On Friday 16 June in Luxembourg, the European finance ministers will hold an initial exchange of views on the legislative package aimed at reforming the European economic governance framework that the European Commission put forward at the end of April (see EUROPE 13170/1).
The Swedish Presidency of the EU Council hopes that the ministers will be able to provide political guidance to continue the “intense” work underway at technical level and ensure a “smooth transition” of the matter to the Spanish Presidency, a European source said on Thursday 15 June. In their view, the conclusions of the March Ecofin Council provide a “good basis” for the work (see EUROPE 13141/22).
Broadly speaking, Germany, supported by the countries advocating budgetary rigour, continues to argue for stricter quantitative criteria for consolidating public finances than those in the proposal on the table, such as reducing public debt to 1% of GDP for the most heavily indebted countries (see EUROPE 13158/15).
On the other hand, France and Italy refuse to allow future European fiscal rules to go that far. Paris is also opposed to the introduction of an annual deficit reduction criterion of 0.5% for countries whose deficit exceeds 3% of GDP and which are not subject to an excessive deficit procedure, a provision included in the Commission’s proposed reform of the Stability Pact.
The Commission’s proposal already contains significant elements of budgetary consolidation, such as the annual 0.5% reduction in deficit, the fact that public debt will have to be lower at the end of the period chosen for implementing the macro-budgetary plans (4 years or more depending on the scale of the reforms and investments agreed), and the mechanism aimed at ensuring that budgetary consolidation is not postponed until the end of the period, the French Ministry of Finance pointed out on Wednesday 14 June.
According to a diplomat involved in the negotiations, the experts’ fear is that the discussions will crystallise political differences and complicate the continuation of the technical work.
“Now it’s time to build bridges and not to dig tranches” on this issue, said the European Commissioner for Economic Affairs, Paolo Gentiloni, on his arrival in Luxembourg on Thursday 15 June.
The stated aim is to reach a political agreement on the reform in the EU Council this autumn, with a view to reaching agreement with the European Parliament by the end of 2023.
Taxation. During a public debate, the ministers will discuss the ‘ViDA’ initiative, presented by the Commission at the end of 2022, which aims to modernise the value added tax (VAT) system (see EUROPE 13194/18). This will be a policy debate based on a compromise proposal from the Swedish Presidency. Although the text has the majority support of the Member States, certain points pose difficulties.
The Member States appear to be in favour of using digital technologies to collect VAT, in particular through electronic invoicing. However, they are hesitant about charging VAT on temporary rental or transport activities, such as the Airbnb and Uber platforms.
“If these platforms collect VAT from their customers, they should be able to deduct it, and I’m not sure that, financially, this is a beneficial operation for treasuries”, explained a source at the French Ministry of Finance.
A European source, also contacted on Wednesday, explained that some Member States, such as Poland, already have a national electronic invoicing system and are reluctant to create a cross-border system, fearing incompatibility between the two systems, particularly in terms of combating money laundering.
The European source also mentioned the fact that this initiative raises the issue of privacy protection. France raised the issue of territoriality, and in particular “disruptions to the French art market”.
Business taxation. It should also be noted that the Council is expected to approve conclusions on the progress made by the Code of Conduct Group in the first half of 2023 (see EUROPE 13199/20).
Ukraine. The ministers will also take stock of the socio-economic consequences of Russia’s military aggression against Ukraine.
Macrofinancial assistance to Kyiv after 2023, aid for the reconstruction of the country and the search for a multi-year solution to avoid recurring negotiations could be discussed.
The European Commission is due to make a specific proposal as part of the scheduled mid-term review of the Multiannual Financial Framework on Wednesday 21 June.
European Semester. As part of the ‘European Semester’ budgetary process, the Ecofin Council is expected to adopt its opinion on the socio-economic policy recommendations made to each Member State (see EUROPE 13187/22). It will take up the Commission’s call for the EU27 to pursue prudent budgetary policies, in particular by putting an end to budgetary support measures for energy as soon as possible in 2023 and 2024.
In its recommendations, the Commission recommends a quantitative limit for each country on the increase in net public spending.
NGEU. Without debate, the Ecofin Council will also approve Estonia’s revised recovery plan, which includes a REPowerEU chapter aimed at accelerating the climate transition and reducing dependence on Russian fossil fuels (see EUROPE 13139/24).
View the Council decision amending Estonia’s plan: https://aeur.eu/f/7iy ; and its annex: https://aeur.eu/f/7iz
Financial services. Finally, the Swedish Presidency will report on the progress of ongoing work on legislative matters in the area of financial services.
In the context of the Capital Markets Union (CMU), discussions are expected to focus in particular on the seven or so legislative proposals currently under interinstitutional negotiation, including the revision of the MiFID Directive and the MiFIR Regulation (see EUROPE 13132/18) governing the markets in financial instruments, and the European Single Access Point (ESAP), which is intended to facilitate access to information on EU companies and financial products (see EUROPE 13111/18). (Original version in French by Mathieu Bion, Anne Damiani and Thomas Mangin)