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Minister Bajuk: “We achieved great progress in the field of improving financial stability and financial supervision, and provided coordinated responses at the EU level to the financial market shocks and high food and oil prices”

Dr Andrej Bajuk, Minister of Finance and President of the Economic and Financial Affairs Council (ECOFIN), presented the main achievements of the Slovenian Presidency in the field of economic and financial affairs today at a press conference, where he pointed out: "The Slovenian Presidency focused on concrete responses to the issues citizens and companies of the EU care about, and demonstrated the EU's ability to take concrete actions in the financial and economic field. Consideration of the dossiers was conducted in accordance with the planned presidency programme, during which we achieved all set objectives."

The Slovenian ECOFIN Presidency paid special attention to financial stability. The International Monetary Fund assessed that the ECOFIN conclusions adopted with regard to financial stability and supervision during the Slovenian Presidency "break new ground" in this field. Minister Bajuk pointed out the two most important achievements made in this field: "We concluded a significant agreement at the EU level concerning supervision of the financial sector, as well as the new Memorandum on cooperation regarding cross-border financial stability."

Financial stability and financial supervision

One of the preconditions to complete the directives in the field of insurance (Solvency II) and banking (the Capital Adequacy Directive) was the adoption of key principal decisions on organising the supervision of cross-border financial groups in the EU.  In May and June, several important agreements in this field were reached. The supervision of cross-border groups should be based on close cooperation and exchange of information between national supervisors. An important agreement concerning the supervision of cross-border financial groups in the EU was reached with the adoption of the following four ECOFIN decisions:

  • award of an EU mandate to national supervisors;
  • strengthening of the role of three EU supervisory committees (L3 committees);
  • strengthening of cooperation of supervisory authorities within the collegiums of supervisors for individual cross-border financial groups;
  • facilitation of work on the convergence of regulatory and financial reporting, and a commitment to continue work in the field of burden-sharing during cross-border financial crises.

At the informal ECOFIN meeting on 4 and 5 April in Brdo pri Kranju, agreement on the Memorandum of cooperation between financial supervisory authorities, central banks and financial ministries of the EU Member States was reached regarding cross-border financial stability. The Memorandum specifies the manner of institutional cooperation during preparations for a potential cross-border financial crisis and the solution thereof. It entered into force on 1 June, when it was signed by all 113 signatories. The following four institutions from Slovenia signed the Memorandum: the Insurance Supervision Agency, Securities Market Agency, Bank of Slovenia and Ministry of Finance. The ministers invited the European Commission to prepare a discussion on the guarantee scheme for deposits, and they also approved the next exercise in crisis management, which shall be held in spring 2009 on the basis of the new Memorandum on cooperation.

In relation to the EU's responses to the financial shock which began in August last year, Minister Bajuk pointed out that the Slovenian Presidency thoroughly monitored the events on the financial markets and coordinated EU responses to the financial shock, which contributed greatly to preventing premature and incorrect measures by both administrations and participants in financial markets. "The first principled and informed decision was that measures which could prevent the potential repetition of similar shocks and which did not contribute to calming down the current situation should be well examined and thoroughly prepared. Past experiences from the financial markets teach us that the consequences of thoughtless and rash measures under such circumstances can be very harmful in the long term. Already in October, the ECOFIN Council adopted a similar work plan, which committed several working bodies at the EU level (the European Commission, three EU supervisory committees, the Banking Supervision Committee, etc.) to cooperate with a group of very active organisations at the international level, and to thoroughly examine and prepare the required measures in fields where the response of the industry itself would not be enough. These are bodies which are not managed by Slovenian representatives, but we nevertheless monitored the work and assess that it has been carried out very well and in accordance with the work plan."

Solvency II

In the field of financial services, the Slovenian Presidency achieved significant progress in its work on the proposal for the Solvency II Directive, which shall change the manner of operation of certain insurance and reinsurance companies and upgrade the provisions concerning their capital adequacy. In relation thereof, Minister Bajuk said: "The Solvency II Directive is very complex, because it combines 14 existing (re)insurance directives into one document, to which the rules on solvency were added. With a lot of hard work, our experts succeeded in reaching an agreement on most of the 313 articles. Only two main issues remain open: prudential supervision of insurance groups and the European Commission proposal for an innovative arrangement of cross-border financial groups. At its conclusion, the Slovenian Presidency prepared a compromise proposal that includes more ideas on solving these two issues in an integrated manner."

