Preparation of Eurogroup and Economic and Finance Ministers Council, Brussels 7 and 8 November (Amelia Torres, Oliver Drewes, Gregor Kreuzhuber, Maria Assimakopoulou, Valérie Rampi, Michael Mann)

Monday, November 7 2005, 15:03

EUROGROUP

Eurogroup ministers will meet at 19:00 hrs on Monday 7 November. Joaquín Almunia i, Commissioner responsible for Economic and Monetary Affairs, and European Central Bank Governor Jean-Claude Trichet i will attend.

The meeting will start with a regular exchange of views on the economic situation, in particular on inflation trends in the euro area from a medium term perspective and related policy issues. Recent data (among others, October Commission economic sentiment and Germany's IFO index; August retail trade and industrial production; and September unemployment rate) confirms the view that economic growth is accelerating in the second half of the year. Inflation edged up to 2.6% in September, before falling slightly to 2.5% in October, according to Eurostat's flash estimate. Core inflation (excluding energy prices) however stood at around 1.5%, showing that the spill-over from high oil prices has been largely absent so far.

Ministers will also discuss the issue of the global imbalances and whether higher growth in the euro area would help solving what remains one of the biggest risks to the world economy. The discussion is intended to identify the main messages of the euro zone for the December G7 meeting and other international meetings. For background on the Commission services position see the last Quarterly Report on the Euro Area and its focus on Global current account imbalances (see IP/05/1268)

Ministers will also have a first discussion on a package of statistical governance issues ahead of next day's ECOFIN Council, which is expected to reach conclusions on a subject key for budgetary surveillance in Economic and Monetary Union (see below).

Finally, Commissioner Almunia will inform about the second Commission report on the practical preparations for the introduction of the euro in the new Member States which was presented on Friday 5 November. The report, which is separate from whether the Maastricht convergence criteria (`Convergence Report') are fulfilled, shows that Estonia, Lithuania, Slovenia and Slovakia are the first to adopt a euro changeover plan. All but Slovakia (2009) aspire to adopt the euro in 2007. For details (see IP/05/1371).

ECOFIN COUNCIL

The European Union's Council of Economics and Finance Ministers will start at 10.00 hrs on Tuesday 8 November. The European Commission will be represented by Economic and Monetary Affairs Commissioner Joaquín Almunia, Enterprise and Industry Vice President Günter Verheugen, Internal Market Commissioner Charlie McCreevy and Taxation and Customs Union Commissioner Lazlo Kovacs).

A press conference is expected to take place at the end of the ECOFIN meeting.

EC Budget : road map to an integrated internal control framework (VR)

The ECOFIN Council is to adopt conclusions on the Commission's communication on a roadmap to an integrated internal control framework adopted on 15 June. The Commission has already made a significant contribution by providing an assessment of the gaps between the internal control framework of the Commission services and the control principles set out in the Court of Auditors's proposal for a Community internal control framework opinion n°2/2004. It is preparing an action plan for December to follow-up the results of the gap analysis, aiming to provide greater assurance on the legality and regularity of the underlying transactions in the Union's budget. The European Parliament and the Commission argue that a declaration of assurance made by the highest national authorities that control systems at national level are adequate and ensure legal and regular transactions would be a key element providing the Court of Auditors with the reasonable assurance about expenditure regularly made through shared or centralised indirect management at national level. Discussions on this and related issues have taken place in September at expert level (see SPEECH 05/570). A commitment by the Council supporting management declarations would be a valuable step on the way to being able to achieve a positive statement of assurance.

Better Regulation - measuring administrative costs (GK)
The European Council of 22 and 23 March 2005 requested the Commission "to consider a common methodology for measuring administrative burdens with the aim of reaching an agreement by the end of 2005". As better regulation is now high on the political agenda of the EU and Member States, there is a growing interest in quantifying the costs of administrative burden of regulation. The Commission suggests the so-called Standard Cost Model. It consists of a detailed assessment of individual pieces of legislation, mainly based on direct interviews of enterprises and expert judgments. The Commission will include this method in the Commission's impact assessment and evaluation guidelines. It further invites the Member States to reach agreement on a common methodology. The Council will hold a discussion on this matter.

