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Commission takes concrete steps to strengthen EMU
The Commission adopted a package of concrete measures on 21 October that will begin implementation of the ambitious plan to deepen the Economic and Monetary Union (EMU). Following the presentation of the "Five Presidents' Report", the Commission launched Stage 1 ("Deepening by doing") of the process of completing EMU on 1 July 2015. Despite progress, particularly in reinforcing economic governance and with the launch of the Banking Union, the EMU remains incomplete. The package of measures adopted by the College of Commissioners entails a revised approach to the European Semester that encompasses enhanced democratic dialogue and further improved economic governance. It foresees the introduction of national Competitiveness Boards and an advisory European Fiscal Board. A more unified representation of the euro area in international financial institutions, especially the IMF, is also envisioned. The package also specifies the steps towards completing the Banking Union, notably via a European Deposit Insurance Guarantee Scheme and measures to further reduce risk in the banking system.
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Europe's Economic and Monetary Union needs strong foundations, not least to be more resilient to future shocks and withstand the global challenges ahead of us.
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Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue
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Economic Union: Commission recommends national Competitiveness Boards and revamps European Semester
A genuine Economic Union could ensure that each economy has the structural features to prosper within the Monetary Union. To realise this Economic Union, the Commission has proposed a system of national Competitiveness Boards. The boards would provide independent policy expertise for assessing competitiveness performance and reforms at the Member State level and at the same time they would reinforce the policy dialogue between the EU and the Member States. The Commission is also working to streamline the European Semester. The aim is to further increase ownership of the process and increase reform implementation. The revamped European Semester will be structured into two successive stages to distinguish more clearly between European and national issues and so that euro area and common challenges can be fully and coherently reflected in country-specific actions. The Commission will also focus strongly on employment and social developments and make the process more democratic by involving the European Parliament and national parliaments more closely.
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Financial Union: Commission to propose common system for deposit insurance to complete missing piece of the Banking Union
Taking steps toward Financial Union is crucial for guaranteeing the integrity of the euro. The Banking Union is designed to accomplish this by limiting risks to financial stability and increasing risk-sharing with the private sector. Completing the Banking Union requires implementing already agreed legislation as well as further measures to reinforce financial stability. A common system for deposit insurance is still the missing piece of the Banking Union, and the Commission will therefore present, before the end of the year, a legislative proposal on the first steps towards a European Deposit Insurance Scheme (EDIS). The aim is to create a more European system that is disconnected from government purses; citizens will then be certain of the safety of their deposits independent of their geographical location. Finally, alongside the completion of the Banking Union, completion of the Capital Markets Union remains a key priority.
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Fiscal Union: Commission setting up European Fiscal Board to augment SGP surveillance and enforcement, support policymaking
To realise a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation, the Commission is setting up an independent European Fiscal Board. The board will act as an advisory body to the euro area’s system of multilateral economic monitoring. It will evaluate the implementation of the EU fiscal framework feeding into the Commission’s work on surveillance and enforcement of the Stability and Growth Pact (SGP). It will also advise on the overall direction of fiscal policy within the euro area. The board will be a functionally independent body composed of five international experts, hosted by the Commission. It will neither replace national fiscal councils nor duplicate the Commission's work on applying the SGP. In fact, the board will cooperate closely with national fiscal councils and will benefit from their expertise in fiscal matters, as well as from their local knowledge.
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Political Union: Commission seeks more democratic accountability and legitimacy, single voice in international financial institutions
Political Union is the piece that holds everything together. It provides the foundation for economic, financial and fiscal union through genuine democratic accountability, legitimacy and institutional strengthening. This includes getting European and national parliaments, and social partners, more closely involved in national reform programmes, and proposing a more unified representation for the euro area in international financial institutions, especially the IMF. Due to the current institutional set-up of the IMF the euro area does not speak with one voice and punches below its weight. To achieve a unified representation and a single seat on the IMF's Executive Board by 2025 at the latest, the Commission proposes to start by improving coordination among euro area Member States and making euro area representation gradually more consistent.
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Commission refers six Member States to EU Court of Justice for failing to transpose EU rules on Bank Recovery and Resolution
On 22 October, the Commission announced that it had decided to refer the Czech Republic, Luxembourg, the Netherlands, Poland, Romania and Sweden to the Court of Justice of the EU over failure to transpose legislation on Bank Recovery and Resolution (BRRD). The Commission had sent a reasoned opinion to 11 EU Member States on 28 May 2015 (IP/15/5057), asking them to transpose the BRRD. Referrals to the Court imply the imposition of, at least, a daily penalty payment until full transposition has taken place. The Commission can decide to withdraw this case should a Member State implement the EU rules in question. The new BRRD rules equip national authorities with the necessary tools and powers to mitigate and manage the distress or failure of banks or large investment firms. The objective is to ensure that banks on the verge of insolvency can be restructured without taxpayers having to bail them out to safeguard financial stability.
