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Eurogroup welcomes conclusions of Greek review mission; gives green light for approval of EUR 8.3 billion
Euro area finance ministers welcomed the conclusions of the fourth review mission, completed on 19 March, under Greece’s macroeconomic adjustment programme. In a statement released on 1 April, the finance ministers noted that Greece’s fiscal performance is on track to exceed programme targets in 2013 and meet them in 2014. The Eurogroup also acknowledged the Greek authorities’ strong commitment to the implementation of a wide range of product market and institutional reforms, and underlined the importance of continuing reform of the public sector and labour markets. Finance ministers noted that Greece’s financial sector has stabilised, as shown by the positive results of a stress test and asset quality review conducted by the Bank of Greece, and the success that two of the four core banks have had in raising more capital than required by the supervisor, and doing so solely from private investors. The Eurogroup approved the launch of national procedures that will pave the way for approval of the next European Financial Stability Facility (EFSF) instalment of EUR 8.3 billion to be paid out in three tranches. Following the disbursement of the first tranche of EUR 6.3 billion, two further tranches each of EUR 1 billion are linked to the implementation of milestones agreed with Greece.
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| Today, the Greek economy is stabilising and we expect a return to growth and a gradual recovery in employment starting this year. To strengthen this recovery and boost job creation, it will be essential for Greece to continue to embrace economic reforms, maintain sound public finances and facilitate targeted investments. |
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Olli Rehn, Vice-President of the European Commission
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Vice-President Rehn on electoral leave, Vice-President Kallas representing him during his absence
Siim Kallas, Commission Vice-President responsible for Mobility and Transport, will stand in for Vice-President Olli Rehn during the latter’s electoral leave. On 2 April, Commission President Barroso announced that seven European Commissioners would stand for election to the European Parliament, and that six of them will take electoral leave from their duties in order to participate actively in the election campaign. Vice-President Rehn’s electoral leave commenced on 7 April and concludes on 25 May. As provided for in the Code of Conduct, electoral leave is unpaid and during that period Commissioners may not use the human or material resources of the Commission. All Commissioners on electoral leave will return to active duty in the Commission from 26 May. If elected, those who decide to take up their seat in the European Parliament will need to resign from the Commission by the end of June.
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First post-programme surveillance mission to Spain finds positive trends have continued
After expiry of Spain’s financial sector programme in January 2014, a staff team from the European Commission, in liaison with staff from the European Central Bank, undertook the first post-programme surveillance (PPS) visit to Spain on 24-28 March and on 3 April. The European Stability Mechanism participated in the meetings on aspects related to its own Early Warning System. The mission found that overall, the positive trends of policy progress, on going economic adjustment and diminishing financial stress that formed the basis for Spain's programme exit have continued. A recovery in output is on going; unemployment, though still high, is on a gradual declining path; and inflation is below the euro area average and expected to stay low as the recovery of price competitiveness continues. Despite Spain’s steady progress, however, important challenges to sustained economic and employment growth, public finances and the banking sector remain.
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March 2014: Economic Sentiment up in the euro area and broadly flat in the EU
In March the Economic Sentiment Indicator (ESI) increased by 1.2 points in the euro area (to 102.4), while remaining broadly flat in the EU (a marginal increase of 0.3 points to 105.3). In the euro area, improved sentiment was driven by a noticeable increase in consumer confidence. The increases in services and retail trade confidence were comparatively modest and industry and construction sentiment remained broadly unchanged compared to February. All of the five largest euro area economies saw the ESI rising, in general fuelled by buoyant consumer confidence. The Netherlands booked the sharpest ESI increase (+2.3), followed by Spain (+2.2) and Italy (+1.3), while France (+0.7) and Germany (+0.4) saw modest improvements. Contrasting with the euro area, the headline indicator for the wider EU remained broadly flat (+0.3), due to slipping sentiment in the largest non-euro area EU economy (UK, -4.1) and broadly unchanged levels in the second largest one (Poland, +0.2).
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Support Group for Cyprus publishes first report on technical assistance
On 2 April, the Support Group for Cyprus published its first report on technical assistance for Cyprus. The Support Group was launched by European Commission President Manuel Barroso in March 2013 in order to coordinate the technical assistance requested by Cyprus. Its mandate is to help implement specific reforms set out in Cyprus’ economic adjustment programme, alleviate the social consequences of the economic downturn and revive and diversify the economy. The Support Group's first activity report, which covers the period September-December 2013, presents its current findings in six key policy areas: the budgetary framework and public financial management, revenue administration, immovable property tax reform, the welfare system, healthcare and renewable energy. The Support Group is helping to shape important reforms in Cyprus, particularly in the areas of revenue administration, the welfare system and healthcare.
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Communication on smooth euro changeover in Latvia draws conclusions for future changeovers
The Commission has adopted a Communication regarding the most important aspects of Latvia's changeover to the euro on 1 January 2014. According to the Communication issued on 8 April, Latvia’s successful changeover again demonstrates that a short dual circulation period is sufficient if the changeover is well prepared. The Communication notes that the changeover in Latvia was well prepared and smoothly implemented. Moreover, according to the Flash Eurobarometer survey 393 of January, it was perceived as successful by 79% of citizens. Preventing abusive practices regarding pricing was a key element of the changeover. One strategy to address this was the compulsory dual display of prices in lat and euro, which enabled Latvians to easily compare prices and get used to thinking in their new currency. Another initiative, the “Fair Euro Introducer” campaign invited businesses to commit not to misuse the changeover for their own profit, to respect the changeover rules and to provide the necessary assistance to their clients.
