Brussels, 18/06/2014 (Agence Europe) - On Friday 20 June, EU28 finance ministers will discuss the European Commission's European Semester social and economic recommendations for 26 member states.
Earlier this month, the Commission published recommendations for the member states (not including Greece and Cyprus) along with a recommendation for the eurozone as a whole, which the Ecofin Council is now invited to adopt (see EUROPE 11092).
At the Ecofin meeting, ministers have the option of unveiling for their opposite numbers other reforms to help achieve their country's budget objectives that were not included in their stability and growth programmes. French minister Michel Sapin may provide information about the €4 billion of new budget savings (including €1.6 billion from freezing credits and €1 billion of savings on social security spending) to be introduced in France to achieve its target of a public deficit of 3.8% of GDP in 2014.
Once endorsed by the Ecofin Council, the recommendations will be endorsed by the European summit on Friday 27 June, the final process in the European Semester. A draft conclusions document for the summit, seen by this newsletter, says that the member states must respect the recommendations in their upcoming budget, structural reform and social policy decisions. The document states that it is crucial for eurozone countries to pursue economic policies that are mutually reinforcing in order to boost their structural capacity to create economy growth and jobs via convergence that promotes healthy policies in key domains for the proper functioning of EMU, along with related solidarity mechanisms.
Excess deficit proceedings dropped for six countries. As recommended by the Commission, finance ministers will end the excess deficit infringement proceedings against six countries: Austria (deficit of 2.8% of GDP in 2014 and 1.5% in 2015; debt of 80% of GDP in 2014), Belgium (deficit of 2.6% in 2014 and 2.8% in 2015; debt of over 100% in 2014 and 2015), Denmark (deficit of 1.2% in 2014 and 2.7% in 2015; debt of 43.5% in 2014), the Netherlands (deficit of 2.8% in 2014 and 1.8% in 2015; debt of 73.8% in 2014 and 73.4% in 2015), the Czech Republic (deficit of 1.9% in 2014 and 2.4% in 2015; debt of 44.4% in 2014 and 45.8% in 2015) and Slovakia. Eleven member states still have excess deficit proceedings running against them.
The Ecofin Council will endorse the positive assessment, expected to be delivered by the Eurogroup the previous day, on Lithuania's joining the euro (see EUROPE 11002).
Banking Union. At Germany's request, the Commission will inform delegations about the drawing up of two implementing measures stipulating how bank contributions to national bank resolution funds and the eurozone's bank resolution fund, SRF, are to be formulated (see EUROPE 11084). Internal Market Commissioner Michel Barnier sent a letter to the Greek Presidency noting that the Commission will be unveiling the implementing measures in September once the regulation establishing the eurozone resolution mechanism (SRM) has been published in the EU Official Journal in July. Barnier says the two implementing measures will be published at the same time in order to protect the single market.
France will be paying attention to ensure French banks are not expected to pay more than their fair share. Germany wants the nature of the risks taken by banks to be taken into account when calculating their contributions to the SRF.
Taxation. At their previous meeting, the ministers agreed to endorse the hybrid loan section of the draft directive on parent companies and subsidiaries, which has been divided into two. The aim is to prevent companies from wriggling out of tax by transferring profits to other countries. After talks with the European Commission, Sweden decided at the Coreper meeting of 27 May to give its approval. At the same meeting, Malta had expressed reservations about the Greek Presidency's compromise deal (see EUROPE 11090) arguing that it would be possible to find wording that was more respectful of member states' responsibilities for tax issues, which it views as a question of principle. Malta says the European Commission's wording was better. Valetta also has concerns about double taxation.
A meeting is planned on Thursday 19 June, the day before the Ecofin Council, where the Commission will work out what Malta is after exactly. If it is simply avoiding the danger of double taxation, a special statement can be added to solve the problem. On the question of member states' powers when it comes to tax issues, it is said that Malta's views will not be accepted. The Presidency feels that enough preparations have been done for the matter to be discussed by ministers. Countries have until the end of 2015 to transpose the directive into their own legislations so Malta says there is time enough for the legislation to be fine-tuned. The Maltese say the finance minister will arrive for the Ecofin Council to defend the same views as at the expert meeting on 27 May.
The finance ministers will endorse the conclusions set out in a Council of Ministers report on a code of conduct on damaging company tax practices. A Council of Ministers group is asked to consider the “substance criterion” for “patent boxes” for encouraging R&D and innovation by the end of the year. The experts in question have not yet reached agreement on this and are due to meet in September and publish a report by the end of the Italian Presidency. An EU source says that two countries, one being Luxembourg, are criticising the mandate of the group working on codes of conduct as being too restrictive, but sources in Luxembourg say that is not true and the country is not challenging anything at all.
One part of the report covers dialogue with Switzerland and five Swiss tax measures that the code of conduct expert group says are damaging. This is an important question for Italy. The member states are expected to state that the draft agreement will not prevent counter-measures being introduced unilaterally against any new Swiss tax systems.
The Commission will submit to the member states its draft budget for 2015, which recommends a moderate increase in appropriations of 2.1% for commitment appropriations and 1.4% for payment appropriations (see EUROPE 11098). The net contributing countries are not expected to take kindly to the rise because financing it will require further cuts in their own budget spending. (MB and EL)