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2103rd Council meeting

– ECOFIN –

Luxembourg, 5 June 1998

President: Mr Gordon BROWN

  •   Chancellor of the Exchequer of the United Kingdom

S U M M A R Y

PARTICIPANTS 3

ITEMS DISCUSSED

PREPARATION OF THE EUROPEAN COUNCIL MEETING IN CARDIFF

- AGENDA 2000 - CONCLUSIONS 5

- BROAD ECONOMIC POLICY GUIDELINES 6

- EMPLOYMENT ACTION PLANS 9

- PAN-EUROPEAN CAPITAL MARKETS 10

PREPARATION OF STAGE 3 OF EMU 10

TAXATION OF SAVINGS 11

ELECTRONIC COMMERCE 11

EBRD PRESIDENCY 11

STATEMENT ON RUSSIA  12

ITEMS ADOPTED WITHOUT DISCUSSION

ECOFIN:

Subscription of the capital of the ECB - statistical data I

Status and treatment of ECB officials I

Chernobyl Shelter Fund I

BUDGET:

Revision of the 1977 EC Financial Regulation (7th set of amendments) II

TRANSPORT:

Mutual recognition of the symbol of the Member State on the registration plate II

TRANSPARENCY:

Public access to documents II

The Governments of the Member States and the European Commission were represented as follows:

Belgium:

Mr Philippe MAYSTADT

Deputy Prime Minister, Minister for Finance and Foreign Trade

Denmark:

Mr Michael DITHMER

State Secretary for Economic Affairs

Germany:

Mr Theo WAIGEL

Mr Jürgen STARK

Mr Klaus BÜNGER

Federal Minister for Finance

State Secretary, Federal Ministry of Finance

State Secretary, Federal Ministry of Economic Affairs

Greece:

Mr Yiannos PAPANTONIOU

Minister for the National Economy and Finance

Spain:

Mr Rodrigo de RATO y FIGAREDO

Mr Cristóbal MONTORO MORENO

Second Deputy Prime Minister and Minister for Economic Affairs and Finance

State Secretary for Economic Affairs

France:

Mr Dominique STRAUSS-KAHN

Minister for Economic Affairs, Finance and Industry

Ireland:

Mr Charlie McCREEVY

Minister for Finance

Italy:

Mr Carlo Azeglio CIAMPI

Mr Vincenzo VISCO

Minister for the Treasury

Minister for Finance

Luxembourg:

Mr Robert GOEBBELS

Mr Luc FRIEDEN

Minister for Economic Affairs

Minister for the Budget

Austria:

Mr Rudolf EDLINGER

Mr Wolfgang RUTTENSTORFER

Federal Minister for Finance

State Secretary, Federal Ministry of Finance

Netherlands:

Mr Gerrit ZALM

Minister for Finance

Portugal:

Mr António SOUSA FRANCO

Mr Fernando TEIXEIRA dos SANTOS

Minister for Finance

State Secretary for the Treasury and Finance

Finland:

Mr Sauli NIINISTÖ

Mr Raimo SAILAS

Minister for Finance

State Secretary for Finance

Sweden:

Mr Erik ÅSBRINK

Ms Kari LOTSBERG

Minister for Finance

State Secretary for Finance

United Kingdom:

Mr Gordon BROWN

Ms Helen LIDDELL

Chancellor of the Exchequer

Economic Secretary to the Treasury

  •   

Commission:Mr Jacques SANTER

Mr Yves-Thibault de SILGUY

Mr Erkki LIIKANEN

Mr Mario MONTI

President

Member

Member

Member

  

Other participants:

  • Sir Nigel WICKS   Chairman of the Monetary Committee
  • Mr Henri BOGAERT   Chairman of the Economic Policy Committee
  • Mr Hans BORSTLAP   Chairman of the Employment and Labour Market Committee

  

PREPARATION OF THE EUROPEAN COUNCIL MEETING IN CARDIFF

  • -AGENDA 2000 - CONCLUSIONS

The Council has discussed the economic and financial aspects of Agenda 2000, on the basis of a draft of the second part of the progress report for the Cardiff European Council prepared by COREPER for the General Affairs Council.

Agenda 2000 is of fundamental importance to the future economic and financial development of the EU. The Union must make important political choices about its main policies and the medium term financial framework within which they will be developed. These decisions will be given even greater moment by the challenge of enlargement.