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Selective tax advantages for Fiat in Luxembourg and Starbucks in the Netherlands deemed illegal under EU state aid rules
The Commission has decided that Luxembourg and the Netherlands have granted selective tax advantages to Fiat Finance and Trade and Starbucks, respectively, that are illegal under EU state aid rules. The conclusions followed in-depth investigations, which were launched in June 2014. In each case, a tax ruling issued by the respective national tax authority artificially lowered the tax paid by the company. Tax rulings as such are perfectly legal. However, the two tax rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies. They do not reflect economic reality. The Commission has ordered Luxembourg and the Netherlands to recover the unpaid tax from Fiat and Starbucks, respectively, in order to remove the unfair competitive advantage they have enjoyed. The amounts to recover are between EUR 20-30 million for each company.
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Investment plan: Commission and EIF mobilise EUR 237 million in loans to support 20,000 European micro-enterprises
A total of 20,000 micro-enterprises in six countries will get access to loans worth EUR 237 million under the European Programme for Employment and Social Innovation (EaSI). The European Investment Fund (EIF), which manages the EaSI guarantee on behalf of the European Commission, and six microfinance institutions signed guarantee agreements on 21 October. The guarantee agreements target those who wish to start or further develop their own micro-enterprises, in particular people who have difficulties in entering the job market or in accessing finance. The Commission will contribute EUR 17 million to the guarantees. In other investment plan news, on 14 October the European Parliament voted in favour of the European Fund for Strategic Investments (EFSI) Steering Board proposal to appoint Wilhelm Molterer as EFSI Managing Director and Iliyana Tsanova as Deputy Managing Director. Mr Molterer was previously a Vice-President with the European Investment Bank, Member of the Austrian Parliament and Vice Chancellor and Finance Minister of Austria. Ms Tsanova has over 12 years of development banking experience with the European Bank for Reconstruction and Development.
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"Real Economy" episode takes a closer look at Europe's economic growth
The latest episode of "Real Economy" takes a look at European growth, using the metaphor of racing cars to explain and explore the questions “Is growth reliable?” and “Is it back for good? According to Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, “Europe is now in a clear, sound, robust recovery. The problem is that this recovery is ,first, sluggish and, second, unequal between the Euro area and non-euro area Member states.” Moscovici added that Europe needs more investment in order to be more innovative and competitive in the decade ahead. Jens Ulbrich, the Chief Economist at the Deutsche Bundesbank believes that a slowdown in the BRICS countries would lead to a reduction in the growth rate in the euro area of 0.2 percentage points – which is not that much – but that it could fan uncertainty and volatility on financial markets. Real Economy also travelled to Poland to see how the industrial sector and exports are driving the recovery. Among other indicators, the evolution of industrial production indicates that Europe has started growing again, but also that this growth is happening at different speeds in different countries. Real Economy aims to bring the complexities of economic matters in the EU closer to Euronews' daily audience of 6.5 million viewers. Besides watching it on TV, viewers can also follow it online - live or on demand.
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EU current account surplus EUR 12.5 billion in August, an increase over 2014
The EU seasonally adjusted external current account recorded a surplus of EUR 12.5 billion in August 2015, compared with a surplus of EUR 14.8 billion in July 2015 and a surplus of EUR 3.9 billion in August 2014, according to estimates from Eurostat, the EU statistical office. In August 2015, compared with July 2015, based on seasonally adjusted data, the surplus of the goods account decreased (+EUR 5.1 billion compared with +EUR 8.8 billion) and the surplus of the primary income account moved into deficit (-EUR 0.5 billion compared with +EUR 0.1 billion). The surplus of the services account grew (+EUR 14.1 billion compared with +EUR 12.3 billion), while the deficit of the secondary income account fell slightly (-EUR 6.3 billion compared with –EUR 6.5 billion).
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Interlinkages between Household and Corporate Debt in Advanced Economies. European Economy. Discussion Papers 17.
This paper contributes to the debate on deleveraging in the non-financial private sector. It proposes a framework to assess the interconnectedness of deleveraging in the household sector and in the nonfinancial corporations sector. Panel regressions were performed on a set of OECD countries, between 1981 and 2013, to cover several crisis episodes, including the latest one. The findings show robust results for a mutual and positive influence between households and non-financial corporations’ debt developments. The paper also finds that, in cases in which the share of labour in GDP is higher, deleveraging by non-financial corporations will take a heavier toll on deleveraging by households. This can be explained by the fact that corporations squeeze the wage bill in order to restore their profitability. Conversely, household deleveraging affects consumers’ propensity to consume, which in turn affects corporations’ profitability and incites deleveraging by them.
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Causes of low inflation in the euro area
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Inflation in the euro area and many other parts of the world has been exceptionally low for some time. Core inflation, which excludes energy and unprocessed food prices, by contrast, has been relatively more stable
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Directorate-General for Economic and Financial Affairs
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