Brussels, 12/02/2001 (Agence Europe) - Monday's Ecofin Council adopted a recommendation proposed by the Commission (Article 99.4 of the Treaty), which stigmatises the expansionist and pro-cyclical nature of the Irish budget for the year 2001, considered lacking in conformity with the Broad Economic Policy Guidelines (BEPG).
The Council recommends that the Irish Government put an end to this non-conformity of its budget for 2001 and adopt compensatory budgetary measures. It calls on the Commission to report during this year on the economic and budgetary evolution of Ireland. The recommendation - the decision to publish it - which requires qualified majority, were adopted without voting. The document is drafted in general terms and does not impose any specific measures to be adopted by Ireland. This is the first time that a Member State is reprimanded for its failure to comply with the Broad Economic Policy Guidelines. Didier Reynders, Belgian Finance Minister, declared that "this shows the determination to strengthen surveillance in the European economy". Jean-Claude Juncker, Prime Minister and Finance Minister of Luxembourg, said the "case of Ireland is an example from which other countries should take inspiration. It shows that Community rules must be obeyed". Commissioner Pedro Solbes stressed that it is a question of implementation of the system of peer pressure, a model in which he places his confidence. The alarm bell was sounded by the Commission and the Economic and Finance Committee. Irish policy for reducing taxation and increasing public spending added to high growth (10.7% in 2000) could cause "overheating" with dangerous inflationary trends. Ireland, however, is sound economically with a budgetary surplus of 4.7% of its GDP and one of the lowest public debts in Europe (39% of GDP), but its inflation stands at 3.9%, that is, well above the 2% criteria set by the ECB.
Ireland defended its position. It put forward a fall in growth during the coming years, fall from 8.8% in 2001 to 5.7% in 2003. It explained that the reduction in taxes made it possible to moderate a call for salary increases. It feels that its budgetary decision will only have a mild effect in the long-term. The Irish Minister, Charlie Mac Creevy, the only one to speak before the decision, stated that the concerns were unjustified, and that it is "difficult" for him to understand these measures, given the performance of the Irish economy. The French Minister Laurent Fabius, saw in this decision a "question of European coherence". For him, even if Irish inflation has fallen over the last months, it remains far from its normal rate.
The EU 15 adopted the Commission's recommendations on the updated convergence programmes for France, Italy, Greece, Austria, Ireland, the United Kingdom and Denmark. They noted the French programme, whose pace for the reduction of the deficit is considered to slow, due, among other things, to tax relief, rather than to use the stronger growth than foreseen to reduce the deficit. The growth forecasts of 3.1% per year on average in Italy have been seen as over optimistic. It has been asked not to lose from its sights the aim of a reduction in the budgetary deficit.
Amending budget, financial services, introduction of the euro
The Council also approved, without debate, the proposed Supplementary and Amending Budget on EUR 971 million, aimed at tackling the BSE crisis and which must still be approved by the European Parliament. The Ministers nevertheless added that any other change to the 2000-2006 budgetary forecasts is out of the question. The German Deputy Finance Ministers Cauio Koch-Wessre stated that "in the case of a need for more money, there should be restructuring or savings in the agricultural budget."
Moreover the Council looked at a Communication from Commissioner Frits Bolkestein on electronic commerce and financial services, in the framework of the decision taken in Lisbon for the completion by 2005 of an integrated Internal Market. France should its attachment to maintaining the host country rule (that of the consumer). Commissioner Bolkestein asserted that "everything works backwards with regards to the country of origin approach, foreseen in the Directive on electronic commerce, is unacceptable."
The Ministers concerned had a "brief" discussion over the compromise text by the President on the updating of the 1985 Directive (85/611/EEC) on certain bodies for collective investment in real estate. The stake covers sufficient own funds and bank guarantees. The question was returned to COREPER, which should rule by 1 March.
The Council adopted conclusions that recognise the importance for those suffering from sensorial or intellectual difficulties to become familiar with the new euro notes and coins, and provides for measures allowing them to prepare for the change. These conclusions also provide for the adjustment of conditions for the loan of euro notes to industries that are more closely concerned (automatic vending machines, for example).
Ministers reached a political agreement on a draft regulation relating to the protection of the euro against counterfeiting and falsification, in a way that strengthens the legal protection of the euro in time for its introduction on 1 January 2002. The difficulties of a constitutional kind raised by Germany and by Austria were raised.