European Commission - Directorate-General for Econ : 18.01.2013 - Preparation of Economic and Finance Ministers Council, Brussels, 22 January 2013

European Commission

MEMO

Brussels, 18 January 2013

Preparation of Economic and Finance Ministers Council, Brussels, 22 January 2013

The EU's Council of Economic and Finance Ministers will take place on Tuesday, 22 January at 10.00. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services and Algirdas Š emeta, Commissioner for Taxation and Customs Union, Audit and Anti-Fraud. A press conference is expected to take place after the meeting.

1 Current legislative proposals

The Council will be updated on the following current legislative proposals:

Banking Supervision Mechanism (SdR)

On 4 December 2012 the Council adopted a General Approach on the set of proposals for a single supervisory mechanism (SSM) for banks. Trilogues with the European Parliament and the Council have now started. The proposed new supervisory system with the ECB at its centre aims to strengthen Economic and Monetary Union. The SSM is a first step towards a fully-fledged banking union as it was laid out in the Commission's Communication of 12 September 2012 and in the "Blueprint for a deep and genuine economic and monetary union" of 28 November 2012 (see ( IP/12/953)and IP/12/1272). In this context, Commissioner Barnier will welcome the Irish Presidency's ambitious plan to reach agreement on this file by the end of January, and encourage all sides to work together constructively to make this possible.

More information:

http://ec.europa.eu/internal_market/finances/committees/index_en.htm

Revised Capital Requirements rules (CRD IV) (SdR)

The Council is invited to consider a legislative package to strengthen the regulation of the banking sector. Trilogues with the European Parliament and the Council are ongoing. The proposed package would replace the current Capital Requirements Directives (2006/48 and 2006/49) with a Directive and a Regulation that would constitute another major step towards creating a sounder and safer financial system.

The Directive governs access to deposit-taking activities while the Regulation establishes the prudential requirements that institutions need to respect. (see IP/11/915).Commissioner Barnier will welcome the progress reached under the Cyprus Presidency, and invite Member States to reach agreement on the outstanding issues, such as bankers' remuneration and national flexibility.

More information:

http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

Economic governance - "Two-Pack" (SOC)

Two draft Regulations, the so called "Two-Pack ( see MEMO/11/822), aim to further strengthen economic governance in the euro area, especially through pre-emptive country surveillance of national budgets.

The Council will discuss the state-of-play on the legislative process. The Commission welcomes the progress made with the European Parliament and the Council in the "trilogues" to finalise the technical content of both draft proposals. This should facilitate a first reading agreement on the package in the near future. As Vice-President Olli Rehn recently said, "this is a test of Europe's credibility on our road towards a stability union of both responsibility and solidarity".

2 Presentation of the Irish Presidency's work programme (SOC, SdR and ET)

The Council will discuss the EU Presidency work programme for the first half of 2013. The Presidency programme aims at securing stability, jobs and growth.

Vice-President Rehn and Commissioners Barnier and Šemeta will welcome the Presidency's work programme.

Vice-President Rehn will stress the need for the adoption of the two-pack, smooth implementation of the European semester and further work to strengthen the Economic and Monetary Union.

Commissioner Barnier will emphasise the adoption of the proposed bank resolution and recovery Directive and of the proposal for a Deposit Guarantee Scheme as a matter of urgency.

He will also put the stress on the need for adoption of Markets in Financial Instruments Directive and Regulation (MIFID) (see IP/11/1219). He will also urge Council members to work with the Presidency, Commission and Parliament to conclude trilogues on mortgage credit (see MEMO/11/205and IP/11/383)and make progress on the Central Securities Depositories Regulation (see IP/12/221and MEMO/12/163).

The Commission also expects substantial progress on Proposals for a Regulation on Market Abuse and for a Directive on Criminal Sanctions for Market Abuse (MAR/MAD) (see MEMO/12/595).

Commissioner Šemeta will welcome the ambition that the Irish Presidency is showing in its intention to make progress on key files, notably the Financial Transaction Tax, Action Plan on Tax Evasion, Common Consolidated Corporate Tax Base CCCTB (see IP/11/319and MEMO/11/171) and Quick Reaction Mechanism on VAT (IP/12/868, MEMO/12/609).

3 Follow-up to the European Council meeting on 13-14 December 2012 (SOC and SdR)

The Council will discuss the outcome of the European Council of 13-14 December, when EU leaders agreed to work further on a roadmap on strenghening the Economic and Monetary Union (EMU). On 28 November, the Commission published a "blueprint" for a deep and genuine EMU underpinned by astrong and stable architecture in the financial, fiscal, economic and political domains( IP/12/1272). This constituted the Commission's input to the report of the Presidents of the European Council, European Commission, Eurogroup and European Central Bank and formed the basis for the discussion at last December's European Council.

