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Commission meets Italian government as Italy takes over Council Presidency
The College of the European Commission and top officials met with the Italian government on 3-4 July in Rome as Italy began its 6-month Presidency of the Council of the EU. President Barroso met with the Italian Prime Minister Matteo Renzi, and a reception with the Italian President Giorgio Napolitano was held. The Italian presidency comes at a crucial moment for the EU as it coincides with the first six months of the new European Parliament, and the start of a new trio of presidencies, with Latvia and Luxembourg to follow Italy. During its term, the Italian presidency will also collaborate closely with the new College of the Commission and the new president of the European Council. In its work programme through December on economic and financial matters, the Italian presidency will focus on four objectives: putting forward a new economic policy agenda based on structural reforms and investments for growth and jobs, coupled with further deepening the Economic and Monetary Union; overseeing the final steps towards the Banking Union; strengthening financial services with the aim to facilitate credit flow to the real economy; and taxation reforms. In a statement issued on 8 July , the Council underlined its support for the objectives of the Italian Presidency.
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| We fully support the Italian Presidency, which has established a clear set of goals, that we very much welcome, namely the need for reform, both at home and in the European Union. And we need this new enthusiasm. |
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José Manuel Barroso, President of the European Commission
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Siim Kallas assumes responsibility for economic and monetary affairs and the euro pending appointment of replacement for Rehn
After winning in the European elections that were held in May, Olli Rehn resigned from the European Commission in order to take up a seat in the European Parliament from 1 July 2014. Commission President Barroso has appointed Vice-President Siim Kallas to take over responsibility for economic and monetary affairs and the euro pending a decision on the replacement of Mr. Rehn. Meanwhile, Finland has nominated Mr. Jyrki Katainen as Rehn’s replacement, and President Barroso has announced that he intends to allocate the economic and monetary affairs and the euro portfolio to Mr. Katainen, about whom the Council has already formally consulted the European Parliament, which is scheduled to give its opinion on the candidate on 17 July.
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Council issues country-specific recommendations to Member States on their economic and fiscal policies, concluding European Semester
On 9 July, EU finance ministers adopted the 2014 country-specific recommendations to Member States on their economic and fiscal policies, as well as a specific recommendation on the economic policies of the euro area, thereby formally concluding this year’s European Semester. The European Semester is the EU’s annual economic and fiscal policy monitoring process. This year’s recommendations, which were endorsed by the European Council on 27 June , based on the Commission recommendations of 2 June, emphasize policies to enhance competitiveness, support job creation and fight unemployment, and on the follow-up to reforms to improve the functioning of labour markets. In general, the recommendations note that the correction of macroeconomic imbalances has progressed and public finances continue to improve, while economic growth has started to return and there is a modest rise in employment levels. They warn, however, that in many parts of Europe unemployment – and in particular youth unemployment – is still at unprecedented and unacceptable levels, and that poverty and social exclusion remain major concerns.
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ECB keeps rates unchanged; will switch to 6-week meeting cycle and publish regular accounts of monetary policy meetings
The European Central Bank (ECB) has decided to keep the level of key interest rates unchanged. At a meeting on 3 July, the ECB’s Governing Council decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.15%, 0.40% and -0.10% respectively. The Governing Council also announced some of the rules for the targeted longer-term refinancing operations (TLTROs). The TLTROs aim to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. Under the scheme, banks will initially be able to borrow an amount equivalent to up to 7% of a specific part of their loan portfolios during two operations in September and December 2014, with additional operations scheduled through June 2016. In a separate announcement, the ECB said that it would adjust the schedule of meetings to a 6-week cycle and publish regular accounts of the Governing Council’s monetary policy meetings, starting in January 2015.
