9636/97 (Presse 235) C/97/235

2023rd Council meeting

– ECOFIN –

Brussels, 7 July 1997

President: Mr Jean-Claude JUNCKER Prime Minister and Minister for Finance of the Grand Duchy of Luxembourg

1 C O N T E N T S

PARTICIPANTS ...... 3

ITEMS DISCUSSED

LUXEMBOURG PRESIDENCY WORK PROGRAMME...... 5

CONVERGENCE PROGRAMME OF ITALY...... 6

FOLLOW-UP TO THE AMSTERDAM EUROPEAN COUNCIL ...... 8

TECHNICAL CHARACTERISTICS OF EURO COINS ...... 8

STAGE III OF EMU ...... 9

BROAD ECONOMIC GUIDELINES...... 10

STRUCTURED DIALOGUE – MEETING WITH THE FINANCE MINISTERS OF THE CCEE . 11

ITEMS ADOPTED WITHOUT DEBATE

Development: Developing countries – co-financing of NGOs ...... I

Consumer affairs: Consumer credit ...... I

Culture: WIPO Copyright and Performances and Phonograms Treaties ...... II

In the case of legislative acts, votes against and abstentions are indicated. Decisions including statements to which the Council has decided to grant the public access are indicated by asterisks; the statements in question may be obtained from the Press Office.

2 The Governments of the Member States and the European Commission were represented as follows:

Belgium: Mr Philippe MAYSTADT Deputy Prime Minister, Minister for Finance and Foreign Trade

Denmark: Ms Marianne JELVED Minister for Economic Affairs Mr Michael DITHMER State Secretary for Economic Affairs

Germany: Mr Theo WAIGEL Federal Minister for Finance Mr Jürgen STARK State Secretary, Federal Ministry of Finance Mr Klaus BÜNGEL State Secretary, Federal Ministry of Economic Affairs

Greece: Mr Yiannos PAPANTONIOU Minister for the National Economy

Spain: Mr Rodrigo de RATO Y FIGAREDO Deputy Prime Minister and Minister for the Economy and Finance

France: Mr Dominique STRAUSS-KAHN Minister for Economic Affairs, Finance and Industry

Ireland: Mr Charlie McCREEVY Minister for Finance

Italy: Mr Carlo Azeglio CIAMPI Minister for the Treasury

Luxembourg: Mr Jean-Claude JUNCKER Prime Minister and Minister for Finance Mr Minister for Economic Affairs Mr Minister with responsibility for the Budget

Netherlands: Mr Gerrit ZALM Minister for Finance

Austria: Mr Rudolf EDLINGER Federal Minister for Finance

Portugal: Mr António de SOUSA FRANCO Minister for Finance

Finland: Mr Sauli NIINISTÖ Minister for Finance Mr Raino SAILAS State Secretary for Finance

3 Sweden: Mr Erik ÅSBRINK Minister for Finance

United Kingdom: Mr Gordon BROWN Chancellor of the Exchequer

Commission: Mr President Mr Yves-Thibault de SILGUY Member Mr Mario MONTI Member

Other participants Sir Nigel WICKS Chairman of the Monetary Committee Mr Henri BOGAERT Chairman of the Economic Policy Committee

3 Participation of the CCEE in the structured dialogue meeting:

Bulgaria: Mr Muravey RADEV Minister for Finance

Estonia: Mr Agu LELLEP State Secretary at the Ministry of Finance

Hungary: Mr Péter MEDGYESSY Minister for Finance

Latvia: Mrs Aija POCA Minister of State for Finance

Lithuania: Mr Algirdas Gediminas ŠEMETA Minister for Finance

Poland: Mr Marek BELKA Deputy Prime Minster and Minister for Finance

Romania: Mr Valentin LAZEA State Secretary at the Ministry of Finance

Slovak Republic: Mrs Tatiana SILHÁNKOVÁ State Secretary at the Ministry of Finance

Czech Republic: Mr Ivan PILIP Minister for Finance

Slovenia: Mr Mitja GASPARI Minister for Finance

4 PRESENTATION OF THE LUXEMBOURG PRESIDENCY WORK PROGRAMME

The Council held a public, televised debate on the Luxembourg P residency's work programme in the ECOFIN domain for the second half of 1997.

When presenting his programme, the President of the Council highlighted its two central themes which are on one hand implementation of Phase III of EMU and continuation of the preparations for that purpose and on the other hand taxation, with regard to both proposals under consideration and giving a new impetus. The President also emphasized the following four priorities: the follow-up to the Amsterdam conclusions, a new impetus for keeping employment at the top of the Union's political agenda, future financing of the Union (which forms part of the 2000 Agenda), work in the field of prudential supervision and finance and assumption of the Community's responsibility in the outside world.

The debate – during which the President of the Commission and all the Member States' Ministers for Finance or Economic Affairs commented on the Presidency programme – revealed that the speakers considered that it tackled appropriately the main challenges facing the Community in the ECOFIN area. They assured the Presidency of their full support in implementing this ambitious programme.

