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Presentation of the Programme and Priorities of the Slovenian Presidency of ECOFIN to the Economic and Monetary Affairs Committee of the European Parliament by Dr Andrej Bajuk

Chairwoman Madame Berès, Members of the Committee, Ladies and Gentlemen,

Thank you for the invitation and the opportunity to outline the programme of the Slovenian Presidency of Ecofin. I shall begin with a brief presentation of our programme and priorities in the sphere of economic and financial affairs and then give you, respected Committee members, more time for questions and comments.

Slovenia is the first of the new Member States to preside over the Council. This is a great honour but at the same time a significant challenge. We are not afraid of this challenge but we do need support. Europe will only succeed if we work together.

The Slovenian Presidency will rely on established rules and methods of inter-institutional cooperation and shape solutions together with our partners in the Council, the Commission and most certainly the European Parliament. This includes today's presentation. Although our cooperation got off to a good start at the end of November in Ljubljana and last week here at the European Parliament, I believe that today's presentation and discussion will further clarify our plans and contribute to constructive cooperation over the next few months. In some of the priority dossiers, your support will be vital if we are to make effective progress.

Slovenia has taken over the Presidency as the last member of a Trio that also includes Germany and Portugal. Through our 18-month programme, all three Presidencies defined the following common objectives:

  • To ensure efficient and effective management of economic policy;
  • To improve the quality of public finances in the EU;
  • To take further steps towards completing the Internal Market, in particular with regard to financial services and taxation.

Germany and Portugal accomplished a great deal. It is now our turn to move things forward, conclude work in certain areas, speed things up where possible, and supplement, where needed, the work that has been done.

Over these six months, discussion will begin of a number of new dossiers. We do not expect to be able to conclude this process in the time available, but we do have the will and determination to bring the discussion and the search for consensus – which includes the Parliament – as far as possible.

At a time when the Slovenian Presidency is working to ensure that the Treaty of Lisbon enters into force as planned, it is of the utmost importance that we strengthen the trust of citizens in the EU, and in its ability to confront the challenges of present and future.

This will be achieved above all through appropriate communication about our work and our political determination. By means of clear, simple and regular information, we will try to raise awareness of policies aimed at making citizens' lives easier, facilitating business operations, promoting creativity and innovation and highlighting the benefits of a united Europe. Our work over the coming months can be divided into three broad areas: (i) economic policy coordination, (ii) financial services and (iii) taxation.

I. Macroeconomic situation and policies

  • Slovenia has taken over the Presidency at a time when, in the wake of the recent turbulences in financial markets, it has become clear that the very strong growth we have experienced in the EU economy over the past couple of years will moderate slightly in 2008. Nevertheless, growth estimates remain close to potential, with risks to the downside. This makes it all the more important to pursue the policies that according to our mutual experiences enabled this achievement and that have been identified by experts as supportive of enhanced growth and financial stability.
  • The EU's fundamentals remain very strong: employment is high, domestic demand is picking up. However, there are some risks, that can be combined into three groups:
  1. Developments in financial markets: the extent of the anticipated losses in financial sector has risen considerably from EUR 100 billion to EUR 400–500 billion.
  2. Price developments: energy and food price increases influence economic activity as well as inflation. Current developments indicate a short-term influence, but it is of key importance that we prevent second-round effects.
  3. Situation in the US and other markets: growth risks in the US have risen. Although until now Europe has compensated for lower exports to the US with higher exports to other markets, there is a risk that growth in third markets will slow down as a result of the decline in the US.

We are aware of these risks, but we must not forget the fundamentals of our economic strength, strongly influenced by the positive effects of the past reforms.

