Brussels, 14/05/2003 (Agence Europe) - As well as holding discussions on Tuesday regarding pension funds and the fiscal package (see EUROPE yesterday p 7), the Ecofin Council, under the chairmanship of Nikos Cristodoulakis achieved the following results:
BEPG: the Ecofin Council called on the Economic and Financial Committee and the Economic Policy Committee to continue work on the Broad Economic Policy Guidelines for 2003-05, which should facilitate a decision during the Council on 3 June, before sending them to the Salonika Summit. Ministers confirmed that the BEPG priorities will be: 1) pension reform; 2) labour market reform; 3) improving competitiveness through education, training and research and development. Council Chairman, Nikos Christodoulakis said that, "the novelty is that the priorities will be set out for three years, which demonstrates our determination to continue structural reforms around the three pillars". During the debate, Germany, raised the question of growth. The United Kingdom insisted on the need to combine labour market flexibility with respect for the individual rights of workers. France highlighted investment in research and Spain focused on labour market reform.
Stability Pact/Austria: As expected, the Ecofin Council approved the Austrian stability programme for 2003/07. It points out in its "opinion" that the new government in office since 28 February succeeded in updating the programme but information on the budgetary programme will have to be presented later. It notes "with some concern" that the objective of reducing the debt to less than the 60% threshold had to be postponed till 2007. The deficit is expected to reach 0.6% in 2002, 1.3% in 2003, 1.5% in 2005, 1.1% in 2006 and 0.4% in 2007. These forecasts are based on annual growth perspectives of an average of 2.1% between 2002 and 2005.
Finally, "the Council considers that these perspectives for growth are plausible, given that there is no macro-economic imbalance dominating the Austrian economy and that the external environment, according to forecasts, is improving. Consequently, the Council considers that the reduction in spending should be implemented as planned. In addition, the planned tax cuts should be accompanied by a reduction in spending, in order to prevent the risk of budgetary slippage and enable Austria to return earlier to a budget close to balance. From 2003, the government will have to attempt to find a better budgetary position than planned, particularly if growth is more significant than planned if the funds set aside for aid linked to flooding are not completely exhausted".
Pensions: The Ecofin Council has requested the Economic Policy Council to present a new report in November 2003 on the implications of an ageing population on pensions and the viability of public finance. This report will prepare the forecast exercise to be carried out in 2004 and which will be available in mid-2005. The Ministers defined a mandate outlining that the report will: 1) present a general view of all the analyses provided at a European level on the impact of the ageing populating over the next 10-15 years; 2) analyse the effectiveness of the indicators developed by the Commission in the 2002 stability pact and the convergence programmes and propose possible improvements; 3) present detailed proposals and a calendar for elaborating the next projections. This exercise will cover current and future Member States. It will focus on spending on pensions, income transfer systems to the elderly, health systems and other spending linked to ageing. The report will also take into account the risks linked to the different demographic scenarios.
"International Finance Facility": British Minister, Gordon Brown, presented his "international facility" aimed to increase available resources of development aid through guaranteed long-term loans. The United Kingdom is hoping that this instrument will bring the amount for international aid up from the current 50 billion to 100 billion in 2015. The Council has called on the Economic and Financial Committee to examine this proposal in detail, notably the links with the European Development Funds, and present a report on 3 June.
VAT/Germany: the Council has authorised Germany to exclude goods and services that are 90% used by the private sector from VAT deduction rules. This exemption to the 6th directive on harmonisation of turnover taxes is valid up to June 2004. The Council considers that it is justified by the need to simplify the VAT system.