Brussels, 10/05/2012 (Agence Europe) - EU27 finance ministers will be discussing the economic and political situation in the EU27 and the eurozone on Monday 14 and Tuesday 15 May in the light of the European Commission's spring economic forecasts (to be unveiled on Friday 11 May). They will try to agree on a single European candidate to head the EBRD and will endorse the broad agreement reached last week on draft CRD IV legislation to tighten up bank funding requirements.
Eurogroup. The Eurogroup meeting will be particularly political, according to EU sources, with the eurozone finance ministers expected to want a clearer idea about success or failure in the talks to form a new government in Greece. Meanwhile, the country's troika of lenders will meet their pledge under the second Greek bailout by paying out €4.2 billion (see separate article).
Several finance ministers, those of Portugal, Ireland, Spain and Slovakia, for example, will set out their budget and macroeconomic strategies. The discussion about Portugal and Ireland will be brief because ministers are happy with the speed at which the two countries are introducing their structural adjustment programmes. The Spanish economy minister, Luis de Guindos, will brief ministers on the decision to part-privatise Spanish bank Bankia, which sank under the weight of its toxic mortgage lending (see EUROPE 10610). The ministers will want to know how the Spanish government aims to increase transparency on bank assets, but are not expected to discuss the idea of giving Spain longer to cut its excess deficit (due to be cut to 3% in 2013). A European source said that Spain had not asked for an extra year, as far as the source was aware, and although it was a tough target, the source thought it was do-able. The same source said that the ministers would not be talking about any easing of interpretation of the Stability and Growth Pact rules governing investment spending.
CRD IV. The ministers will confirm the broad agreements reached by a qualified majority last week on the draft CRD IV legislation to incorporate into EU rules the Basel Committee Agreement on increased bank funding requirements (see EUROPE 10607 and 10606). Some 26 member states now agree, with only the United Kingdom reported to be unhappy. The Danish Presidency does not want new negotiations at the meeting, but rather a formal negotiating mandate based on the broad, qualified majority, agreement so it can enter talks with the European Parliament. The EP's economic and monetary affairs meeting will vote on the Karas report on Monday 14 May.
EBRD. Over breakfast, the EU27 will try to reach agreement on a single candidate to become the new head of the European Bank for Reconstruction and Development (EBRD) - the EBRD has until 18 or 19 May to elect a new chief. A diplomat from a country that has put forward a candidate wondered whether the EU would agree on a single European candidate or whether it would let non-European shareholders decide (the EU represents 6% of the EBRD shareholders' vote). Five candidates are battling it out, the current chief, Mirow of Germany, Philippe de Fontaine Vive Curtaz of France and Suma Chakrabarti of the UK. The election is taking place amidst wider discussions to appoint the heads of a number of European financial institutions that fall vacant in June, like the head of the Eurogroup, the head of the new European Stability Mechanism and a post on the ECB's Executive Board.
EIB. Coinciding with the annual meeting of the EIB governors, the EU ministers want to find out whether the bank's head, Werner Hoyer of Germany, will be making an official request for additional capital, and if so, how much the EIB is after.
Savings tax. All 27 member states will be discussing the updating of the EU savings tax rules in the light of changes to Germany's and the UK's savings tax agreements with Switzerland to make them compatible with EU rules. It is unlikely that the ECOFIN Council on Tuesday will be able to give the Commission a negotiating mandate for EU-wide savings tax agreements with tax havens because of the determined opposition of Austria and Luxembourg, which refuse to go along with the idea of automatic exchange of information until countries like Switzerland do so. When it is finally given a negotiating mandate, the Commission will re-enter talks with Switzerland to change the EU-Swiss savings tax deal to include the amendments that will be made in the future to the EU savings tax directive (amendments still on the drawing board at the Council of Ministers).
The ministers will be publishing a conclusions document on the new EU VAT strategy, backing the European Commission's idea of making the system simpler, more robust and fraud-proof, explains a draft conclusions document seen by this newsletter. The new VAT system will levy VAT in the country of destination with a single set of simplified EU rules and standardised obligations to cut red tape for small businesses. There will be a one-stop shop for countries doing business Europe-wide, VAT would be levied on a larger range of goods and services with a levelling upwards of reduce rate VAT, identical rules on the right to tax deductions, and more up-to-date collection and inspection methods with the aim of maximising tax revenues and stamping out tax fraud and tax evasion. The ECOFIN Council will be deciding on the gradual generalisation of the one-stop-shop system after 2015, how an optional standardised VAT return for businesses would operate and how levying VAT in the country of destination might work.
EU budget for 2013. The European Commission will unveil to ministers its draft budget for 2013 (see EUROPE 10602). Several member states are planning to speak on this, particularly the net contributing countries, not happy about the planned 8% increase in the EU budget. A European diplomat said that increasing the EU's budget by 6.8% was cash that would have to be taken from other areas in order to meet the public deficit reduction target of 3% and there was a problem with exactly how the Commission implemented the budget - the Council of Ministers needs a clearer picture of exactly what is done with the money so that the member states can plan ahead for the Commission's regular requests for cash.
Credit ratings. The draft directive on credit rating agencies will not now be discussed at this ECOFIN Council. A minority of member states are now calling for talks to re-open on the question of rating agencies registered outside the EU, which contradicts the decision by the recent ECOFIN Council (see EUROPE 10587). The ministers' talks are focusing on restricting the mooted rotation of rating agencies to “structured” financial products. (MB/FG/transl.fl)