5 CONVERGENCE PROGRAMME OF ITALY

– Conclusions

The Council carried out an examination of the Convergence Programme of Italy for the period 1998- 2000. The Council acknowledged with satisfaction the remarkable progress in convergence achieved by Italy, particularly as regards inflation, interest rates and currency stability. The Council welcomed the Programme's intention to steadily reduce the government deficit in order to complete the fundamental adjustments that are taking place in this field in Italy; in addition, the Council appreciated the commitment reiterated by the Italian government to comply strictly with the deficit target of 3% of GDP in 1997.

The Convergence Programme aims at reducing the government deficit to 2,8% of GDP in 1998, 2,4% in 1999 and to 1,8% in the final year of the programme. The Council takes note that these budgetary objectives correspond to those of the Documento di Programmazione Economica e Finanziaria (DPEF) 1998-2000, which have received full endorsement from the Italian Parliament. The Council underlines the importance of this strong political commitment behind the objectives of the programme. Such a commitment is crucial and requires the adoption of all the necessary measures for an effective achievement of the budgetary objectives of the programme. Moreover, the Council appreciated the commitment of the Italian government to achieve the budgetary objectives of the programme on a year-by-year basis. While welcoming these objectives, the Council invites the Italian authorities to consider them as ceilings, with a view to preventing shortfalls and to fostering faster decline in the government debt ratio. The Council believes that the assumptions on growth and on interest rates retained in the convergence programme scenario are reasonable; however, it points out that the evolution of interest rates depends crucially on the consolidation of an environment of low inflation and monetary stability and on the successful implementation of the envisaged structural budgetary adjustment.

6 The Council considers it appropriate that the budgetary strategy of the programme relies mainly on expenditure restraint and that most of the adjustment is envisaged for 1998. It also considers that the programme identifies the correct areas for measures to be taken in 1998. The Council emphasizes that the robustness and credibility of the implementation of the programme will very much depend on the quality of the concrete measures to be introduced. Therefore, it urges the Italian government to adopt measures with permanent effect on deficit reduction, namely in the framework of the presentation of the Budget Law for 1998. Indeed, this is the only way to secure the continuity of the adjustment effort and to ensure that a sustainable budgetary position is achieved.

The programme reaffirms the engagement of the Italian authorities in a programme of sweeping structural reforms in several areas. These reforms are most welcome since they will benefit the public finances and also have a favourable impact on the efficiency of the entire economic system. Of crucial importance is the reform of the welfare state. The Council strongly supports the commitment expressed in the programme to keep expenditure on pensions constant in terms of GDP during the period of the programme; determined and effective measures in this area are indispensable to ensure the sustainability of fiscal consolidation. Of great importance is also the reform of the Italian tax system; in this area particular attention has to be paid to the avoidance of revenue shortfalls in the transition period.

The Council invites the Commission and the Monetary Committee to monitor the implementation of the programme and to report to the Council once the concrete budgetary measures have been defined, namely, in presentation of the Budget Law for 1998.

7 FOLLOW-UP TO THE AMSTERDAM EUROPEAN COUNCIL

The Council took note of the information supplied by its President concerning the Presidency's intentions on the work to be carried out as a result of the European Council in the context of economic and monetary union (in particular with regard to coordination of economic policies and external aspects of the euro), and preparations for the extraordinary European Council meeting on employment scheduled for the second half of November.

TECHNICAL CHARACTERISTICS OF EURO COINS

Having noted the positive result of the technical verification of capacity to produce euro coins made from Nordic Gold alloy, the Council confirmed the political agreement reached at its previous meeting on the Commission's proposal concerning denominations and technical specifications of euro coins. The Regulation will be formally adopted when the decision on adoption of the euro by the Member States has been taken.

If the Commission submitted suggestions on the question of possible minimal harmonization of the characteristics of the national side of euro coins so that they are easier to recognise, the Council would examine the matter further.

STAGE III OF EMU

Following the conclusions of the European Council in Amsterdam on 16 and 17 June, the Council formally adopted without debate the two Regulations forming part of the Stability and Growth Pact, namely:

– the Regulation on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies;

– the Regulation on speeding up and clarifying the implementation of the excessive deficit procedure *.

The Council decided to publish the above Regulations in the Official Journal, as well as the Resolution on the Stability and Growth Pact and the Resolution on Growth and Employment which were adopted by the European Council in Amsterdam.

The Council also decided to publish in the Official Journal the Resolution on the establishment of a new Exchange Rate Mechanism in the third stage of Economic and Monetary Union.

With regard to the legal framework of the euro, the Council agreed to the Regulation on the introduction of the euro; it cannot be formally adopted until the decision on adoption of the euro by the Member States has been taken. That Regulation will however be published in the Official Journal. It will be remembered that the Regulation on some provisions relating to the introduction of the euro was adopted on 17 June.

