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We need to continue with the implementation of structural reforms and respect the rules of the Stability and Growth Pact

This was the point stressed by the Slovenian Minister of Finance and current President of the Economic and Financial Affairs Council (ECOFIN), Dr Andrej Bajuk, after today’s ECOFIN meeting. The Finance Ministers, among other things, adopted the Key Issues Paper on economic and financial affairs to be submitted to the spring meeting of the European Council. Dr Bajuk underlined, “The European economic fundamentals are sound, but the European economy is facing risks in the capital markets as well as supply side price shocks. We must therefore continue with the implementation of structural reforms to increase productivity growth and employment, to continue to improve the quality of public finances and to respect the rules of the Stability and Growth Pact. We consider that the Pact has been structured properly to function during all phases of the economic cycle.”

Against this background, the Slovenian Presidency wishes in particular to stress the importance of investment in knowledge, the continuation of efforts to complete the Single Market and efficient solutions in the Energy and Climate Change package. In the context of preparations for the spring meeting of the European Council on 13 and 14 March, the Ministers adopted conclusions on the efficiency of economic instruments in achieving energy and climate change targets. They emphasised that ECOFIN supports Europe’s leading role in matters related to achieving energy and climate change objectives. We must ensure, however, that the transition to a low-carbon economy will be handled in a way consistent with ensuring sustainable economic growth and sound public finances. The Ministers stressed that the total expenditure entailed by the European Commission proposal should be evaluated and taken into consideration. They added that instruments based on market principles, such as e.g. emissions trading schemes and environmental taxes, should be developed.

The Ministers discussed and adopted an opinion on the first series of updated stability and convergence programmes of 11 Member States. Finland, Germany, Luxembourg, the Netherlands and Sweden have already reached their medium-term budgetary objectives (MTOs), while Hungary, Romania and the United Kingdom are above or very close to the reference value of a budget deficit of 3% of GDP. France, Italy and Slovakia have not achieved their MTOs either, and must therefore consistently continue the rigorous implementation of their budgetary policies. It was also pointed out that the eurozone members had expressed their full support for the commitments agreed upon last April in Berlin, and France in particular was invited to achieve its MTO by 2010.

Generally speaking, the Member States’ results for 2007 were better than expected. A total of 16 Member States have already achieved their MTOs; this includes Slovenia, which took advantage of the economic good times in 2007 and recorded a budget surplus for the first time. Slovenia’s Stability Programme will be discussed at the next ECOFIN meeting on 4 March. The Ministers also exchanged views on best practices in terms of measures aimed at achieving the MTOs.

In addition, they adopted a recommendation on the discharge to be given to the Commission for implementation of the EU’s general budget for 2006, as well as recommendations on the budgetary discharge to be given to the directors of 22 specialised EU agencies for 2006.

Among the A items of today’s meeting, the value added tax (VAT) package and the updated Directive concerning indirect taxes on the raising of capital were adopted without discussion, consensus having been reached at the December ECOFIN meeting. The VAT package in particular represents an important achievement of the Portuguese Presidency. The amended rules of the VAT package, on the location where services are performed, will ensure that VAT on services provided will, to a greater extent, be paid to the Member State where the consumer is located; furthermore, the rules will prevent the distortion of competition between Member States due to different VAT rates.


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Date: 15.02.2008