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Financing of first greenfield project bond transaction under EU-EIB Project Bond Initiative successfully concluded
Financing for the A11 motorway project in Belgium was successfully concluded on 20 March 2014. The project is both the first greenfield (i.e., constructing a new asset, rather than refurbishing or extending an existent asset) Public Private Partnership project and the first transport deal supported under the Project Bond Initiative (PBI). The project concerns the construction of a 13km 2-lane highway that will connect the N31 at Brugge to the N49 at Knokke, and approximately 90 civil structures, including 3 tunnels, a 1km long viaduct and 2 twin draw bridges. Construction began in March and is scheduled to take three years. The credit enhancement structure provided by the EIB with the support of the EU budget bridges the gap between traditional bank lending and project bond finance. It does so through an innovative mechanism that allows for committed financing and deferred drawdown, thus proving its capability to mitigate greenfield risk. The transaction is being financed through a EUR 578 million project bond and an equity participation of EUR 80 million. The EIB guarantee portion of EUR 115 million supports the senior debt and resulted in an uplift of three rating notches from the Moody's agency to a rating of A3. This transaction demonstrates that the EU-EIB initiative is well on track as reported in the Commission report on the Pilot Phase of the PBI, which was published on 19 December 2013.
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Expert Group publishes final report on debt redemption fund and eurobills
Commission President Manuel Barroso and Vice-President Olli Rehn received the final report of the Commission’s Expert Group on a debt redemption fund and eurobills on 31 March. The Commission established the Expert Group in July 2013 to examine the possible merits, risks, requirements and obstacles of partial substitution of national issuance of debt by joint issuance in the form of a redemption fund and eurobills. The final report concludes that both a debt redemption fund/pact and eurobills would have merits in stabilising government debt markets, supporting monetary policy transmission and promoting financial stability and integration. However, these merits would be coupled with economic, financial and moral hazard risks. The Expert Group recommends first collecting evidence on the efficiency of the EU’s reformed economic governance before taking any decisions on joint issuance schemes. The idea for a debt redemption fund and eurobills was first proposed in the Commission’s Blueprint for a Deep and Genuine EMU, published in November 2012.
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European Commission proposes to strengthen shareholder engagement and introduce a "say on pay"
The European Commission adopted measures on 9 April to improve the corporate governance of around 10,000 companies listed on Europe’s stock exchanges. The proposal to revise the existing Shareholder Rights Directive aims to reduce managers’ excessive short-term risk taking by making it easier for shareholders to use their existing rights over companies and by enhancing those rights when necessary. The new measures would help ensure that shareholders are more engaged, better hold the management of the company to account and that they act in the long-term interests of the company. For the first time, European “say on pay” rules would also be introduced. The new rules would oblige every company to disclose information on its remuneration policies and how they were put into practice, and to put its policies to a binding shareholder vote. The measures are expected to contribute to the competitiveness and long-term sustainability of these companies. The package of measures implements key actions identified in the Communication on the long-term financing of the European economy of 27 March.
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ECFIN website features new section for citizens: ‘European Economy Explained’
DG ECFIN has added a new section to its website to help explain the EU’s economic policies to citizens. Easily accessible through ECFIN’s main website, ‘European Economy Explained’ will be launched in all the official languages of the EU ahead of the upcoming European elections. The new pages address citizen’s concerns about the crisis head-on, and explain how the European Semester works and what it means for them. Written in a clear and engaging style, 'European Economy Explained' will also help interested users to easily find the more technical material on the main website.
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Commission proposes more flexible visa rules to boost growth and job creation
The European Commission has proposed more flexible visa rules that would boost growth and job creation. Non-EU nationals wishing to travel to the EU are often faced with cumbersome, lengthy and costly visa procedures. The rules proposed on 1 April would significantly shorten and simplify the procedures for those wanting to come to the EU for short stays, thereby reducing costs and bureaucracy while maintaining the same level of security. Making access to the Schengen area easier for legitimate travellers would boost economic activity and job creation in, for instance, the tourism sector, as well as in related sectors such as the restaurant and transport industries. A study in August 2013 showed that more flexible and accessible visa rules could lead to an increase in trips to the Schengen area of between 30% and up to 60%, from six countries alone. This could add as much as EUR 130 billion to the EU economy in total direct spending over five years, and translate into 1.3 million jobs in tourism and related sectors.
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Quarterly Report on the euro area (QREA)
The focus section of the latest edition takes a look at the poor performance of total factor productivity (TFP) in euro area catching-up economies during the decade preceding the crisis. It concludes that policy measures that foster innovation, reduce the restrictiveness of employment protection legislation, lower corporate tax rates and improve government effectiveness would help support TFP growth. A first special topic analyses the sensitivity of DG ECFIN estimates of the ‘non-accelerating wage rate of unemployment’ (NAWRU) to alternative assumptions of inflation expectations. The second special topic examines the relationship between government and manufacturing wages, and finds that wage moderation in the government sector may spill over to the private sector thereby boosting competitiveness and contributing to external rebalancing. The third special topic reviews Latvia's recent boom-bust experience and discusses the challenges ahead in light of the country’s adoption of the euro. The fourth, and final, special topic compares balance sheet adjustment in the non-financial corporate sector in the euro area and in the United States, and shows that adjustment since the crisis has been faster in the latter.
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| Directorate-General for Economic and Financial Affairs |
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