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Brussels, 5 September 2002

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The EU’s Economics and Finance Ministers will start with a meeting on Friday 6 September at 15.00 hrs. A press conference by the Presidency and the Commission is scheduled at 17.00 hrs. Finance Ministers are due to meet at 17.30 hrs on the same date. A press conference by the Eurogroup President and the Commissioner is scheduled at 19.30 hrs. The informal Ecofin meeting will resume on Saturday with the participation of central bank governors for the whole day. A press conference by the Ecofin President, the responsible Commissioners and the ECB is scheduled for 18.00 hrs. (XURJURXS *7 The Eurogroup will start with an exchange of views on the economic situation and policy stance. This discussion will also serve as an input to the preparation of the upcoming G7 meeting. Commissioner Solbes will inform Ministers about the launch of the excessive deficit procedure for . The launch of the procedure is automatic according to the Treaty following the release of a 4.1% of GDP deficit figure for 2001. The Commission will propose to Ministers a timetable for the various steps envisaged by the Treaty. Ministers are also expected to discuss the possible budgetary effects of the disastrous floods in August.

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6DYLQJVWD[DWLRQ -7 Following a debriefing by Danish Finance Minister Thor Pedersen, the current President of the Council of Finance Ministers, on his meeting with the Swiss President and Minister for Finance Kaspar Villiger on 30 August 2002, Taxation Commissioner Frits Bolkestein will report to Ministers on the progress to date of negotiations with third countries on the taxation of savings and particularly the results of the latest discussions with . The Council on 13 December 2001 gave its political agreement to the text of a Directive to ensure effective taxation of interest income from cross-border investment of savings paid to individuals within the Community as proposed by the Commission in July 2001 and amended by the High Level Group on Taxation on 7th December (see MEMO/01/439). Under the proposed Directive, each Member State would ultimately be expected to provide information to other Member States on interest paid from that Member State to individual savers resident in those other Member States. But for a transitional period of seven years, , and would apply a withholding tax instead of providing information, at a rate of 15% for the first three years and 20% for the remainder of the period. That Council also agreed that this draft Directive “represents the entirety of the provisions for the taxation of savings for the purpose of negotiating with the third countries” as requested by the Feira in June 2000. The Feira European Council requested that, in parallel with the discussions within the Community on the savings proposal, talks be initiated with key non-EU countries to ensure the adoption of “equivalent” measures in those countries in order to allow effective taxation of savings income paid to EU residents. The countries in question are the United States, Switzerland, , Monaco, Andorra and San Marino. The Commission has since had contacts with all the countries in question. The Council conferred a formal negotiating mandate on the Commission to conduct these talks in October 2001 (see MEMO/01/330). Under the timetables established at Feira and by the Council in July 2001, the Council should decide unanimously on a final text of the Directive no later than 31 December 2002, on the basis of a report presenting the outcome of the negotiations with the third countries and of the discussions of the and the with their dependent and associated territories concerning the adoption of the same measures in those territories.

(QHUJ\WD[DWLRQ -7 The Presidency will outline a work programme concerning the proposal for a Directive on energy taxation with a view to reaching an agreement on the Directive by the end of 2002, in line with the deadline set by the European Council in Barcelona in March this year, and reaffirmed by the Seville European Council in June. Commissioner Bolkestein will give his full support to the Presidency in this initiative. The EU's Council of Ministers has been debating for some years the Commission's 1997 proposal for a Community framework, including minimum tax levels, for the taxation of all competing sources of energy (see IP/97/211). The Spanish Presidency earlier this year drew up guidelines (for further details see MEMO/02/121) providing a clear direction for further work on the basis of the Commission’s proposal. At their meeting on 20 June, Economic and Finance Ministers took note of a progress report to the Seville European Council by the Chairman of the ad hoc High Level Working Party on energy taxation established following the Council of Ministers of 8th May. The report notes that Member States’ delegations to the Working Party now agree on all aspects of the Spanish Presidency guidelines except the following three points: - the application of tax reductions for particular areas of production, such as for energy-intensive businesses, or where agreements have been reached with businesses which lead to achievement of environmental protection objectives or improvements in energy efficiency - the question of whether there should be a lower rate of duty on diesel fuel used for professional purposes compared with that for private use (Member States in discussions stressed the need for special tax treatment for the road haulage sector and passenger transport industry to offset increases in fuel costs while acknowledging the need to combat the significant competitive distortions caused by different national rates of diesel taxation). The report noted that the intended to make the proposal now made concerning this issue. The Commission presented this proposal last July (see IP/02/1134 and MEMO/02/176). - the length of the transitional periods to be allowed to certain Member States before they have to introduce the energy tax measures agreed.

