Meeting informally in Prague on Friday 9 and Saturday 10 September, EU finance ministers will aim to approve the proposed €5 billion macrofinancial assistance for Ukraine that the European Commission put forward on Wednesday 7 September (see other news).
The objective of the Czech Presidency of the Council of the European Union is to overcome Hungary’s reluctance to provide public guarantees for this assistance, which would only be mobilised in the event of a Ukrainian default.
The ministers will also discuss the continuation of macroeconomic assistance to Ukraine in order to reach a total package of up to €9 billion in 2022, as agreed by the European Council in June.
Ukraine’s post-war reconstruction will also be discussed. The Czech Presidency will sound out ministers on the RebuildUkraine plan proposed by the European Commission in May, which includes the establishment of a dedicated EU financial instrument (see EUROPE 12955/2).
See the Czech document used as a basis for discussions: https://aeur.eu/f/2za
Economic impact of the war in the EU. Ministers will discuss the economic impact on the EU of Russia’s invasion of Ukraine as their energy counterparts meet in Brussels to determine further emergency measures (see EUROPE 13016/1).
“What the energy ministers will discuss will have a fiscal implication. What should be done? In what way? How much will it cost?”, a diplomatic source wondered on Tuesday 6 September.
In a preparatory note, the Czech Presidency asks the ministers to “evaluate the impact and effectiveness of support measures, in particular those in the energy sector”.
The Czech authorities also believe that, due to the Russian invasion, governments’ room for manoeuvre is “much more limited” now than it was at the outbreak of the Covid-19 pandemic in spring 2020. “Amid surging commodity prices and supply disruptions, inflation has soared in the EU, exacerbating the exceedingly difficult trade-off faced by policymakers between supporting growth and keeping prices in check” they note, while “ financial conditions have started to tighten and borrowing costs have increased” with the normalisation of monetary policy.
In these circumstances, the Czech Presidency identifies that its main priority is to “restore price stability and protect the most vulnerable groups”.
See the Czech preparatory note: https://aeur.eu/f/2zg
Reform of EU fiscal rules. On Saturday morning, national delegations will be invited to debate the reform of the European economic governance framework before the European Commission presents a communication detailing its approach in a few weeks.
In a document used as a basis for ministerial discussions, the Czech Presidency considers that the existing rules have reached their limits (see EUROPE 13015/3).
On Wednesday, at a conference of the Bruegel think tank, the European Commissioner for Economy Paolo Gentiloni outlined a possible reform of the Stability and Growth Pact, which would be based on “simplification, strengthening national ownership and improving implementation”, with “the overall objective of supporting debt sustainability and sustainable growth”. “One way to achieve this could be to move to medium-term macrofiscal plans that set multi-year net expenditure trajectories consistent with debt convergence to prudent levels”, he said.
These plans could, he said, “include investment and reform commitments reflecting the priorities of the EU and the countries” themselves, building on the experience of national recovery plans within the Next Generation EU recovery plan. And to ensure greater national ownership of future EU fiscal rules, Member States would have “more room to manoeuvre in proposing budgetary trajectories, provided they respect common EU principles, including debt sustainability”, the Commissioner said, with “the reform and investment commitments (made) potentially allowing for a longer period of budgetary adjustment”.
In return, “greater ex-ante national ownership of the design of budgetary trajectories could be balanced by stronger ex-post enforcement at EU level”, for example through “credible, debt-based” infringement procedures “in the event of excessive deficits”, suggested Mr Gentiloni.
See the Czech document used as a basis for discussion: https://aeur.eu/f/2YL
Direct taxation. On Saturday morning, the Czech Presidency will organise an exchange of views on possible developments in the field of direct taxation within the EU.
This ministerial debate is taking place in the context of an increasing number of directives being prepared in the EU framework in the field of direct taxation, in particular the directive implementing pillar II of the OECD agreement on minimum taxation of companies, currently blocked by Hungary (see EUROPE 12986/19).
The evolution of the regulatory framework should aim at removing tax obstacles and simplifying the functioning of the internal market, thus benefiting taxpayers and helping to combat fraud and harmful tax competition.
At the same time, the Czech Presidency stresses the importance of States’ fiscal sovereignty. “Legislative proposals (...) increasingly interfering with the sovereignty of Member States should be considered very carefully and – ideally – avoided”, it considers in its preparatory document.
It is only a short step from there to not wishing to debate the end of unanimity in the Council on tax matters (see EUROPE 12992/16).
See the Czech document used as a basis for discussion: https://aeur.eu/f/2zl (Original version in French by Mathieu Bion with Anne Damiani)