«President Berès, Members of the ECON Commission, Members of the European Parliament, Ladies and Gentlemen,
It is with great satisfaction that I come here today to present the final balance of the activities undertaken by the Ecofin Council under the Portuguese Presidency, thus ensuring the continuation of the very constructive relationship that we established at the start of our Presidency, when I informed you of our strategic objectives and of our priority lines of action in the Economic and Financial Affairs area.
I am pleased, on presenting to you today a summary of the main results achieved, to be able to witness the spirit of institutional cooperation that has prevailed in the links between the Portuguese Presidency and the European Parliament. This cooperation has been a decisive factor in allowing us to advance on multiple fronts, thus contributing to equip the European Union with the instruments that it requires to be equal to the opportunities presented and be capable of meeting the challenges that arise in an increasingly global world, providing a positive response to our citizens' concerns.
Without intending to be, in any manner, exhaustive in relation to the results achieved in the sphere of Economic and Financial Affairs, I would like to share with you today those results that seem to me to be most significant.
As you shall recall, to improve the quality of public finances in the Member States, through the strengthening of the budgetary framework and of public expenditure and revenue efficiency and effectiveness, was selected by the German, Portuguese and Slovenian Presidencies as a transversal theme to be developed over the course of this 18-month period, since it is an essential aspect to guaranteeing the sustainability of economic and social policies and economic growth rooted in solid foundations.
In this context, the Portuguese Presidency focused on the institutional aspects of the quality of public finances and, in particular, on the role that modern and efficient general government plays in the development of a competitive business environment and citizens' well-being.
The impact that the modernisation of public administration has on improving the efficiency of the State and on fostering competitiveness and growth was the topic of a workshop co-organised with the European Commission and one of the main themes under analysis at the informal meeting of Ministers of Finance in Porto, in September. Formal conclusions on this topic were adopted at the ECOFIN Council Meeting of October. The importance of public administration modernisation measures for the control over expenditure and for strengthening growth and jobs and, thus, their contribution towards achieving both the objectives of the Stability and Growth Pact and of the Lisbon Strategy were recognised. The reforms carried out in this field should therefore be subject to regular monitoring, particularly in the context of the National Reform Programmes, and the work to measure efficiency in the public sector and to evaluate the impact of the reforms on economic performance should be strengthened.
The implementation of the preventive and corrective arms of the Stability and Growth Pact, in an economically consistent manner, was also ongoing during this second half of 2007. I emphasise the conclusions adopted in the October ECOFIN Council concerning ways of improving the effectiveness of the Pact's preventive arm.
Also in relation to the implementation of the Pact, the regular budgetary surveillance exercise was carried out. The Programmes of Austria and the Czech Republic were analysed during the half-year period and, for the latter, the Council has approved a new Recommendation on the correction of its excessive deficit. The Council has assessed positively the compliance by Hungary and Poland of previous ECOFIN Recommendations and it has closed the excessive deficit procedure against the United Kingdom.
The approval of the legislative acts that will permit Cyprus and Malta to adopt the euro from 1 January 2008 was also a very significant development, which marked in a very positive way the commencement of our Presidency, as have had already been highlighted in my visit to this parliamentary Committee in July.
Another topic of great relevance to the Portuguese Presidency concerns the Lisbon Strategy for growth and jobs. The debate on the new cycle of the Lisbon Strategy was launched during this half-year, with the objective to contribute to the establishment, under the Slovenian Presidency, of the new Integrated Guidelines. The conclusions of the November Council consider the Lisbon Strategy is providing a coherent basis for the reforms required to modernise the European economies, improving the ability to adapt to rapid changes and to deliver leadership in the context of such changes.
There was consensus that the four priority reform areas identified in the March 2006 European Council - employment, knowledge and innovation, improving the business environment, energy and climate change - remain valid and up-to-date and that the Integrated Guidelines do not require a significant overhaul. The focus of the new upcoming cycle should therefore be on strengthening ownership, on implementation of structural reforms by the Member States and, in relation to the Community Lisbon Programme, on improving the coherence of reforms and on maximising positive spill-over effects.
The regular round of horizontal multilateral surveillance, assessing the progress obtained with the National Reform Programmes was also performed, with a focus this year on innovation and SME's, better regulation and competition, and the modernisation of labour markets. The Council conclusions show a globally positive situation, though it is acknowledged that additional effort in implementing structural reforms is required, namely in areas such as fostering competition, especially in the services sector and network industries, and in labour markets.
The Ecofin Council also provided its contribution to other topics of a transversal nature, such as flexicurity and migration, broadening the economic and financial dimension to be considered in the definition of policy in these areas. The ECOFIN Council expressed the need of ensuring that national flexicurity strategies are compatible with solid and financially sustainable budgets. As for the economic impact of migration, it highlighted the link with the labour market and with growth potential and, henceforth with the Lisbon strategy, but also that migration is no substitute for structural reforms.
