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European leaders reach agreement on EUR 960 billion multiannual EU budget
The European Council reached agreement on 8 February on the next multiannual financial framework (MFF), which defines the budgetary priorities of the EU for the years 2014-2020. The deal was reached for an EU of 28 Member States, on the assumption that Croatia will join in 2013. It limits the maximum possible expenditure to EUR 960 billion in commitments, corresponding to 1.0% of the EU’s Gross National Income (GNI). EU leaders agreed to reduce the overall expenditure ceiling by 3.4% in real terms, compared to the current MFF (2007-2013). In order to enhance growth and jobs, however, they increased funds for research, innovation and education, and set aside EUR 6 billion for a new initiative to tackle youth unemployment. New measures were also put in place to improve the quality of spending. On the revenue side, the EU may develop new own resources in the form of a new VAT system and the future Financial Transaction Tax. Final agreement must still be reached with the European Parliament.
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“…this has been a difficult negotiation, but a fair assessment should recognise that this deal is not perfect but it offers a basis for negotiations with the European Parliament. I hope these negotiations will be successful.
José Manuel Barroso
President of the European Commission. |
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EU and US to launch negotiations for a Transatlantic Trade and Investment Partnership
The EU and US have decided to take their economic relationship to a higher level by agreeing to launch negotiations for a comprehensive trade and investment agreement. An EU-US agreement would be the biggest bilateral trade deal ever negotiated – and it could add 0.5% to the EU’s annual economic output. In a joint statement released on 13 February, US President Barack Obama, European Commission President José Manuel Barroso and European Council President Herman Van Rompuy stressed that an EU-US agreement would also contribute to the development of global rules that can strengthen the multilateral trading system. The Transatlantic Trade and Investment Partnership will go beyond removing tariffs to focus on aligning the rules and technical product standards that currently form the most important barriers to transatlantic trade. The decision comes after European leaders voiced their support for a free-trade zone with the US at a meeting of the European Council on 8 February and is based on the recommendations of the EU-US “High Level Working Group on Jobs and Growth”.
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Council adopts conclusions under the 2013 European Semester
European finance ministers adopted conclusions on 12 February on the basis of two reports submitted by the European Commission: the Annual growth survey 2013 and the second Alert mechanism report on macroeconomic imbalances. The two reports were submitted as part of the European Semester, the yearly cycle of economic policy coordination. The Council agreed that the priorities identified in the 2012 annual growth survey remain valid for 2013, particularly ensuring debt sustainability and improving competitiveness, while creating the conditions for sustainable growth and jobs. The finance ministers also acknowledged the conclusions of the alert mechanism report, part of the Macroeconomic Imbalances Procedure, which will lead to further in-depth reviews for 14 Member States. Ministers also adopted conclusions on the Commission's 2012 fiscal sustainability report, which assesses the sustainability of public finances in the Member States and called on Member States to focus on sustainability-driven strategies in their upcoming stability and convergence programmes.
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Economic adjustment programme for Ireland well on track
Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Dublin from 29 January-7 February for the ninth review of the government’s economic programme. Ireland’s strong track record of programme implementation has been maintained. The government is estimated to have comfortably met its 2012 fiscal targets and it remains committed to a 2013 deficit ceiling of 7.5% of GDP and to correcting the excessive deficit by 2015. Conclusion of this review will make available a disbursement of EUR 1 billion by the IMF and EUR 1.6 billion by the European Financial Stabilisation Mechanism (EFSM) and European Financial Stability Facility (EFSF), with EU member states expected to disburse a further EUR 500 million through bilateral loans.
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Spain on track with financial sector assistance programme
A delegation from the European Commission, in liaison with the European Central Bank, the European Stability Mechanism and the European Banking Authority, completed the second review of the financial sector assistance programme for Spain from 28 January to 1 February. The International Monetary Fund also participated as an independent monitor. The delegation concluded that the programme remains on track. Banking sector conditions have broadly stabilised since the start of the programme. This is the result of several factors: the adoption of restructuring plans; the on-going recapitalisation of State-aided banks; the transfer of assets to, a new asset management company; and the easing of funding constraints.
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Commission sets out details of proposed Financial Transaction Tax
The European Commission has set out the details of the Financial Transaction Tax (FTT) to be implemented under enhanced cooperation. The proposed legislation adopted by the Commission on 14 February mirrors the scope and objectives of the original FTT proposal put forward by the Commission in September 2011. It would tax all transactions with an established link to the FTT-zone at 0.1% for shares and bonds and 0.01% for derivatives. When applied by the 11 Member States that will implement the tax, the FTT is expected to deliver revenues of EUR 30-35 billion a year. The current proposal follows agreement last month by EU finance ministers to allow the 11 Member States to move ahead with an FTT under enhanced cooperation. It will be implemented after discussions with all 27 EU Member States, consultation with the European Parliament and upon unanimous agreement by the 11 Member States.
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Commission proposes criminal law measures to crack down on euro counterfeiting
The European Commission has proposed criminal law measures aimed at cracking down on the counterfeiting of euro notes and coins. The proposal introduced on 5 February would strengthen cross-border investigations and introduce minimum penalties, including imprisonment, for the most serious counterfeiting offences. The proposal would also enable the analysis of seized forgeries during judicial proceedings in order to detect further counterfeit euros in circulation. Counterfeiting of the euro is estimated to have cost at least EUR 500 million since the currency was introduced in 2002.
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Anti-money laundering: Stronger rules to respond to new threats
The Commission adopted two proposals on 5 February to reinforce the EU’s existing rules on anti-money laundering and fund transfers. The threats associated with money laundering and terrorist financing are constantly evolving, thus requiring regular updates of the rules. The proposals are a Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and a Regulation on information accompanying transfers of funds to secure "due traceability" of these transfers.
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Is China transitioning to a lower growth plateau? ECFIN Economic Briefs. 18/2013
China's economy slowed significantly in the first three quarters of 2012 and questions have been raised about a possible hard landing. While early indicators have shown signs of improvement in the most recent months, it is essential to understand what is driving this slowdown and how lasting it may be given China's importance as an engine for global growth. Is the Chinese economy experiencing just a “temporary malaise”; is it at the beginning of a sharper and more protracted downturn; or is it in a transition to lower but still sustainable growth rates? The paper concludes that the “growth at any cost” model of growth is no longer a viable option for China. Hence, China will inevitably need to transition to a new growth model.
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| Directorate-General for Economic and Financial Affairs |
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