The Agenda 2000 policy reforms will need to be consistent with the Treaty and with the wider approach to economic reform, and in particular the more efficient working of markets, the encouragement of competition, and an improved allocation of resources, while respecting economic and social cohesion.

The Council recalled the Luxembourg European Council’s conclusions on the imperative of budgetary discipline and efficient expenditure. This was particularly relevant in the context of EMU and enlargement. The Council believes that this principle must be applied consistently across the Agenda 2000 package. It will therefore be necessary to take together all decisions affecting the Financial Perspective.

The Council stresses the importance of sound financial management and fraud prevention. The Council shares the Commission’s aim of ensuring that also in the enlarged Union at least the present level of protection of the Community’s financial interests and policies will be maintained.

The Council noted the Commission's working assumption that the existing own resources ceiling would be maintained but that some Member States had not accepted this. The Council also noted the Commission's intention to bring forward in the Autumn its report on own resources, including the question of relative budgetary positions in the light of policy reforms. In this context the Council noted the call of some Member States for creation of a mechanism for correcting budgetary imbalances but that some other Member States opposed this. The Council also noted that some Member States have made proposals for changing the own resources, e.g. by creating a progressive own resource.

The Council recalls the importance of full implementation of the conclusions of the Luxembourg European Council on dual programming.

The Council welcomes the idea of negotiating a new IIA with the European Parliament on the basis of maintaining an appropriate balance of power between the institutions, ensuring strict budgetary discipline and clearly separating accession-related expenditure.

The ECOFIN Council will continue to consider the important economic and budgetary issues arising from all parts of Agenda 2000.

  • -BROAD ECONOMIC POLICY GUIDELINES

The Council reached agreement on the draft broad guidelines of economic policies of the Member States and the Community which are of particular importance in view of the introduction of the euro on 1 January 1999.

The draft will be presented to the European Council in Cardiff for political endorsement and then for formal adoption by ECOFIN in July.

The introductory chapter which defines the main priorities : "a successful EMU and prosperity and jobs" reads as follows :

"The introduction of the euro on 1 January 1999 marks a new phase in the process of European integration and in the conduct of the economic policies of the Member States and of the Community.

The vigorous and credible implementation by the Member States, especially over the last two years, of policies aimed at achieving a high degree of sustainable economic convergence in the Community has yielded tangible results.

Firstly, reflecting these remarkable convergence efforts and results, the Council of the European Union, meeting in the composition of Heads of State or Government, decided on 3 May 1998 that eleven Member States fulfilled the necessary conditions for the adoption of the euro.

Secondly, these efforts are fostering the development of a macroeconomic policy mix conducive to growth and employment.

However, until now, insufficient progress has been made in reducing unemployment in many Member States.

Since the summer of 1997, when the previous Broad Economic Policy Guidelines were adopted, an increasingly robust and more broadly based economic recovery has taken hold in the Community, in a context of historically low inflation. With spare capacity currently available in most Member States and with prospects for subsequent healthy growth in investment, especially in equipment, solid growth should be able to take place without encountering capacity constraints or generating inflationary tensions, if, as expected, wage developments continue to be appropriate. In addition, the underlying economic fundamentals are sound and improving continuously, demand prospects are brightening and confidence is strengthening further. The impact on Community growth prospects from the financial and economic events in Asia appears limited, provided that the crisis neither deepens nor spreads to other countries in the region.

Against the background of a further strengthening recovery, employment could increase moderately, leading to a slight reduction in the unemployment rate up to 1999 in the Community as a whole. This would constitute a first, albeit modest, step in the direction of the objective of a high level of employment aimed for in Article 2 of the Treaty of Amsterdam.

The present level of employment in the Community is the result not only of high unemployment (about 18 million people in 1997) but also of poor employment prospects over long periods which have discouraged many people from seeking a job, many of whom are beneficiaries of other social security provisions. Thus, the creation of new jobs will have to absorb not only the unemployed but also a rising participation rate and still some demographic increase in the population of working age.

The increase in employment over the medium and longer term would greatly alleviate the burden on Member States’ public finances and social security systems. Moreover, it would help to fight efficiently against poverty and social exclusion.

