The Financial Secretary to the Treasury (Mr Mark Hoban)
The Economic and Financial Affairs Council was held in Brussels on 10 July 2012. Ministers discussed the following items:
Economic governance—“two pack”
The incoming Cypriot presidency updated Ministers on the process to be followed for trilogue negotiations with the European Parliament on the “two pack” of economic governance proposals. The Parliament has suggested changes to the proposals. The Council confirmed that the general approach it agreed on 21 February would be the starting point for the negotiations: the first working-level meeting with the Parliament was scheduled for 11 July.
Revised capital requirements rules (CRD4)
The presidency briefed Ministers on progress made in trilogue negotiations, and expressed its wish to finalise the negotiations as soon as possible. It had already held its first trilogue and had scheduled further meetings very soon. It will aim to achieve adoption of both the directive and the regulation at first reading, though it acknowledges several outstanding issues requiring resolution—including the mechanism for member states to impose additional prudential requirements, remuneration policies, crisis management, sanctions, the balance of power between the authorities of “home” and “host” countries, corporate governance, and the powers of the European Banking Authority (EBA). The UK favours a full and faithful implementation of Basel 3 in the EU and member states having the flexibility to increase minimum standards in order to protect financial stability in their jurisdiction.
Proposal for Bank Recovery and Resolution Directive
The Commission presented its proposals for a directive, which the Council noted, and Ministers held a preliminary exchange of views. The presidency’s aim is for the Council to agree a general approach by December.
Presentation of the Cyprus Presidency Work Programme
The new presidency presented its work programme on economic and financial affairs for the next six months. It will prioritise implementation of recently adopted initiatives on economic governance, fiscal consolidation, strengthening the European financial services framework and accelerating structural reforms, as well as some tax issues. Ministers exchanged views on this: I highlighted the European Commission’s €15 billion upward revision to its June proposal for the 2014-2020 multi-annual financial framework, which was already unaffordable, and called for re-prioritisation of the EU budget. The Council took note of the presidency’s programme.
Follow-up to the European Council on 28-29 June 2012
Ministers discussed work required to follow up the June European Council discussions, on establishing what has been termed “genuine economic and monetary union” and a banking supervisor. On the latter, the Commission will present proposals, expected in the autumn: the Council held a preliminary exchange of views in advance of these. I intervened to welcome the European Council’s commitment to the integrity of the single market and to highlight the need to protect against its fragmentation—such as discrimination between the euro area and euro “outs”—and I pointed out that banking union makes sense for the euro area, as mutualised risk should be accompanied by mutualised control.
European Semester
The Council adopted the recommendations to member states on their economic and fiscal policies, and the specific recommendation on the economic policies of the member states of the euro area. As required by the “comply or explain” principle established by economic governance legislation agreed last year, the Council provided explanations of its modifications of Commission proposals and recommendations.
Ministers also discussed the European semester more broadly and suggested ideas for improving the process in 2013. The presidency called for further discussions at Council meetings scheduled for the autumn.
Spain’s Excessive Deficit Procedure
In a late addition to the agenda. Ministers agreed to extend Spain’s deadline to correct its deficit under its excessive deficit procedure. Spain will now have until 2014 to bring its deficit below the EU’s 3% of GDP reference value.
Other business
The Council agreed to recommend the nomination of Yves Mersch (currently Head of Luxembourg’s central bank) to the executive board of the European Central Bank (ECB). This recommendation will be submitted to the European Council for a decision, after consultation with the European Parliament and the ECB’s governing council.