  • Under the Slovenian Presidency the Ecofin Council will define a new three-year set of Broad Economic Policy Guidelines. It should be noted that the Lisbon strategy or Strategy for growth and jobs delivers results; therefore the text of the Integrated Guidelines does not need to be changed. The stability of the process of structural reforms in Europe is a very important element of their success. Ecofin will continue to ensure the fundamental macro-economic conditions for investment, growth and increased employment. This means a rigorous implementation of the Stability and Growth Pact to ensure sound and sustainable public finances, as well as measures to encourage the quality of public finance expenditure.
  • Regarding the Stability and Growth Pact, the Council will continue to monitor budgetary developments very closely. It is hoped that a number of countries can be moved out of the excessive deficit procedure in spring. Many other countries have either arrived at or made good progress towards medium-term budgetary objectives. The Slovenian Presidency will work together with the Commission to ensure that budgetary consolidation continues – particularly close attention will need to be paid to those countries not yet at the medium-term objective and not making sufficient progress towards it, and those countries that risk breaching the 3% of GDP reference value.
  • Cyprus and Malta introduced the euro on 1 January. The Presidency takes a particular interest in the management of the changeover, as the last country to have introduced the euro before them. We can note that the changeover has gone smoothly to date, and recognition is therefore due to the Cypriot and Maltese authorities for their successful efforts.
  • Slovakia has declared its desire to adopt the euro from 1 January 2009. The Commission and the Council will assess its compliance with the convergence criteria in May, and then the Council will examine the situation on the basis of the documents presented by the Commission and the ECB. All parties are aware of the need to allow as much time as possible for the Parliament to play its full role in the procedure, but this also has to be balanced with ensuring that the best data for the analysis of convergence is available. The Council and the Parliament can begin their work at the same time, as soon as the Commission and the ECB adopt their convergence reports.
  • Let me mention that the adoption of the second three-year cycle of the renewed Strategy for growth and jobs will be a key priority for the Slovenian Presidency.
  • The 2005 Spring European Council decided to strengthen ownership and accountability of the Strategy for growth and jobs by introducing National Reform Programmes. The NRPs have enabled a stepping-up of the implementation of the structural reforms necessary to address the challenges of globalisation, even if the pace and intensity differ among Member States. The Strategy has helped to further integrate economies and facilitated the alignment of business cycles, and this allows for a monetary policy better geared to Member States' needs.
  • Structural improvements have been most evident in labour markets, with unemployment declining to below 7% and the employment rate approaching 65%, with particularly strong increases amongst women and older workers. It appears that the decade-long decline in productivity has been interrupted. For the first time in ten years, job creation and productivity improvements have occurred simultaneously.
  • The recent international turbulences highlight the need to increase the resilience of the economy and to use the existing scope to improve both labour utilisation and labour productivity. Unemployment, especially of a long-term nature and among the young, remains far too high. Public debt should be reduced at an accelareted pace and pensions and healthcare should be modernised without delay.
  • The Slovenian Presidency looks forward to a good cooperation and synergy with the European Parliament in the Strategy for growth and jobs discussion. We welcome the draft report, prepared by ECON, which contains some emphases, worth noting in the preparation of the final explanatory text of the Broad Economic Policy Guidelines (BEPG). The Ecofin Troika will meet with a delegation of the European Parliament in February 2008 for an exchange of views on the BEPGs.
  • Slovenia will continue the work on the quality of public finances initiated by the Trio. Particular attention will be paid to the efficiency of social transfers and to deepening the discussion on the efficiency of public spending on education.


