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  03 December 2020  
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Economic and Financial Affairs

ECFIN E-news 228

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Banking Union advances as Eurogroup agrees to proceed with reform of ESM including common backstop
Video conference of Mr Paschal DONOHOE, President of the Eurogroup © European Union, 2020

During a video meeting of the Eurogroup in inclusive format on 30 November, EU finance ministers agreed to proceed with the reform of the European Stability Mechanism (ESM), to sign the revised Treaty in January 2021 and to launch the ratification process.

They also agreed to establish a common backstop to the Single Resolution Fund in the form of a credit line from the ESM. The backstop will reinforce and complement the Resolution Pillar of the Banking Union and will help to ensure that a bank failure does not harm the broader economy or cause financial instability. Ministers also agreed to advance the entry into force of the common backstop by two years to the beginning of 2022. They will seek to advance risk reduction by using existing credible frameworks such as EU-wide stress tests, reinforced regulatory requirements for specific institutions, and enhanced surveillance to deal with structural issues. These decisions mark another important step towards completing the Banking Union. Ministers also acknowledged the good progress in Greece – on the basis of the enhanced surveillance report – and approved the next tranche of policy contingent debt measures worth €767 million.

SeeAlso
See also Eurogroup, 30 November 2020
Viewpoint
Paschal Donohoe, President of the Eurogroup
Mr Paschal DONOHOE, President of the Eurogroup © European Union, 2020

“Since the onset of the pandemic, the Eurogroup has shown our determination to tackle the economic challenges head on, and today's agreement again confirms our unity of purpose. This is a crucial stepping stone in our path to strengthen the Banking Union, and it is an important complement to our efforts in supporting economic recovery.”

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ECOFIN ministers confirm support for new tax information sharing rules for digital platforms; review Banking Union, Capital Markets Union and European Semester
Video conference of Economic and Finance Ministers Press conference © European Union, 2020

During a video conference on 1 December, EU finance ministers confirmed their support for new rules by which Member States' tax authorities will automatically exchange information from 2023 onwards on income earned by sellers on digital platforms.

This will help to prevent tax evasion and tax avoidance, enhance tax fairness and foster a level playing field for both the platforms and their sellers. Ministers also took stock of progress in strengthening the Banking Union and the reviewed draft Council conclusions on the Commission's new Action Plan on the Capital Markets Union. The conclusions are due to be approved by the Council by written procedure after the informal video conference. As part of the annual European Semester process, ministers exchanged views on an alert mechanism report, marking the start of the annual macroeconomic imbalances procedure, and a draft Council recommendation on the economic policies of the euro area. The Council is scheduled to approve the recommendation as well as the conclusions on the alert mechanism report in January 2021. The presidency and the Commission debriefed ministers on the G20 finance ministers' and central bank governors' meeting held on 13 November 2020, which focused on debt relief. Ministers also discussed international taxation issues such as how to address the tax challenges caused by the digitalisation of the economy.

SeeAlso
See also Council of the EU, 01 December 2020
Commission disburses €8.5 billion under SURE to five Member States
SURE infographic © European Union, 2020

The European Commission has disbursed €8.5 billion in the third instalment of financial support to five Member States under the SURE instrument.

As part of the SURE operations on 1 December, Belgium received €2 billion, Hungary €200 million, Portugal €3 billion, Romania €3 billion and Slovakia €300 million. This support, in the form of loans granted on favourable terms, will help these Member States cover costs directly related to the financing of national short-time work schemes, and other similar measures put in place as a response to the coronavirus pandemic, including for the self-employed. With this disbursement, 15 Member States have received around €40 billion under the EU SURE instrument between the end of October and the end of November. Once all SURE disbursements have been completed, Belgium will have received €7.8 billion, Hungary €504 million, Portugal €5.9 billion, Romania €4.1 billion and Slovakia €631 million. The Commission will proceed with further support under the EU SURE programme in 2021, up to the maximum available ceiling of €100 billion. In 2021, the Commission will also begin borrowing under NextGenerationEU, the temporary recovery instrument of €750 billion designed to build a greener, more digital and more resilient Europe.

SeeAlso
See also Commission disburses €8.5 billion under SURE to five Member States
Euro area and EU Economic Sentiment markedly down – Employment Expectations declining
Euro area graph © European Union, 2020

In November 2020, the Economic Sentiment Indicator (ESI) fell markedly in the euro area (-3.5 points down to 87.6) and the EU (-3.6 points down to 86.6).

After the partial recovery of sentiment between May and September and the broad sideways movement in October, the drop is the first one since sentiment fell sharply in the first COVID-19 wave. The Employment Expectations Indicator (EEI) posted its second monthly decline in a row (down by 3.3 points in both regions to 86.6 in the euro area and 87.2 in the EU). In the euro area, the ESI’s decline was fuelled by diving confidence in retail trade, services and among consumers. Sentiment in industry and construction held up rather well, posting comparatively mild deteriorations. Amongst the largest euro-area economies, the ESI plunged in Italy (-8,7) and France (-4,8), while its losses were more contained in Germany (-2.8) and Spain (-2.0). The Netherlands bucked the trend with a moderate improvement in sentiment (+1.0). The second consecutive monthly drop of the Employment Expectations Indicator (-3.3) reflects sharply scaled back employment expectations in retail trade, as well as moderately lower ones in services and construction.

SeeAlso
See also Euro area and EU Economic Sentiment markedly down – Employment Expectations declining
Investment Plan: EIB supports social inclusion of ex-convicts, zero interest loans for students and climate action
Plant growing © European Union, 2020

The European Investment Bank (EIB) and the Italian Ministry of Justice have joined forces to curb the reoffending rate of ex-convicts and ensure their smooth reintegration into society through innovative financing and procurement methodologies.

Through the European Investment Advisory Hub, EIB experts will work with the Italian Ministry of Justice to assess the possibility to launch a social impact bond. To improve educational and professional opportunities in Southern Italy, the “StudioSì” fund, founded by the Italian Ministry for University and Research (MUR) and managed by the EIB, has awarded its first €2 million in zero-interest loans. The fund, benefitting from a €100 million allocation from the European Social Fund (ESF), supports students from Italy's eight southern regions, particularly those from lower income families, who study in Italy or abroad, with zero-interest loans to finance their tuition fees and living costs. Meanwhile, the EIB Group will help Austrian bank Hypo Vorarlberg to increase its capacity to support fresh lending to energy efficiency projects. The Group agreed on 1 December to provide a mezzanine guarantee on a €330 million portfolio of mainly Austrian loans to SMEs and mid-caps, originated by Hypo Vorarlberg Bank AG. With this financial support, Hypo Vorarlberg will expand its lending in support of new highly energy-efficient residential buildings.

SeeAlso
See also Investment Plan for Europe
Publications
Budget System in Poland: Challenges and Ongoing Reforms
Budget System in Poland: Challenges and Ongoing Reforms © European Union, 2020

This paper analyses the main challenges facing Poland’s budgetary system and the actions taken to address them.

 
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The 2021 Ageing Report: Underlying Assumptions and Projection Methodologies
This report details the underlying assumptions and projection methodologies to estimate the economic and budgetary impact of an ageing population over the long term
 
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Selected speeches

01/12/2020

Remarks by Executive Vice-President Dombrovskis at the ECOFIN press conference
 
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30/11/2020

Remarks by Commissioner Gentiloni at the Eurogroup press conference
 
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