Brussels, 16/01/2009 (Agence Europe) - The first Ecofin Council under the Czech EU Presidency is to meet on Tuesday 20 January with an agenda that focuses on the European economic situation and implementation of recovery plans at European and national level in the light of the pessimistic economic forecasts presented by the European Commission the day before. On the basis of a Presidency working paper (see EUROPE 9819), European finance ministers will hold a discussion on budgetary policy strategy. Discussion may turn to the fact that excessive deficits have been noted with regard to the rules of the revised Stability and Growth Pact (SGP) and to the particularly degraded economic situation, since national recovery plans will be a serious weight bearing on national public finances. Another subject of discussion possible is the need for concerted action on budgetary consolidation.
During the breakfast discussion, the 27 ministers will hear an account of the Eurogroup meeting scheduled the day before and not attended by the Czech EU Presidency as it is not part of the Eurogroup. As agreed last autumn, ministers will take stock of implementation of national financial rescue plans and support for the economy. The Czech Presidency will present its work programme in the economic and financial spheres to the delegations: - definition of economic strategy in the context of preparing the Spring European Council; - finalisation of inter-institutional talks on several draft directives in the field of financial services - Solvency II for insurance, requirements on banks' own funds, European registration of financial rating agencies (general guidelines could be defined by the Ecofin Council in February on this last element); - definition of a European position with a view to the next G20 summit on reform of the global financial architecture, to be held in London on 2 April; - and the search for a political agreement on reduced value added tax (VAT) rates.
The European Council in December endorsed the European recovery plan fixed at 1.5% of the EU's gross domestic product (GDP) (see EUROPE 9803). It also called on the Ecofin Council to regulate the question of applying reduced VAT rates by March. On Tuesday, the Czech Presidency will announce to delegations the method and the timetable that it plans to follow in order to reach agreement. It will present a memo to ministers stressing the link between reduced indirect taxation and the European recovery plan, based on documents provided by the Commission during the last half year. The Ecofin Council will have a further discussion in February to guide the work of the expert group, itself tasked with drafting conclusions to be adopted by ministers in March. The Spring European Council will be informed of progress in work, with the Czech Presidency only foreseeing resumption of legislative work once this preparatory phase is over. Under the French Presidency, the positions of delegations did not change: - about 20 member states are in favour of applying reduced VAT rates when this does not have an impact on the internal market, while others - with Germany, Denmark and Scandinavian countries to the fore - have always been hostile to such a measure (see EUROPE 9775). When it comes to application of reduced rates to environmentally-friendly products and services, analyses are underway at the European Commission, which is not expected to come to any specific initiative until spring. It should be noted that the arrangements for the financing of additional Community funding necessary for implementing the European recovery plan will not be discussed on Tuesday. The next day, the Commission will present to member state ambassadors a list of energy interconnection projects and internet infrastructure projects that will receive additional funding. At the end of December 2008, ambassadors were unable to reach qualified majority vote in favour of the Commission's proposal, stressing the need to ensure adequate geographical balance and to grant special attention to the degree of maturity of projects to be retained (see EUROPE 9810). Finally, although support for the automotive industry is not expected to be tackled during the Ecofin Council, such a subject does remain closely linked to the European recovery plan which provides for a broad range of possible measures (guaranteed loans, interest subsidies on loans, etc) for manufacturers experiencing difficulties due to the economic crisis. European industry ministers had met in Friday in Brussels to take stock of the dossier (see related article).
At a request from France, ministers will discuss European rules on undertakings for collective investment in transferable securities (UCITS). In a letter addressed to the Commission and member states, the French authorities state that provisions relating to the liability of fund depositories are interpreted in different ways in the different member states (see EUROPE 9818).
In order to ensure the highest level of investor confidence in the UCITS label, they favour the idea of a coherent approach at EU level either through legislation amending the UCITS directive or through a broarder directive on the securities law. An opinion from the Committee of European Securities Regulator might also be considered. On Tuesday, the Commission may decide to inform finance ministers of action it is planning to ensure uniform interpretation of protection provisions for investors in harmonised investment funds.
Other business. The ECOFIN Council will endorse without debate a €3.1 bn loan for Latvia to help it cope with the financial crisis (see EUROPE 9810). The loan is being provided from the EU medium-term balance of payments aid mechanism and is accompanied by the monetary and economic measures like fixing the Latvian currency's exchange rates, tightening public finance to ensure the public deficit does not rise above 5% of GDP in 2009 and 3% in 2011, large-scale structural reforms and cutting public sector wages. The European Commission and the European Central Bank will report on the smooth introduction of the euro in Slovakia on 1 January 2009 (see EUROPE 9811). The ECOFIN Council will also adopt conclusions on investment in the Western Balkans (see EUROPE 9819). (M.B. trans jl&fl)