Brussels, 11/02/2011 (Agence Europe) - The meeting of EU finance ministers on Tuesday 15 February will focus on the new legislation to boost economic governance in the EU (see EUROPE 10298). On Monday afternoon, 14 February, the Eurogroup (the meeting of eurozone finance ministers) will also discuss the issue, examining the economic situation and rising inflation. Non-euro countries will be attending Monday's meeting to examine the planned European stability mechanism to take over from the EFSF and other temporary funds in the summer of 2013 to ensure stability in the eurozone.
Economic governance. The ECOFIN Council on Tuesday will discuss the economic governance legislation. Agreement in principle is expected next month to enable the talks with the European Parliament to be concluded in June 2011. Based on the work of the European Council's ministerial taskforce, the discussions have continued apace, explains the Hungarian Presidency in a progress report. It will try to make progress on a dozen outstanding issues on Tuesday.
The member states are expected to agree that money raised from fines on countries infringing the stability and growth pact (SGP) will feed the eurozone bailout funds. Italy has a reservation about the preventative role of the SGP for the definition of the numerical indicator for autonomous non-compensated spending. For the corrective arm of the SGP, all member states bar Greece and Italy (the most highly indebted eurozone countries as a ratio of GDP) agree that public debt reduction should proceed as follows - each year, the debt should be cut by a twentieth of the total amount over and above 60% of GDP, as suggested by the European Commission. A three-year transition period would be allowed for application of this measure. More work is needed on definition of relevant elements for calculating debt reductions. One diplomat said that Italy seemed a little isolated when it asked for private debt to be included in assessments of public debt risk.
For the first time, the new legislation will include monitoring of macroeconomic imbalances like housing bubbles based on a table of indicators yet to be decided. Member states are asking what role the Council of Ministers should play in drawing up and approving said indicators and whether the table should be decided as a political decision together with the European Commission or whether the Council of Ministers alone should decide. Two non-eurozone countries want greater differentiation between countries with the euro and countries without the euro when it comes to the choice of indicators and warning levels.
G20. The ECOFIN Council will draw up the position that the EU members of the G20 will argue at the G20 finance summit in Paris on 18 and 19 November (see separate article).
European semester. The ministers will issue recommendations for the preparation of national reform programmes as part of the European semester. A draft conclusions document states that the recommendations will be largely based on the Commission's Annual Growth Review (see EUROPE 10292). The member states will be urged to consolidate public finance at “well above 0.5% of GDP” a year, in addition to recommended changes to pensions (raising the retirement age and eliminating early retirement), healthcare and employment (recognition of professional qualifications and making unemployment benefits conditional upon seeking to return to work). Reform of the banking industry should be speeded up as appropriate and the member states should prepare strategies for dealing with failed banks ahead of the next bank stress tests.
Savings tax. Draft taxation legislation will be examined by the ministers on Tuesday (see EUROPE 10297), who will hold a policy debate about changes to the savings tax directive (2003/48/EC) to include companies and new financial products. The main outstanding issues are the demand by Luxembourg and Austria for the directive to set conditions for non-EU countries, wanting various tax havens to be forced to introduce similar rules, (namely the tax havens of San Marino, Andorra, Monaco, Liechtenstein, Switzerland and ten overseas territories of the United Kingdom and the Netherlands); and also wanting to be allowed to keep their energy taxation at source systems for non-residents during a transition period. Anti-fraud deals with the above countries may force Austria and Luxembourg to scrap their deduction at source systems and banking confidentiality and to share bank account information with other countries. Their competitors, headed by Switzerland, would only be required to provide information upon request. Other member states, however, want the transition period to end seven years after the directive comes into force. Negotiations will also cover an anti-fraud deal with Liechtenstein and a negotiating mandate for the Commission for anti-fraud deals with Andorra, Monaco and San Marino and a new anti-fraud deal with Switzerland. (M.B./F.G./transl fl)