Date of release : 12-04-2005

Policy area : Economic and Financial Affairs Economic and Financial Affairs

Event : Economic and Financial Affairs Council

The Ministers for Finance from the 12 member countries of the eurozone, as well as the Ministers for Finance from the 25 Member States of the European Union, met in Luxembourg on 11 and 12 April 2005, first as the "Eurogroup" and then as the "Economic and Financial Affairs" Council.

The two meetings were presided over by the Prime Minister, Minister for Finance, Jean-Claude Juncker, in his capacity as President elect of the Eurogroup and current President of the "Economic and Financial Affairs" Council, as well as by the Minister for the Economy and Foreign Trade, Jeannot Krecké.

The Minister for the Treasury and the Budget, Luc Frieden also attended the meeting of the "Economic and Financial Affairs" Council.

Meeting of the Eurogroup

The Ministers for Finance from the member countries of the eurozone studied the budget situation within the eurozone, especially that of Germany, France, Greece, Italy and Portugal. According to Jean-Claude Juncker, the budgetary trends in these countries "continues to cause us concern", and they must be "monitored very closely".

As for Italy, the Eurogroup acknowledged the European Commission’s intention to prepare a report by June based on Section 104(3) of the Stability and Growth Pact. Since it is expected that Italy will not be able to adhere to the 3% cap on deficits in 2005, this report would constitute a precursor to the excessive deficit procedure.

As for the Netherlands’ budget status, the Eurogroup reported that this country made a downwards correction to its excessive deficit and, as expressed by Jean-Claude Juncker, "demonstrated model behaviour", so that the European Commission will propose abandoning the excessive deficit procedure against the Netherlands next month.

The Ministers also acknowledge that the Greek government has made concerted efforts to stabilise its budget, which should allow it to drop below the 3% deficit line in 2006; consequently, no additional measures will be imposed at this time.

Regarding preparations for the meeting of the G7 Ministers for Finance this weekend in Washington, Jean-Claude Juncker stated his desire to stick "word for word" to the statement the G7 made about exchange rates in London last February.

The Eurogroup also expressed its desire to see the Asian countries demonstrate greater monetary flexibility. "An organised valuation of certain Asian currencies is absolutely necessary," President Juncker stated on this matter, going on to specify that certain Asian countries also had their role to play in the struggle against the negative effects of the valuation the euro has undergone.

Regarding the increase in the price of oil, the Eurogroup expressed, in the words of its President, its "concern over the current situation." For Jean-Claude Juncker, "the current level of prices is beginning to hamper growth in Europe. For this reason, the European Commission was invited to update its discourse on the impact the increase in petrol prices has on growth."

Meeting of the "Economic and Financial Affairs" Council

The "Economic and Financial Affairs" Council held a long debate on the status of the directive on taxation on savings. While the Council was able to report that substantial progress had been made towards Member States implementing the directive and towards equivalent measures in affected third party countries and dependant and associated territories, it is clear that differences still exist between the European Commission and several Member States regarding how the directive is applied to certain financial products.

Faced with this situation, the Luxembourg Presidency proposed several formulas as compromises, one of which ultimately was unanimously accepted by the delegations.

This formula stipulates that "the directive applies to all interest payments made as from 1 July 2005 (date on which the directive is implemented), excluding the proportion of said interest accrued prior to that date." The compromise stipulates "that only income derived from mutual fund organisations that directly or indirectly invest only 15% or less of their assets in debts can be excluded from the definition of interest payments." In order to ensure that these provisions are equally applied to affected third party countries and dependant and associated territories, the Member States, the Commission, pertaining to third party countries, as well as the Netherlands and the United Kingdom, in association with associated or independent countries, "will each guarantee in writing or assure that the written guarantees are made so that all parties act in full compliance with the provisions applied to mutual fund organisations."

The "Economic and Financial Affairs" Council will verify the existence of all of these written enforcement guarantees during its meeting in June 2005.

The Council acknowledged the presentation by the European Commission regarding the integrated guidelines, particularly the Broad Economic Policy Guidelines.

The Presidency submitted to the Council the negotiating box for the financial perspectives for the period 2007-2013.

The Council then acknowledged the Commission’s presentation of budget notices on 1 March 2005.

The Council also reflected on a document from the European Commission regarding financing development aid. Discussions on this topic will appear at the forefront of the agenda for the informal Ecofin meeting in Luxembourg on 13 and 14 May 2005.

Lastly, the Council agreed on the advisability of a new directive being drafted by the European Commission regarding excise taxes on alcoholic beverages in order to adjust for the effects of inflation since 1992, the last time these rates were updated.