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European Commission


Brussels, 3 December 2012

Preparation of Economic and Finance Ministers Council, Brussels, 4 December 2012

The EU's Council of Economic and Finance Ministers will start on Tuesday, 4 December at 11.00. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services and Algirdas Šemeta, Commissioner for Taxation and Customs Union, Audit and Anti-Fraud. A press conference is expected to take place after the meeting.

Banking Supervision Mechanism (SdR)

The Council is due to adopt a General Approach on the set of proposals for a single supervisory mechanism (SSM) for banks. The proposed new supervisory system with the ECB at its centre aims to strengthen the Economic and Monetary Union. The SSM is a first step towards a fully-fledged banking union as it was laid out in the Commission's Communication of 12 September 2012 and in the "Blueprint for a deep and genuine economic and monetary union" of 28 November 2012 (see (IP/12/953) and IP/12/1272). On 29 November, the vote of the Economic and Monetary affairs Committee of the European Parliament gave a mandate to reach an agreement with the Council, which opens the way to starting the informal trilogue. In this context, Commissioner Barnier will underline the excellent work on these proposals made both by the Cyprus Presidency and the European Parliament . He will maintain the momentum by calling the Council upon reaching a general approach so that negotiations can be concluded by 1 January 2013, as it has been explicitly requested by the European Council in October.

The outstanding issues touch on the role of the national supervisors, the governance of the ECB and the voting rights within EBA.

More information:

Revised Capital Requirements rules (CRD IV) (SdR)

The Council is invited to consider a progress report from the Presidency on a legislative package to strengthen the regulation of the banking sector. The proposed package would replace the current Capital Requirements Directives (2006/48 and 2006/49) with a Directive and a Regulation that would constitute another major step towards creating a sounder and safer financial system. The Directive governs the access to deposit-taking activities while the Regulation establishes the prudential requirements that institutions need to respect. (see (IP/11/915).). Commissioner Barnier will welcome the progress report presented by the Cyprus Presidency and invite Member States to reach an agreement by the end of the year with the European Parliament. Commissioner Barnier will confirm that the European Commission stands ready to help the Council and the European Parliament to reach an agreement on the outstanding issues, which concern inter alia bankers remuneration and national flexibility.

More information:

Economic governance – "Two-Pack" (SOC)

The two Regulations proposed by the Commission on 23 November 2011 to improve budgetary surveillance in the euro area  – the so called "Two-Pack" (see MEMO/11/822)- are an indispensable step towards reinforcing the fiscal framework in the EMU. This package is one of the key short-term steps towards a genuine Economic and Monetary Union is going to be developed.

The first proposed Regulation of the Two-Pack aims at enhancing budgetary coordination and ex ante budgetary surveillance for all euro area Member States. To ensure the timely correction of deficits, it also reinforces the monitoring of those Member States under the Excessive Deficit Procedure. Furthermore, it is also a concrete way to enshrine in EU law some of the commitments of the Treaty on Stability, Coordination and Governance into EU law.

The second proposed Regulation aligns and better integrates the principles used in providing financial assistance via instruments outside of the EU framework with the EU Treaty framework.

On Tuesday, the Council will discuss the state of play regarding the legislative process. The Commission welcomes the progress achieved with the European Parliament and the Council in the "trilogues", which should facilitate reaching a first reading agreement on the package still before the end of this year.

Credit Rating Agencies Taxation (SdR)

The Council will be informed on the outcome of the successful trilogue meeting held on 27 November in view of technical finalisation.

Commissioner Barnier welcomed the political agreement reached by the Council and the European Parliament on additional rules for credit rating agencies (CRAs) which aim to reduce the over-reliance on ratings, eradicate conflicts of interest, and establish a civil liability regime. The full text of this statement along with further background information can be found at:

Macroeconomic Imbalance Procedure – Commission Alert Mechanism Report (SoC)

Olli Rehn, Vice-President for Economic and Monetary Affairs and the Euro will present the Alert Mechanism Report (AMR), which the Commission published on 28 November in order to launch the second cycle of the Macroeconomic Imbalance Procedure (MIP). The report calls for in-depth reviews of developments related to the accumulation and unwinding of macroeconomic imbalances in 14 EU Member States: Belgium, Bulgaria, Denmark, Spain, France, Italy, Cyprus, Hungary, Malta, the Netherlands, Slovenia, Finland, Sweden and the United Kingdom (IP/12/1275, MEMO/12/912). For twelve of them, an in-depth analysis was already carried out in the first cycle of the procedure earlier this year, and imbalances – of a different nature and severity – were found to exist. The countries concerned received policy guidance through the country-specific recommendations under the European Semester (MEMO/12/388) in May. The Commission considers that it is useful to take a closer look again at the risks involved and progress underway in unwinding imbalances in these Member States. In the case of Malta and the Netherlands, it will be the first time that an in-depth review under the MIP is carried out.

