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European Commission - Economic and Financial AffairsEuropean Commission - Economic and Financial Affairs
Quarterly Report on Euro Area © George Pchemyan-Istock.com 2010 Report on Public Finances highlights need for fiscal consolidation and strengthened surveillance
- ECOFIN Council agrees that Europe 2020 is the right framework for implementing exit strategies and achieving growth
- Task force on economic governance discusses proposals for budgetary and macro-economic surveillance
- G20 agree on need for differentiated approach to fiscal consolidation
- Review mission concludes Latvia on target with deficit reduction
- Commission recommends opening excessive deficit procedures for Cyprus, Denmark and Finland, concludes effective taken by twelve Member States
- Former ECFIN Director General Klaus Regling appointed as chief executive of the European Financial Stability Facility (EFSF)
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Quarterly Report on Euro Area © George Pchemyan-Istock.com 2010 Report on Public Finances highlights need for fiscal consolidation and strengthened surveillance

Events in spring 2010 have exposed the urgent need to address the fiscal challenge in the euro area and the EU. High and rising public debts raised concerns about governments' solvency, and as a result, sovereign risk premia shot up to unprecedented levels in several euro area Member States. The 2010 Report on Public Finances in EMU issued on 16 June presents recent budgetary developments, examines developments in fiscal surveillance and draws lessons for debt reduction strategies. It also investigates the link between macro-financial and budgetary risks.

Viewpoint
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As long as the consolidation is managed effectively, the negative short-term impact on growth should be limited and the positive long term effects should be sizeable.

Oli Rehn, Commissioner for Economic and Monetary Affairs
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Eurogroup and ECOFIN meetings © European Union
ECOFIN Council agrees that Europe 2020 is the right framework for implementing exit strategies and achieving growth

On 8 June, the Economic and Financial Affairs Council (ECOFIN) adopted a series of conclusions related to the Europe 2020 Strategy, and underlined its role as the most appropriate framework for implementing exit strategies and ensuring smart, sustainable and inclusive growth and jobs. Finance ministers also endorsed work done to remove macro-structural bottlenecks and welcomed the Commission's Communication on reinforcing economic policy co-ordination in the EU and euro area. The Council also said that an improved framework needs to be set in place to co-ordinate policy development in Member States, providing broader, more tightly integrated country surveillance covering all major macroeconomic and structural policies.
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Herman Van Rompuy during the Task force on economic governance © European Union
Task force on economic governance discusses proposals for budgetary and macro-economic surveillance

At their second meeting on 6-7 June, members of the Task force on economic governance, chaired by Council President Herman Van Rompuy, discussed concrete proposals on budgetary and macro-economic surveillance. A ‘European Semester’ will give Member States the chance to review each other’s budgets when they are still proposals, before they have been implemented; sanctions will be applied earlier on; and budget surveillance will take more account of debt dynamic rather than focusing on annual deficits alone. The Commission will develop an early warning system when Member States’ macro-economic fundamentals threaten to weaken their competitive position or harmful imbalances risk jeopardising the smooth functioning of EMU.
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KwangAn bridge in South Korea © iStockphoto.com
G20 agree on need for differentiated approach to fiscal consolidation

Meeting in Busan, Korea on 4-5 June, G20 finance ministers agreed on the need for fiscal consolidation and that exit strategies should be coordinated globally. Ministers felt, however, that the pace of fiscal consolidation should be differentiated according to national situation. The G20 also emphasized that policies should focus on putting the world economy on a more sustainable and higher growth path. In the area of financial market reform, countries agreed on the need for increasing bank capital, but differed in their support for a global levy on financial institutions.
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Riga © iStock.com.jpg
Review mission concludes Latvia on target with deficit reduction

The European Commission has concluded discussions with the Latvian authorities on implementation of the policy programme under the €7.5 billion multilateral assistance package. The discussions were held during a joint mission with the IMF, World Bank and Swedish representatives, which took place in Riga from 25 May-7 June. The Latvian authorities and the joint mission agreed that the 2010 budget deficit target of 8.5% of GDP is within reach, but that further consolidation will be needed to reach the 2011 budget deficit target of 6% of GDP. Continued consolidation is required to meet the Maastricht criteria for euro adoption and to build the stability necessary for economic recovery.
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Piggy bank © Karen Roach - Fotolia.com
Commission recommends opening excessive deficit procedures for Cyprus, Denmark and Finland, concludes effective taken by twelve Member States

On 15 June, the European Commission concluded that excessive deficits exist in Cyprus, Denmark and Finland, and recommended deadlines for their correction to the Council. These steps are a follow-up to the reports that the Commission presented on 12 May. The Ecofin Council is expected to decide on the recommendations at its next meeting on 13 July. The Member States concerned will then have six months to indicate what action they have taken or plan to take to progressively reduce their budget deficits. The Commission also concluded that effective action was taken by Belgium, the Czech Republic, Germany, Ireland, Spain, France, Italy, the Netherlands, Austria, Portugal, Slovenia and Slovakia in response to the Council recommendations of 2 December 2009 on the correction of their excessive government deficits. The Commission concluded that no further steps under the excessive deficit procedure are necessary for these countries.
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Klaus Regling © European Union
Former ECFIN Director General Klaus Regling appointed as chief executive of the European Financial Stability Facility (EFSF)

In line with the decisions taken on 9 May 2010, within the framework of the ECOFIN Council, to safeguard financial stability in the EU, Finance Ministers established the European Financial Stability Facility (EFSF) on 7 June 2010. As a limited liability company under Luxembourg law, the EFSF will collect funds and provide loans in conjunction with the IMF to cover the financing needs of euro area Member States in difficulty, subject to strict policy conditionality. Euro area Member States will provide guarantees for EFSF issuance up to a total of € 440 billion on a pro rata basis. The President of the Eurogroup, Jean-Claude Juncker, announced that Mr Regling will take office as CEO of the EFSF as of 1 July 2010.
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European Economy Research Letter (EERL)
The articles in the new EERL cover the recent Baltics Study (Occasional Paper N° 58), two recent ECFIN research events, and a study on the link between housing and money holdings across euro area countries. The editorial has been contributed by Karl Pichelmann, the coordinator of the Group of Advisers in DG ECFIN. The regular sections provide information about academic articles by ECFIN staff, ECFIN publications, visiting fellows, and scheduled events.

The pre-accession economies in the global crisis: from exogenous to endogenous growth? European Economy Occasional Paper 62
Finland: adjusting to an ageing population, Country Focus 4/2010
European Business Cycle Indicator – June 2010
Fiscal performance and income inequality: Are unequal societies more deficit-prone?
Upcoming: Banking crisis output loss and fiscal policy, ECP
Upcoming: 2010 Economic and fiscal programmes of potential candidate countries: EU Commission's assessments, European Economy Occasional Paper 63
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Agenda Calls
17-18 June
Brussels
European Council meeting
25-27 June
Toronto
G8 Toronto Summit
29 June
Brussels
ECFIN workshop: The UK economy, post-recession – same as it ever was?
22-23 November
Brussels
DG ECFIN 7th Annual Research Conference 2010
Call for Papers - ECFIN/C/2010/015 - Workshop on Public debt and economic growth (deadline: 25 June 2010, closing date 25 June 2010)
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Directorate-General for Economic and Financial Affairs