As I had the opportunity to mention here in July, the achievement of significant progress in the field of «better regulation», constitutes a key vector of the Lisbon Strategy, since it is fundamental in stimulating productivity, competitiveness, competition and innovation. The significance of the progress already made in reducing administrative burdens, at national and Community level, was recognised in the Council conclusions adopted in October A number of areas where efforts need to be stepped up were also identified, and the European Commission has been invited to give particular focus to the needs of SME's and newly created enterprises.
The specific aspects of reducing the statistical burden were considered in the November Ecofin Council. The Council conclusions underline the need to find the right balance between minimising the response burden and preserving the quality of the statistics. They highlight that single reporting systems for different end uses must be supplied and that existing data must be integrated, namely through the intensive use of administrative data. The measurement of the statistical response burden must be improved and criteria to assess the progress made in their reduction must be developed.
In the field of statistical governance, I would like to highlight with particular appreciation the agreement reached in first reading with the European Parliament for the creation of the European Statistical Governance Advisory Board and the European Statistical Advisory Committee, which represents a very significant step towards a more efficient European statistical system.
The completion of the Internal Market, as a key vector to ensuring a globally competitive Europe, was another main priority of the Portuguese Presidency.
In this context, the reinforcement of the integration of financial markets and the regulatory and supervisory convergence are of particular significance. The Ecofin Council was particularly active in this field during the Portuguese Presidency, and I would especially like to report to you on the work undertaken in the areas I consider of uttermost relevance:
i) Firstly, on the deepening of the European Union's financial stability arrangements: Based on the discussion that took place at the informal Porto meeting between Ministers of Finance and Central Bank Governors - which provided for an agreement on common principles for the management of financial crises and on priority areas of work to be undertaken - the October ECOFIN Council adopted conclusions that permit to strengthen the effectiveness of cross-border crises management and crises resolution arrangements. In particular, the extension of the Memorandum of Understanding on cooperation and the exchange of information, signed in 2005 by banking supervisory authorities, central banks and ministries of finance has been formally agreed. This extension includes three new elements: i) the common principles that had been approved; ii) a common analytical framework for the assessment of systemic implications of a potential crisis; iii) practical guidelines regarding the procedures to take in potential cross-border crisis situations. A work programme timetabling this action and others to be developed with the objective of strengthening the effectiveness of the financial stability mechanisms in the European Union was also established.
ii) Secondly, I would underline the monitoring of the evolution of the economic situation and financial markets, in view of the turbulence and risk reassessment in the markets, triggered by the difficulties that arose in the sub-prime mortgage market of the United States.
The subject was debated at the informal meeting in Porto, and a joint statement was issued by Ministers and Governors. It was further analysed in the October ECOFIN, based on a contribution prepared by the Economic and Financial Committee. It was recognised that, on the one hand, the EU macroeconomic fundamentals remain strong and compatible with sustainable economic growth, and, on the other hand, that substantially higher uncertainty requires a permanent vigilance of the economic and financial situation. It was acknowledged that financial innovation contributes to important efficiency gains, but that it also raises important challenges for supervisory and regulatory authorities, namely in terms of structured financial instruments. Henceforth, the Council agreed on a work programme to be implemented until the end of 2008, in cooperation with the EU's international partners, primarily focussing on how to improve transparency and market functioning, including the role of rating agencies, as well as bolstering valuation processes and risk management in financial markets, including liquidity risk. This work programme was endorsed by the Heads of State and of Government in their informal meeting in Lisbon, in October.
iii) Thirdly, on the enhancing of the regulatory and supervisory framework of financial services, in the context of the review of the «Lamfalussy» process.
The ECOFIN Council of 4 December included an in-depth debate on this topic, on the basis of various contributions, in particular the final report of the Inter-Institutional Monitoring Group. It was recognised that the Lamfalussy process led to substantial improvements in the regulation and supervision of financial markets, in line with the better regulation objectives. Notwithstanding these progresses, areas in which the Lamfalussy process and structures can and must be improved were identified. In a context of growing market integration, the role of the Level 3 Committees in strengthening the convergence of supervisory practices and policies and cooperation between authorities should be reinforced. The conclusions identify this and other priority action areas and a work programme to be primarily implemented over the course of the next year. The debate further provided the conclusion that the Council should continue to closely monitor progress in these areas, with the objective of ensuring convergence in supervision and effective coordination over cross-border market players.
iv) Another very significant topic is the proposal for the Solvency II Directive. . This is an area in which Europe has taken a leadership role, providing the opportunity to significantly influence international standards in the insurance sector. The Portuguese Presidency has made work on this Directive a top priority, in order to contribute to its adoption by the Council and European Parliament in the near future. On the basis of the progress report from the Council's working group, the ECOFIN Council of 4 December held a policy debate on one of the most sensitive aspects of the new proposal ? capital support within insurance groups ? and agreed on deepening the work on the areas identified by the Presidency.
v) The agreement between the Council and the European Parliament on the «Comitology» Package also deserves a very particular mention. This Package is aimed at adapting financial legislation to the new regulatory procedures with control, which involved the amendment of 15 legislative acts in the financial service area. The spirit of institutional cooperation was once again a determining factor in achieving this common objective of agreement at the first reading.
vi) Without going into details I would just like to reference the debates held at Council level on the enhancement of the integration of securities' clearing and settlement systems in the European Union and of the European venture capital markets, as well as the broadening of regulatory dialogue with Europe's main partners in the world, in particular with the United States and China.
