At their meeting on 22 January, euro area finance ministers reached a political agreement on the third review of Greece’s economic adjustment programme, based on the conclusion that the Greek authorities have implemented nearly all reforms required under the review. The agreement enables the Eurogroup Working Group and the governing bodies of the European Stability Mechanism (ESM) to take the steps necessary for the disbursement of the fourth tranche of the ESM programme amounting to EUR 6.7 billion, once the few remaining conditions have been fully completed. In other news, the Eurogroup appointed Hans Vijlbrief as the new President of the Eurogroup Working Group, for a term of two years. Vijlbrief, who has been serving as Treasurer-General at the Dutch Ministry of Finance succeeds Thomas Wieser, who has presided over the group since January 2012. Ministers also held a follow-up discussion on the further steps towards deepening of the EMU, were informed about the results of the 7th post-programme surveillance (PPS) mission to Portugal, discussed the draft Council recommendation on the economic policy of the euro area for 2018, and exchanged views on the International Monetary Fund's preliminary findings from its interim mission relating to the Article IV consultation with the euro area. 

"The Eurogroup has an important role to play before the March Euro Summit in helping to progress with our most urgent proposals – those concerning the Banking Union and the future of the ESM. I think there is a consensus these are the two more mature decisions."

Meeting on 23 January, EU finance ministers removed eight jurisdictions from the EU’s list of non-cooperative jurisdictions for tax purposes, following commitments made at a high political level to remedy EU concerns. Barbados, Grenada, the Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the United Arab Emirates were moved to a separate category of jurisdictions subject to close monitoring. The decision leaves nine jurisdictions on the list of non-cooperative jurisdictions out of the 17 initially announced on 5 December 2017. In other business, ministers discussed measures to address non-performing loans in the banking sector, examined growth prospects and macroeconomic imbalances under the European Semester, adopted the conclusions from the Commission’s Annual Growth Survey and Alert Mechanism Report, and approved a draft recommendation on the economic policies of the euro area. They also discussed the further development of EU economic and monetary union, as well as the priorities of the Bulgarian presidency regarding economic and financial affairs.

The European Investment Bank (EIB) announced on 26 January that it is providing a EUR 70 million loan to Austrian company AVL List GmbH (AVL) to help fund research, including R&D projects for hybrid and fully electric powertrains as well as advanced driver assistance systems for connected and autonomous vehicles. The EIB loan was made possible by the European Fund for Strategic Investments (EFSI), the main pillar of the Investment Plan for Europe (IPE). The EIB is also providing EUR 48 million in financing for the construction and operation of three new wind farms in Austria (Kreuzstetten IV, Dürnkrut II and Hipples II) with a total capacity of 39 MW. In Spain, the EIB signed a deal worth EUR 30 million with Empresa Municipal de Transportes (EMT) of Palma de Mallorca to replace the city’s all diesel bus fleet with more modern, safer, more comfortable and less polluting vehicles powered by compressed natural gas. The EIB also signed a EUR 100 million loan agreement with Spanish multinational Acciona on 19 January to help the company make strategic investments in sectors such as renewable energy, infrastructure and water treatment.

On 23 January, the report on “Boosting Investment in Social Infrastructure in Europe” was published and presented at a high-level event in the Charlemagne building in Brussels. Former Commission President Mr Romano Prodi gave a keynote speech, followed by Vice-President Jyrki Katainen, and almost 300 participants attended the event and contributed to a lively discussion. The report highlights that long-term, flexible and efficient investment in education, health and affordable housing is essential for the economic growth of the EU, the well-being of its people and a successful move towards upward convergence in the EU. The report addresses four specific questions: how is social infrastructure shaped in the EU today; what will social infrastructure look like 10 years from now; what are the EU's financial needs for social infrastructure in the future; and which financial instruments would be needed.

ECFIN Director-General Marco Buti delivered the keynote speech on “The Future of the EU fiscal governance” at the FIRSTRUN Final Conference at CEPS, a leading ​think tank and ​forum for debate on EU affairs, on 29 January. FIRSTRUN (Fiscal Rules and Strategies under Externalities and Uncertainties) is a project by a consortium of prestigious universities and economic policy institutes to conduct research and policy analysis on EU economic governance. In his comprehensive analysis, Marco Buti addressed key changes to EMU’s fiscal architecture since the crisis; assessed the current EU fiscal framework; and examined the future of EU fiscal governance, including the 6 December package. Buti concluded that while steps have been taken to breach EMU fault lines revealed by the crisis, the present set-up remains vulnerable to shocks and places too heavy a responsibility on the ECB. He also explained the difficulty in finding the right balance between EU and national levels, and between rules, institutions and market discipline, and noted that the proper sequencing of reforms is key. Regarding the roadmap for deepening EMU, Buti’s parting recommendation was to “fix the roof when the sun is shining.”    

In January, the Economic Sentiment Indicator (ESI) decreased slightly from its 17-year high in both the euro area (by 0.6 points to 114.7) and the EU (by 0.4 points to 114.7). The softening of euro-area sentiment resulted from markedly lower confidence in services and retail trade, while confidence in industry remained stable. By contrast, confidence increased among consumers and, in particular, construction managers. Amongst the largest euro-area economies, the ESI rose in Spain (+0.9), the Netherlands (+0.9) and Germany (+0.6) but decreased markedly in France (-2.4) and Italy (-1.7). The slightly softer decline of the EU ESI (-0.4) resulted from a steep improvement of sentiment in Poland (+5.0), while the ESI decreased in the largest non-euro area EU economy, the UK (-0.7). As opposed to the euro area, construction confidence in the EU decreased slightly due to plummeting confidence in the UK. In line with the euro area, confidence among consumers and in financial services improved in the EU, while it worsened in retail trade and services, while confidence in industry remained broadly unchanged. In January 2018, the Business Climate Indicator (BCI) for the euro area also edged slightly lower (-0.06 points to +1.54) from its highest level recorded since 1985 in December.

The Commission has proposed new rules to give Member States more flexibility to set Value Added Tax (VAT) rates and to create a better tax environment to help SMEs flourish. The proposals presented on 18 January are the final steps of the Commission's overhaul of VAT rules, which is intended to create a single EU VAT area that dramatically reduces the EUR 50 billion lost to VAT fraud each year in the EU, while supporting business and securing government revenues. The EU’s common VAT rules, agreed by all Member States in 1992, are out of date and too restrictive. They allow Member States to apply reduced VAT rates to only a handful of sectors and products. As a result of the changes, countries will be on a more equal footing when it comes to some existing exceptions to the rules, known as VAT derogations. Moreover, the new rules also address the problem of smaller companies suffering from disproportionate VAT compliance costs. Businesses trading cross-border face 11% higher compliance costs compared to those trading only domestically, with smaller players hit hardest. Under the new rules, VAT-related compliance costs will be cut by as much as 18% per year.