Broad Economic Policy Guidelines

Today’s ECOFIN Council had a discussion on the Commission’s draft Broad Economic Policy Guidelines which have been updated and extended to cover the ten new Member States.

Ministers agreed with the Commission’s overall approach and the Council will have a more detailed look at the updated Guidelines in June, following which, they will be forwarded to the European Council, as is normal.

Output and output gaps

We discussed and endorsed the report by the EPC on their research into the output gap methodology used by the Commission when assessing Member States’ Stability and Convergence Programmes for consistency with the SGP and renewed the research mandate of the Working Group. It will review its progress later in the year.

EIB Lending Mandates - Russia

The Council confirmed its agreement of 25 November 2003 regarding a separate EIB lending mandate of up to 500 million in favour of Russia and the Western New Independent States (WNIS). Subject to the Opinion of the European Parliament, the Council will adopt the necessary decisions in early autumn.

On that basis the Council invited the EIB to pursue its preparatory work in Russia without interruption.

Implementation of SGP – Council decision abrogating the decision on the existence of an excessive deficit in PORTUGAL

The Council decided to end the Excessive Deficit Procedure against Portugal. Since 2002, the Portuguese authorities have shown great determination in maintaining budgetary discipline in line with the Council Recommendation.

In bringing the Excessive Deficit Procedure on Portugal to a close, the continued effective operation of the Stability and Growth Pact has been demonstrated. However, Portugal still faces budgetary challenges. Therefore, the Council has called upon Portugal to take the actions necessary to ensure that it remains on track to achieve sound public finances.

Implementation of the SGP – Early warning for ITALY

Today the Council discussed the situation of the public finances in Italy, in the light of a Commission Recommendation for the Council to issue an ‘early warning’. The Italian Government is firmly committed to keeping the budget deficit below 3% of GDP through timely and effective measures. Having listened to the Commission and the Member States and in the light also of the commitment of the Italian government, there is a broad consensus that the decision should usefully be postponed to July, when we will examine the specific package of measures.

Savings Tax Directive – update on position regarding Dependent Territories and on negotiations with Third Countries

The Council took stock of the state of play in the negotiations on savings tax agreements with Andorra, Liechtenstein, San Marino and Monaco and Switzerland and with the ten relevant UK and Dutch dependent and associated territories.

The Council noted the considerable progress made with Andorra on a savings tax agreement, and the possible future monetary agreement with Andorra, in respect of which it adopted, as an A point, a decision this morning.

As regards San Marino, Monaco and Liechtenstein, the Council, on the basis of a report by the Commission, noted developments in negotiations since its last meeting in March. The Council reiterated its clear and unequivocal support for the position being taken by the Commission in these negotiations. In particular, the Council emphasised that it was not prepared to make concessions in relation to the benefits of the Interest and Royalties and Parent/Subsidiary Directives.

The Council also heard reports on the present position in the negotiation of saving tax agreements with the relevant dependent and associated territories of the UK and the Netherlands. The Council welcomed the fact that the texts of the formal bilateral savings tax agreements between the Member States, on the one hand, and the Crown Dependencies and the Netherlands Antilles and Aruba on the other, are now in the process of being signed by the Member States.

Finally, the Council reaffirmed its determination to finalise the negotiations on these savings tax agreements in the very near future so that it will be in the position at its meeting in June, 2004 to conclude that all the conditions for applying the provisions of the Savings Tax Directive from 1 January 2005 onwards will be met.

Financial Services: Transparency Directive – political agreement

Ecofin today unanimously agreed to the global compromise package reached with the European Parliament on the Transparency Directive. This agreement is an important step forward in achieving a single market for financial services. The Directive is an important component of the Financial Services Action Plan. The Irish Presidency is very grateful for the constructive efforts made by all sides in enabling a consensus to be reached.

Financial Services: Committee Structure Directive – political agreement

The Council today gave its political agreement to the proposal for a Directive to reform the committee structure for the financial services area so that the Lamfalussy process, which already applies in the securities area, can be extended to the banking, insurance and UCITS sectors also.

Preliminary draft budget for 2005

The Commission presented its draft budget for 2005 to the Council today covering expenditure for all twenty-five Member States for a full year.

The negotiating process will culminate in December 2004. Ecofin will have a conciliation meeting with a European Parliament delegation on 16th July next after which it will adopt its first reading.

Future Financial Perspective

I updated colleagues on the progress of discussions on the future Financial Perspective under the chairmanship of the Irish Presidency. There was a comprehensive exchange of views about this issue. I will provide a further update on progress made by the Irish Presidency on this issue at the Ecofin meeting in June.

A.O.B. – Commission Report on Alcohol Rates

Under AOB, Sweden questioned the Commission about its plans in relation to a report due to be published by the Commission on Rates of excise duty on alcohol and alcoholic drinks. The Commission expected that its report would be adopted in the coming weeks and would be presented to the Council as soon as practicable.

Ecofin Ministers discuss the impact of health care spending on public finances

Over breakfast, we discussed the issues of health care spending and its impact on the sustainability of public finances.

We noted the steady rise in health care spending as a share of GDP in recent decades, and that the healthcare sector currently accounts for between 5½ and 10½ % of GDP across Member States. We agreed that there is likely to be considerable pressure for increased public spending on health, driven largely by ageing and public expectations. This will pose a challenge for budgetary management.

Macroeconomic Dialogue

Yesterday I represented the Council at the tenth meeting of the Macroeconomic Dialogue. Representatives of the Council, Commission, the European Central Bank and the Social Partners had a discussion on the economic situation and the appropriate policy mix.

Trialogue with the European Parliament on the BEPGs, 10 May 2004

Yesterday’s Trialogue meeting had a discussion on the Commission’s draft Broad Economic Policy Guidelines and the European Parliament’s resolution on the Guidelines. The Trialogue format allows for a constructive exchange of views among the Troika of Council Presidencies, the European Parliament, and the Commission.

The discussion centred on suggestions for modifying the Guidelines to reflect the economic and social priorities identified by the Parliament. The discussion was useful and productive. The Parliament’s input will inform the ongoing preparation of the Guidelines by the Council, and by its preparatory Committees.

IGC Issues

Ministers had an exchange of views on the progress being made by the IGC. It was agreed that positive progress was being made, and that Ministers would continue to input their views on the text through the procedures which have been established by the Irish Presidency.