EU Funding: Informal meeting of the EU economy and finance ministers

At their meeting in Nice, chaired by Christine Lagarde, the EU economy and finance ministers and governors of the central banks agreed on a joint response to confront the economic slowdown and restore confidence in the financial markets.

The EU economy and finance ministers and the central bank governors established a common diagnosis on the economic situation in Europe. Growth is weaker than expected due to a triple shock: inflation; change; and the impact of the financial crisis.

In this context, the economy and finance ministers and the governors are determined to act together to implement a consistent and coordinated response at European level to take full advantage of the more favourable recent developments: the slowdown in inflation following the decrease in oil and raw commodities prices and the more favourable euro exchange rate.

They decided to mobilise common and national policies to respond to situations that may vary from one country to another.

They supported the Presidency’s proposal to take a coordinated response based on four pillars:

- In budgetary matters, the Member States could let the automatic stabilisers work to support activity, while continuing their efforts to control spending and respect the 3% deficit limit
- The structural reforms should be continued as they contribute to restoring purchasing power by increasing competition
- The European Investment Bank (EIB) will support SME funding, thanks to the increase in its financial means (by 15 billion euros in 2008-2009, or more than 50% over two years, and 30 billion by 2011)
- Lastly, in financial matters, measures aimed at restoring confidence through increased transparency and accountability will be implemented without delay. The ministers and governors had verified compliance with the transparency recommendations made to the banks for the publication of their half-year results.

The economy and finance ministers and governors also debated a better coordination of the controls and supervision of financial players in Europe.

They pronounced themselves in favour of a standardised application of EU rules by supervisors. To this end, the data sent by banks to the supervisory authorities would be harmonised by 2012.

The Presidency also proposed solutions for enhancing the coordination of the various national authorities that supervise financial groups operating in several European countries.

Lastly, the ministers debated using lower VAT rates as an instrument of economic policy and agreed that the smooth functioning of the internal market should be taken into account in this analysis. They discussed the economic arguments which could justify additional recourse to reduced rates (some countries wished to lower VAT to create jobs, lower consumer prices, or to discourage the underground economy), and the issues for public finance.  These discussions will be continued at the ECOFIN Council in October on the basis of facts provided by the Commission.

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