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Olli Rehn at the press conference © European Union, 2012 Commission finds Belgium, Cyprus, Malta and Poland took effective action to correct deficits while Hungary's measures are insufficient
- Euro banknotes and coins 10 years on
- Review mission to Ireland concludes economic programme on track
- Commission launches accelerated infringement proceedings against Hungary over the independence of its central bank and other issues
- Troika mission in Greece
- Danish government and European Commission discuss priorities for Denmark’s EU presidency
- Commissioner Rehn underscores the advantages of Stability Bonds
- EU 30-year bond issue raises € 3 billion for Ireland and Portugal
   
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Olli Rehn at the press conference © European Union, 2012 Commission finds Belgium, Cyprus, Malta and Poland took effective action to correct deficits while Hungary's measures are insufficient

The European Commission on 11 January published its assessment of budgetary implementation under the ongoing Excessive Deficit Procedures (EDP). It concludes that while Belgium, Cyprus, Malta and Poland have taken effective action to correct their excessive deficits in a sustainable manner, this is not the case for Hungary. The Commission, therefore, recommends the drafting of a Council decision under the EDP that no effective action has been taken by Hungary to correct its excessive deficit. This is the first time the Commission has published an assessment of progress under the EDP since the new EU economic governance rules (often referred to as the "six-pack") of the strengthened Stability and Growth Pact entered into force on 13 December 2011. As Hungary is not a member of the euro area, it won't face the prospect of financial sanctions under the "six-pack". Nevertheless, based on the recommended EDP Council decision, the Commission could propose to suspend a part or all of Hungary's cohesion fund commitments for 2013. Any further step towards that would be coordinated with the Commission services for Regional Policy. Finally, there will also be a proposal formulating the new EDP recommendations, which have to be adopted by the Council at the latest two months after the decision that no effective action has been taken.

Viewpoint
"
Today's report shows that the six-pack is already delivering. It has given the European Commission teeth to act when countries fail to bring their deficits under control and reduce their debt. Fiscal discipline is crucial to reinforce confidence in our public finances. I stand by my word: I am determined to fully use this new powerful set of tools from Day One.

Olli Rehn, European Commission Vice-President and Commissioner for Economic and Monetary Affairs and the Euro
"
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Close-up of falling Euro coins on paper money © Istockphoto
Euro banknotes and coins 10 years on

1 January 2012 marked the tenth anniversary of the introduction of euro banknotes and coins. The introduction of euro cash was the final step in an unprecedented alignment of monetary policies and lead to closer cooperation between countries of the euro area. Notwithstanding the current difficulties in certain EU countries, the euro area has benefitted overall from low and stable inflation, and a strengthened internal market. In addition, the 332 million people who use the euro no longer have to pay extra costs to exchange currencies and there is more transparency in cross-border transactions, which enhances competition. During the global financial crisis of 2008, the euro protected the euro-area countries, yet shortcomings in EU economic governance, which contributed to severe fiscal imbalances, were also revealed. These were recently tackled and EU economic governance considerably strengthened. The revised rules should be the basis for a more solid foundation of Economic and Monetary Union, increased budgetary discipline, and enhanced economic policy coordination and surveillance.

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The Ha'penny bridge in Dublin © Thinkstock.com
Review mission to Ireland concludes economic programme on track

Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Dublin during January 10-19 for the regular quarterly review of the government’s economic programme. The teams’ assessment is that the programme is on track but challenges remain and continued steadfast policy implementation will be key. The EC and IMF missions will seek approval for the completion of this review from the relevant EU bodies and the IMF Executive Board respectively.

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Hungary © European Union
Commission launches accelerated infringement proceedings against Hungary over the independence of its central bank and other issues

On 17 January the Commission launched accelerated infringement proceedings against Hungary over new legislation that came into force at the beginning of 2012 under Hungary's new constitution. Following several exchanges with the Hungarian authorities on their drafts of the new legislation, the Commission concluded that the Hungarian legislation conflicts with EU law by calling into question the independence of Hungary's central bank and data protection authorities and because of measures affecting Hungary's judiciary. As first step in the procedure, the Commission decided to send three Letters of Formal Notice to Hungaryand to raise further related issues. The Hungarian authorities have one monthto respond to the Commission's concerns.

