The Chancellor of the Exchequer (Mr George Osborne)
The Economic and Financial Affairs Council was held in Brussels on 24 January 2012. Ministers discussed the following items:
European Markets Infrastructure Regulation (EMIR)
Ministers agreed a Council position on outstanding issues relating to the authorisation of Central Counterparties (CCPs) on EMIR. This will facilitate trialogues with the European Parliament. The Government have been clear that the national competent authority (NCA) must retain a pre-eminent role with regard to the authorisation of CCPs. I secured agreement that the Council position retained this principle. The Council position means that in order to block authorisation, a significant majority of an authorisation college must vote against the NCA. Furthermore, the Government also secured safeguards that mean the NCA has the option to take the decision to binding mediation facilitated by the European Securities and Markets Authority (ESMA). Finally, in order to maintain the objectives of the process, I secured a clause stating that any vote against an NCA is explained in writing setting out which provisions of EMIR and/or EU law have not been met.
I also secured a clause in EMIR to prevent discrimination against any member state as a venue for clearing services in any currency. This is related to a wider concern for the UK in relation to the ECB’s location policy that states that non-euro area based CCPs, which includes UK-based CCPs, which clear a certain threshold of euro-denominated products should move to the euro area. The UK considers that this policy is contrary to fundamental principles of EU law and is challenging the location policy in the European Court of Justice. This challenge is ongoing.
Proposals from the Commission on Economic Governance
Ministers exchanged views on the two Commission proposals to strengthen economic governance in the euro area. The first proposal would require euro area member states to present their draft budgets at the same time each year and would give the Commission the right to assess them. The second proposal would strengthen economic and fiscal surveillance of euro area countries facing, or threatened with, serious financial instability. On the first proposal, some Ministers raised concerns about the administrative burden and timing of the reporting requirements. On the second proposal, several member states noted that the recommendation of a country to receive financial assistance should require a consensus vote, in line with decisions to grant financial assistance. The presidency asked the working group to consider these issues further.
Presentation of the Presidency work programme
The presidency presented Ministers with its programme for ECOFIN for the next six months, identifying important areas of work. First, the presidency emphasised the need to implement the six-pack and take forward the new two-pack proposals on economic governance. The second priority is to improve the stability of the European banking sector through progressing financial services dossiers. Thirdly, the presidency emphasised the importance of tax co-ordination. Finally, the presidency noted the need to co-ordinate the EU position in international forums. The Commission and Ministers supported the work programme and agreed to support the presidency.
The presidency work programme is available at: http://eu 2012.dk/en/Global/Soegeresultat?q=work+programme &size=10
European Semester (including Annual Growth Survey and EuroPlus Pact)
The presidency outlined the timetable for the European semester and the Commission set out its priorities. I intervened to emphasise that fiscal consolidation is a necessary but not sufficient condition for restoring growth. Structural reforms are also needed, and the Council should have substantial discussions on these issues. The EU should exploit its full potential as a single market and negotiate trade agreements with third parties, to stimulate growth within the EU and elsewhere. I stated that I would support an EU growth test, to ensure that the regulatory burden of proposals are fully considered, not only in ECOFIN but in other Councils. I also made it clear that the Council should not spend time discussing a financial transactions tax when it is clear that there is no unanimity on the issue. Other Ministers intervened in support.
Follow-up to the G20 Meeting of Finance Deputies (Mexico, 19-20 January 2012)
The presidency and the Commission gave a debrief of the G20 Finance Deputies’ Meeting. Deputies discussed the global economy and framework, strengthening financial regulation and IMF resources. G20 Finance Ministers and central bank governors will meet in Mexico on 25-26 February.
Implementation of Stability and Growth Pact
Ministers discussed the Commission’s assessments of Belgium, Cyprus, Malta, Poland and Hungary’s progress on correcting their excessive deficits. The Commission assessed that the first four member states had taken effective action and no further steps under the excessive deficit procedure (EDP) were necessary. The Commission proposed that Hungary had taken no effective action to bring the deficit below 3% of GDP in a sustainable manner. The Council voted in favour of the Commission’s proposal. As Hungary is not a member of the euro area it cannot face sanctions under EDP. However, failure to take effective action to correct their excessive deficit could lead to the suspension of Hungary’s cohesion fund commitments. The Government believe that sound public finances are essential for sustainable economic growth.
Revised Code of Conduct of the Stability and Growth Pact
Ministers endorsed the revised code of conduct. The code of conduct provides guidelines on: the implementation of the stability and growth pact and the content of stability and convergence programmes. The code of conduct has been updated in light of the new economic governance legislation. The Government supported the revised code of conduct. The Commission and the Economic and Financial Committee will review the code of conduct again later in the year.
Eurogroup plus meeting on 23 January
Ministers met prior to ECOFIN on 23 January, to discuss the European stability mechanism (ESM) treaty and the intergovernmental treaty on stability, co-ordination and governance. Ministers reached agreement on the treaty establishing the ESM and agreed that entry into force of the treaty would be brought forward to July 2012. I intervened in order to secure agreement that, in line with the spirit of the agreement reached at the December 2010 European Council, there should be no new commitments from the European financial stabilisation mechanism as soon as the ESM is established. Heads of states and Government discussed the new intergovernmental treaty further at the Informal European Council on 30 January. The Government believe that the inter- governmental treaty should not undermine the operation of the single market, or otherwise infringe on areas of policy which are for discussion by all member states in the EU context. The intergovernmental treaty should not cut across the provisions and procedures in the EU treaties, or seek to bypass the prescribed procedures for amending the EU treaties.
Eurogroup debrief
The Commission debriefed Ministers of the eurogroup meeting over breakfast. The Commission are due to release their latest forecasts, which will take into account the downside risks the Commission identified last autumn. Ministers agreed that further discussion on euro area issues were needed.