On 23 October, the Commission requested that Italy submit a revised draft budgetary plan within three weeks. The request comes after a finding by the Commission, after consulting with the Italian authorities, that the draft budgetary plan submitted by Italy for 2019 contains a particularly serious non-compliance with the fiscal recommendation addressed to Italy by the Council on 13 July 2018. The previous week, the Commission had sent letters asking for clarification to six Member States: Italy, Belgium, Spain, France, Portugal and Slovenia. On 22 October, each of these countries replied with a letter clarifying their draft budgetary plans. Italy’s plan is not in line with commitments presented in its Stability Programme of April 2018 and includes a significant planned deviation from the fiscal path recommended by the Council. Both the fact that the draft budgetary plan provides for a fiscal expansion of close to 1% of GDP, while the Council had recommended a fiscal adjustment, and the size of the deviation (a gap of around 1.4% of GDP or EUR 25 billion) are unprecedented in the history of the Stability and Growth Pact. The fiscal requirements for Italy in 2019, as for all Member States, were endorsed unanimously by the European Council of 28 June 2018 and adopted by the Council of the European Union on 13 July 2018, including Italy.

"The euro area is built on strong bonds of trust, underpinned by rules that are the same for everybody. It is our job and duty to uphold common interest and mutual commitments taken by the member countries.”

On 18 October, EU leaders met together with Eurogroup President Mário Centeno and European Central Bank President Mario Draghi for the Euro Summit of 27 EU Member States. Together they assessed the state of play of negotiations on the deepening of the Economic and Monetary Union (EMU) in advance of the Euro Summit in December. At the previous Euro Summit in June, EU leaders adopted a first set of decisions on the reform of the EMU, including the role of the European Stability Mechanism (ESM) and the completion of the banking union. They asked the Eurogroup to prepare the terms of reference of the common backstop and agree on a term sheet for the further development of the ESM by December 2018. In December 2017, EU leaders had agreed that work should concentrate on areas where convergence of views is the greatest. Euro area reform is part of the Leaders' Agenda, a concrete work programme that seeks to unblock and find solutions to the main political challenges and priorities of the EU. 

At the European Council working dinner on 17 October, leaders of the 27 EU Member States reviewed the state of the Brexit negotiations with the UK. Ahead of the meeting, Prime Minister Theresa May updated the leaders on the UK perspective on the negotiations. Leaders reaffirmed their full confidence in Michel Barnier as the negotiator and their determination to stay united. They also noted that, despite intensive negotiations, not enough progress has been achieved. They called on Mr. Barnier to continue his efforts to reach an agreement in accordance with previously agreed European Council guidelines. The leaders declared their readiness to convene a European Council, if and when Mr. Barnier reports that decisive progress has been made. In the area of EU-Africa relations, leaders agreed that cooperation should be taken to a new level, underpinned by the necessary resources, including through the European External Investment Plan and the EU Trust Fund for Africa. They underlined their support for the Commission's initiative for a new Africa-Europe Alliance for Sustainable Investment and Jobs and called for further action, including concrete proposals for Member States' involvement.

“Europe works” is an exhibition that brings home to visitors the astounding success of one of the key priorities of the current Commission, the Juncker Plan. The Plan, including its financial pillar the European Fund for Strategic Investments (EFSI), is being implemented by the EIB Group and has already surpassed the original goal of mobilising EUR 315 billion in additional investment, reaching EUR 335 billion in investments triggered this past summer. The exhibition will take place on Friday 26 and Saturday 27 October from 10am to 6pm at the pavilion at Place Rogier in Brussels. It highlights a wide range of investment projects but goes beyond presenting facts and figures to let visitors see, taste or experience them. For instance, using virtual reality visitors will be able to learn about the production of healthy algae in Portugal or discover a French amusement park and ride in a hot air balloon. They’ll be able to take pictures in a photo booth and taste some of the delicious food products companies produce with EFSI support. Visitors will also be able to talk to the people behind these projects – the craftsmen, inventors, and managers whose work makes a difference to people in their local communities and in Europe. Jyrki Katainen, Vice President of the European Commission, and Ambroise Fayolle, Vice President of the European Investment Bank Group will participate in the exhibition opening on Friday morning at 10am.

