The finance ministers of the European Union countries will meet in Nicosia (Cyprus) on Friday 22 and Saturday 23 May for an informal meeting devoted to the Union’s competitiveness, the use of ‘stablecoins’ and long-term fiscal sustainability.
On Friday at midday, following the Eurogroup meeting (see EUROPE 13872/9), the European ministers will address the boosting of competitiveness during a working lunch. These discussions will take place with the participation of the European Stability Mechanism (ESM), the aim being to explore further ways of strengthening European competitiveness in light of recent geopolitical developments.
“Following the significant diagnostic work carried out with the ‘Letta’ and ‘Draghi’ reports, and now that the problems have been clearly identified, the task at hand is to discuss the best solutions for truly bridging the competitiveness gap”, a European diplomat told a small group of journalists, including Agence Europe, on Wednesday 20 May.
The discussion will draw on academic contributions, while the Cyprus Presidency of the EU Council has identified, in a discussion paper intended to inform the debate, five key lines of inquiry: strengthening Europe’s economic resilience and strategic autonomy, particularly in the fields of energy, innovation and financing; obstacles to private investment in R&D and the role of the Savings and Investment Union; adapting Europe’s industrial and export model to the strategic sectors of the future; the impact of the diversity of Member States’ economic models on competitiveness; and ways of increasing European productivity while preserving the Union’s social model.
See the Presidency discussion paper on strengthening competitiveness: https://aeur.eu/f/lzk
Stablecoins. On Friday afternoon, the informal Economic and Financial Affairs Council, with the governors of European central banks in attendance, will continue its discussions regarding the use of so-called ‘stable’ cryptocurrencies (stablecoins), which are typically pegged to a conventional currency – for example, the US dollar – much like Dai, USD Coin or Tether. This latter stablecoin has experienced the strongest growth, although, generally speaking, the use of stablecoins in the real economy remains modest.
The discussion is expected to focus on the risks these assets could pose to EU financial stability, monetary sovereignty and bank financing, as well as on the regulatory responses and European infrastructures that need to be developed to avoid excessive dependence on dollar-denominated stablecoins in the future tokenised financial landscape.
“This debate will also feed into the work already under way within the Eurogroup, where progress is also expected by July”, the same European diplomat indicated.
Fiscal sustainability. On Saturday morning, ministers and central bankers will consider how to reconcile, on the one hand, the enormous investment requirements for defence and the decarbonisation of the economy and, on the other, the imperative to maintain sound public finances.
In another briefing note, a copy of which was obtained by Agence Europe, the Cyprus Presidency asks Europe’s finance ministers whether they share the IMF’s position that, in order to regain fiscal room for manoeuvre, Member States should go beyond EU fiscal rules and “rethink” their role in areas such as “health care, education, pensions, and infrastructure”.
The Cyprus Presidency stresses that the “credibility” of the Stability and Growth Pact will depend on its “strict” application, with flexibility clauses to be restricted to “exceptional circumstances“.
To increase the budgetary resources available at European level for financing investments that bolster the EU’s strategic autonomy, the Cypriot authorities also take the view that borrowing mechanisms should be considered in areas generating “clear added value”, citing joint procurement in defence, as well as major infrastructure projects related to energy or critical raw materials.
Nevertheless, the Cyprus Presidency cautions, due consideration must be given to the implications of joint borrowing, such as the servicing of the debt incurred. According to the European Court of Auditors, it notes, the costs associated with the €900 billion borrowed by the EU (primarily to tackle the Covid-19 pandemic) are expected to “exceed €30 billion in 2027, more than double earlier estimates”. (Original version in French by Bernard Denuit and Mathieu Bion)