Speeches, Interviews

Speech of Finance Minister Karl-Heinz Grasser addressed to the Members of the Economic and Monetary Committee of the European Parliament

I am pleased to have the opportunity to present the priorities of the Ecofin Council for the next six months to your committee and to have an exchange of views on these priorities. I would also like to take advantage of this opportunity for assuring a close partnership co-operation of the Austrian Presidency with the European Parliament.

Europe faces major challenges both on the political as well as on the economic side; I am convinced that Europe will be able to tackle these challenges successfully. It is our com-mon task and responsibility to put growth and employment on top of our agendas; and it is our common task and responsibility to ensure incomes and prosperity as well as fair and attractive life and working conditions. This requires a much more pro-active approach to globalisation. We also have to ensure that the opportunities of globalisation will be used in the best way. We have to provide answers to the fears of our citizens and we have to bring Europe closer to them.

The Austrian Presidency wants to contribute to meeting these challenges. We want Europe's potential, its capabilities and innovative powers to be used more efficiently. For this we need the support of the European Parliament, and we also need a close co-operation between the European Parliament and the Council.

Increasing Growth and Employment

The main objective still is to increase growth and employment throughout Europe and to strengthen Europe's position in the global marketplace.

We as Presidency will make this work our top priority, and we have a clear context for pur-suing these ambitions, since the Spring 2005 European Council agreed not only a renewal and re-design of the Lisbon Strategy, but also a reform of the Stability and Growth Pact. Both of these elements have the specific purpose of setting all Member States' na-tional policy responsibilities in the European context. Structural reforms must be pursued as a coherent programme within and across Member States, while stability-oriented fiscal policies throughout the EU will be the platform for, and not an obstacle to, improved growth performance.

Member States must all take their responsibilities, since the European context is one of economic policy coordination, not of the definition and imposition of a single economic policy prescription. But we will all benefit if we can coordinate effectively, since in the end we are all pursuing the same overall objectives - better growth performance, more jobs and greater prosperity for our citizens in the global economy.

Economic policy co-ordination

The key to all of this will be the effective implementation of the re-launched Lisbon proc-ess. For the first time, we have comprehensive National Reform Programmes covering all the priority actions that Member States are undertaking to improve their economic per-formance. It will be essential that we make the best use of this opportunity to highlight the responsibility, and also the desire, of Member States for genuine reforms that will bring lasting benefits.

As in previous years, the Ecofin Council will prepare a Key Issues Paper for the discussion of the Head of States and Government which should provide guidance for future priorities on economic and fiscal policy. The main objectives are: more coherence between policy areas (macroeconomic policy/ structural policy) and policy levels (Community level/ Mem-ber States), clear orientation for the next round of national reform programmes, and benchmarks fur the evaluation done by the Commission afterwards.

We are very much interested in an in-depth discussion of the Head of States and Govern-ment in order to increase the national ownership of this reform process. The key topics from my point of view are research and development, SMEs and labour markets. 

Sustainable public finances

Achieving sustainable public finances in addition to structural reforms is the second cornerstone of sound economic policy. It is necessary in itself, and it also provides the platform of confidence from which investment, increased employment and greater prosper-ity can be launched.

The revision of the Stability and Growth Pact agreed in 2005 explicitly recognises the need to support structural reforms which will increase growth, as well as the need to step up fis-cal consolidation efforts when economic times are good. Well, economic times are becom-ing good now, so it is time to pursue the twin ambitions of budgetary consolidation and structural reform in parallel, to provide a solid basis for a brighter future.

As Presidency, we will oversee a rigorous application of the Pact's new framework so as to ensure sustainable public finances for the long term, based both on lower deficits and debt and on the implementation of the necessary structural reforms. Again, Member States will have to take their responsibilities and the Council will help them to do so, through peer support wherever we can, and peer pressure wherever we must.

Better regulation

Once a framework of macroeconomic stability is in place, and once the essential economic reforms outlined in the Lisbon process are in place, then it is up to the individual dynamism of our businesses to provide the real engine of growth and the real competitive edge in the global economy. That is why the conditions in which they operate should be designed to encourage innovation and entrepreneurship, and this is why we will be pursuing further improvements in the regulatory environment.

From our point of view it seems necessary also to have an in-depth discussion on the ad-ministrative costs of the implementation of Community programmes within the framework of this initiative. In some cases these are very high. Given the ongoing negotiations on the financial perspective we could take advantage of this circumstance in order to achieve pro-gress on simplification initiatives.

Financial services

The Commission has set out its vision for Europe's financial services policy over the five coming years in its White Paper which it presented in December. Initial reactions from different players have been largely positive.

We believe that the objectives set out in the White Paper are right and that the paper is fully in line with the Commission's Green Paper in May, which the Council welcomed in October. At this stage it would be premature to second-guess the Council's reaction; ac-cording to our planning this topic will be on the agenda of the Ecofin Council in March.