The European Investment Fund (EIF) and Cassa di Risparmio di Bolzano – Südtiroler Sparkasse (CRB) signed a guarantee agreement on 19 October on a EUR 60 million portfolio of loans to improve access to finance for SMEs in Italy. This agreement benefits from the support of the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe, the Juncker Plan.
Meanwhile, in France, Groupe BPCE signed a new guarantee agreement on 19 October with the EIF that will provide EUR 700 million in loans to French SMEs. This is Groupe BPCE’s third partnership as part of the InnovFin program which facilitates access to financing for growth projects for companies in Europe. The European Investment Bank (EIB) agreed on 17 October to provide a EUR 330 million EFSI-backed loan to construct the Blankenburg tunnel connection near the municipality of Rotterdam in the Netherlands. The new connection is set to alleviate traffic around Europe’s busiest port, as well as ease traffic on nearby motorways leading to Belgium and Amsterdam. On 11 October, the EIF and Banque et Caisse d'Épargne de l'État, Luxembourg (BCEE) signed a new InnovFin guarantee agreement on a EUR 40 million portfolio of loans to improve access to finance for SMEs in Luxembourg, while in Poland an EIF agreement with PKO Leasing S.A. under COSME (the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises) is expected to generate PLN 1.5 billion (approx. EUR 348 million) in new financing for 10,000 Polish SMEs.

On 17 and 18 October, DG ECFIN hosted a seminar for civil society representatives in EU Member States on the European Commission’s Economic Agenda in the context of ECFIN's Communication Strategy. DG ECFIN welcomed civil society representatives from 20 Member States who participated in 6 sessions addressing a range of topics. Participants were particularly interested in the European Semester and the European Pillar of Social Rights, the Ageing Report, and social inequalities and European integration. They appreciated that employment and social policies have become more embedded in economic policy thinking since the crisis, and that the Commission has stepped up the monitoring of imbalances. Participants also discussed the need to ensure that reforms 2.0 will continue to have a social dimension and that the European Pillar of Social Rights remains at the heart of the political agenda for the next Commission. ECFIN speakers at the event found the discussions with civil society representatives who are very close to their constituents extremely fruitful. The discussions not only helped ECFIN to understand how policy recommendations are received and perceived in the different Member States, but also enabled ECFIN to fill information gaps and dispel some misunderstandings.

According to data released on 23 October by Eurostat, the EU statistical office, at the end of the second quarter of 2018, the government debt to GDP ratio in the euro area stood at 86.3%, compared with 86.9% at the end of the first quarter of 2018. In the EU, the ratio decreased from 81.5% to 81.0%. Compared with the second quarter of 2017, the government debt to GDP ratio fell in both the euro area (from 89.2% to 86.3%) and the EU (from 83.4% to 81.0%). As for deficits, in the second quarter of 2018, the seasonally adjusted general government deficit to GDP ratio stood at 0.1% in the euro area, a decrease compared with 0.2% in the first quarter of 2018 and the lowest deficit since the beginning of comparable time series in 2002. In the EU, the deficit to GDP ratio stood at 0.3%, a decrease compared with 0.5% in the previous quarter and also the lowest deficit since the beginning of comparable time series in 2002.

The EU economic and financial landscape – and especially economic governance – has evolved dramatically since the first issue of ECFIN e-news was published in December 2009. With publication of this 185th issue, we would like to kindly ask you once again to contribute your views and suggestions. What do you like about the newsletter? What could be improved? Thank you for sharing your thoughts by spending just a few minutes to answer the online questionnaire. We appreciate your feedback.