Brussels, 06/12/2010 (Agence Europe) - EU finance ministers will be meeting for an ECOFIN Council meeting on Tuesday 7 December to discuss the economic and financial situation against the backdrop of tension on the money markets and speculation against various countries in the eurozone.
The agenda includes strengthening economic governance, tax cooperation, aid for Ireland, healthcare and managing crises in the financial world. Other issues, like the impact of changes in pensions systems on implementation of the Stability and Growth Pact and a tax on banks, will also be discussed in preparation for the European Council of 16 and 17 December. Over lunch, the French delegation will present its programme for the French presidency of the G20 and the ministers will discuss EU representation at the G20.
Aid for Ireland. The ministers will formally endorse the details of the Irish aid programme decided on 28 November (see EUROPE 10263), which includes a loan of €67.5bn at a rate of approx. 5.8% from the EU and the IMF (International Monetary Fund). The decision and the formal request (recommendation) that the Irish government end its enormous public deficit (32% of GDP this year) are expected to reassure the markets at this time of tension. Both the decision and the recommendation have to be voted through on a qualified majority vote.
Economic governance. Based on a report from the chair of the Economic and Financial Committee and following on from the European Council of 28 and 29 October, the ECOFIN Council will examine the six items of draft legislation unveiled by the European Commission to change the budget discipline rules for the member states and to introduce monitoring and sanctions systems for macroeconomic imbalances. The Council and Parliament will be urged to reach agreement on the legislation by the summer of next year so that it can be rapidly introduced in practice. The Council and Parliament negotiators will meet informally ahead of the Council meeting. The president of the ECB, Jean-Claude Trichet, urged the European Parliament on Friday to be more ambitious than the Commission, whose draft legislation went in the right direction, he said, but is not bold or detailed enough. The Council will decide on the legislation is by a qualified majority vote.
Financial crisis management. The Council will publish a conclusions document on preventing, managing and solving banking crises based on a report from the Commission. The Commission is currently preparing a crisis management system with three types of measures (preparatory preventive measures, early intervention by the surveillance authorities and powers and systems to solve crises). The ministers are expected to approve the general direction taken by the Commission's programme and take note of its plan to unveil new legislation in the spring of next year. The conclusions document will deal with issues like fair contributions by financial institutions to the cost of the new regulation and crisis management system being designed (see above).
Fiscal cooperation. The ministers will be asked to reach agreement in principle on the EU directive to boost administrative cooperation in direct taxation to tackle fraud and tax evasion more effectively and to align the EU's legislation with OECD rules. Two issues were unresolved at the 19 October meeting (see EUROPE 10241), namely the automatic exchange of information among member states, where there is disagreement about the categories of income this should apply to and the reciprocal nature of the information provided; and exchange of information upon demand, where Luxembourg and Austria are concerned about fishing expeditions. Other tax issues will also be discussed by the ministers, like the report on implementation of a code of conduct to remove tax competition issues for companies in the EU, on which a conclusions document is expected to be published. Ministers will also discuss a draft on levying VAT on postal services to bring the VAT directive in line with the three post office liberalisation directives; and a possible agreement in principle on adapting the VAT system for travel agents in line with technology changes (electronic reservations). These issues require unanimous decisions-making.
Healthcare. The Council is expected to publish a conclusions document on public healthcare based on a joint report by the Commission and the Economic Policy Committee, stressing the need to cut costs and optimise the use of public funding via a long-term reform of social welfare systems in countries facing an ageing population.
Ahead of the European Council of 16 and 17 December, the ministers will approve two reports to be submitted to EU heads of state, namely:
A report on the impact of reforming the pensions system on implementation of the Stability and Growth Pact. Nine member states that have introduced a multi-pronged pensions system (state, mixed and private), or are preparing to do so, believe that these reforms to ease public finance in the long-term incur costs in the short-term that aggravate their budget deficits. They therefore want this to be taken into consideration when calculating their public deficit and public debt. Two of them, Hungary and Poland, want these costs to be excluded from the deficit and debt calculations. The report recognises that not counting the cost of reform of pensions systems when deciding on excessive deficit proceedings for a certain period of time could be a way of taking the impact of pensions reform into account, but rules out any amendment in the protocol to the EU Treaty on the excessive deficit proceedings or Eurostat's rules of assessing the balance of public accounts.
A report on a tax on financial institutions. This report was requested by the European Council in October. It looks at how the various systems in place can be coordinated to avoid multiple taxation of banks operating in more than one member state. The taxes are being examined in relation to measures to solve banking crises by ensuring that banks pay their fair share of the cost of consolidating public finances and the cost to the state and the taxpayer of bailing out the banks (16,5% of EU GDP in 2008 and 2009). In the short-term, it is unlikely that all the member states will introduce taxes of this nature, some of them have already done so and others are looking into it. This could generate the danger of multiple taxation of banks operating in various countries, which might be further complicated by the taxing of branches or subsidiaries of banks whose headquarters are in another member state. Differences in the size of the tax in the member state could create an uneven playing field and cause banks to move to a different country, although this danger is limited in the short-term. In a report published in May 2010, the Commission recommended the creation of a fund for struggling banks, financed by a tax on banks under a new EU financial crisis resolution system. In a report to the European Council in October, the Council noted growing consensus on the idea and the aims of such a tax, but member states are still divided about whether the money raised should go to a crisis resolution fund, as suggested by the Commission, or straight into member states' coffers.
The ministers will also discuss a report on short selling and credit default swaps. (F.G./transl.fl)