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Greek Flag © Istockphoto.com
Troika mission in Greece

The decisions of the Euro Summit of 26-27 October 2011 have entered the implementation phase. The Commission, ECB and IMF staff teams returned to Athens on 17 January to discuss and agree on the economic policies of the new programme, and assess the end-December compliance with the existing MoU. A preparatory first leg of the mission took place on 12-18 December 2011.


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Helle Thorning-Schmidt, on the left, and José Manuel Barroso, © European Union, 2012
Danish government and European Commission discuss priorities for Denmark’s EU presidency

José Manuel Barroso, President of the European Commission, and Danish Prime Minister Helle Thorning-Schmidt discussed priorities and expectations for Denmark’s presidency of the EU during a ceremony and meetings held on 11-12 January in Copenhagen. President Barroso expressed strong support for the Danish government’s plan for the next six months, saying that he was “really very happy” that Denmark and the Prime Minister had put the completion of the Single Market, the Energy Efficiency Directive and finalisation of a common European patent at the top of the agenda, as this would break down barriers to growth. Later, speaking at a press conference following the presentation of the programme of the Danish Presidency to the European Parliament on 18 January, Barroso said “We need a real push on concrete measures for growth. It is not that we have to choose between fiscal consolidation or growth – we need both.”

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Rehn at the seminar © ALDEADLE
Commissioner Rehn underscores the advantages of Stability Bonds

Speaking at a seminar of the European Parliament's "Alliance of Liberals and Democrats for Europe" (ALDE) on 10 January, European Commission Vice-President Olli Rehn presented the Commission’s Green Paper on Stability Bonds. Referring to the paper, which was issued last year, Rehn said that joint issuance of Member States’ debt would drive further integration of European bond markets and make them more efficient, thus lowering transaction costs and the cost of government borrowing. While such bonds would be intrinsically linked with further strengthening of economic governance, he also said that they would strengthen financial stability and that by lowering debt-servicing costs they would give Member States the time and breathing space necessary for economic reform and fiscal consolidation. Rehn cautioned that Stability Bonds should not lead to a reduction in budgetary discipline, should be very safe and reliable instruments and must be consistent with the EU Treaties.


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Bond © Thinkstock.com
EU 30-year bond issue raises € 3 billion for Ireland and Portugal

On the back of strong and widespread investor demand, the EU successfully placed a 30-year bond issue on 9 January, reflecting market confidence in the EU. Ireland and Portugal will each receive half of the EUR 3 billion that was raised. The operation was carried out by the European Commission on behalf of the EU and under the auspices of the European Financial Stabilisation Mechanism (EFSM).The new benchmark bond is the first EU issue with such a long maturity, and a rarity among both European and supranational issuers. The long dated funding will further extend the average maturity of the EU loans to Ireland and Portugal, thereby improving debt sustainability and the long-term outlook for both countries.


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Business and Consumer Surveys - Economic Sentiment Indicator

In December, the Economic Sentiment Indicator (ESI) declined moderately in both the EU and the euro area. The ESI declined by 0.8 points in the EU and by 0.5 points in the euro area, to 92.0 and 93.3, respectively. The overall decline in the EU resulted from weakening confidence in services, construction and among consumers, while sentiment improved in retail trade and remained broadly stable in industry. In the euro area, worsening sentiment was observed in services, retail trade and among consumers, while confidence in industry and construction was broadly unchanged. The ESI is a leading indicator compiled by ECFIN on a monthly basis as part of its Business and Consumer Surveys. It uses ‘soft data’ to reflect the sentiment – optimistic, pessimistic or neutral – of managers and consumers.



 
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Call for papers. "EU balance-of-payments assistance for Latvia: Foundations of Success" (working title)..
Deadline: 31 January 2012
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Directorate-General for Economic and Financial Affairs