key indicators for the euro area see also:
Twice a year, the Eurogroup exchanges views with the International Monetary Fund on euro-area policies. In the summer, this is done in the context of the formal Article IV consultation with the euro area. In the autumn, the IMF conducts a so-called interim mission. As part of the latest consultation, Marek Belka, the Director of the IMF European Department, will present to the Eurogroup the Fund's views on the economic outlook for, and the economic policies of, the euro area. These views are then discussed within the Eurogroup.
Ministers will also take stock of the changes brought about by the Lisbon Treaty that comes into force today (see separate published today as well as relevant item in the last edition of the European Economy News) http://ec.europa.eu/economy_finance/een/015/article_8889_en.htm .
E COFIN COUNCIL
The Council of Economics and Finance Ministers will start at 9.30 hrs on Wednesday 2 December. It will be preceded by a working breakfast at 9.00 hrs. The ECOFIN meeting will be attended by Commissioner for Economic and Monetary Affairs Joaquín Almunia, Commissioner for Internal Market and Services Charlie McCreevy and Commissioner for Taxation and Customs Union Laszlo Kovacs A press conference is expected to take place after the meeting.
Financial Services (OD)
Regulations establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority
Ministers will be invited to agree on a general approach on the Commission proposal of 23 September 2009 for three Regulations establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority. These proposals were developed on the basis of, notably, the recommendations of the High level expert group chaired by Jacques de Larosière of February 2009. The three new European authorities, together with the national authorities, will form a “European System of Financial Supervision” which, together with the European Systemic Risk Board (which proposal is also currently being discussed), will aim at sustainably reinforcing financial stability throughout the EU; at ensuring that the same basic technical rules are applied and enforced consistently; at identifying risks in the system at an early stage; and at being able to act together far more effectively in emergency situations and in resolving disagreements among supervisors.
Ministers are expected to adopt conclusions on the Single Euro Payments Area (SEPA). These conclusions stress the importance of achieving an integrated and competitive internal market for euro payments for the benefit of citizens and businesses and inter alia , (i) note the progress already accomplished, (ii) recall the areas where further work is needed, (iii) stress in this respect, notably, the role of public authorities in the migration process to SEPA standards, products and services, (iv) invite the Commission , in cooperation with the ECB and with all actors concerned, to carry out a thorough assessment of whether legislation is needed to set binding end dates for SEPA Direct Debit and SEPA Credit Transfer and (v) encourages the Commission and the ECB, in close cooperation with all actors concerned, to establish a SEPA governance and monitoring structure before mid-2010.
Derivatives markets and Code of conduct on clearing and settlement
Ministers are expected to adopt conclusions on the future actions in relation to derivatives markets and on the experience of the Code of conduct on clearing and settlement. These conclusions stem in particular from the G20 leaders’ commitments to act in relation to derivatives markets made at the Pittsburgh summit of September 2009 and from the Commission communication on “Ensuring efficient, safe and sound derivatives markets – future policy action” of October 2009. The conclusions, notably, (i) agree on the need to develop a comprehensive policy on OTC derivatives, (ii) support the need for a substantial mitigation of counterparty credit risk and (iii) agree with the importance of improving transparency, efficiency and integrity for derivatives transactions. On the Code of conduct on clearing and settlement, the conclusions note in particular the progress made in terms of increased efficiency and reduced cost for investors, and agree that further steps need to be taken to address the issues related to risk and regulatory barriers highlighted by the Code of conduct.
Financial stability arrangements
Ministers are expected to adopt conclusions on financial stability arrangements, based on the Commission communication on “an EU framework for cross-border crisis management in the banking sector” and the reflection paper from the Economic and Financial Committee on “a European policy coordination for crisis prevention, management and resolution, including burden sharing arrangements”. These conclusions, notably, (i) welcome the preparatory analysis carried out by the Commission in its Communication, covering early intervention, bank resolution measures and insolvency proceedings, (ii) welcome the work done by the EFC so far on setting out a number of directions for EU-wide policy coordination framework for financial stability, including in respect of the principles on burden sharing and (iii) agree on a timetable for further work in the coming months.
VAT: Draft Directive on reverse charge on emission allowances and certain goods
The ECOFIN is expected to agree a general approach on a Directive amending the VAT Directive as regards the option to apply reverse charge to the supply of certain goods and services particularly subject to fraud. In September 2009, the Commission tabled a proposal for an experimental and optional scheme whereby Member States would be allowed to apply a reverse charge mechanism to emission allowances as well as to a limited number of goods. The proposal is designed to tackle Carousel fraud in a number of economic sectors and is at the same time provide a quick reaction to massive fraud detected on the CO2 markets over this summer.
VAT treatment of postal services
The Presidency will try to get agreement on re-launching Council discussions on the VAT treatment of postal services. The Commission tabled, in 2003, a proposal whose main purpose was to remove the current exemption from VAT for postal services, and to give an option to apply a reduced rate to a wide range of postal services. Against the background of the liberalisation of this sector by 2010, the acceptance of that proposal would ensure a full level-playing field through a neutral VAT system and would remove barriers to investments in this key economic sector.
