The Slovenian Presidency of the Council of the European Union has invited the EU’s major financial institutions to Brdo pri Kranju on Friday 10 and Saturday 11 September for an informal ministerial meeting to review the major projects ahead without taking formal decisions.
On Friday afternoon, EU Finance Ministers and central bankers will discuss the impact of climate change on the economy, financial systems and stock markets.
“Our common goal is to minimise risks”, Slovenian Finance Minister Andrej Šircelj said in an audiovisual message ahead of the meeting.
A Slovenian paper used as a basis for discussion notes that “while not anticipated by financial actors and not reflected in the valuation of assets, physical risks arising from climatic events and, perhaps even more so, risks related to the imposition of increasingly stringent environmental rules, can lead to severe revaluations of financial assets”. And currently, it adds, the securities, real estate and insurance markets do not take these risks sufficiently into account.
The Ministers are therefore asked how financial institutions can be encouraged to further integrate climate and environmental risks into their activities, including through regulation.
See the preparatory document: https://bit.ly/3zX7iKT
Blockchain. At lunch, the major financial institutions will discuss the benefits and risks of deploying blockchain technology in the monetary and financial spheres and in the creation of digital identities.
“Nowadays, banks and other centralised institutions ensure transaction integrity. In the future, this role of institutions may be fully replaced by blockchain technology”, notes a second Slovenian preparatory document. Adding: “Will a sole program code, without any legal subjectivity behind it, be able to obtain a banking license? If the answer is yes, blockchain technology and other distributed ledger technologies (DLT) will play a key role here”.
Ministers discussed how this technology could be integrated into EU regulation (eIDAS, MiFID II and GDPR) while not hindering innovation.
On the regulation of crypto-assets (MiCA proposal), “there is a strong convergence of views in the EU Council to have a fairly strict regulation, while the Commission had relied more on flexibility to facilitate innovation”, said a national diplomatic source.
The European Parliament and the EU Council are to enter into interinstitutional negotiations on the proposal introducing a pilot scheme for market infrastructures based on Distributed Ledger Technology (DLT) (see EUROPE 12761/1 and 12750/14).
See the preparatory document: https://bit.ly/3A0T23u
SDR. On Friday, a discussion workshop will also focus on how to direct the IMF’s Special Drawing Rights (SDR) allocations and focus them on the most fragile countries.
Stability and Growth Pact. On Saturday, the second working day will be devoted to preparing the EU for future crises.
“We will discuss fiscal policy in light of the recovery. We can achieve a better recovery and resilience through investment, which will ensure stronger growth and a better quality of life”, said Mr Šircelj.
Thanks in part to the Covid-19 vaccination campaigns, the economic recovery is stronger than expected. EU GDP grew by 2.1% in the second quarter, following a 0.1% fall in the previous quarter, and is expected to return to pre-crisis levels by the end of 2021.
While the activation of the general escape clause will freeze the Stability and Growth Pact until the end of 2022, the Ministers will begin to clear the way for a gradual return to European fiscal rules in 2023.
However, how can we ensure that the inevitable fiscal consolidation is sufficiently gradual so as not to hamper the investments needed in the green and digital transitions to enable the EU to reach its 2050 climate neutrality target?
This debate has only just begun, but Ministers are aware that the subject will come up, especially once the European Commission has re-launched the reflection on the reform of the Pact.
In a study used as a basis for discussion, the Bruegel Institute estimates the annual investment needs at a range between 0.5 and 1% of EU GDP. “A ‘green golden rule’, excluding net green investment from the fiscal indicators used to measure fiscal rule compliance, is the most promising option to address this tension” between fiscal consolidation and investments, the study said.
See the Slovenian preparatory document: https://bit.ly/38TjDUg
See the Bruegel Institute study: https://bit.ly/3yWCqbS
Taxation. Finally, the Ministers will discuss the agreement on international corporate tax reform, currently supported by 140 countries, but not Ireland, Hungary and Estonia (see EUROPE 12753/1).
According to Mr Šircelj, “more solidarity and equality between countries at the global level is possible by changing taxation”.
Discussions will focus on actions to be taken in order to “ensure a consensus of all Member States” in the run-up to the presentation of the final report of the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on 8 October and its expected adoption by the G20 Finance at the end of October. The question of the impact of the future international agreement on the EU’s long-term tax policy is also raised.
See the preparatory document: https://bit.ly/3DZIt3a (Original version in French Mathieu Bion)