Brussels, 09/03/2012 (Agence Europe) - European finance ministers will be meeting on Monday 12 March 2012 to discuss the second Greek bailout. They will ask Hungary to take corrective budget measures if it wants to avoid a freezing of Cohesion Funds earmarked for it for 2013. Upon request from Germany, the ministers will discuss the draft EU legislation to introduce a financial transaction tax.
Greece. The Eurogroup will discuss the second Greek bailout. After a teleconference, the eurozone ministers said on Friday 9 March that they were encouraged by the high private sector involvement in the Greek bond write-down (see related article) and said the criteria had been met for final approval of the second Greek aid programme.
Hungary. The ECOFIN ministers will enter a new stage in the infringement proceedings that could lead to a freezing of the nearly €500 million earmarked for Hungary for 2013 from the EU Cohesion Fund. They will endorse two separate legal measures: - a draft decision to suspend the Cohesion Fund cash (see EUROPE 10559); - a draft recommendation that Budapest introduce by mid-September 2012 corrective measures to ensure it meets its budget targets (deficit of 2.5% of GDP in 2012) (see EUROPE 10568). The Danish Presidency says the two procedures are linked and if the budget correction is made, then the suspension of aid will not take place. The EU27 member states will vote on the suspension of Cohesion Fund cash by a qualified majority vote, and all bar Hungary will vote on the excess deficit procedure question.
Stability and growth pact. The Danish Presidency says it is important that the stability and growth pact is applied to the letter. A source suggests that it is important to be coherent and the ministers will focus on key words like credibility to show the markets that the EU is serious about budget discipline; or equal treatment among member states, to demonstrate that in similar cases in the future, and in the talks on the upcoming financial framework (budget), it will be made easier to suspend payment of the Structural Funds. Given the current economic climate, does the Danish Presidency believe that the national budget targets for 2012 and 2013 are reasonable and should be achieved? The Presidency answered that if the Commission goes ahead with the excess deficit proceedings, then the Danish Presidency will put the matter on the ECOFIN Council agenda to ensure the system is credible. The situation in Spain, where the government has announced a lower deficit reduction target (5.8% of GDP in 2012, rather than the planned 4.4%) while promising to reduce the deficit to below the 3% cut-off point in 2013 as planned, is putting application of the brand new stability and growth pact to the test.
Macroeconomic imbalances. The ministers will adopt a conclusions document on the recent European Commission report identifying 12 member states where macroeconomic imbalances require further study (see EUROPE 10553). They will recommend that in preparing national reform programmes, that member states take account of the result of the Commission's report (which does not look at countries in surplus, like Germany). A draft conclusions document seen by this newsletter suggests the ECOFIN Council will welcome the Commission's plan to examine what underlies the serious and long-lasting current account surpluses and what they imply, and will examine potential ways of ensuring a rebalancing.
The size of the European financial backstop (bailout funds) will not be discussed by the ECOFIN Council, but will be examined later in the month. Neither will the appointment of a member of the ECB's Executive Board.
FTT. The Danish Presidency will inform ministers of progress in technical work on the introduction of a financial transaction tax (FTT) in the EU (the experts have finished their initial examination of the legal issues). A formal debate will not be held at this stage as it could prove counter-productive. The Danish Presidency is likely to continue with the technical work for a policy debate in May or June 2012.
There is debate about what the FTT should be levied on and whether it should apply to derivatives, bonds and pension funds. Other areas of debate include the amount of the tax, who would pay it, and more general issues like the impact on the economy, the risk of companies moving their transactions outside the EU and whether the directive would apply to non-European financial establishments. Nine countries (France, Germany, Italy and others) want the FTT work to be speeded up so that if it is not introduced throughout the EU27, then it can be introduced in fewer countries by means of a process known as enhanced cooperation. The United Kingdom has already announced that it will be vetoing the tax (which has to be introduced by a unanimous vote - see EUROPE 10549). (MB/FG/transl.fl)