For economic policy, the tasks are to set the conditions for (i) a further strengthening of the recovery and (ii) its extension into a self-sustaining, non-inflationary economic growth process over the medium and longer term -- a prerequisite for substantially and durably higher employment. This will require a strengthened programme of macroeconomic and structural policies and a determined implementation of the 1998 Employment Guidelines to address a number of key challenges while allowing the Community’s economies to better adapt to changing circumstances in the years ahead.

The introduction of the euro will not in itself solve the Community’s unemployment problem. But in fulfilling the above-mentioned tasks, the stability framework of EMU will contribute to the maintenance of a policy mix that is favourable to growth and employment.

In the macroeconomic area, governments and, in their respective field, the social partners should each make all the required efforts to support the stability objective of the single monetary policy.

Simultaneously, structural policies and reforms of the product, service and labour markets are required to facilitate a tension-free growth process, to reinforce competitiveness, to translate growth into employment and to make growth more respectful of the environment.

More generally, there is a need for a better functioning of the single market for which all Member States are responsible.

Only if this policy strategy is pursued with resolve by all actors and if its implementation is well co-ordinated in line with the Luxembourg European Council resolution, will EMU - as called for in Article 2 of the Treaty - reap its full benefits and contribute to achieving the overall objectives of the Community, including the promotion of sustained and non-inflationary growth respectful of the environment, a high level of employment and rising living standards."

  • -EMPLOYMENT ACTION PLANS

The Council held a debate on the employment action plans presented by Member States in implementing the 1998 Employment Guidelines agreed at the extraordinary European Council which was held last November in Luxembourg.

As a basis for this debate, the Council had received a Commission communication entitled "From guidelines to action: the national action plans for employment", which evaluates whether the undertakings given by the Member States match the tenor and objectives of the Guidelines in 1998. The Council was also presented with the opinions of the Economic Policy Committee and the Employment and Labour Market Committee on the 1998 national action plans.

In line with the Presidency suggestions, the Council focused, in particular, its discussion on the following questions:

  • -promotion of growth and employment through macro-economic stability and consolidation of public finances, and reinforcement of this policy by reform of product, capital and labour markets;

  • -action on employability: increase of the effective labour supply; switch from passive into active labour market measures; reduce tax burden on labour; reforms of tax/benefit systems;

  • -entrepreneurship: stimulation of job creation, particularly in small firms, and avoid risk of over-regulation in this context.

In his concluding remarks the President noted that there was agreement that the generally favourable macro-economic climate creates an ideal opportunity to tackle unemployment and to expand job opportunities; Ministers had welcomed progress across the EU to ensure that the young and long-term unemployed and other socially excluded groups are reinserted into the work force and reaffirmed the importance of using

active labour market measures to help people from welfare to work; they had also emphasized the need to continue to pursue sound macro-economic policies, complemented by structural reform to product, capital and labour markets; Ministers had agreed on the need to ensure that tax and social security systems are employment friendly and stressed the importance of the role of the SMEs and of creating a culture of entrepreneurship.

The Presidency will present the outcome of today's discussion - together with the results of the Labour/Social Affairs Council of 4 June - to the Heads of State or Government in Cardiff.

  • -PAN-EUROPEAN CAPITAL MARKETS

Following the discussion at the April session of the Commission paper "Risk Capital - a key for job creation in the European Union" and its annexed Action Plan, the Council considered, over lunch, a revised version of the Action Plan aimed at improving access to capital in the EU for high growth emerging companies.

The Council welcomed the Commission initiative and concluded that the Council and Member States should examine in detail the Commission's recommendations.

PREPARATION OF STAGE 3 OF EMU

The Council was informed about the outcome of the first meeting of the "Euro 11 Group", held on 4 June at the Chateau de Senningen, by Mr Edlinger, Finance Minister of Austria, who presided over this meeting.

TAXATION OF SAVINGS

The Council heard a presentation by Commissioner MONTI of the proposal, adopted by his Institution on 20 May, for a Directive on taxation of cross-border savings which forms part of the taxation package agreed at the ECOFIN Council of 1 December 1997.

The incoming Austrian Presidency indicated its intention to conduct work on this proposal in an active and careful manner and asked the competent Council bodies to start rapidly its examination with a view to its adoption by the Council in due course.

ELECTRONIC COMMERCE

The Council took note of the conclusions adopted by the Telecommunications Council on 19 May 1998 on Globalisation and the Information Society as well as of the state of work undertaken by the ad hoc Working Group on electronic commerce, set up following the presentation of a French memorandum at the March session concerning Community coordination in this field.

