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European Commission

MEMO

Brussels, 11 October 2013

Preparation of Economic and Finance Ministers Council, Luxembourg, 15 October

The EU's Council of Economic and Finance (ECOFIN) Ministers will take place in Luxembourg on 15 October at 12.30. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro and Michel Barnier, Commissioner for Internal Market and Services. A press conference is expected to take place after the meeting.

Preparation of the European Council on 24-25 October 2013 (SOC)

Indicators and policy areas for strengthened economic policy coordination (SOC)

The June European Council decided that work should be pursued to strengthen the Economic and Monetary Union (EMU) in a number of areas related to economic policy coordination. At the upcoming European Council on 24-25 October, the EU Heads of State or Governments will look at the issue of indicators and policy areas for strengthened coordination and at the social dimension of EMU. The discussion is to be continued in December 2013.

Economic and Finance Ministers were requested to prepare a contribution on indicators and policy areas for strengthened economic policy coordination. The Council will exchange views on this issue. On the basis of this discussion, as well as that on the social dimension of EMU in the Employment, Social Policy, Health and Consumer Affairs Council, the Presidency will prepare a letter to President Herman Van Rompuy as an input to the October European Council meeting.

The Commission stands ready to support the work in this field, in the context of the initiatives to move towards a deep and genuine EMU. As set out in the Blueprint which was presented in November 2012 (MEMO/12/909), coordination and surveillance of employment and social policies should be reinforced within the EMU, and convergence in these areas should be promoted.

In this vein, the Commission adopted a Communication on Strengthening the Social Dimension of the Economic and Monetary Union on 2 October. (see IP/13/893 and MEMO/13/837).

Commission-EIB SME initiative (SOC)

Small and medium-sized enterprises (SMEs) are the backbone of the EU's productive fabric and Europe’s job engine. Today, 85% of net new jobs in the EU’s private sector are created by SMEs. Although the economic situation has been improving across the EU over recent months, SMEs continue to report difficulties in accessing finance and would need additional support. This shortage is particularly acute and worrying in Southern European countries. As Vice-President Rehn said earlier this month: A "key to sustainable growth is that the necessary structural change and new economic activity must be financed. Many SMEs in southern Europe in particular still struggle to access finance." For this reason, the EU has put forward several initiatives aiming to promote the job-creation potential of SMEs.

The European Commission and EIB Group in June proposed an initiative to complement and utilise synergies between existing SME support programmes at national and EU level. The June European Council agreed on the expansion of joint risk-sharing instruments between the European Commission and the EIB Group to leverage the private sector and incentivise capital market investments in SMEs and asked that "The Council, in consultation with the Commission and the EIB, will specify without delay the parameters for the design of such instruments co-financed by the Structural Funds, aiming at high leverage effects. The necessary preparations should be made to allow these instruments to begin operating in January 2014."

The proposed SME Initiative aims to complement the actions taken at national level in support of SMEs by using structural funds: It could be implemented under the existing and tested framework of the programme for the Competitiveness of Enterprises and SMEs (COSME) and Horizon 2020 instruments and has the potential to help develop European capital markets. The involvement of the European Investment Fund and the EIB in the structuring of each transaction would provide a standard approach, which facilitates investor analysis. The voluntary participation of all Member States in this initiative is crucial for its success. In addition, by using a joint instrument (COSME and Horizon 2020), no co-financing would be required for the European Structural and Investment funds deployed, and the initiative would benefit from state-aid clearance.

The Council will have another exchange of views on these issues ahead of the 24-25 October European Council, where it will renew its call for concrete, quick delivery.

More information:

http://ec.europa.eu/europe2020/pdf/eib_en.pdf

European Semester: lessons from 2013 and way forward (SOC)

The Council is expected to take stock of the third "European Semester" of multilateral economic and financial surveillance. Whilst the 2013 European Semester was more effective and worked better than previously, there are areas where progress could still be made. The deliberations in the Council will be mirrored by a discussion in the Employment, and Social Policy Council on 15 October. The Lithuanian Presidency will prepare a synthesis report on the semester, to be approved by the General Affairs Council on 22 October.

The Commission would like to see a stronger emphasis on monitoring of implementation of policy recommendations and increased focus on reform implementation at the level of Ministers and Heads of State or Governments. Moreover, a comparison of Member States' performance could improve the political traction. This should include thorough discussions of horizontally relevant issues at the level of Ministers.

More information on economic governance:

MEMO/13/318

http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/priorities/economic-governance/index_en.htm

Follow-up to G20 Finance Ministers and Governors' meeting on 10-11 October 2013 and Annual Meetings of the IMF and World Bank Group on 11-13 October 2013 in Washington

The Presidency and the Commission will inform the Council about the outcome of the G20 Finance Ministers and Governors' meeting and the Annual Meetings of the IMF and World Bank Group.

At the G20 meeting, the EU indicated its continued support for the G20 work on financing for investment. This is also a priority in the EU in order to further boost investment and improve access to credit in particular for SMEs in Southern Europe.

