Press release 72/2006
Finance Minister Heinäluoma will represent the European Union at the G-20 meeting
The core objectives of the Finnish EU Presidency are to promote the preconditions for economic growth and employment in Europe and strengthen Europe’s role in the global economy. The key means for achieving these objectives include ensuring a stability-oriented fiscal policy and speeding up economic and structural reforms.
The EU Presidency also creates more international tasks for the Finnish Ministry of Finance. Eero Heinäluoma, the Minister of Finance, will be chairing the Ecofin Council of Ministers’ meetings in the autumn, and will be vice-chairman of Eurogroup meetings. Heinäluoma will also represent the European Union in September at the IMFC meeting of the International Monetary Fund in Singapore, and in November at the G-20 meeting in Melbourne.
In September Finland will host the informal Ecofin meeting in Helsinki, in which the EU Member States’ Ministers of Finance and Governors of the central banks will participate.
Focus areas of the Ecofin Council
In the autumn of 2006 the activities of the Council of Ministers will be guided by a multi-annual (2004-2006) strategic programme, a more detailed Council work programme drafted by Austria and Finland, and a special Ecofin Council work programme for 2006, now updated by Finland. The scope of the Ecofin Council covers some 50 issues.
Strengthening the coordination framework for economic policy
During the Finnish Presidency, economic policy coordination will be further strengthened on the basis of the revisions made a year ago to the Stability and Growth Pact and the Lisbon Strategy. The reform of the Stability Pact will be evaluated. Member States will update their National Reform Programmes in the autumn of 2006 and report for the first time on their implementation.
The objective in the implementation of the Stability and Growth Pact is to support a clear interpretation of the new elements that were included in the pact in 2005. It was then decided that each Member State defines its own medium-term objective for public finances. The implementation of the reform of the Pact will be assessed on the basis of the Commission’s communication. The aim is also to intensify the discussion on public finances and examine these issues further in the context of the assessment of the stability and convergence programmes.
Stability and integration of the financial markets
During its Presidency, Finland will pay attention to the stability of the financial markets. It aims to further improve the financial markets crisis management organization and the necessary capacity in view of the increasing integration of the financial markets.
Finland aims vigorously to promote the preparation of financial markets legislation. A payment services directive, supervisory assessment of transactions in shareholdings and clearing and settlement in securities trading will be key projects.
Alcohol taxation
In the EU, national tax rates on alcohol differ substantially from one country to another, which has caused distortion in the functioning of the Single Market. It is necessary to harmonize the tax rates to even out the price levels of alcohol. The aim of the Finnish Presidency is to raise the EU minimum excise duty rates on alcohol particularly with regard to spirits.
Value added tax
Over the last two years, the Ecofin Council has discussed a package of proposals regarding the modernisation and simplification of the value added tax system. The aim of this VAT-package is to improve the functioning of the single market, by reforming the provisions on the place of taxation for services and by simplifying value added tax obligations for traders.
The aim of the proposal on the place of taxation for services is to change the place of taxation so that tax would as often as possible be levied in the country of consumption. The aim of the proposals to simplify value added tax obligations is to reduce the compliance costs of taxable persons engaged in cross-border business with the value added tax provisions. The core of the simplification proposal is the single point of contact system. The proposal also includes a revision of the refund procedure in accordance with the eighth directive.
Finland will continue discussing the topic with the aim of achieving political agreement by the end of the year.
Enlargement of the euro area
In July, the Ecofin Council will adopt the necessary legal instruments enabling Slovenia to adopt the euro from 1 January 2007. This isgoing to start a new stage on the enlargement of the eurozone. In accordance with the Treaty, the eligibility of Member States with a derogation must be assessed at least once every two year. In November the fulfilment of the criteria will be evaluated when the Commission and the ECB draw up regular convergence reports. The reports will be discussed by the Council in due course, and the question of to what extent the Member States with a derogation fulfil the criteria for a high degree of sustainable convergence and the prerequisites for adopting the single currency will be addressed.
Renewal of the European Investment Bank’s external lending mandate
The Council will decide in Autumn 2006 on new EIB external lending mandates. The decision will define the loan guarantees assigned to different geographical regions outside the EU. New general external lending mandates may cover new regions, taking into account enlargement and the EU’s revised neighbourhood policy. Finland’s aim is that the new lending mandates support the EU’s neighbourhood and partnership policies in a reasonable balanced way.
Other focus areas
Concluding the Agenda 2007 negotiations
In May 2006, the Council, the Parliament and the Commission signed an agreement on the size of the financial frameworks for 2007-13. This agreement makes it possible to bring various policy programmes to a conclusion during the Finnish Presidency. Concluding negotiations on policy programmes before the new Programming Period starts in 2007 is very important to avoid unnecessary delays.
The 2007 Budget is the first one in the 2007-13 financial framework. The aim is to concentrate on the full implementation of the effects of the new frameworks. Particular attention will be given to making the financial administration more effective and developing administrative methods.
The aim is that the Council’s decision on the system of the European Communities’ own resources will be finalized during the Finnish Presidency.
Regulatiory reform
Better regulation is part of the EU?s horizontal decision making. The aim is to include previously agreed commitments in the practical work of the Council. Improving the quality of legislation will require commitment and cooperation from all institutions concerned. Better regulation, and mainly its Administrative burden reform will be discussed at the October Ecofin Council The Commission will be expected to report on the assessment of administrative costs to enterprises which, since the beginning of the year, have been an integral part of the impact assessment of new EU legislation.
Global competition, innovation and productivity
In the pressure of global competition, the economic success of the European Union is increasingly dependent on the ability to adapt and change. A sound basis for innovation has been established by increasing investment in research and product development. Innovation is of key importance to increasing economic growth, productivity and competitiveness.
From the point of view of the Ecofin Council, innovation policy is vital both for more efficient R&D financing and for promoting the growth potential of the economy. Overregulation in the Single Market and legislative and structural obstacles continue to be problems for Europe. State aids have also mainly maintained old structures. In addition, Europe’s problem is that the financial markets do not adequately support growth oriented entrepreneurship and risk-taking.
The informal Ecofin in September will focus on innovations, on how they are put to use, and their effects on productivity. Particular attention will be given to eliminating obstacles to risk-taking and growth oriented entrepreneurship. These are key issues when the foundations are being laid for future competitiveness and increasing growth potential.
Energy
In the future, the development of the energy market will become more significant for macroeconomic stability and sustainable growth. In this perspective, the ECOFIN Council will present its own contribution to the debate on how energy efficiency could be improved and the security of the energy supply promoted for as competitive a price as possible, while also taking into consideration the objective of sustainable development.