The Council further welcomed the Commission's intention to submit to the Council at its next session a communication on the indirect taxation aspects of electronic commerce in view of the preparation of the OECD Conference in Ottawa from 7-9 October 1998 on this subject.

EBRD PRESIDENCY

The Council agreed to nominate Mr Horst KÖHLER as the EU candidate for the Presidency of the European Bank for Reconstruction and Development.

STATEMENT ON RUSSIA

"We are monitoring Russia's situation closely. Russia's economic stability is vitally important to all of our interests.

We strongly support the emphasis of Russia's government on reforms to strengthen the fiscal situation and the financial situation generally and thereby promote growth. We believe the Russian authorities have crafted a credible package of policies which will strengthen the fundamentals of the Russian economy and allow confidence to return.

Vigorous implementation of these and other reforms are the most crucial actions Russia's authorities can take to build confidence in Russia's economic prospects. We therefore urge the Russian authorities to implement the programme fully and rapidly while providing for social needs.

We continue to back the engagement of the IMF and the World Bank in support of Russian reform and are ready to consider further support from these international financial institutions as necessary and as appropriate since they are the instruments we have established for this purpose : they are the right and proper sources of finance."

OTHER DECISIONS

Adopted without discussion. In the case of legislative acts, votes against or abstentions are indicated. Decisions containing statements which the Council has decided to release to the public are indicated by asterisks; the statements in question may be obtained from the Press Office.

ECOFIN

Subscription of the capital of the ECB - statistical data *

The Council adopted a Decision on the statistical data to be used for the determination of the key for subscription of the capital of the ECB.

The initial capital of the ECB is ECU 5 000 million which will be subscribed and held by national Central Banks only. The statistical data to be used for determining their share are population and gross domestic product at market prices as defined according to the European System of Integrated Economic Accounts (ESA).

Status and treatment of ECB officials

Following the establishment of the ECB, the Council accordingly amended Regulation no 260/68 which lays down the conditions and procedure for applying the tax for the benefit of the European Communities.

The Council also accordingly amended Regulation no 549/69 determining the categories of officials and other servants of the European Communities to whom the provisions of Article 12, the second paragraph of Article 13 and Article 14 of the Protocol on the Privileges and Immunities of the Communities apply.

Chernobyl Shelter Fund

The Council adopted a Decision concerning a Community contribution to the Chernobyl Shelter Fund set up at the European Bank for Reconstruction and Development.

This Decision provides for a contribution by the Community of up to 100 million ECU over the two years 1998-1999 to be managed by the Commission. The contribution will be taken from existing TACIS credits. The annual appropriations will be authorized by the budgetary authority within the limits of the financial perspective.

The Decision follows the agreement of the G7 at the Denver Summit in June 1997 on the setting up of a multilateral funding mechanism to assist Ukraine in transforming the existing Chernobyl sarcophagus into a safe and environmentally stable system.

In this context, it is recalled that the G7, the Commission and Ukraine signed a Memorandum of Understanding on 21 December 1995 on the closure of the Chernobyl Nuclear Power Plant by the year 2000.

BUDGET

Revision of the 1977 EC Financial Regulation (7th set of amendments)

The Council amended Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities with a view to implementing the Commission's recommendations on SEM 2000.

This 7th set of amendments of the Financial Regulation is part of phase 2 of SEM 2000 and is designed to help improve the Commission's internal financial management. It aims, in particular, to step up checks on commitments and payments, to clarify the rules on subcontracting and delegating as well as to update the tasks of the financial controller.

TRANSPORT

Mutual recognition of the symbol of the Member State on the registration plate

The Council adopted by unanimity its common position on the Regulation on the recognition in intra-Community traffic of the distinguishing sign of the Member State in which motor vehicles and their trailers are registered (see Press release of 17 March 1998 n 6886/98 (Presse 70).

TRANSPARENCY

Public access to documents

The Council agreed on the replies to the

  • -sixth confirmatory application for access to Council documents from Mr. Steve PEERS in 1998, the Danish, Netherlands and Swedish delegations voting against;

  • -third confirmatory application for access to Council documents from Mr. Tony BUNYAN in 1998, the Danish and Netherlands delegations voting against.


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