In the AMR, the Commission identifies Member States whose macroeconomic situation needs further scrutiny through an in-depth review, the outcome of which is not pre-judged. Only after the in-depth reviews next spring will the Commission conclude whether imbalances or excessive imbalances exist, and propose appropriate policy recommendations. In general terms, the latest AMR presents evidence that the adjustment of macroeconomic imbalances is progressing.

Vice-President Rehn has said: "The EU is going through a difficult process of unwinding macroeconomic imbalances that built up in the decade before the crisis. A lot has already been done and reforms are bearing fruit. But the rebalancing process is far from complete and will shape the economic landscape for several years to come. Through the Macroeconomic Imbalance Procedure, the Commission provides guidance to Member States to ensure the adoption of adequate policies to tackle imbalances and lay the foundation for sustainable growth and job creation."

Annual Growth Survey 2013 (SoC)

Olli Rehn, Vice-President for Economic and Monetary Affairs and the Euro will present the 2013 Annual Growth Survey (AGS), which the European Commission adopted on 28 November. It sets out five priorities designed to guide Member States through the crisis to renewed growth. The AGS kick-starts the European Semester for economic policy coordination, which ensures that Member States align their budgetary and economic plans with the Stability and Growth Pact and the Europe 2020 strategy. The main message of the AGS this year is that while EU policies are beginning to show results – deficits are coming down, tensions in financial markets are easing and there are signs that competitiveness is improving in some Member States – continued reform is needed to generate sustainable growth and jobs.  That is why the Commission considers that the five priorities outlined in last year's AGS (see MEMO/11/821) remain valid. The five priorities are: pursuing differentiated, growth-friendly fiscal consolidation; restoring normal lending to the economy; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the crisis; and modernising public administration (IP/12/1274, MEMO/12/910).

Issues related to the Economic and Monetary Union (SoC and SdR)

Olli Rehn, Vice-President for Economic and Monetary Affairs and the Euro and Michel Barnier, Commissioner for Internal Market and Services will present the Blueprint for a deep and genuine Economic and Monetary Union, which the Commission published on 28 November (IP/12/1272, MEMO/12/909). It provides a vision for a strong and stable architecture in the financial, fiscal, economic and political domains. The path set out in the Blueprint involves incremental measures taken over the short, medium and longer term.

The Blueprint is the Commission’s contribution to the report of the “four presidents” on the next steps towards a deeper Economic and Monetary Union. A final version of the report is being prepared by the President of the European Council in coordination with President Barroso, the President of the European Central Bank and the President of the Eurogroup, and will be discussed by the European Council on 13-14 December.

Implementation of the Stability and Growth Pact – Excessive deficit procedure - Greece (SoC)

The Council will discuss the Communication that the Commission adopted on 30 November. The Communication outlines the efforts that Greece has made to correct its excessive deficit. The general government deficit has improved from 15.6% in 2009 to an estimated 6.9% of GDP in 2012. The actual fiscal effort made by Greece has been considerably greater. Nevertheless, since the recession in Greece has been greater than expected, it is considered that the Greek authorities will need an additional two years up to 2016 to correct their excessive deficit. Moreover, the Council will make a formal decision on the Greek Economic Adjustment Programme. This will allow the further financing and debt reduction package to be implemented.

Financial Transaction Tax (ET)

The Council is expected to hold a debate on the Commission's proposal to authorise going forward with a common Financial Transaction Tax system in 11 Member States.

On 23 October, the Commission tabled a proposal for a Council Decision to authorise setting up a common system of financial transaction tax under the procedure of enhanced cooperation, which can be used in case no unanimity is achievable and at least 9 Member States want to go ahead in an area that is not yet covered by EU legislation (see IP/12/1138).

