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At informal Milan meeting, EU finance ministers reaffirm commitment to structural reforms
At both their informal Eurogroup and ECOFIN meetings of euro area and EU finance ministers on 12 and 13 September in Milan, finance ministers reaffirmed their commitment to structural reforms as Vice-President Katainen summarised on 13 September. Ministers also agreed on common principles to reduce the tax burden on labour. Reducing taxes on labour would increase growth, support job creation, and contribute to the smooth functioning of the EMU. Taxes in the euro area are skewed towards labour, however, and in view of the need for fiscal consolidation the tax burden on labour has been growing over the last few years. The finance ministers agreed that taxes should be reduced for the most vulnerable citizens and that any tax reductions on labour should be revenue neutral. They also agreed that reforms should respect fiscal targets in line with the Stability and Growth Pact and that tax reductions would be more effective when coupled with labour market reforms. Investment also has a key role to play. The Italian Presidency invited the Commission and the European Investment Bank to look into ways to better identify and evaluate projects and improve cooperation with national development banks or other bodies.
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| No country is immune from the need to reform. |
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Jyrki Katainen, Vice-President of the European Commission responsible for Economic and Monetary Affairs and the Euro
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G20 Ministerial and Central Bank Governors discuss global economic outlook
Vice-President Katainen participated in the G20 Ministerial meeting on 20-21 September in Cairns. Discussions focused on the global economic outlook; the finalisation of G20 growth strategies; tax transparency; and financial regulation. Preliminary analysis suggests that, compared to the October 2014 IMF forecast, the growth strategies implemented by G20 members over the year will collectively lift GDP by 1.8 per cent through 2018. Ministers also agreed on an investment package for the November Brisbane summit, further progress on “too big to fail” and shadow banking, as well as international tax transparency, both regarding the automatic exchange of tax information, and tax base erosion and profit shifting by multinationals. These measures were welcomed by EU Tax Commissioner Šemeta. On 19 September, Eurostat, the statistical office of the EU, released the latest edition of “The EU in the world”, in which the EU and the 15 non-EU G-20 countries are compared across several dimensions using a range of harmonised European and international indicators.
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Eurobarometer: Nine out of ten Lithuanians are confident about adapting to the euro
In the run up to Lithuania adopting the euro on 1 January 2015, Lithuanians feel fit for the euro: 90 % say that they personally will manage to adapt to the euro while 51% think that their country is also ready for the changeover, according to a Flash Eurobarometer survey of 1000 citizens. Carried out from 4-6 September, the survey also shows that more than two-thirds of Lithuanians feel that they have a good knowledge about the euro. Seventy percent now describe themselves as either ‘very well’ or ‘rather well’ informed, compared with just 50% when polled in April. Ensuring that prices are displayed in both the old currency and in euros was again cited as the most important action to ensure a successful changeover. A large majority of respondents, 77%, said that they thought this should be done in shops, while 71% said that prices in both currencies should also be printed on bills, and 65% said they should be printed on their pay slips.
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Euro conference in Lithuania marks country’s accession to the euro; reforms to strengthen EMU and the single market discussed
On 25 September the Bank of Lithuania hosted, in collaboration with the European Central Bank, the European Commission and the Lithuanian Ministry of Finance, the traditional euro conference marking a country's accession to the euro. Lithuania will adopt the euro on 1 January 2015. The conference in Vilnius, entitled “Single market, single currency, common future”, discussed euro area enlargement and policy reforms that are aimed to strengthen the functioning of Economic and Monetary Union (EMU) and of the single market. As one of the keynote speakers, Vice President Katainen acknowledged Lithuania's long-standing pursuit of prudent fiscal policies and serious reforms which allowed the country to join the euro as of 2015. He added that having all three Baltic States use the euro as a common currency would further strengthen economic and trade links among themselves and with other 18 members of the euro area. “Lithuania's euro adoption also underlines the vitality of the Economic and Monetary Union, which remains an attractive community to be a part of,” Katainen said, “The euro area today coordinates economic policy more effectively; it has a robust financial firewall to safeguard stability and the gradual creation of a banking union.”
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Second quarter employment up by 0.2% in euro area and by 0.3% in the EU
The number of persons employed increased by 0.2% in the euro area and by 0.3% in the EU in the second quarter of 2014 compared with the previous quarter, according to national accounts estimates published by Eurostat, the EU statistical office. In the first quarter of 2014, employment rose by 0.1% in the euro area and 0.2% in the EU. These figures are seasonally adjusted. Compared with the same quarter of the previous year, employment grew by 0.4% in the euro area and by 0.7% in the EU in the second quarter of 2014 (after +0.1% and +0.6% respectively in the first quarter of 2014). Eurostat estimates that, in the second quarter of 2014, 224.9 million men and women were employed in the EU, of which 146.5 million were in the euro area. Among Member States for which data are available, Estonia (+1.2%), Portugal (+0.9%) and Spain (+0.7%), recorded the highest employment increases in the second quarter of 2014 compared with the previous quarter, while Lithuania (-1.0%) and Cyprus (-0.1%) registered decreases.