Turning now to legislative proposals, I understand your committee is in enhanced coopera-tion with the lead committee (civil liberties, justice and home affairs) on the Commission proposal for a regulation on information on the payer accompanying transfers of funds, and I welcome the excellent progress already made by Mr Bullmann on his draft report.

I am pleased that he has been willing to consider the wording of the general approach agreed by the Council on 6 December. The general approach is the result of sometimes intense negotiations between Member States and was carefully calibrated in order to be acceptable to all, but it seems to me we have got it right: on the whole, reactions to the general approach from industry and others have been positive. Can I also stress the im-portance of avoiding, if possible, a second reading of this proposal as that would seriously put at risk the industry's necessary preparations for the entry into force less than a year from now, on 1 January 2007.

The legislative proposal that will take up most of the Presidency's time in financial services over the coming months is the recent proposal for a directive on payment services in the internal market. The idea is to remove national barriers to cross-border payments and to establish a single payment market in the EU, to be complemented by the industry's ini-tiative to set up a "Single Euro Payment Area" including integrated payment infrastructures and products in the euro zone. Ambitious and far-reaching as they may seem, I am con-vinced that the Commission proposal and the industry initiative are ideas whose time has come. So far there has only been one Council working party meeting to discuss the pro-posal for a directive, so it is not yet possible to for me indicate if the Council is willing to lend its full support to the proposal. Rest assured however that as soon as your committee has appointed a rapporteur we will work closely with that person to take the proposal for-ward in parallel in the two institutions.

Tax coordination

The overall objectives of the Austrian Presidency to improve economic growth and em-ployment in Europe and to strengthen Europe's position in the global context clearly impact on Austria's priorities in taxation.

As regards indirect taxes, we will focus on three broad areas:

• First, as requested by the December 2005 European Council, we will be seeking a so-lution to the question of reduced VAT rates at the January ECOFIN.
• Secondly, we will entertain a broad informal discussion on the possible future design of the VAT system at an informal high-level gathering in Vienna on 6-7 February.
• Thirdly, we will seek progress in the framework of the Council's working parties and bodies on legislative proposals that modernise and simplify the present European VAT system while reinforcing efforts to combat fraud. As far as the modernisation and simplification of the VAT systems are concerned, there are four topics which are impor-tant to mention here:
  • First there are the proposed new rules on the place of supply of services which will ensure that tax revenue falls to the state of consumption and that tax-payer ob-ligations are simplified.
  • Secondly, and very important for the private sector, is the cluster of proposals con-cerning the one-stop shop, because these new rules, if adopted, will greatly sim-plify life for all taxable persons who do business across the border in another Mem-ber State. We will continue the excellent work done by the UK Presidency in this area.
  • Thirdly, the Austrian Presidency awaits new proposals from the Commission as re-gards electronic commerce. The present rules that apply to services that are elec-tronically supplied by taxable persons from outside the EU to EU customers will ex-pire at the end of June.
  • Fourthly, the Austrian Presidency will pursue efforts to rationalise the derogations which Member States presently enjoy to facilitate the combating of fraud.

In the area of direct taxation, the Austrian Presidency wants to deepen the ongoing work on the common consolidated tax base for companies. The working party in the Commis-sion has done a lot of work at technical level and the Council could be invited to give its first political appreciation of that work. 

Finally, the Austrian Presidency will also seek progress in the area of savings taxation. The agreement among Member States, five European countries and ten dependent and associated territories to apply savings tax measures from 1 July 2005 was a true mile-stone. But, a level playing field for financial services and an effective anti-avoidance strat-egy require further progress. In fact it was always understood that savings tax measures should be applied by all major financial centres in the world. Austria therefore wants the European Union to actively explore the possibility of concluding savings tax agree-ments with global players such as Hong Kong and Singapore, and of extending the net-work of agreements also to dependent and associated territories that do not yet apply such measures under the existing rules.

Strengthening Europe's role in the international context

Stability-oriented macroeconomic policy with public finances aiming at increasing quality and sustainability, together with structural reforms contribute to boost Europe's growth and employment potential and thus strengthen Europe's role vis-a-vis its international partners. The Austrian Presidency will therefore further deepen the debate on the challenges of globalisation taking into account the excellent work done already under the British Presi-dency .

The Presidency's aim is twofold: First, we want to focus on which measures are necessary at the European level in order to further increase Europe's attractiveness as business and employment location while simultaneously ensuring that a broad range of people can share the benefits of globalisation. Second, we want to deepen the discussion with our in-ternational partners on which strategies and coordination mechanisms are necessary at global level in order to ensure a balanced and smooth development in various economic regions.

Enlargement of the euro area

The Austrian Presidency will also see the presentation by the Commission and the Euro-pean Central Bank of convergence reports on the Member States hoping to adopt the euro in 2007. A thorough examination of these reports will of course be a high priority with great political and economic significance and I will ensure that this examination is begun as soon as possible, so as to reach decisions in good time.