It will be based on the scope and objectives of the Commission proposal of 2011 (see IP/11/1085). The objectives of the September 2011 proposal were essentially three-fold. First, an FTT would strengthen the EU Single Market and avoid distortions of competition by setting up a harmonised framework for an FTT. Second, it would ensure that the financial sector makes a fair and substantial contribution to covering the cost of the financial crisis. And finally, it would create appropriate disincentives for transactions that do not enhance the efficiency or stability of financial markets thereby complementing regulatory measures to avoid future crises.

VAT Quick Reaction Mechanism (ET)

The Council will hold an orientation debate on the Commission's proposal for a Quick Reaction Mechanism (QRM) that would enable Member States to respond more swiftly and efficiently to VAT fraud (see IP/12/868).

VAT fraud costs the EU and national budgets several billion euro every year. In some serious cases, vast sums are lost within a very short timeframe. Under the QRM, a Member State faced with a serious case of sudden and massive VAT fraud would be able to implement certain emergency measures, in a way which they are currently not allowed to under VAT legislation. In this context, the proposal provides that the Commission would be able to take within a month a decision authorising a Member State to apply a "reverse charge mechanism" which makes the recipient rather than the supplier of the goods or services liable for VAT. Under the current derogation system, only the Council can do so upon a proposal from the Commission, according to a procedure which may take up to a year. The proposed QRM would significantly improve the chances of Member States to effectively tackling complex fraud schemes, such as carrousel fraud, and to reducing otherwise irreparable financial losses.

Annual Report of the Court of Auditors on the implementation of the budget for the financial year 2011 (ET)

The Council is expected to hold a debate on the Annual Report of the European Court of Auditors on the implementation of the budget concerning the financial year 2011. The European Court of Auditors is the independent external auditor of the European Union. Each year, the Court publishes an Annual Report on the implementation of the EU budget (see IP/12/1174). The Commission welcomes the report which shows a stable situation for the EU budget as a whole. The Commission notes that EU programmes implemented by Member States deserve increased attention by all actors involved and is determined to maintain a high level of supervision by using all tools at its disposal. Based on the Annual Report, the Council adopts a recommendation on granting discharge to the Commission for the implementation of the EU budget. Following its adoption, the recommendation will be presented to the European Parliament's budgetary control committee.

Other issues:

Code of Conduct on Business Taxation (A point) (ET)

This point is due to be approved by the Council without discussion.

The Council is expected to adopt Conclusions on the Report of the Code of Conduct Group concerning the Group's work under the Cyprus Presidency. The Code of Conduct Group reports to the Council on progress achieved by the end of each Presidency.

During the Cyprus Presidency the Code of Conduct Group pursued its work on rolling back harmful tax practices and monitoring Member State's efforts to refrain from introducing any in the future. The UK Gibraltar Income Tax Act 2010 was discussed by the Group and it agreed that certain elements of the Gibraltar tax regime are harmful under the criteria of the Code. The Group progressed on various items of the Work Package 2011 (mismatches, administrative practices, monitoring of agreed guidance and the preparation of new guidance or application notes). Finally, the Group reported on the dialogue with Switzerland concerning the application of the Code principles, encouraging the Commission to intensify the dialogue and expressing the wish to see concrete progress by the end of the Irish Presidency.

Implementation of the Stability and Growth Pact – Excessive deficit procedure – Malta (A point) (SoC)

This point is due to be approved by the Council without discussion.

On 7 November the Commission recommended that the Council abrogate the Excessive Deficit Procedure (EDP) for Malta, as foreseen in Article 126(12) of the Treaty.

In 2011, the general government deficit of Malta narrowed to 2.7% of GDP, which is below the reference value of 3% of GDP. According to the Commission's 2012 autumn forecast (IP/12/1178), the deficit will slightly decrease to 2.6% in 2012 and it will remain under 3% of GDP over the forecast horizon (until 2014). Therefore, the Commission has concluded that the correction of the excessive deficit is durable.

On the basis of the 2012 autumn forecast, the Commission made an assessment of the public finance situation in all Member States. The Commission will continue monitoring public finance developments that warrant an immediate response. The next key moment to review ongoing EDPs will be in the context of the 2013 winter forecast.

Report of High-level Expert group on reforming the structure of the EU banking sector chaired by Erkki Liikanen (SdR)

Over lunch, Erkki Liikanen, governor of the Bank of Finland, will present the report of his group, which will be followed by discussions.

More information on the report:

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