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EU leaders discuss report on Europe's Economic and Monetary Union
In addition to taking an important next step towards a comprehensive strategy to tackle the migration and refugee crisis, EU leaders also stressed the need for taking forward the process of completing the Economic and Monetary Union (EMU). At a meeting of the European Council on 15-16 October, leaders restated that this should be done in full respect of the EU's single market and in an open and transparent manner. EU leaders will review these issues at their December meeting. The report of the five Presidents – European Commission President Jean-Claude Juncker, the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz – revealed ambitious plans on 22 June for deepening the EMU as of 1 July 2015 and completing it by 2025 at the latest. While some of the actions will be brought forward in the short term, such as the creation of a euro area system of competitiveness authorities or a European Fiscal Board, others go further as regards sharing of sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury. The Five Presidents’ envision moving beyond rules to institutions in order to guarantee a rock-solid and transparent EMU architecture.
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Trade for All: European Commission presents new trade and investment strategy
The Commission has proposed a new trade and investment strategy for the EU, entitled ‘Trade for All: Towards a more responsible trade and investment policy’. This approach, which was announced on 14 October, is based on three key principles - effectiveness, transparency and values - and would ensure that trade policy benefits as many people as possible. Fostering trade is essential for Europe: more than 30 million jobs depend on exports outside the EU; 90% of future global growth will happen outside Europe's borders; and EU firms already export nearly as much as China to the rest of the world and more than firms in the US or any other country. The new EU trade policy is designed to make sure that trade actually delivers on its promise of new economic opportunities; that trade negotiations are more transparent to the public; and that the European social and regulatory model is safeguarded. The new strategy is partly intended to respond to the current debate on trade in the EU – including concerns regarding the Transatlantic Trade and Investment Partnership (TTIP).
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Combatting corporate tax avoidance: EU finance ministers agree to increase transparency
EU finance ministers have reached an agreement on a directive to improve the transparency of tax rulings. The agreement reached during the Council meeting of 6 October aims to prevent corporate tax avoidance by requiring Member States to exchange information automatically on advance cross-border tax rulings, as well as advance pricing arrangements. Forming part of a package of measures which the Commission proposed on 18 March, the new directive will ensure that when one Member State issues an advance tax ruling or transfer pricing arrangement any other Member State affected will be in a position to monitor the situation and the possible impact on its tax revenue. The Commission praised the agreement as a step forward in combatting aggressive tax planning and in ensuring fair competition. In separate business, euro area finance ministers endorsed the first set of milestones that Greece needs to implement in order to receive a disbursement of EUR 2 billion. The Commission also welcomed the approval of the Jobs and Growth Plan for Greece by the European Parliament and by the Council that was presented by the Commission on 15 July.
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The draft budgetary plans submitted by euro area Member States have been published on line
Euro area Member States draft budgetary plans (DBPs) as received by the deadline of 15 October have been put online. Cyprus and Greece do not need to submit these plans because they are currently subject to macroeconomic adjustment programmes. The draft budgetary plans are part of a process enshrined in EU Regulation No 473/2013, which is part of the so-called “Two-pack” that entered into force on 30 May 2013. The process is intended to ensure better coordination of fiscal policies among euro area Member States. The Commission will provide assessments of each Member State’s plan, as well as an assessment of the budgetary situation and prospects of the euro area as a whole. The opinion on each DBP is based on the requirements of the Stability and Growth Pact (SGP). For Member States under the SGP’s preventive arm, the Commission considers the extent to which Member States have implemented the Country-Specific Recommendations under the European Semester; and in particular their compliance with Medium-Term Objectives (MTO) or the adjustment path towards the MTO. For Member States under the SGP’s corrective arm, also known as the Excessive Deficit Procedure, the Commission assesses compliance with the relevant Council recommendation. The Commission is scheduled to adopt an opinion on the DBPs by 30 November. However, if it identifies particularly serious non-compliance with SGP obligations, it adopts its opinion within two weeks of submission of the draft budgetary plan and requests a revised draft budgetary plan as soon as possible and in any event within three weeks of the date of its opinion. Following Spain's submission of its DBP on 11 September, well ahead of the deadline due to elections in December, on 12 October the Commission invited the Spanish authorities to present an updated DBP.