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Euro area unemployment rate at 11.6%, EU at 10.3%
The euro area seasonally-adjusted unemployment rate was 11.6% in May 2014, stable compared with April 2014, but down from 12.0% in May 2013. The EU unemployment rate was 10.3% in May 2014, down from 10.4% in April 2014, and from 10.9% in May 2013. These figures were published on 1 July by Eurostat, the statistical office of the European Union. Eurostat estimates that 25.2 million men and women in the EU, of whom 18.6 million were in the euro area, were unemployed in May 2014. Compared with April 2014, the number of persons unemployed decreased by 63,000 in the EU and by 28,000 in the euro area. Compared with May 2013, unemployment fell by 1.4 million persons in the EU and by 636,000 in the euro area. Among Member States, the lowest unemployment rates were recorded in Austria (4.7%), Germany (5.1%) and Malta (5.7%), and the highest in Greece (26.8% in March 2014) and Spain (25.1%).
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Euro area annual inflation stable at 0.5%
Euro area annual inflation is expected to be 0.5% in June 2014, stable compared with May, according to a flash estimate from Eurostat, the statistical office of the European Union. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in June (1.3%, compared with 1.1% in May), followed by energy (0.1%, compared with 0.0% in May), non-energy industrial goods (0.0%, stable compared with May) and food, alcohol & tobacco (-0.2%, compared with 0.1% in May). Following this flash estimate, the release with full data for June 2014 is scheduled for 17 July 2014.
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Through COSME programme, EU mobilising up to EUR 25 billion of finance for SMEs
Small and medium-sized enterprises (SMEs) in Europe will soon have the opportunity to access up to EUR 25 billion of additional finance supported by the COSME programme (the EU Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises). The programme announced on 30 June will allow financial institutions throughout Europe to provide enhanced access to finance to up to 330,000 SMEs. The COSME programme will fund guarantees and counter-guarantees to financial institutions to help them provide more loans and lease finance of up to EUR 150,000 to SMEs. SME debt finance portfolios will also be securitized, and the programme will invest in equity funds that provide risk capital to SMEs, mainly in the expansion and growth stage. The COSME programme builds on the success of the Competitiveness and Innovation Framework Programme (2007-2013) that helped to mobilise more than EUR 16 billion in loans and EUR 2.8 billion in venture capital to over 311,000 SMEs in Europe.
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Commission presents actions to better protect and enforce intellectual property rights
On 1 July, the European Commission adopted two communications – an Action Plan to address infringements of intellectual property rights (IPR) in the EU and a Strategy for the protection and enforcement of intellectual property rights in third countries. The EU Action Plan focuses on the fight against commercial scale IP-infringements because they do the most harm to the EU economy. New enforcement policy tools include the “follow the money” approach that aims to deprive commercial scale infringers of their revenue flows. Taking into account changes in the global economy such as outsourcing and the advent of new technologies, the strategy aims to improve the Commission’s current means for promoting enhanced IPR standards in third countries and stemming the trade in IPR infringing goods. Such an approach could include using trade policy tools to protect and enforce IP.
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ESRB publishes recommendation on guidance for setting countercyclical buffer rates
On 30 June, the European Systemic Risk Board (ESRB) published a Recommendation on guidance to EU Member States for setting countercyclical buffer rates. The guidance, which was approved at the 18 June 2014 meeting of the ESRB General Board, is required under EU legislation. It serves the purpose of establishing a common approach to setting the countercyclical capital buffer across the EU. The capital buffer aims to reduce the pro-cyclical amplification of financial shocks to the real economy by encouraging banks to build up additional capital when the risks of system-wide stress are growing. In this way, during a downturn the banking sector can absorb unexpected losses while continuing to provide credit to the real economy.
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Quarterly Report on the Euro Area, Vol.13, No. 2 (2014)
The focus section of this issue takes a look at cross-country growth differences in the euro area since the crisis and their main drivers. It finds that cyclical differences have recently reached record highs and also documents a worrying trend of income divergence. A first special topic discusses the short-term outlook for inflation using a simple open-economy New Keynesian Phillips curve. The second special topic discusses how institutional structures of housing and mortgage markets affected market developments during the last cycle. The third and final special topic presents a new indicator of external competitiveness based on sector unit labour costs.
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| Directorate-General for Economic and Financial Affairs |
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