Savings Tax Directive
The Presidency will try to reach a political agreement on the proposal to amend the Savings Tax Directive in order to close loopholes in the current legislation. Since 2005, the Savings Directive ensures that paying agents either report interest income received by taxpayers resident in other EU Member States or levy a withholding tax on the interest income received. In November 2008, the Commission proposed improvements to the Directive, to better ensure the taxation of interest payments which are channelled through intermediate tax-exempted structures (trusts, foundations…). The Commission also proposed to extend the scope of the Directive to income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurances products.
The ECOFIN is expected to agree a general approach on the Commission proposal to review the legislative framework for the recovery of tax claims in the EU. The Commission presented in February 2009 a proposal for a new Council Directive on mutual assistance for the recovery of claims relating to taxes, duties and other measures, intended to increase the efficiency of the recovery assistance between Member States.
Administrative Co-operation Directive
The ECOFIN is expected to agree on a general approach on the Commission's proposal for a Directive on administrative cooperation in the field of taxation. The Commission proposed in February 2009 a Directive on administrative cooperation in the field of taxation. It aims at extending the scope of the cooperation to all taxes not covered by another instrument, at drastically reinforcing all mechanisms of administrative cooperation, at introducing comitology procedures for technical implementing measures, at abolishing bank secrecy rules alongside with the international standards and at introducing a most favoured nation clause.
Anti-fraud agreements with third countries
The ECOFIN is expected to agree a general approach on the draft anti-fraud agreement with Liechtenstein and to give the Commission a mandate to negotiate anti-fraud and tax cooperation agreements with Switzerland, Andorra, Monaco and San Marino. After long negotiations with Liechtenstein, the EU is close to concluding an anti-fraud agreement with an important component concerning fiscal cooperation. This agreement would be a significant achievement both in stepping up the European response to combating fraud but also, in light of international developments, towards strengthening the exchange of information and transparency for tax purposes. The objective of this agreement is to increase the capacity of all Member States to fight against tax fraud and any other illegal activity to the detriment of their financial interests. The Commission adopted on 30 June 2009 a Recommendation to the Council to authorise the Commission to open negotiations with Andorra, Monaco, San Marino and Switzerland. The aim is to combat fraud and other illegal activity, and to ensure administrative cooperation through exchange of information on tax matters.
Code of conduct for business taxation
The Council is expected to adopt conclusions on the work carried out by the Code of Conduct group during the Swedish Presidency.
Implementation of the Stability and Growth Pact (AT)
Ministers are asked to endorse recommendations for a revision of the deadline to correct the budget deficit in France, Ireland, Spain and the United Kingdom; to conclude that Greece has not taken effective action to be able to correct its deficit by the previously agreed deadline; and to set deficit correction deadlines for another nine countries: Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal ( ). On 11 November the Commission proposed to the Council to set 2013 as the deadline for the correction of the deficits, below the 3% reference value, in Austria, the Czech Republic, Germany, Slovakia, Slovenia, the Netherlands and Portugal. For Belgium and Italy it proposed 2012 in view of the comparatively limited size of the deficit and the existence of high debt ratios . The Commission also assessed "effective action" had been taken in France, Ireland, Spain and the UK, in response to Council recommendations of last April. But the worsening of the economic situation compared with the Commission's January forecasts justified revising the existing recommendations and extending the deadlines by one year as foreseen by the Stability and Growth Pact, i.e. 2013 for France and Spain, 2014 for Ireland and financial year 2014/15 for the UK. In the case of Greece it concluded that Greece had not taken effective action. " We need to design clear and credible exit strategies to reduce public deficits and debts that have been dramatically increased by the crisis," said Economic and Monetary Affairs Commissioner Joaquín Almunia on the adoption of the recommendations. "The Stability and Growth Pact provides the anchor for such exit strategies (…) I believe the deadlines proposed today are appropriate and realistic ". In an article published today, he also says: Restoring growth and consolidating public finances are two sides of the same coin. There can be no strong, balanced and sustainable growth of the kind Europeans and the G20 want to see if nothing is done to stop debt spiralling out of control (…) Ultimately we face a stark choice. Either we get our budgets back under control, or our debts will control us".
Preparation of the European Council (10-11 December) (AT)
The ECOFIN ministers will adopt the Council Conclusions on Lisbon post-2010 as a contribution to the December European Council. The Conclusions provide broad messages regarding the importance of addressing structural challenges in the aftermath of the crisis and suggest that the new post-2010 Lisbon strategy should aim at raising EU's growth potential and ensuring sustainable public finances in line with the Stability and Growth Pact. The Conclusions also provide messages on importance of better integrating the social dimension and climate change policies into a new strategy in an economically sound manner, streamlining the use of targets, enhancing multilateral surveillance, raising public awareness and support to reforms, as well as fostering dialogues with citizens and stakeholders to better communicate the benefits of reforms at the national and local levels.
The Commission launched a formal consultation on EU2020 – a successor to the Lisbon strategy – on 24 November (see - http://ec.europa.eu/eu2020 ) . It will come forward with concrete proposals regarding the new strategy in early 2010 when the new Commission takes office.