Brussels, 03/07/2009 (Agence Europe) - With the change of Presidency at the beginning of this month, the Ecofin Council of 7 July will start with the presentation of the Swedish work programme for the next six months. The meeting will be short, with EU finance ministers joining up with their Mediterranean counterparts for a meeting of the Union for the Mediterranean (the first such ministerial meeting since the war in Gaza). The meeting will continue over lunch with discussion of future Euro-Mediterranean Investment and Partnership Facility (FEMIP) action.
Eurogroup. On the evening of Monday 6 July, euro area ministers will discuss their own work programme for the second half of the year. The 16 member states will also debate the economic situation in the euro area (the effect of the crisis on growth potential and prospects of price development) and the measures taken by Greece to reduce its deficit. They will also discuss the issue of external representation of the euro area ahead of the G20 talks on the reform of IMF governance.
Swedish Presidency programme. With tackling the financial crisis as the main priority, discussions will focus on improving supervision and regulation of financial markets. The Commission will bring forward its proposals in September (most likely on 30) and the Swedish Presidency wants political agreement by the end of the year. Re-establishing sound public finances, another of the issues to be debated at the Ecofin Council, will need an appropriate exit strategy to be drawn up, one that takes account of future challenges (especially, the ageing population and how to fund social security systems). The issue of labour market reform will be broached at the informal meeting in Gothenburg on 1-2 October, as will the new post-2010 Lisbon Strategy. Ahead of the Copenhagen conference, finance ministers will seek to make progress on funding mechanisms for climate change measures, with the Presidency wanting to finalise a negotiating mandate in October.
Pro-cyclicality. Ministers will hold an exchange of views on ways to reduce pro-cyclicality on financial markets. Pro-cyclicality is the term given to the perceived exacerbation of fluctuations on volatile markets and it can sometimes originate in the regulations in force. In a report, the economic and financial committee examines pro-cyclical effects and identifies four main policy responses: - the monitoring of system-wide risks; - the building of counter-cyclical buffers through capital and provisions; - the improvement of accounting rules to lessen the valorisation of assets through the “fair value” principle; - and the establishment of a sound framework for remuneration schemes to dissuade financial institutions from rewarding excessive risk-taking.
Stability and Growth Pact. The Council will adopt decisions (under Article 104(6) of the Treaty) on the existence of excessive government deficits in Latvia (see EUROPE 9934), Lithuania, Malta, Poland and Romania (see EUROPE 9928), and recommendations, under Article 104(7), on corrective action, to be taken. It is also expected to revise the time allowed Hungary to come back below the 3% of GDP bar (see EUROPE 9928). The times allowed are: - 2010 for Malta; - 2011 for Lithuania (an annual average fiscal effort of at least 1.5% over the 2009-2011 period), Romania (an annual average fiscal effort of at least 1.5% from 2010) and Hungary; - 2012 for Latvia (an annual average fiscal effort of at least 2.75% over the 2010-2012 period) and Poland (an annual average fiscal effort of at least 1.25% from 2010). The Council will also approve the latest convergence programmes (Latvia and Romania) and stability programmes (Austrian, Belgium, Slovakia and Slovenia) for 2009.
Medium-term budgetary objectives (MTOs). Now is not the time to announce new medium-term objectives for consolidating member states' public finances, but a related issue will be discussed on Tuesday. At the request of Slovenia, ministers will examine the new method for calculating MTOs which should take greater account of implicit liabilities, such as public retirement systems, in defining the fiscal positions to be achieved. The idea behind this approach, proposed at the time of the reform of the Stability and Growth Pact and due to be applied with effect from the next updating of stability and convergence programmes this autumn, is to better pinpoint the development of the future debt and, from there, to define the MTO. Slovenia, whose current debt is not very high (22.8% of GDP in 2008, though likely to increase because of the crisis), says that this approach is problematic since, with the emphasis that is placed on implicit liabilities, it will have to thoroughly review its own MTO. Instead of having an MTO of 1% budgetary deficit, the country will have to be thinking about a budgetary surplus of around 0.75% of GDP. The aim of the discussion is not to have the new method reviewed, all the more so since it is helpful to other countries. (A.B./M.B./transl.rt)