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Euro area international trade in goods surplus EUR 21.2 billion, EUR 1.7 billion surplus for EU
The euro area trade in goods balance with the rest of the world in July 2014 is estimated to have increased to a EUR 21.2 billion surplus, compared with a EUR 18.0 billion surplus in July 2013. The June 2014 balance was +EUR 16.7 billion, compared with +EUR 15.7 billion in June 2013. In July 2014 compared with June 2014, seasonally adjusted exports fell by 0.2% while imports rose by 0.9%. These data were released by Eurostat, the EU statistical office. The first estimate for the July 2014 extra-EU trade balance was a EUR 1.7 billion surplus, compared with +EUR 10.8 billion in July 2013. In June 2014 the balance was +EUR 2.8 billion, compared with +EUR 8.6 billion in June 2013. In July 2014 compared with June 2014, seasonally adjusted exports fell by 0.3% while imports rose by 2.3%.
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The EU Youth Guarantee – where do we stand?
To support the rollout of the European Youth Initiative, the Commission has published a memo on the EU Youth Guarantee. The memo features comprehensive information on the implementation of the Youth Guarantee in Member States, outlines the type of reforms that need to be introduced to improve school-to-work transitions and the employability of young people, and provides an overview of the financial support available from the Youth Employment Initiative and the European Social Fund. It also highlights examples of successful schemes already in place in some Member States. Representatives from 13 Member States met on 18-19 September in Helsinki to review the implementation of the Youth Guarantee in Finland, a pioneer in developing the scheme. The Finnish youth guarantee resulted in a reduction in unemployment amongst young people, with 83.5% successfully allocated a job, traineeship, apprenticeship or further education within three months of registering. The meeting was part of the European Commission's Mutual Learning Programme.
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ECB allots EUR 82.6 billion in first targeted longer-term refinancing operation to support lending to real economy
The European Central Bank (ECB) allotted EUR 82.6 billion to 255 counterparties on 18 September in the first of eight targeted longer-term refinancing operations (TLTROs) to be conducted between September 2014 and June 2016. The programme is designed to enhance the functioning of the monetary policy transmission mechanism in order to support bank lending to the real economy. The second TLTRO will be announced on 9 December and allotted on 11 December. The TLTROs, first announced on 5 June, together with measures announced on 4 September related to the purchase of non-financial private sector assets, will have a sizeable impact on the ECB’s balance sheet.
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The euro built to last: New €10 Europa series bank note enters circulation
The new €10 note entered circulation on 23 September. It is the second banknote of the Europa series to be launched after the new €5, which entered circulation on 2 May 2013. The other banknotes in the series will be introduced gradually over several years, in ascending order. To mark the launch of the new €10, a social media competition called “Selfie with the new €10” is being held via Twitter and Instagram from 23 September until 30 November 2014. The new banknotes incorporate enhanced security features including a portrait watermark, a portrait hologram, an emerald number that changes colour, raised print, and a security thread. The security features of the Europa series are easy to check using the "feel, look and tilt" method. As with the €5, the new and the first series €10 will be issued in parallel until the remaining stocks of the first series €10 have been phased out. The banknotes of the first series will always retain their value, however.
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“Join or not join after Lithuania?” Euro exhibition opens in Poznań, Poland
Building on its success over the last two years, the travelling euro exhibition arrived in Poznań, Poland last week. On 15 September, the exhibition was opened by Małgorzata Zaleska, Member of the Management Board of the National Bank of Poland (NBP) and Ewa Synowiec, Head of the European Commission Representation in Poland. The exhibition takes visitors on the road to the euro in two exhibition areas. After presenting EU countries and the main historic steps that led to the adoption of the euro, it focuses on the Economic and Monetary Union and also addresses topical issues, such as the EU response to the sovereign debt crisis and the new EU economic governance framework. The exhibition will stay in Poznań until 31 October 2014. The "euro-tour de Pologne" will then visit Wrocław, Poland with the same question to visitors: “Join or not join after Lithuania?”
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Market Reforms at Work in Italy, Spain, Portugal and Greece. European Economy 5/ 2014.
Market reforms to boost economic activity and competitiveness have been a central part of Europe’s response to the crisis. This report estimates the potential impact of a selection of such market reforms in four of Europe’s most vulnerable economies: Italy, Greece, Portugal and Spain. The indicators it identifies suggest that reform efforts in these countries appear to be starting to have a positive impact. Both reform efforts and their effectiveness seem to vary across the four countries, however, with Spain showing the strongest signs that the reforms are starting to pay off, followed by Portugal, while Italy and Greece appear to lag behind. The report aims to detect the transmission channels through which reforms ultimately affect macroeconomic outcomes and pays special attention to the role played by the entry and exit of firms. The estimated potential gains suggested by the report would be significant once their full effects are realised, although there is considerable scope for improvement.
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Market reforms at work. Estimated gains in four Member States.
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The image above is part of the infographic highlighting just a few of the reforms introduced in Spain, Italy, Portugal and Greece, their results and estimated impact.
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| Directorate-General for Economic and Financial Affairs |
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