On Tuesday 18 January, EU Finance Ministers will hold an initial political debate on the proposal for a directive transposing the agreement reached at the OECD over the minimum taxation of multinationals (pillar II). They will also discuss the Next Generation EU Recovery Plan.
With the European Commission having tabled a faithful transposition of the international agreement (see EUROPE 12859/6), the French Presidency of the EU Council hopes that discussions will quickly progress so as to reach a political agreement at the March Ecofin Council.
“It is important for the EU to be at the rendezvous and to go quickly for reasons of exemplarity and respecting deadlines”, said a European diplomat on Friday 14 January, noting that the objective that was set was to implement the agreement in 2023.
Some Member States are set to link the application of Pillars I and II, bearing in mind that Pillar I on the reallocation of taxation rights has yet to be finalised at the OECD.
*We agree and disagree we need pillar I, we’ll push for both. but I disagree there is a link between the two. That would slow down the process”, the EU diplomat said, calling this approach “counterproductive”.
Earlier, a source in the French Ministry of Finance had argued that “the legal translation of the two pillars of the agreement is completely different”. Indeed, Pillar I follows a classical legal scheme, which requires national ratification. Pillar II, on the other hand, requires transposition into European law and then into national law.
Regarding the difficulty that the United States is experiencing in transposing the agreement into its domestic law, this European diplomat felt that there was no reason to think a priori that the American legislator would not follow the timetable that had been set.
Next Generation EU. Ministers will be briefed on the implementation of the Next Generation EU Recovery Plan.
At this stage, the EU Council has adopted 22 national recovery plans. Four others are under discussion between the European Commission and the relevant countries (Bulgaria, Hungary, Poland, Sweden), while the Netherlands has not yet officially transmitted its national plan at European level.
On Tuesday, the ministers will not adopt any new recovery plans. Nor should they discuss the Hungarian and Polish plans, because the Council of the EU does not wish to interfere.
“The only thing that we can do is to encourage further working processes to come up with a solution that meets the requirements of the regulation”, requirements that have been met by all other Member States, said the EU source on Friday.
In particular, the European Commission is calling on Poland to respect the rulings of the Court of Justice in respect of the independence of the judiciary and calling on Hungary to put in place robust mechanisms to fight corruption.
European Semester. The Ecofin Council will also discuss the ‘European Semester’ budget process. It will endorse without discussion the economic policy recommendation for the euro area that advocates a moderately expansionary fiscal stance of 1% of GDP in 2022 (1.75% of GDP in 2021), validated the day before by the Eurogroup (see EUROPE 12867/9).
In this context, ministers will adopt conclusions on the Annual Growth Review for 2022 in which they welcome the resumption of the economic policy coordination process in 2022, with the publication of country-specific recommendations, and call on Member States to plan a coherent package of public and private reforms and investments.
See the draft conclusions: https://bit.ly/3FtrZzU
Ministers will also adopt conclusions on macroeconomic imbalances, which recognise that the Covid-19 pandemic has increased macroeconomic risks and inequalities within the EU.
See the draft conclusions: https://bit.ly/3qvnf8O
Stability Pact. Finally, the French Presidency will present its political priorities for the first half of the year, including their thoughts about European fiscal rules. The first meeting is an informal ministerial meeting in February, where Paris wants to reach a joint framework for reflections (see EUROPE 12865/15). (Original version in French by Anne Damiani and Mathieu Bion)