BROAD ECONOMIC GUIDELINES

Following the European Council's discussions in Amsterdam for which preparations were made by the ECOFIN Council on 9 June 1997, the Council also adopted without debate the recommendation on the broad guidelines of the economic policies of the Member States and of the Community for 1997.

8 STRUCTURED DIALOGUE – MEETING WITH THE FINANCE MINISTERS OF THE CCEE

Ministers of the Associated Countries met jointly with ECOFIN Ministers in the context of the structured dialogue. They focused on "Capital movement liberalization and financial sector reform in the Associated Countries" and examined progress made since the last review of this subject at the joint meeting in October 1995. The discussion was organized around three main themes: the liberalization of capital movements, banking sector reforms and capital market reforms and developments. The Czech Republic, the Slovak Republic and Poland commented on their experience on one of the above themes and a number of other countries presented their views.

Ministers agreed that the progress made in liberalizing capital movements and reforming the financial sector has been significant although not uniform in all associated countries. Differences in initial conditions, the occurrences of severe difficulties in certain cases and decisiveness to implement reforms were factors which can explain differences in results. The effort must continue in order to consolidate the positive results and accelerate the integration of these countries into the Community and international economic and financial system.

The experience from capital liberalization has been positive as the relaxation of restrictions on the movement of capital was operated in an orderly manner and, in general, without serious balance of payments difficulties. However, the opening of the capital account entails risks of destabilizing capital flows if market expectations are reversed. Experience shows that coherent and sustainable economic and financial policies and implementation of the necessary structural reforms is the best way to limit the risks of destabilizing capital flows as restrictions on the movement of capital are relaxed.

Ministers noted that significant progress has been made in most associated countries in reforming the banking system and improving its soundness and performance. However, this progress has to be consolidated and deepened as the situation remains still fragile. Basic measures concerning banking regulations have been adopted in most associated countries and their enforcement is now the major challenge. Progress has also been made in opening the capital of state-owned banks to private investors. However, the presence of the state in banking is still important in most associated countries.

The development of the capital market is generally lagging behind that of the banking system. Capitalization and liquidity of equity markets remain low compared to mature market economies. However, in a number of countries capital market activity has risen considerably following progress in privatization programmes. The continuation of the privatization process combined with improvement in market transparency would contribute to the development of the capital market. A basic legislative and regulatory framework in the area of investment services and insurance has, to a large extent, been introduced and the enforcement of the adopted rules is the most difficult task. In this context, further effort has to be made towards improving transparency of operations and investor protection.

The EU, international financial institutions and EU Member States supplied substantial financial and technical assistance to the associated countries, judged by them as very helpful. The Commission's White Paper is providing guidance to the associated countries in approximating their legislation with Community standards in the areas of capital movements and financial services.

The Ministers agreed to review again the subject of capital movement liberalization and financial sector reform in the associated countries.

9 OTHER DECISIONS

Adopted without debate.

DEVELOPMENT

Developing countries – co-financing of NGOs

The Council adopted the common position on the Regulation on co-financing operations with European non-governmental development organizations in fields of interest to the developing countries, with a view to forwarding it to the European Parliament (cooperation procedure). The decision formalizes the political agreement reached by the Council on 5 June 1997 (see Press Release 8631/97 Presse 183).

CONSUMER AFFAIRS

Consumer credit

The Council adopted unanimously the common position with a view to adopting a Directive amending Directive 87/102//EEC (as amended by Directive 90/88/EEC) for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit.

The aim of the proposal for a Directive, which the Commission submitted to the Council on 25 April 1996, is to provide for the application of a single Community formula for the calculation of the annual percentage rate of charge for consumer credit. The Directive gives several examples of that calculation.

The common position will be forwarded to the European Parliament with a view to a second reading, in accordance with the co-decision procedure (Article 100 of the Treaty).

The Member States will transpose this Directive no later than two years after its entry into force.

CULTURE

WIPO Copyright and Performances and Phonograms Treaties

The Council formally adopted the Decision authorizing the signing, on behalf of the European Community, of the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty.

The Copyright Treaty completes the Berne Convention for the protection of literary and artistic works, which was last revised in 1971, and adapts it to the digital environment. Authors will be able to benefit from legal protection for the distribution, rental, communication to the public and making available to the public (over networks) of their works. Explicit protection is provided for computer programs and databases. In addition the Treaty contains provisions on technological measures (such as on the contravention of anti-copy devices) and on rights management information as well as provisions on the enforcement of rights.

I As far as performances and phonograms are concerned, these right holders will be able to benefit from an exclusive right of reproduction, distribution, rental, and making it available to the public (over networks) of their performances and phonograms. Moreover performers and phonogram producers will also benefit from a right of remuneration for broadcasting and all other forms of communication to the public of phonograms published for commercial purposes. Just as in the Copyright Treaty, this Treaty sets out provisions on technological measures, on rights management systems and on the enforcement of rights.

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