EU Statistical Governance (AT)

The Commission at the end of 2004 put in place a strategy to reinforce the quality of fiscal statistics used in the context of the excessive deficit procedure (see IP/04/1530, IP/05/234 and IP/05/599). Following a series of discussions in the first half of 2005, ministers are expected to reach conclusions on, among other things:

  • Amendment of Regulation 3605/93 (quality of statistical data in the EDP)

The proposed regulation aims to increase the quality of budgetary data and the independence, integrity of accountability of the European Statistical System. It also details the rules and procedures guiding Eurostat's methodological visits to the Member States.

The role of the Committee on Monetary, Financial and Balance of Payments Statistics (CMFB)

The Council is expected to conclude that the CFMB provides important and timely expertise advice to allow Eurostat to reach decisions on complex operations and has worked satisfactorily.

- Review of priorities

At several occasions during the past year, the Council discussed the review of statistical priorities. In the framework of the "Better Regulation" initiative, a Task Force has worked on balancing data requirements with the resources made available to statistical authorities and the burden on respondents. The Council is expected to request the work of the Task Force to be incorporated into the statistical programme for 2008-2012.

Implementation of the Stability and Growth Pact (AT)

  • Application of the ongoing excessive deficit procedure

On 20 October 2005, the Commission adopted a recommendation to the Council based on Article 104(8) of the Treaty to decide that -for the second time- Hungary has not complied with the Council recommendations to correct its excessive deficit (see IP/05/1311).

The Council is expected to endorse this Commission recommendation. The next step will be therefore a repetition of the recommendation under Article 104(7) of the Treaty.

Taxation (MA)

  • Value Added Tax (VAT) reduced rates

Ministers are due to continue their discussions on reduced rates of VAT. Commissioner László Kovács will welcome the UK Presidency document which forms the basis of the discussion. He will repeat that the Commission is conscious of the difficulty of reaching an agreement on this issue and will examine with an open mind a compromise based on the reflection document issued by the Presidency.

The Commission could accept the Presidency's ideas that local services, as restaurant services, housing, domestic care services or small repair services, to be included in Annex H of the 6th VAT Directive and thereby be allowed a reduced VAT rate ( where Member States so choose). However, as the risk of creating distortions of competition is high, and given the strong objections of a number of delegations and of the Commission itself, the Commission will support the Presidency that no additional goods should be allowed a reduced VAT rate.

The Commission's aim is to seek a balanced approach for the whole of the European Union in this area. The proposal would also provide for definitive rules concerning the VAT treatment that should be applied to labour-intensive services. The proposal would not alter the present optional nature of reduced VAT rates: no Member State would be obliged to introduce new reduced VAT rates.

The Commission had presented its proposal in July 2003 for simplifying and rationalising the rules on reduced rates of VAT (see IP/03/1024 and MEMO/03/149).

  • VAT: One-Stop-Shop and other measures to simplify VAT obligations

Economics and Finance Ministers will take note of the progress made to date under the UK presidency on the Commission's proposal of October 2004 to simplify current VAT compliance obligations for traders (see IP/04/1331).

Commissioner László Kovács will express appreciation for the efforts of the UK presidency to achieve progress on this file. The adoption of this proposal would help cross-border traders who supply goods and services to other EU Member States. In particular the proposal would provide for a "one-stop-shop" system whereby a trader could fulfil all his VAT obligations for EU-wide activities in the Member State in which he is established. This system would allow traders to use a single VAT number for all supplies made throughout the EU and to make VAT declarations to a single electronic portal that would then be submitted automatically to the different Member States to which the trader supplies goods or services.

Financial Services : cross-broder consolidation in the EU financial sector (OD)

Commissioner Charlie McCreevy will present an analysis on why there has been little cross-border consolidation so far in the EU financial sector. This in response to the request of Finance Ministers to look into possible obstacles to cross-border mergers and acquisitions in this sector, expressed in the informal Ecofin meeting of Scheveningen in September 2004 (see MEMO/04/214). This analysis draws on a Communication from the Commission on "Intra-EU investment in the financial services sector", adopted 21 October 2005, and on a Commission Staff working document on "Cross-border consolidation in the EU financial sector". In particular, the latter includes the results of an online market participant survey carried out in spring 2005 (see IP/05/444). Commissioner McCreevy will also present the ongoing work on the possible revision of Article 16 of the EU Banking Directive 2000/12/EC, also initiated after the Scheveningen informal Ecofin Council.

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