II. Financial services

  • Financial services are the second area of work and the focus of the Ecofin Council's interests. The Presidency will continue its long-term work on ensuring stability of financial markets. The Council will also be invited to analyse lessons from the recent turmoil and decide on the way forward. The Slovenian presidency will do its utmost to ensure that the discussions and adoption of measures take place in the exisiting institutional setting of the EU.
  • The strenghtening of financial stability is of extreme importance to the Slovenian Presidency and we will ensure that it is given effective consideration by the Council. For this reason, an annex to our Ecofin programme has been prepared, expressing our intentions in greater detail. We should recognise that even if the current situation on financial markets is not satisfactory, the real economy in the EU remains on strong fundamentals.
  • Over the next two months the European Council in March will first have to review developments and the situation on financial markets on the basis of the contribution from Ecofin, while the whole financial stability dossier will be the key topic of the informal Ecofin meeting in Slovenia in April. This will give us the opportunity to discuss further steps in the development of a system of financial stability, in line with the roadmaps agreed upon in autumn 2007. This includes the signing of a memorandum of understanding between ministries of finance, supervisors and regulators on crisis management. The central aim of the Presidency is to carry the agreed work forward, to propose further policy action where appropriate and to speed up progress where needed.
  • On the legislative side, let me first underline the Solvency II project. It goes much further than simply revising and updating the current EU solvency regime for insurance and reinsurance companies. One of its principal virtues is that it will fill in the gaps in current legislation, taking account of the latest developments in the sector. It will also better reflect the true risks of an insurance or reinsurance company. All the actors involved in the sector – industry itself as well as supervisors and regulators – agree that it is a very far-reaching project, but also believe it will make their life easier. That is why this proposal is a priority of the Presidency in the financial services area. We aim to progress as fast as possible on this dossier. Good relations with the European Parliament are crucial. We will therefore be in close contact with you. This way, I hope it will be possible to reach an agreement on this directive in the first reading.
  • Towards the end of April we expect the Commission to come forward with a proposal to amend and modernise the UCITS (Undertakings for Collective Investments in Transferable Securities) directive. The important contribution made by the existing UCITS directive was that for the first time it introduced a European passport for investment funds, enabling them to offer their products across borders to investors in other Member States. Although the implementation of this UCITS passport has encountered some practical problems over the years, on the whole it has proved a huge success. On the other hand, asset management has undergone considerable changes since 1985 when the original UCITS directive was adopted. The time has come to modernise the existing framework in order to achieve greater market efficiency, but above all better investor protection in a constantly evolving business environment. We are counting on the European Parliament to work with us with a view to reaching an agreement as soon as possible. We are well aware that the two EP resolutions last year and, in particular, in 2006 demonstrate how committed the rapporteur and the Parliament are to these matters.
  • In spring (probably mid April) we are also expecting the Commission to propose amendments to the financial collateral directive and the settlement finality directive, so as to extend the range of eligible collateral. Here, too, we hope for close cooperation with the European Parliament, with a view to rapidly reaching an agreement.
  • In retail financial services, may I remind you that the Single Euro Payments Area (SEPA) yesterday entered its commercial phase. With regard to the mortgage credit sector we will examine the Commission White Paper, while special attention will be paid to the Commission Communication on financial education, which has long been identified as a crucial challenge, not least in the context of the growing pension and savings burden on households.


III. Taxation

  • Moving on to the third and final area of our work, taxation, I would like to stress that in the sphere of indirect taxation, the Slovenian Presidency will promote the modernisation and simplification of the common rules on value added taxes and excise duties. We have begun discussions on the new legislative proposal for a Council directive as regards VAT on financial and insurance services. The Presidency is continuing discussion of the Council Directive on technical amendments, where it wishes to reach agreement among Member States. With regard to excise duties, the Presidency will focus on the recasting of Directive 92/12/EEC. This Directive contains the general arrangements for products subject to excise duty and for the holding, movement and monitoring of such products. The Commission is expected to propose a review and simplification of that Directive already in February 2008.
  • The Slovenian Presidency will increase efforts in the fight against tax fraud. The Council is awaiting Commission studies on long term measures against tax fraud – the introduction of an optional general reverse charge mechanism and on taxation of intra-Community supplies. The Council also expects proposals on conventional measures to fight against tax fraud.
  • In the area of direct taxation, the Slovenian Presidency will cooperate with the permanent chairman to find solutions and, within its competencies, help to reach an agreement among Member States on the future work package of the High Level Code of Conduct Group on Harmful Tax Competition. The Presidency also intends to continue the discussion on the coordination of national tax systems.

In conclusion I would like to mention that judging from the responses of my colleagues to the presentation of the programme in the Ecofin Council I believe that the work in the areas set out above has been planned well. Against this background I hope that through effective and hard work and good cooperation we will be able to report a number of achievements in the field of financial and monetary affairs by the end of June 2008, when I would appear before the Committee to present our results. Our next exchange of views is planned for 12 February, but I will of course be happy to accept any additional invitations to attend sessions of the Committee if the need arises during the course of the Presidency.

Thank you for your attention.


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Date: 29.01.2008