Ecofin meeting reaffirms support for Growth and Stability Pact
The first meeting of Ecofin (European Union finance ministers) to be held under the Czech EU Presidency on Tuesday reaffirmed its support for the EU's Stability and Growth Pact despite a possible increase in budget deficits in some member states due to...
The first meeting of Ecofin (European Union finance ministers) to be held under the Czech EU Presidency on Tuesday reaffirmed its support for the EU's Stability and Growth Pact despite a possible increase in budget deficits in some member states due to the current difficult economic situation.
"While budget deficits will increase in many member states in the short run, and a number of member states will temporarily exceed the deficit reference value, we remain fully committed to sound and sustainable public finances. The Stability and Growth Pact provides adequate flexibility to deal with these exceptional situations. The adjustment path and recommendations will take into account this exceptional situation, as well as differences in fiscal space," the ministers said.
The Finance Ministers said they were all committed to return to their consolidation path towards medium-term budgetary targets as soon as possible, keeping pace with the economic recovery.
The Ecofin meeting stated that although the decisive actions taken by European governments last autumn contributed to the stabilisation of financial markets, "the economic situation is deteriorating fast and the latest Commission forecast shows that we are now facing a deeper economic downturn, which is expected to continue throughout the first half of this year".
The European Commission on Monday forecast that GDP growth in the EU is expected to shrink by 1.8 per cent (and by 1.9 per cent in the eurozone) this year before recovering moderately to 0.05 per cent in 2010.
EU Finance Ministers emphasised that restoring the proper functioning of credit channels is a very important task and that the EU's Economic Recovery Plan will be accompanied by structural reforms within the Lisbon Strategy.
"No radical overhauls of reform strategies are warranted and backtracking should be avoided. Furthermore, when implementing national measures, distortions of the single market should be avoided by adherance to competition and state aid rules," the ministers said.
They also said that any economic measures taken to stimulate the economy will take some time before having an impact and that the provision of capital to the banking sector was not intended to create new, higher statutory capital requirements for this sector. "The capital requirements of banks should continue to be assessed on a case-by-case basis, in line with existing EU regulations, based on their individual risk-profile and rigorous stress-testing," the ministers said. Speaking at a press conference at the end of Ecofin meeting Czech Finance Minister Miroslav Kalousek said that the council of finance ministers had asked the Czech Presidency to work on a proposal for reduced VAT rates in certain sectors.
This was first identified by the European Council in December which requested the council to settle the issue by March.
"While budget deficits will increase in many member states in the short run, and a number of member states will temporarily exceed the deficit reference value, we remain fully committed to sound and sustainable public finances. The Stability and Growth Pact provides adequate flexibility to deal with these exceptional situations. The adjustment path and recommendations will take into account this exceptional situation, as well as differences in fiscal space," the ministers said.
The Finance Ministers said they were all committed to return to their consolidation path towards medium-term budgetary targets as soon as possible, keeping pace with the economic recovery.
The Ecofin meeting stated that although the decisive actions taken by European governments last autumn contributed to the stabilisation of financial markets, "the economic situation is deteriorating fast and the latest Commission forecast shows that we are now facing a deeper economic downturn, which is expected to continue throughout the first half of this year".
The European Commission on Monday forecast that GDP growth in the EU is expected to shrink by 1.8 per cent (and by 1.9 per cent in the eurozone) this year before recovering moderately to 0.05 per cent in 2010.
EU Finance Ministers emphasised that restoring the proper functioning of credit channels is a very important task and that the EU's Economic Recovery Plan will be accompanied by structural reforms within the Lisbon Strategy.
"No radical overhauls of reform strategies are warranted and backtracking should be avoided. Furthermore, when implementing national measures, distortions of the single market should be avoided by adherance to competition and state aid rules," the ministers said.
They also said that any economic measures taken to stimulate the economy will take some time before having an impact and that the provision of capital to the banking sector was not intended to create new, higher statutory capital requirements for this sector. "The capital requirements of banks should continue to be assessed on a case-by-case basis, in line with existing EU regulations, based on their individual risk-profile and rigorous stress-testing," the ministers said. Speaking at a press conference at the end of Ecofin meeting Czech Finance Minister Miroslav Kalousek said that the council of finance ministers had asked the Czech Presidency to work on a proposal for reduced VAT rates in certain sectors.
This was first identified by the European Council in December which requested the council to settle the issue by March.