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EU finance ministers discuss lessons learnt from European Semester monitoring and adopt the Single Supervisory Mechanism
The EU Finance ministers meeting in Luxembourg on 15 October discussed lessons learnt from the 2013 European Semester monitoring exercise, which wrapped up on 9 July with the Council adoption of the final versions of the country-specific recommendations for Member States. Areas identified where improvements could be made, include, next to the time constraint, better monitoring of implementation throughout the year, and highlighting pensions reform as a particular challenge. The Council also discussed an initiative led by the European Commission and the European Investment Bank aimed at helping SMEs access finance more easily. Following the 12 September green light by the European Parliament, Ministers also formally adopted the Single Supervisory Mechanism (SSM) regulations which put Europe’s largest banks under the direct oversight of the European Central Bank from September 2014. At their meeting on 14 October, euro area finance ministers had also welcomed the major financial sector reform undertaken in both Ireland and Spain.
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| It is essential that we maintain the momentum for the completion of the Banking Union. This means, in particular, working to agree rules for the Single Resolution Mechanism, on the basis of the Commission's legislative proposal. |
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Olli Rehn, Commission Vice-President responsible for Economic and Monetary Affairs and the Euro
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Quarterly report on the euro area examines financial dependence and growth since the crisis
The third 2013 edition, published on 3 October, looks at whether the financial and sovereign debt crisis has had a deeper impact on growth in the euro area’s industries that are more dependent on external finance – and, thereby, on financial sector development and banks’ credit supply. It concludes that the financial crisis has had a negative impact on financial sectors that are more dependent on external funds in the euro area. However, this impact varies widely between core versus periphery euro-area economies and is differentiated for manufacturing versus non-manufacturing and services sectors. There is also some evidence that more developed financial markets have, to some extent, helped cushion the negative growth effect of the crisis.
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Rehn clarifies how bank recapitalisations can be exempted from public deficit calculations
In a letter to EU finance ministers sent on 9 October, Commission Vice President Olli Rehn explained that bank recapitalisations funded by EU Member States are normally considered as "relevant factors for financial stability" and as one-offs and temporary measures. Firstly this broadly implies that in case a Member State breaches the deficit or the debt criterion of the Pact only because of public capital injections into the banking sector, an excessive deficit procedure will normally not be opened. Besides, for those Member States that are already in EDP, these measures are not included in the structural balance and so will not count against them. Therefore, in broad terms the treatment of public capital injections under the Stability and Growth Pact do not weigh against Member States in the context of the excessive deficit procedure. “At the same time, it is clear … that EU fiscal rules provide no disincentive to effective public backstops", Mr. Rehn wrote.
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Global economy in focus at G20, IMF meetings in Washington
Vice President Rehn participated in the G20 Ministerial and the IMF annual meetings in Washington, D.C., from 10-13 October 2013. Ministers and central bank governors mainly discussed recent developments in the global economy including the then US budget deadlock and stalemate on raising the debt ceiling, the normalisation of monetary policy, and the economic slowdown in emerging market economies. There was also great interest in the European banking union and progress towards repairing the financial sector.
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Strong investor interest in ESM inaugural bond
The European Stability Mechanism (ESM) on 8 October launched its long-term funding programme with the placement of a EUR 7 billion, five-year benchmark bond. Investor interest was exceptionally high, with close to EUR 21 billion orders received from more than 200 investors worldwide. HSBC, J.P. Morgan and SGCIB acted as lead managers for the bond, with a coupon of 1.25% maturing on 15 October 2018. The euro area accounted for the greatest proportion of investors (39%), followed closely by Asia (38%), and then the UK and Switzerland (16% combined), the rest of Europe (5%) and elsewhere (2%). Central banks, governments and sovereign wealth funds accounted for 43% of investors, followed by banks (32%), asset managers (19%), insurance/pension funds (5%) and other investors (1%).
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Eurostat publication shows effects of financial crisis on EU regions
The Regional yearbook 2013, published on 7 October by Eurostat, the statistical office of the EU, gives a more detailed and diverse picture of the EU than national level data. It also offers insights into how the financial crisis has affected regions across the EU, indicating, for example, in which regions employment, population and GDP have decreased the most and which regions have registered increases. It also shows how poverty has affected the population differently, depending on whether people live in a densely or more thinly populated area. Among the 43 regions where the employment rate decreased by five percentage points or more between 2008-2011, 15 were in Spain, nine in Greece, six in Bulgaria, three in Portugal, both regions in Ireland and Croatia, two in Romania, and one in France as well as in Estonia, Latvia and Lithuania.
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Latvia prepares for the changeover to the euro, emphasising fair price conversion
In their practical preparations to join the euro area as of 1 January 2014, Latvian authorities have stepped up information and communication efforts to increase public knowledge of Economic and Monetary Union and the euro. An important aim is to ensure that prices for Latvian consumers are correctly converted at the official rate in a fair and transparent transition. The campaign "Fair Euro Introducer", launched on 12 July by government and entrepreneurs, reaches out to consumers through a TV feature about the campaign and what it represents and an encouragement to shop at locations which have signed the memorandum. Another video clip, Euro. Latvia grows, forms part of Latvia's mass media campaign launched in September. It approaches the practicalities of the changeover by comparing it with the laws of nature – everything grows and develops – thus seeing the introduction of the euro as a natural, "evolutionary process".
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Tax reforms in EU Member States 2013 – Tax policy challenges for economic growth and fiscal sustainability. European Economy 5/2013.
This report, prepared jointly by the European’s Commission’s Directorate General for Economic and Financial Affairs and the Directorate General for Taxation and Customs Union, analyses recent tax reforms in EU Member States and identifies the tax policy challenges they face. The authors start by presenting reforms implemented in 2012 and the first half of 2013, then examine selected policy challenges relevant for improving Member States’ tax systems. These challenges encompass the potential contribution of taxation to consolidate public finances – in addition to expenditure control – and the favourability of the tax structure to growth. These are particularly relevant dimensions in times of slow growth and fiscal consolidation. The report also looks at economic challenges related to the design of individual taxes and tax compliance.
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| Directorate-General for Economic and Financial Affairs |
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