Review of the Eurogroup and ECOFIN Ministerial meetings on 17 and 18 January 2022 in Brussels
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Eurogroup
At the Eurogroup meeting on January 17, 2022, the topics of economic adjustment and resilience of the euro area in international comparison, challenges and policy measures with regard to vulnerabilities in the corporate sector and structural changes in the course of the COVID-19 crisis, the euro zone recommendations and the euro zone specific aspects of economic governance at euro area level are on the agenda.
At the start of the Eurogroup, the finance ministers discussed the economic adjustment and resilience of the euro area in an international comparison. First, the European Commission presented its findings. Laurence Boone, chief economist at the Organization for Economic Co-operation and Development, then introduced the debate, highlighting the differences and similarities between the USA and the euro area. Decisive policies would have both in the USA and in the euro area led to a rapid recovery. While the economy in the USA collapsed less severely and is recovering more quickly, the labor market in the euro area is less severely affected thanks to the crisis instruments. Federal Minister of Finance Christian Lindner welcomed the thematic discussion and praised the euro area’s effective crisis policy. Between the discussants and the I-Commission agreed that the economic recovery after the pandemic would be much faster than after the global financial market crisis. The member states that took the floor agreed that the European support measures had so far proven to be appropriate and suitable for containing the economic and employment policy consequences of the corona pandemic and for supporting the economic recovery. This is due in particular to the significantly better starting position before the pandemic. Further efforts to advance the Banking Union and Capital Markets Union, as well as the implementation of the Recovery and Resilience Facility (Recovery and Resilience Facility, RRF) are crucial for the crisis resilience of the euro area.
In addition, Eurogroup ministers held a thematic debate on the challenges and policies related to vulnerabilities in the business sector and structural changes in the wake of the COVID-19 pandemic. The focus of the discussion was on the national perspective, in particular on reforms of insolvency law and experiences with issuing guarantees by individual member states. There was agreement that the measures taken have successfully contained the economic consequences of the pandemic. In particular, the feared wave of insolvencies did not materialize during the pandemic. There was broad support for the need for continued close monitoring of further developments, not least with a focus on small and medium-sized enterprises.
The Eurogroup approved the so-called Eurozone Recommendations. On November 24, 2021, the European Commission presented proposals for the euro zone recommendation as part of the European Semester. As usual, the eurozone recommendations relate to structural reforms, fiscal policy, the labor market and social policy, financial market policy and the further development of economic and monetary union.
At the end of the Eurogroup meeting, a first exchange took place on the eurozone aspects of economic governance, the so-called Economic Governance Review. Ministers discussed the fiscal framework for the euro area and surveillance of program countries after the end of the adjustment programme. Federal Finance Minister Christian Lindner advocated more effective use of draft general government budgets to support fiscal sustainability and called for a return to quantitative fiscal policy recommendations. He was not convinced of the need for a fiscal capacity at European level. There were differing opinions on this.
With regard to the post-program monitoring of the program countries, the member states that took the floor indicated their satisfaction. A number of Member States were open to small technical adjustments and some streamlining of processes; the discussion will continue in due course. As for the draft provisional budgets, it was agreed that the review process was working well and was useful for national debates. Some member states complained about a loss of effectiveness during the pandemic and called for the process to be strengthened again.
At the Eurogroup in an inclusive format, the focus was on the current status of consultations on the banking union. The ministers exchanged views on the status of the banking union, in particular on how to proceed with regard to the preparation of a mutually agreed, multi-stage work plan with deadlines for all outstanding elements. There was no in-depth discussion of the content. Eurogroup President Paschal Donohoe announced that he intends to come up with a proposal of his own. A constructive dialogue process has started.