Moving on to another important operational arm of the Internal Market - Taxation - I would also like to highlight some of the main results achieved.
I would like to focus, first of all, on the VAT Package, a key priority to the Presidency. Following the conclusions of the June ECOFIN Council, we focused on finding solutions to the aspects that remained pending from that Council. Political agreement on the entire package was obtained at the Council of 4 December, following a preliminary debate in the ECOFIN Council of 13 November. In particular, it was possible to find a compromise solution on the taxation at the place of consumption for telecommunications, radio and television and electronic commerce services undertaken in the European Community between businesses and consumers..
A further priority of the Portuguese Presidency was the contribution to defining a Community-wide strategy for fighting tax fraud and evasion. As a means of contributing to the definition of this strategy, the Portuguese Presidency organised the international conference on «The Lisbon Strategy and fighting tax fraud», in Lisbon, on 28 September. The ECOFIN Council of 4 December adopted conclusions on combating tax fraud in the European Union, particularly in relation to VAT. The Council invited the Commission to present legislative proposals, in time for them to be debated in the first quarter of 2008, on conventional anti-tax fraud measures, as well as to present the reports on the impact of the introduction of more far reaching measures. The Council also provided the Commission with guidelines relative to the different elements that should be given priority in the establishment of an EU-wide anti-fraud strategy. It further requested that the Commission to report during 2008 on the progress made.
In relation to reduced VAT rates, the ECOFIN Council of 4 December agreed on a general approach on the draft Directive extending the derogations of five Member States to continue to apply reduced VAT rates until 2010. This draft Directive will be adopted soon, following the consultation of the European Parliament. The Council decided, in relation to the future scheme, to continue the analysis of the economic impact of the application of reduced rates and whether or not reduced VAT rates are appropriate to achieving sector objectives. The Commission announced its intention to present a legislative proposal on reduced rates in 2008.
In view of the importance of the contribution of tax policies to the improvement of environmental protection, the Portuguese Presidency gave new impetus to the work on the proposed car taxation directive. The orientation debate held at the ECOFIN Council of 13 November revealed the ample convergence of views with the approach proposed by the Presidency, to establish common objectives at Community level in relation to the inclusion of a differentiation in motor vehicle taxation based on the environmental performance, contributing in a combined manner to compliance with the obligations arising from the Kyoto Protocol. Nevertheless, various Member States consider that the Community does not have jurisdiction to legislate in this field, rendering progress unfeasible at this stage.
Also in thefield of taxation, the ECOFIN Council agreement of 4 December on the reformulation of the Directive on the taxation of the raising of capital in enterprises (capital duties), which aims to simplify and modernize the current.
The Portuguese Presidency of the ECOFIN Council committed itself, in close coordination with the European Commission, in the fulfilment of the external representation of the European Union, namely in the G20 meetings and in the alignment of member states' positions regarding IMF's reform and governance. The recent participation in the first and promising meeting of Finance Ministers on the Climate Change Summit in Bali should certainly be highlighted.
Finally, and despite the fact that a different Parliamentary Committee is involved, I would like to once more emphasise the excellent spirit of understanding with the European Parliament that permitted the approval of the budget for 2008, including the agreement reached on the multi-year financing for the Galileo project, for the European Institute of Technology, as well as additional funds for the CFSP mission in Kosovo.
Dear Members of the European Parliament,
It is with a feeling of duty accomplished, and the satisfaction derived thereof, that we pass the mantle on to our Slovenian colleagues, our partners in the Presidency Trio that established a common framework for the work to be undertaken by the ECOFIN Council between January 2007 and June 2008, intending, thus, to ensure greater consistency, sustainability and convergence in this work. I highlight, in this time full of uncertainties when citizens expect and demand from us leadership and decision capacity, the need to pursue and deepen the efforts in the domains more directly related to financial stability.
Drawing on my experience as President of the ECOFIN Council over these last six months, which have been enriching and challenging, I can conclude that it is only possible to bring about the advances that the European Union requires in order to be equal to the opportunities and challenges it faces, if there exists an enhanced spirit of responsibility, cooperation, solidarity and mutual comprehension between Member States and between institutions.
I am proud to note that this spirit was always present throughout this half-year, a decisive factor in the results attained thus contributing to the construction of a stronger Europe for a better world.»
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