Brussels, 07/11/2011 (Agence Europe) - Eurozone and EU27 finance ministers have been meeting in Brussels since Monday evening to examine the sovereign debt crisis after the week of financial upheavals that followed the 27 October eurozone summit (see EUROPE 10483).
The Eurogroup will be briefed on the changes in the Greece, where a new coalition government is to be set up (which will not be headed by current prime minister George Papandreou - see separate article). The Eurogroup will discuss the fact-finding missions to be sent to Italy by the European Commission and the IMF to ensure the reforms recently announced by the Italian government are properly implemented. MPs have been defecting from the majority recently and the fact that the G20 decided to send IMF experts to the country may deal the death blow to the likelihood of Prime Minister Silvio Berlusconi's remaining in power (see EUROPE 10489).
All EU27 finance ministers will continue discussions about the effect on European banks of the debt crisis. At the end of October, the eurozone summit agreed on a faster and more substantial recapitalisation of European banks and, by the end of June 2012, Europe's main banks will have to increase their capital to 9% Core Tier 1 after taking account of their exposure to sovereign debt as at 30 September 2011. This is expected to cost the EU some €105 billion (€30 billion for Greece, €26 billion for Spain and €14.8 billion for Italy) and the new capital should be raised from the private sector as a priority (selling off debt, for example and not issuing dividends). Where necessary, public funding may be requested from member states or, as a last resort, the EFSF bailout fund.
The ECOFIN Council will make the final decision on the legislation reforming the Stability and Growth Pact, increasing budget surveillance and introducing macroeconomic surveillance. In this connection, it will publish a conclusions document on the drawing up of a table of indicators for detecting problems. In a preparatory memorandum, the Polish Presidency explained that the approach already being followed by the Commission has received broad backing, although delegations have doubts about one economic indicator, namely the current account thresholds.
Financial Transactions Tax. The ministers will examine the Commission's draft directive to introduce a financial transactions tax (FTT) in the EU from 1 January 2014. The income (to the tune of €57 billion a year) would feed into the EU's budget and reduce member states' contributions to the EU coffers. The tax would cover transactions for all types of financial instruments (capital and money markets, shares, bonds, derivatives, investment funds) but not payments and would be levied on over-the-counter deals as well as organised trading places when at least one of the parties is registered in the EU. The minimum harmonised rate would be 0.1% of the deal for most financial products, but derivatives would be subject to a 0.01% tax. Like all tax issues, unanimous voting is required at the Council of Ministers for this directive. Introducing an FTT would make the EU a world leader and despite strong resistance to the idea from the United Kingdom and Sweden, the idea of an international FTT seems to be gaining ground, as was seen at the Cannes G20 Summit (see EUROPE 10489). The French Presidency of the G20 called for some of the income raised by an FTT to be used for development aid and/or tackling climate change.
The ECOFIN Council will hold a preliminary debate about a draft directive to change the way fuel and energy are taxed to make the tax system more compatible with the EU's current energy savings targets. The draft directive aims to ensure uniform tax treatment of carbon-based fuel and energy content. The main outstanding issues are whether to include the carbon footprint in taxation and removing imbalances in the way different energy products are treated. After hearing the opinions of the member states, the ministers will be asked to set guidelines for the technicalities of legislative.
Switzerland and Liechtenstein. On Tuesday morning, the ECOFIN Council will meet with the EFTA nations' finance ministers and discussion tax issues is likely to arise as a result of the severe criticism at the G20 Summit of Switzerland and Liechtenstein (see separate article). The French President, Nicolas Sarkozy, accused both countries of not introducing an effective legal framework (as set out by the OECD) for the exchange of tax information with tax offices in other countries. (MB/FG/transl.fl)