ECOFIN-Rat
At the meeting of ECOFINMinisters on January 18, 2022, the following items were on the agenda: the proposal for a directive to introduce a global effective minimum taxation of multinational companies in the European Union (EU), the priorities of the French Presidency, the status of implementation of the recovery and resilience facility , Council conclusions on the Annual Sustainable Growth Strategy and the Early Warning Report 2022 and the recommendations on the economic policies of the euro area, the preparation of the meeting of the G20-Finance ministers and central bank governors in February 2022, the focus of the German G7-Presidency and a report by the European Investment Bank (EIB) on investment.
The orientation debate on the draft directive on global effective minimum taxation of multinational companies – Pillar 2 of the broad agreement on the so-called two-pillar project – dominated the ECOFIN. The timetable of the French Presidency is very ambitious: France expects the legal text to be adopted ECOFIN in March before. Almost all Member States took part in the debate. Federal Minister of Finance Christian Lindner welcomed the prompt submission of the proposed directive and emphasized that the ambitious schedule must be adhered to. This is an important signal of Europe’s ability to act in an important global dossier for fair taxation and against harmful tax structuring.
In addition to Germany, the overwhelming majority of member states supported the draft directive in principle I-Commission and France’s ambitious plans and advocated rapid implementation of the directive. A few Member States were more critical and called for a close legal link between the introduction of the global minimum effective taxation (under Pillar 2) and the implementation of Pillar 1 (reallocation of taxing rights). The Presidency, the European Commission and Germany disagreed.
In addition, French Finance Minister Bruno Le Maire outlined the priorities of the French Presidency ECOFIN that aim in particular at consolidating the upswing. He announced that the informal ECOFIN in February, with a view to preparing for the informal summit of heads of state and government in March, on a new fair, sustainable and innovative economic model, which is one of the guiding principles of the French Presidency. In its brief intervention, the European Commission welcomed the general objectives of the French Presidency, stressing in particular the importance of the areas of economic governance, banking union, capital markets union, international taxation and the fight against money laundering. No Member State intervened.
Under the agenda item “Economic recovery in Europe”, they exchanged views ECOFIN-ministers on the implementation status of the recovery and resilience facility. As an introduction, the European Commission informed: The assessments of the Commission on the recovery and resilience plans of Sweden, Hungary, Poland and Bulgaria are still pending. The Commission is in contact with the competent authorities.
A total of 20 Member States have so far received pre-financing. The focus now is on implementing the plan. Payment requests from France, Greece and Italy were currently being examined; in December 2021 there is already a first payout of 10 billion euros to Spain. The French Presidency concluded by stressing that progress had been made in implementing the RRF be central.
Under the “European Semester” agenda item, the Council conclusions on the 2022 early warning report, the 2022 strategy for sustainable growth and the proposal for the euro zone recommendation were adopted by the Council without the Member States speaking.
Then it became G20-Finance ministers and central bank governors meeting prepared for February 17-18. The French Presidency proposed, as usual, to entrust the Economic and Financial Committee with the elaboration of the “I Terms of Reference“ to commission this I– Mandate until G20-February meeting to finalize.
Under “Miscellaneous”, Federal Minister of Finance Christian Lindner briefly outlined the priorities of the Finance Track 2022 taken over by Germany in January G7-Presidency. On the one hand, the focus is on the global macroeconomic recovery. On the other hand, you want the debate Crypto Assets and digital currencies, as well as work on other topics such as climate policy. The European Commission stated that the pandemic had shown the importance of the body. The European Commission expressed support for the German proposal for a climate club.
Finally, the President of the European Investment Bank, Werner Hoyer, presented the key findings of the 2022 Investment Report. He initially presented the importance of the European Guarantee Fund for the economic recovery in the I out. Overall, the investment report paints a positive picture of the 12,500 companies surveyed in the I. Thanks to the impressive political response, an economic collapse was averted. While companies said they are adapting to the economic situation and investing in digitization and greening, there are uncertainties related to the pandemic and high energy prices are having a negative impact on economic activity. Overall, the investment report gives cause for confidence. However, further efforts are needed. The European Commission shared the assessment that challenges remain and emphasized in particular the importance of the recovery and resilience facility.
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