The European Council urged the Council and the European Parliament to agree on the proposals for a Recovery and Resolution Directive(see IP/12/570and MEMO/12/416)and for a Deposit Guarantee Scheme (see IP/10/918)as a matter of urgency before June 2013. The adoption of this legislation is a second important step to be taken towards the banking union.

Commissioner Barnier will reiterate that the Commission is preparing to present a legislative proposal for a single resolution mechanism, once the adoption of the Single Supervisory Mechanism and the Bank Recovery and Resolution Directive are secured.

More information:

http://ec.europa.eu/internal_market/finances/index_en.htm

4 Annual Growth Survey 2013 (SOC)

The Council will exchange views on the Annual Growth Survey (AGS), which the Commission adopted on 28 November. The AGS kick-starts the European Semester for economic policy coordination, which ensures that Member States align their budgetary and economic plans with the Stability and Growth Pact and the Europe 2020 Strategy. The main message of the AGS this year is that while EU policies are beginning to show results - deficits are coming down, tensions in financial markets are easing, imbalances are decreasing and there are signs that competitiveness is improving in some Member States. Nevertheless, there is no room for complacency as continued reform is needed to ensure sustainable growth and jobs.  That is why the Commission considers that the five priorities outlined in 2012 AGS (see MEMO/11/821) remain valid. These five priorities are: pursuing differentiated, growth-friendly fiscal consolidation; restoring normal lending to the economy; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the crisis; and modernising public administration (IP/12/1274, MEMO/12/910). The European Council on 13/14 December agreed with the identified priorities and tasked the Council to continue discussions in the run up to the European Council in March, which will issue guidelines for Member States' economic policies.

5 An Action Plan to strengthen the fight against tax fraud and tax evasion (ET)

Commissioner Šemeta will present the Action Plan to fight against tax fraud and evasion and the Recommendations on tax havens and on aggressive tax planning adopted by the Commission on 6 December 2012 (see IP/12/1325and MEMO/12/949).

The Commission's Action Plan aims at a more effective EU response to tax evasion and avoidance. It sets out a comprehensive set of measures, for now and for the future, to help Member States protect their tax bases.

The first Recommendation foresees a strong EU stance against tax havens, going beyond the current international measures. Using common criteria, Member States are encouraged to identify tax havens and place them on national blacklists. Specified measures to persuade these non-EU countries to apply EU governance standards are also set out.

The second Recommendation is on aggressive tax planning. It suggests ways to address legal technicalities and loopholes which some companies exploit to avoid paying their fair share. Member States are encouraged to reinforce their Double Tax Conventions, to prevent them from resulting in no taxation at all. They should also adopt a common General Anti-Abuse Rule, under which they could ignore any artificial arrangement carried out for tax avoidance purposes and tax instead on the basis of actual economic substance.

Other initiatives foreseen in the Action Plan include a Taxpayers' Code, an EU Tax Identification Number, a review of the anti-abuse provisions in key EU Directives, and common guidelines to trace money flows.

6 Financial Transaction Tax (ET)

The Council is expected to adopt the Commission's proposal to authorise enhanced cooperation on the Financial Transaction Tax amongst 11 Member States.

On 23 October 2012, the Commission tabled a proposal for a Council Decision to authorise setting up a common system of financial transaction tax under the procedure of enhanced cooperation (see IP/12/1138). It is the first time this procedure is used in taxation.

As requested by the 11 Member States that want to move ahead, this common FTT will be based on the scope and objectives of the Commission proposal of 2011 (see IP/11/1085). Once the enhanced cooperation procedure is authorised, the Commission intends to proceed rapidly to the following step of the procedure and will present an 'implementing proposal' detailing the substance of the FTT to be applied by the participating Member States. This would then be discussed in the appropriate Council formations.

Other issues:

Informal Breakfast of the Economic and Finance Ministers - economic and financial market situation (SOC)

Ministers will assess the economic and financial situation and the outlook for the EU economy.

In recent months, financial market stress has eased substantially and risk appetite has begun to return to markets. The latest forecast by the Commission staff, which was released on 7 November 2012, pointed to a gradual improvement of the economic situation from early 2013.

The Commission staff's winter forecast is now starting to be prepared and will be released on 22 February. Commission staff will notably have a close look at the indicators for the timing of the expected return of GDP growth.