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Spain post-programme surveillance: 4th mission finds strong economic recovery and financial sector stabilisation but further efforts needed
Staff from the European Commission, in liaison with the European Central Bank, carried out the fourth post-programme surveillance visit to Spain from 5 to 8 October. The European Stability Mechanism participated in the meetings on aspects related to its Early Warning System. The economic recovery in Spain strengthened further in the first half of 2015, with GDP growth outpacing the euro area average. Improved access to credit for both firms and households, enhanced confidence, and declining oil prices have supported domestic demand, while favourable external developments and enhanced competitiveness have sustained exports. The recovery has also been accompanied by strong job creation, partly thanks to reforms introduced in the labour market, yet unemployment remains high at over 22%. The general government deficit – although it is being reduced – remains among the highest in the euro area. Sound public finances and sustained reform efforts are paramount to sustain the recovery and further rebalance the economy going forward. The next post-programme surveillance mission will take place in spring 2016.
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Investment Plan: road show continues while seminar brings together major players
Concluding his 28-Member State Investment Plan road show, Vice-President Jryki Katainen visited Slovenia on 9 October to meet with representatives of the Slovenian government, business community and citizens. He then went to Finland on 12 October for the opening of a EUR 1.2 billion pulp mill at Äänekoski that is expected to generate 6000 new jobs during the construction phase and sustain another 2500 in the long term, as well as use renewable energy to be fossil fuel-free. The European Fund for Strategic Investments (EFSI) guaranteed EUR 75 million of the EUR 275 million loan provided by the European Investment Bank to finance the mill, the first such transaction in Finland under the Investment Plan for Europe. In related news, the European Investment Fund (EIF) and CIBANK signed the first COSME agreement in Bulgaria to benefit from EFSI support. The agreement will allow CIBANK to provide BGN 200 million (around EUR 100 million) of loans to SMEs in Bulgaria over the next three years. DG ECFIN held a seminar on 1 October to increase awareness among public authorities, investors and journalists with a focus on the start-up of EFSI, the European Investment Advisory Hub (EIAH) and the European Investment Project Portal (EIPP). The seminar facilitated contacts among officials from the Commission, EIB and Member States, private investors and business representatives, and journalists; participants included Vice-President Katainen and Ambroise Fayolle, Vice-President responsible for Innovation at the EIB.
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Finance ministers at G20 and IMFC meetings discuss the global economy and tax issues
Vice-President Dombrovskis and Commissioner Moscovici participated in the G20 Ministerial and the annual meeting of the IMF International Monetary and Financial Committee (IMFC) from 9-11 October in Lima, Peru. The key message from the IMFC meeting was that given risks to the global economy further measures are needed to lift short-term activity and potential growth, preserve fiscal sustainability, reduce unemployment, manage financial stability risks, and support trade. At the G20 meeting discussions focused on the endorsement of the 15 actions of the Base Erosion and Profit Shifting (BEPS) project. The EU’s G20 partners noted positively that the EU had recently agreed on a directive to improve the transparency of tax rulings. This was the last G20 Finance Ministerial meeting before the G20 summit in Antalya on 15-16 November.
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Quarterly report on the euro area (QREA), Vol.14, No.3 (2015)
This edition of the QREA compares the euro area's economic recovery since the crisis to similar events in the past and in other major economies. While much has been done to strengthen the architecture of the EMU and progress has been made with critical structural reforms, the current recovery is weak both by the euro area's own historical standards and in comparison with the recent recovery in other advanced economies, even those hit by systemic banking crises. The weakness has both structural and cyclical features. Another chapter evaluates the EU's methodology for calculating output gaps, vindicating the decision to adopt it as the reference method for fiscal surveillance, while other chapters review the factors driving inflation in the euro area and present an abridged version of the Commission's July analysis of Ireland's economic adjustment programme, which found that programme was largely successful.
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Overview of the seventh report on Cyprus' compliance with the terms and conditions of its economic adjustment programme.
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Directorate-General for Economic and Financial Affairs
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