Discussions in Washington have also focused on the current vulnerabilities to the global economy, in particular the fiscal situation in the US, the normalisation of monetary policy, and the slowdown of growth in emerging market economies. While the EU's growth is gradually picking up, the EU will have the opportunity to reconfirm its determination to stay the course of economic reform, in particular with regard to banking union and the deepening of the economic and monetary union. As Vice-president Rehn stressed when commenting on recent signs suggesting an economic turnaround and progress towards a modest recovery: “This is no time for complacency.”

Preparation of the 19th Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Warsaw from 11 to 22 November 2013 (SOC)

The Council is expected to adopt conclusions regarding the EU's position for the 19th Conference of the Parties (COP19) under the United Nations' Framework Convention for Climate Change (UNFCCC), which will be held in Warsaw from 11 to 22 November. The UN's Framework Convention for Climate Change is the main body for international negotiations on climate policy, including climate finance.

The EU and its Member States have provided and will continue to provide large sums of public climate finance. All the members of the UNFCCC committed last year to reach a globally binding agreement in 2015 to limit greenhouse gas emissions by 2020. This conference is seen as a preparation for reaching this agreement at COP21 in Paris in 2015.

More information:

http://ec.europa.eu/clima/policies/brief/eu/index_en.htm

Other Items

Update on current legislative proposals:

There will be an update from the Presidency on financial services files in the co-decision process where negotiations are progressing, namely the following files:

Bank recovery and resolution Directive –BRRD- (CH)

The financial crisis highlighted that public authorities are ill-equipped to deal with ailing banks operating in today's global markets. In order to maintain essential financial services for citizens and businesses, governments have had to inject public money into banks and issue guarantees on an unprecedented scale: between October 2008 and October 2011, the European Commission approved €4.5 trillion (equivalent to 37% of EU GDP) of state aid measures to financial institutions. This averted massive banking failure and economic disruption, but has burdened taxpayers with deteriorating public finances and failed to settle the question of how to deal with large cross-border banks in trouble.

The proposals adopted on 6th of June 2012 by the European Commission for EU-wide rules for bank recovery and resolution aim to change this (IP/12/570). They ensure that in the future authorities will have the means to intervene decisively both before problems occur and early on in the process if they do. Furthermore, if the financial situation of a bank deteriorates beyond repair, the proposal ensures that a bank's critical functions can be rescued while the costs of restructuring and resolving failing banks fall upon the bank's owners and creditors and not on taxpayers.

The crisis clearly demonstrated that when problems hit one bank, they can spread to the whole financial sector and well beyond the borders of any one country. It also showed that systems were not in place to manage financial institutions facing difficulties. Very few rules exist which determine what actions should be taken by authorities in the case of a banking crisis. That is why the G20 agreed that crisis prevention and crisis management frameworks had to be set up.

The Commission welcomes the efforts and commitment of the Lithuanian Presidency to reach agreement with the European Parliament on the proposal in line with the conclusions of the European Council of December 2012. This timetable is critical to allow the Directive to enter into force across the EU in 2015 and underpin the functioning of the Single Resolution Mechanism for the Banking Union as of the same date.

More information:

http://ec.europa.eu/internal_market/bank/crisis_management/

Single Resolution Mechanism (CH)

The European Commission has proposed a Single Resolution Mechanism (SRM) for the Banking Union on 10 July 2013 (IP/13/674). The mechanism would complement the Single Supervisory Mechanism (SSM) (IP/12/953) which, once operational in late 2014, will see the European Central Bank (ECB) directly supervise banks in the euro area and in other Member States which decide to join the Banking Union. The SRM will implement the BRRD (see above) in an integrated way for the banks supervised by the Single Supervision Mechanism (SSM).

The Single Resolution Mechanism would ensure that – not withstanding stronger supervision - if a bank subject to the SSM faced serious difficulties, its resolution could be managed efficiently with minimal costs to taxpayers and the real economy.

During the upcoming ECOFIN, the Lithuanian Presidency will update the Council about the latest state of play regarding the proposal and will suggest strands of work discussion should focus on in order to reach agreement among Member States before the end of 2013, in line with the conclusions of the European Council.

Commissioner Barnier welcomes the efforts of the Lithuanian Presidency to achieve rapid agreement on the SRM proposal. He will recall that the Commission’s proposal would provide for an effective resolution mechanism for the Banking Union, that he is willing to compromise and looks forward to constructive discussions with Member States.

More information:

http://ec.europa.eu/internal_market/finances/banking-union/index_en.htm

These updates will also cover other financial services files for which the Commission hopes to see a final agreement in coming months:

  1. draft rules relating to markets in financial instruments (MIFID)

IP/11/1219 - MEMO/11/716

http://ec.europa.eu/internal_market/securities/isd/index_en.htm

  1. draft Regulation on Central Securities Depositories, CSRD

IP/12/221 - MEMO/12/163

http://ec.europa.eu/internal_market/financial-markets/central_securities_depositories/index_en.htm

  1. Deposit guarantee scheme

IP/10/918 - Memo/10/320

http://ec.europa.eu/internal_market/bank/guarantee/index_en.htm

  1. Omnibus II legislation for the insurance sector

IP/11/49 - MEMO/13/841

http://ec.europa.eu/internal_market/insurance/solvency/latest/index_fr.htm


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