On Tuesday 8 November, EU finance ministers will attempt to reach a political agreement on the proposed revision of the ‘Eurovignette’ directive, which deals with the taxation of heavy goods vehicles. They should also find political agreement in principle on the legislative package that finalises the integration of the ‘Basel III’ agreement. The Ecofin Council will also discuss the economic repercussions for the European Union of the Russian invasion of Ukraine, including macrofinancial assistance and the impact of sanctions, as well as the impact of the US Inflation Reduction Act on European trade.
Basel III. Ministers are expected to reach a political agreement in principle (‘general approach’) on the legislative package that finalises the integration into the EU of the 2017 ‘Basel III’ agreement strengthening banking prudential rules (see EUROPE 13055/6). In particular, the future rules introduce an ‘output floor’ by 2030 for certain European banks that use an internal model to calculate their capital requirements based on the risks they take. Other provisions concern the supervision of branches of banks from third countries and the treatment of environmental, social and governance risks.
On Friday, the Member States’ ambassadors to the European Union (Coreper) validated the text prepared at national expert level. “We are very pleased to have made considerable progress on this file and we hope for good news on Tuesday”, an EU source said on Friday 4 November.
At the same time, the ECB and the European Banking Authority expressed “great concern” about the ongoing discussions in the EU Council and the European Parliament, asking them not to further weaken the European Commission’s initial text, which they said would reduce Tier 1 capital requirements by 3.4% compared to the Basel III agreement.
Inter-institutional negotiations will start as soon as the European Parliament is ready to negotiate, with MEPs aiming to reach a position in December.
See the Czech compromise text on the directive: https://aeur.eu/f/3VU
See the Czech compromise text on the regulation: https://aeur.eu/f/3VV
Taxation. The Ministers will discuss the draft revision of the ‘Eurovignette’ directive, which deals with the taxation of heavy goods vehicles. While part of the revision has already been approved (see EUROPE 13056/19), the part dealing with taxation has been blocked for some time. Member States were not in favour of the European Commission’s proposal to be given more leeway to reduce taxes on heavy goods vehicles, in order to achieve a gradual reduction in minimum tax rates.
In order to make progress on this issue, the Czech Presidency proposed to lower the minimum rates to zero as soon as the directive enters into force, so as to allow Member States to keep their existing heavy vehicle tax rates.
Despite the positive reception, some countries were reluctant. “The main problem is the way taxes are collected, depending on the region”, explained an EU diplomat on Friday 4 November.
“We asked the Presidency to discuss two issues: the impact on competitiveness and the fear of a race to the bottom” revealed another diplomat.
Furthermore, the EU Council is expected to approve the new mandate of the Code of Conduct Group on Taxation (see EUROPE 13030/16).
Ukraine. After the Eurogroup on Monday (see EUROPE 13056/18), the Ecofin Council will discuss the economic and social repercussions for the EU of Russia’s aggression in Ukraine. The impact of EU sanctions on Russia will also be discussed.
Another point of discussion concerns macrofinancial assistance to Kyiv including the creation of a stable mechanism for the whole of 2023 funded with €18 billion, including €3 billion from the package already agreed for 2022 (see EUROPE 13056/9). The nature of the aid, between grants and/or loans, as well as the way to constitute a public guarantee (EU budget or national budgets) still need to be decided. The Commission could unveil a proposal on Wednesday 9 November, with a view to reaching an agreement in the EU Council by the end of 2022 and activating the future mechanism from January 2023.
US Inflation Reduction Act. At the breakfast, the ministers will discuss the US Inflation Reduction Act (IRA), following a request from two countries, including France. In particular, the Commission will inform them of the consequences of this legislation adopted in August in the United States.
It favours US, Mexican and Canadian producers in granting tax credits for green technologies, such as electric vehicles or solar panels.
Trade Ministers have already discussed the issue in Prague on 31 October (see EUROPE 13054/2) and expressed their willingness to have a special status for European producers. On Tuesday, ministers are expected to stress the need for the EU to stand united against the Americans.
The first meeting of the new EU-US ‘Task Force’ on the IRA took place on 4 November between the cabinet of Commission President Ursula von der Leyen and the White House. This was an opportunity for the EU to ask the US for an initial reaction.
RRF. On Tuesday, the ministers will take stock of the implementation of the Recovery and Resilience Facility (RRF), which finances national recovery plans under the Next Generation EU Recovery Plan. Of 27 national plans, only the Hungarian plan is missing. The Orbán government needs to deliver on commitments to the Rule of law that could break the deadlock. If an agreement is not reached by the end of 2022, Hungary will lose 70% of the promised subsidies.
Stability and Growth Pact. In a presentation of its annual report (see EUROPE 13051/19), the European Fiscal Board will present its ideas on a reform of the European economic governance framework. But formal ministerial discussions will only start in December, after the Commission puts its proposal on the table on Wednesday 9 November.
Budget. NB: a Budget Council will be held on Friday 11 November, with a view to reaching an agreement on the 2023 EU budget with the Parliament (see EUROPE 13046/8, 12992/20). (Original version in French by Anne Damiani, with Léa Marchal and Mathieu Bion)