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Eurogroup President Juncker welcomes entry into force of ESM Treaty
Jean-Claude Juncker, President of the Eurogroup, welcomed the entry into force of the European Stability Mechanism (ESM) Treaty, in a statement issued on 27 September. The ESM Treaty entered into force following the deposit by Germany of its instrument of ratification, with Estonia expected to ratify the treaty in the coming days, thereby closing the ratification process by the 17 euro area Member States. With a capital base of EUR 700 billion, the ESM will be the largest international financial institution, according to Juncker. “The ESM is now the cornerstone of the European firewall and an integral part of our comprehensive strategy to ensure financial stability in the euro area,” he said. The inaugural meeting of the ESM Board of Governors took place on 8 October in Luxembourg.
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The launch of the ESM is a milestone. The euro area now has at its disposal its own robust and permanent firewall with an extensive toolbox for market stabilisation and the potential to make use of greater flexibility in decision-making.
Olli Rehn, European Commission Vice-President for Economic and Monetary Affairs and the Euro |
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Commission adopts Single Market Act II: Twelve priority actions for new growth
The European Commission has adopted the Single Market Act II: a set of twelve priority actions for new growth. The new set of actions, which was adopted on 3 October, focuses on integrated networks, the cross border mobility of citizens and businesses, the digital economy and actions that reinforce social entrepreneurship as well as cohesion and consumer confidence. The Single Market Act II follows in the footsteps of a the first set of measures adopted by the Commission in April 2011 – the “Single Market Act I” – and represents a new chapter in a process towards a deeper, and better integrated single market. Adoption of Single Market Act II marks the 20th anniversary of the EU’s single market and kicks off the Single Market Week (15-20 October 2012). Under the theme “Together for new growth”, a week-long series of events across the EU will give an opportunity to policy-makers and citizens to discuss the achievements and challenges of the single market and come up with new ideas on how to use its full potential in the future.
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High-level Expert Group on EU banking sector presents its findings
The High-level Expert Group on reforming the structure of the EU banking sector presented its final report to the European Commission on 2 October. The group, which is chaired by Erkki Liikanen, Governor of the Bank of Finland and a former member of the European Commission, started its work in November 2011. Its key recommendations are the mandatory separation of proprietary trading and other high-risk trading activities from deposit and lending activities, the possible additional separation of activities if necessary during recovery and resolution, and a review of capital requirements on trading assets and real estate related loans. The group also recommended the strengthening of the governance and control of banks and possible amendments to the use of bail-in instruments as a resolution tool.
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Commission welcomes publication of results of the independent valuation of Spanish banks
The European Commission welcomed publication by the Spanish authorities of the results of the independent valuation of Spanish banks. The results, which were published on 28 September, represent a major step in implementing the financial assistance programme designed to strengthen the Spanish banking sector and restore confidence in it. In line with the Memorandum of Understanding governing the financial-sector programme for Spain, over the past few months an external consultant conducted a stringent bank-by-bank (bottom-up) stress test and a thorough asset quality review. The European Commission was closely involved in this process, as were the European Central Bank (ECB), the European Banking Authority (EBA) and the International Monetary Fund (IMF). The amount of state aid provided to recapitalise Spanish banks will be calculated based on the capital needs for individual banks identified in the report. The recapitalisation of the first group of banks is scheduled to occur by November.
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Vice-President Rehn praises Spanish structural reform plan
In a statement issued on 27 September, Olli Rehn, Vice-President of the European Commission, praised the structural reform plan announced by the Spanish authorities. Rehn called the plan “a major step to broaden and deepen structural reforms, building on important achievements made already,” and noted that the reform plan “includes concrete, ambitious and well-focused measures and establishes clear deadlines in many areas.” The new structural reform plan responds to the country specific recommendations issued to Spain under the European semester and even goes beyond them in some areas. Rehn particularly welcomed plans to establish an independent Fiscal Council, to further liberalise professional services, and to effectively reduce the fragmentation of the internal market in Spain.
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EBA publishes final report on the recapitalisation of European banks
On 3 October, the European Banking Authority (EBA) published the final report on its EU-wide recapitalisation exercise and the data on all individual banks. Twenty-seven banks with an initial capital shortfall submitted capital plans and strengthened their capital positions by EUR 116 billion. This recapitalisation exercise combined with a number of other EU-driven remedial actions resulted in the injection of more than EUR 200 billion into the European banking system between December 2011 and June 2012. The report also found that in line with the EBA’s Recommendation, capital strengthening has not led directly to a significant reduction in lending into the real economy. The EBA will soon issue a new Recommendation designed to ensure that banks maintain the capital accumulated in the last year in order to absorb any unexpected losses and to support a smooth convergence to Capital Requirements Directive IV/Capital Requirements Regulation requirements.
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Improving tax governance in EU Member States: Criteria for successful policies. European Economy. Occasional Papers. 114. August 2012.
This paper discusses how the efficiency of the tax administration can be improved and analyses specific ways to combat tax evasion and the shadow economy. It presents operational criteria to assess the adequacy of policy responses in the area of tax governance.The paper identifies the characteristics of efficient tax administrations, including the existence of an overall compliance strategy and the focus of audit efforts on the largest revenue risks; providing service to those who voluntarily pay their taxes and comply with tax laws on the one hand while implementing control measures for those who don't on the other; and using information available from third parties (e.g. banks) comprehensively and providing pre-filled tax returns to taxpayers. The latter measure makes it easy to pay taxes and at the same time limits taxpayers’ ability to evade taxes.
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| Directorate-General for Economic and Financial Affairs |
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