High food and oil prices

Concerning the high food and oil prices, Minister Bajuk said the following: "On the Slovenian Presidency's initiative, the financial ministers carefully analysed the circumstances in relation to the high food and oil prices. We defined the key structural, cyclical and temporary factors of higher food prices, and the appropriate responses of short- and long-term policies, which we reported to the European Council." The ministers agreed it is critical:

  • to keep improving the market orientation in agriculture: this applies to the EU common agricultural policy, as well as to eliminating obstacles to the export of food at an international level;
  • to provide sustainability of policies on biofuel in the EU;
  • to ensure adequate competition in the food production and sales chain;
  • to increase productivity in agriculture, especially in the developing countries; and
  • to analyse in depth the factors contributing to the sudden steep increase in prices on the world commodity markets.

In relation to oil prices, ECOFIN confirmed the agreement adopted in Manchester in 2005, on the basis of which it is necessary to avoid distorting budgetary and other political interventions, because they prevent the required adjustment of economic subjects. The agreement was further confirmed at the June meeting of the European Council, and the same position was adopted at the meeting of G8 member states in June this year in Osaka. Minister Bajuk added: "It is important that the changes in structural relative prices play their role. Any measures to alleviate the impact of higher oil prices on the poorer population have to be short-term and target-oriented. It is necessary to significantly increase the efficiency of energy consumption and the use of alternative resources in order to decrease the dependency on volatile oil markets."

Successful coordination of economic policy

In the field of coordination of economic policy, Minister Bajuk pointed out the successful beginning of the second three-year cycle of the growth and workplace strategy, and the adoption of broader economic policy guidelines for the 2008–2010 period, and continued: "The Slovenian Presidency ensured the smooth process of Slovakia's accession to the euro zone, and on 8 July ECOFIN will adopt the required legal bases. At the 10-year anniversary of the European Central Bank and the European Monetary Union, we carried out the first exchange of positions. At the ECOFIN meetings, we discussed best practices to improve the quality and sustainability of public finances, with the intent to form the most efficient and sustainable social systems in the EU."

Establishment of an integrated financing mechanism in the Western Balkans

The Minister expressed satisfaction that the Slovenian Presidency managed to ensure ECOFIN's commitment to establishing an integrated financing mechanism in the Western Balkans. With it, the ministers expressed their commitment to financial cooperation and further development in the region. This mechanism will provide a gradual unification of available financing instruments for the Western Balkans, especially various mechanisms of the European Commission, the European Investment Bank and the European Bank for Reconstruction and Development. Currently, more than 20 different financing instruments are being used (without even taking into consideration bilateral financing), which address the various needs of these countries.

He continued: "We adopted concrete steps on the path to establish this mechanism. A common website will be set up this year. In addition, the coordination group with representatives of the Commission and international financial institutions will begin immediately with its work, namely to establish a one-stop project and, by the end of 2008, to prepare a list of the biggest administrative obstacles which must be removed in order to provide efficient coordination of the participating institutions. This means that the countries in the Western Balkans will be able to obtain integrated information regarding the availability of financing at one spot."

The budget

An agreement was reached to amend the EU budget for 2008 No. 3, which provided mobilisation of assets of the Solidarity Fund to restore the flood-affected areas in Železniki.

Progress made in the tax field

Minister Bajuk said that the Slovenian Presidency invested significant efforts in achieving progress on the proposal of technical amendments to the VAT Directive, the proposal relating to taxation of insurance and financial activities with VAT, and the directive proposal on a general regime for excise duties, and continued: "As a priority, we also discussed the fight against tax fraud and actively contributed to faster preparation of the discussion concerning the operation of the savings directive, considering recent cases of tax fraud and evasion."

International affairs

Regarding international affairs, an agreement on the EU's common position on quotas and voting rights in the International Monetary Fund (IMF) within the adopted IMF reform was reached during the Slovenian Presidency. Thereby an important move in the representation of dynamic economies was achieved; many of these are countries with developing markets, and poorer countries were given more power in the management of this multilateral institution.

A beneficial experience

At the conclusion of the six-month presidency of ECOFIN, Minister Bajuk emphasised that the presidency was a great challenge and a very important achievement for our country. He continued: "On the basis of the experience related to the Presidency, we learned a lot at all levels of work. We became familiar with the structure and procedures for adopting decisions from within. In the future, we will know how to better promote our own interests. We proved that as a relatively small country and one of the new EU Member States, we were also able to successfully lead very complex areas and find compromise solutions on issues at the EU level. Of course, achievement of the set objectives would not have been possible without the professional, capable and committed employees at the Ministry of Finance and the Permanent Representation of Republic of Slovenia to the European Union in Brussels. I express my sincere thanks to all on the constructive cooperation and effort that you invested in the presidency project. Together, we were able to successfully conclude a demanding project of great significance for Slovenia."


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Date: 04.07.2008