The European finance ministers may advise the Eurozone countries with considerable budgetary surpluses to bring in reforms allowing their savings to be converted into increased consumption, for instance through investment.
Guarantees to the European Fund for Strategic Investments (EFSI), the financial arm of the 'Juncker' investment plan, "are a particularly effective way for member states with fiscal space to maximise the impact on the real economy and recovery in the euro area", states the draft economic policy recommendations for the Eurozone dated Monday 16 January, to be adopted by the Ecofin Council on Friday 27 January.
The seven countries (Belgium, Italy, Cyprus, Lithuania, Portugal, Slovenia and Finland) whose 2017 budgets are at risk of infringing the Stability and Growth Pact, on the other hand, will be called upon to take action to come into line with the European budgetary rules. On Tuesday 17 January, the Commission said that the revised draft Spanish budget for 2017 was broadly in line with the Pact, but that Madrid still had to stand ready to adopt new measures if necessary (see EUROPE 11707).
In favour of a neutral budgetary orientation at Eurozone level
At the end January, the ministers will reiterate the position they expressed in December, that the Eurozone should "strike an appropriate balance between the need to ensure sustainability (of public finances: Ed) and the need to support investment to strengthen the fragile recovery" (see EUROPE 11682). In calling for a neutral budgetary approach, they are opposing the European Commission's preference to tip the budgetary policy agreed at Eurozone level in favour of spending, at a level of 0.5% of GDP (see EUROPE 11669).
On a financial level, the work at European level to finalise banking union is expected to continue, whilst progress is made in parallel on measures to reduce and share financial risks, such as the creation of a European deposit insurance scheme (EDIS). It is worth noting that in view of the risks from non-performing loans and ineffective banking models, the Nineteen will be called upon to "devise and implement an effective eurozone-wide strategy to complement prudential supervisory action to address viability risks within the banking sector".
The Council will make a recommendation to the Nineteen to reform their employment markets, for instance by introducing employment contracts supporting flexibility and security for employees and employers. Direct taxation should be less of a burden on work, particularly for low-income workers. (Original version in French by Mathieu Bion)