EU Finance Ministers meet at ECOFIN Council
Prague, May 5th, 2009
After the April informal meeting held in Prague, the EU Finance Ministers met again in Brussels.
The regular ECOFIN meeting was chaired by Czech Finance Minister Kalousek and addressed the current economic and financial situation, the sustainability and quality of public finances and tax-related issues. The Ministers discussed the spring economic forecast published by the European Commission one day before the ECOFIN Council meeting. The European Commission revised downwards its estimate of the economic downturn for this year. However, several indicators suggest that the European economy could rebound as soon as in the second half of 2009. According to the European Commission, the stabilisation of money markets and the low inflation rate are a positive sign.
The Ministers were also informed of the course and results of the meeting of the G20 Finance Ministers that was held on 24 April as part of the spring meeting of the International Monetary Fund in Washington. They discussed the implementation of the decisions taken at the G20 summit in London. The ECOFIN Council agreed on the necessity to accelerate the work on the joint EU position for the September summit in the USA. The Ministers also touched upon the issue of accounting standards and decided to discuss it again at their meeting in June. Today’s meeting also resulted in an agreement on the need to rapidly finish the process of increasing the resources of the IMF.
As a follow-up to the spring European Council the ECOFIN Council approved a regulation whereby the ceiling of a loan facility providing medium-term financial assistance to Member States outside the Euro zone has been doubled. Member States that face problems with their balance of payments will be able to obtain loans from the EU amounting to 50 billion euros in total. In the context of the economic crisis, such assistance has already been provided to Hungary and Latvia. Today, the Ministers approved medium-term balance-of-payments assistance to Romania, amounting to 5 billion euros.
The Council adopted conclusions on the issue of the long-term sustainability and quality of public finances. The conclusions were prepared also on the basis of the 2009 report on the impacts of population ageing (Ageing Report 2009) that includes economic and budgetary forecasts of the impact of population ageing on the EU Member States for 2008 – 2060. The Ministers agreed that the present unfavourable economic outlook increases the pressing need to solve the impacts of ageing of European population on the economic performance and public finances of the EU Member States. The Council reaffirmed its commitment to promote further pension and healthcare reforms, reforms aimed to increase productivity and employment and, last but not least, a prudent fiscal policy. The Ministers expressed their belief that it is necessary to pay attention to the efficiency and purposefulness of public expenditures and to reinforce fiscal institutions.
Following the informal meeting of EU Finance Ministers held in Prague in April, the ECOFIN Council adopted conclusions in which, five years after the historically biggest EU enlargement, it assessed this step as an economic success for all parties involved.
The Commission informed the ECOFIN Council of the progress of regulatory dialogues with key EU partners, particularly the USA, Japan, China, Russia and India. Information on dialogues with third countries in the area of economy and finance is a regular part of the agenda of the ECOFIN Council in May.
Another important topic addressed at the meeting was the issue of taxation. The Ministers discussed the proposed amendments to the directive on excise duty on manufactured tobacco and, in particular, the issue of increasing the minimum rates and redefining tobacco products. However, due to incompatible opinions of the Member States, political consensus was not reached.
The Council also touched on the issues of good governance in the area of taxation and fight against tax evasions. The Commission introduced its Communication on Taxation and Good Governance and informed of the progress achieved in negotiations with Liechtenstein on an agreement against fraud. The ECOFIN Council will discuss the issue of good governance in more detail at its June meeting in Luxembourg.
The Czech Presidency informed the other Member States of the current situation in the negotiations concerning significant legislative acts in the area of financial services. The Presidency and the European Parliament have reached a compromise wording of four key legislative texts. The regulation on credit rating agencies responds to one of the factors of the current financial crisis by setting out conditions for the activities of credit rating agencies in the EU, their registration and supervision, rules for publishing ratings and providing information to the investors. The Presidency also succeeded in reaching an agreement on the proposal for a regulation on cross-border payments in euros. The regulation reflects the development in the cross-border payment market, particularly the creation of the Single Euro Payments Area (SEPA). The amended regulation will strengthen the protection of consumers´ rights and support the development of a modern and efficient payment system within the EU. A difficult issue on the agenda was the revision of the Solvency II Directive. This directive represents a crucial reform of regulation in the insurance sector. It introduces a new solvency regime for the insurance sector while replacing 13 existing directives with a single piece of legislation.
Last but not least, the Czech Presidency made progress in negotiations on the proposal for a new directive governing the issue of electronic money and the associated supervision. Another achievement was the agreement to remove high regulatory barriers that hinder the development of the e-money market in the EU. Furthermore, it will now be possible to set up "hybrid e-money institutions", i.e. institutions that conduct other activities in addition to issuing electronic money. All four proposals had been approved by the European Parliament at its April plenary.
The Commission's presentation of the first proposal for the EU budget for 2010 in the ECOFIN Council launched the annual budgetary procedure for the upcoming year.
In the context of the implementation of the European Economic Recovery Plan, the Council formally adopted several pieces of legislation. The Ministers approved the amendment to the VAT Directive, allowing the Member States to apply the reduced VAT rate to labour-intensive services (they reached an agreement on this opportunity already at their meeting in March). The Council also adopted amendments to the Regulation on the European Social Fund and the Regulation on the European Regional Development Fund that extend the categories of costs eligible for support from these funds.
At their work lunch, the Minister paid attention to the preparation of the contribution of the ECOFIN Council to the informal Employment Summit that is to take place in Prague on 7 May. The Ministers also emphasised the broader, longer-term context of economic policies aimed to create conditions for healthy economic growth, for increasing the employment rate and for sustainable public finances.
The meeting comprised a dialogue with the EU candidate countries: Croatia, the Former Yugoslav Republic of Macedonia and Turkey. The EU Finance Ministers met with their counterparts from the candidate countries and the Governors of their Central Banks. The main topic on the agenda of this regular meeting was the assessment of the Pre-accession Economic Programmes. The Ministers appreciated the progress achieved by the candidate countries in the stabilisation and transformation of their economies and recommended further improvements to their economic and budgetary policies that also reflect the current crisis. The outcomes of the dialogue are summarised in the conclusions of the Presidency.
Radka Kohutová,
Spokeswoman of the Ministry of Finance
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