What's new from ECFIN
April 2010 | Issue 17
Commission finds risks to budgetary consolidation in Member States’ stability and convergence programmes
The European Commission has examined the updated stability and convergence programmes of 24 Member States, announcing its conclusions on 17 and 24 March. The crisis has had a major impact on public finances, with 20 Member States currently subject to the EU’s excessive deficit procedure following the operation of automatic stabilisers and the significant fiscal stimulus measures put in place since the start of the crisis. The Commission, calling for budgetary consolidation to begin in all states by 2011 at the latest, found in several cases that growth assumptions underlying budgetary projections were optimistic and that budgetary consolidation strategies were not sufficiently concrete from 2011 onwards. The Commission’s recommendations for Council opinions on these programmes will be discussed at the ECOFIN meeting of 16-17 April.
April 2010 | Issue 17
Commission adopts recommendation on the euro as legal tender
Although euro-area Member States share a single currency, interpretations of what its legal tender status means still differ confusingly from one country to another. Can a retailer refuse payments in cash at all times? Can shops refuse payments with high denomination banknotes? The Commission recommendation on the scope and effects of legal tender of euro banknotes and coins defines good practice and gives guidelines on issues with direct implications for daily life such as the acceptance of cash payments or high denomination banknotes in shops, the validity of surcharges for cash payments, the legal tender status of 1- and 2-cent euro coins and rounding rules.
April 2010 | Issue 17
Competitiveness divergences persist in euro area
The global economic crisis has only temporarily reduced current-account divergences within the euro area, according to DG ECFIN’s first Quarterly Report on the Euro Area for 2010. The report, released on 30 March, also finds that the competitiveness divergences which had been building up since the introduction of the euro have not been corrected significantly, and that the need for adjustment remains. Urgent policy action is particularly needed in those euro-area countries showing persistently large current-account deficits and large competitiveness losses.
April 2010 | Issue 17
ECFIN seminar examines Austria and its eastern neighbours 6 years after EU enlargement
The seminar, held on 12 March, looked at competitiveness, labour market and financial market issues. Owing to close ties in foreign trade and investment in Eastern Europe, Austria’s current account has swung from structural deficits in the past to stable surpluses. It has maintained a strong competitive position through sustained wage moderation under well-functioning social partnership. Austria’s share of foreign labour is one of the highest in Europe, but it has been less successful in attracting highly qualified personnel and making full use of immigrants’ productive potential.
April 2010 | Issue 17
Further Balance of Payments help for Latvia and Romania
The EU disbursed on 11 March the latest instalment of a EUR 3.1 billion loan to Latvia agreed in January 2009 as part of a EUR 7.5 billion multilateral financial assistance package to help deal with the effects of the economic and financial crisis. At the same time, it disbursed the latest EUR 1 billion of a EUR 5 billion loan to Romania. The payment came after the European Commission positively assessed the Latvian and Romanian authorities’ compliance with the required economic policy conditions attached to the Memorandum of Understanding (MoU). Supplemental Memoranda of Understanding (SMoU) were signed in February.
