Economic and Financial Affairs

Six successes in the shadow of the economic crisis

18 December 09:44

Sweden took over the Presidency at a time when the EU faced major challenges in the wake of the severe economic crisis. A new architecture for financial supervision, exit strategies from Member States' crisis measures, new financial market regulations, better conditions for crisis management, fighting VAT fraud on emissions rights and a new growth strategy for Europe are six issues on economy and finance ministers' agenda on which the EU made important progress in the autumn.

Managing the crisis is the main task

The overriding aim of the Swedish Presidency is to continue dealing with the financial and economic crisis and safeguarding longer-term growth and employment potential. This includes mitigating the effects of the current decline as well as promoting measures that facilitate a rapid yet sustainable recovery. In parallel, it will be crucial to push ahead with further efforts to improve the functioning of credit and capital markets.

The Presidency is prepared to take the further initiatives that may be required to successfully combat the economic and financial crisis.

The reform of the current supervisory and regulatory frameworks for financial institutions in the EU will continue. The Swedish Presidency will take forward the important work conducted by the French and Czech Presidencies.

The measures to be taken should seek to create a robust and effective EU-wide framework for macro- and micro-prudential supervision, aiming at, inter alia, improved stability and protection against future financial crises in the EU. One of the priorities will be to reach concrete results on the future supervisory architecture in the EU. Legislative proposals to that end are envisaged for September.

Furthermore, work is foreseen on legislative proposals concerning the Capital Requirements Directive, including remuneration issues and prudential rules mitigating pro-cyclical effects. There will also be work done on a revision of the Prospectus Directive.

In addition, the Swedish Presidency will take forward the negotiations on the Directive on Alternative Investment Fund Managers (AIFMs), under which managers of all types of funds (hedge funds, private equity, etc.) will be subject to a stringent regulatory regime.

As a response to the financial crisis, the EU needs to strengthen financial stability arrangements with a view to enhancing its crisis management and resolution capabilities. The Swedish Presidency aims to reach an agreement on relevant policy actions and a timetable for their implementation.

It is important, particularly in times of crisis, to use resources efficiently and to maintain robust public finances. In addition, measures taken to address short-term problems should not run counter to what is desirable in a longer-term perspective.

The current downturn has put significant pressure on national budgets, with increasing deficits and debt levels. Restoring sustainability to public finances is a priority.

To that end, a credible application of the Stability and Growth Pact is essential. There is a need to formulate a strategy on how Member States should reverse their large budget deficits. Also, progress must be made on how to tackle the long-term challenges posed by ageing populations.

Looking ahead, increased unemployment will be one of the most demanding challenges. The way we deal with labour market issues today will largely determine the EU’s future economic growth potential and safeguard that we maintain a socially inclusive society.

There is a need to focus both on those becoming unemployed now and on those already unemployed and furthest away from the labour market. Preventing unemployment from becoming persistent is crucial, not least in the perspective of an ageing population. Active labour market policies are particularly important in maintaining employability, a policy line of importance also to avoid the resurfacing of protectionist pressures.

The effects of the economic crisis will be felt not just in the short run. There is an obvious risk that potential growth will be affected for a prolonged period. The risks related to unemployment persistence merely underline this. Thus, the need to push ahead with a comprehensive strategy for sustainable growth and full employment is greater than ever.

We need a revitalised strategy that transforms our Union into an economy which has the ability to reap the benefits of globalisation. Specifically, this means promoting investment in human capital and research, restoring public finances to a sustainable path and further improving the framework conditions for business and innovation with the vision to create an eco-efficient economy. The positive impact of greater labour force participation on growth and welfare must also be emphasised. Greater access to affordable childcare and tax systems favouring labour market entry will boost female employment.

Most importantly, successful implementation of the Lisbon Strategy requires strong national and regional ownership, efficient benchmarking and evaluation as well as robust institutional frameworks underpinning increased productivity and long-term growth.

The ECOFIN Council will discuss key aspects of these policies with a view to contribute to the design of the Lisbon Strategy post-2010.

Climate change is one of the main challenges facing the world. A top priority of the Swedish Presidency will be to achieve significant progress in climate negotiations, particularly at the Copenhagen Summit in December 2009, where the goal is an ambitious and credible international climate agreement which includes real and significant emission reductions.

The financing aspect is a key issue in the international negotiations. The ECOFIN Council will play an important role in the EU preparations prior to these negotiations. The objective is to develop a financing agreement in the run-up to Copenhagen that will lead to sufficient mitigation and adaptation actions.

The use of cost-effective economic instruments, such as a carbon dioxide tax and emissions trading, has a key role in climate policy. The Presidency will initiate a discussion of how economic instruments can best be used to that end. The Presidency supports the ongoing work by the Commission to revise the Energy Taxation Directive. An essential part of such a revision is the introduction by Member States of a carbon dioxide tax in sectors not covered by the EU Emissions Trading Scheme.

Coordinating Europe’s economies

EU finance and economics ministers meet in the ECOFIN Council approximately once a month. The ECOFIN Council discusses such matters as economic policy coordination, economic surveillance and monitoring of Member States’ budgetary policy and public finances. Tax issues, the euro, financial markets, and economic relations with countries outside the EU are also discussed. Every year, the ECOFIN Council prepares and, along with the European Parliament, adopts the budget of the European Union. During the Swedish Presidency, the ECOFIN Council will be chaired by Anders Borg, Minister for Finance.

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