2 The report outlines proposed solutions to these problems and notes alternative solutions proposed by some delegations, for consideration by the Council.

:RUOG HFRQRPLF VLWXDWLRQ DQG SUHSDUDWLRQ RI WKH ,0)& :RUOG %DQN  ,0)PHHWLQJV *7 Recent economic developments point to increased downside risks for the growth scenario included in the Commission’s Spring forecast. The downward revision of the fourth quarter 2001 GDP growth data increased the negative hangover form last year. Although recovery in the first quarter of 2002 was in line with the Commission’s forecasts, on the basis of current indicators, growth in the second quarter appears to be slightly lower than expected. Indicators continue to point to an acceleration of growth in the second half of this year but one that is more modest than originally envisaged. A major uncertainty concerns the increased tensions in the Middle East and Iraq, and the associated developments in oil prices. Other risks are related to the impact on household and investor‘ confidence of the recent correction in stock market prices, the volatility in financial markets and possible contagion effects from the economic crises in some Latin America countries. In this light, growth forecasts for 2002 will probably have to be revised downwards for the US, Japan and the EU. New estimates will be prepared for the Commission’s Autumn forecast in November.

5HLQIRUFHG HFRQRPLF SROLF\ FRRSHUDWLRQ DQG VWUHDPOLQLQJ RI SURFHVVHV *7 On 3 September the Commission adopted a Communication (IP/02/1261) on the streamlining of the annual economic and employment policy coordination cycle. This decision follows up on the Barcelona European Council's request to streamline the relevant processes with a view to strengthen the emphasis on implementation and to synchronise the calendars for the adoption of the Broad Economic Policy Guidelines (BEPGs) and the Employment Guidelines (EGs). The changes proposed will have wider implications and important political consequences. The Commission’s Communication aims at improving the transparency, coherence and effectiveness of the EU policy coordination framework. Its three main elements are the following: - a better and clearer articulation of the policy co-ordination cycle; - an increased focus on the medium-term; and - an improved policy coherence. As of 2003, the existing coordination processes will be regrouped around a few pivotal points in the annual cycle. In preparation for the Spring European Council, the Commission would present, together with the Spring Report (Synthesis Report), an Implementation Package, consisting of the BEPGs Implementation Report, the draft Joint Employment Report, and an Implementation Report on the Internal Market Strategy. After the Spring European Council, taking account of its guidance, the Commission would present a Guidelines Package, which would include the BEPGs, the EGs and the Employment Recommendations. In addition to the proposals on streamlining the Commission will come forward before the end of the year with proposals for common standards on the conduct of economic policies. This initiative is also in response to the request of the Barcelona European Council for measures to reinforce economic policy coordination.

3 The objective of common standards will be to clarify the respective roles of economic and budgetary policies in three domains - (1) preserving macroeconomic stability, (2) raising growth potential and (3), coping with shocks that affect individual Member States or the area as a whole. They should improve transparency and predictability by clarifying the policy stance expected of authorities under various economic circumstances and help demonstrate that the euro area has a well defined economic strategy with a clear medium-term orientation. Ecofin is expected to have a longer exchange of views on this point in the October Ecofin meeting. Discussions on this point are currently under way in the Economic and Financial Committee (EFC).

()&5HSRUWRQ)LQDQFLDO5HJXODWLRQ6XSHUYLVLRQDQG6WDELOLW\ -7 The informal meeting of Economics and Finance Ministers in Oviedo in April mandated the EU’s Economic and Finance Committee (EFC) to report on Financial Regulation, Supervision and Stability. The EFC’s interim report was presented to the Council in July and the EFC was then asked to come forward by the end of September with a final report on implementing a new approach to legislation on all financial sectors, based on the 'Lamfalussy' framework already agreed with the for securities legislation (see IP/02/195). Mr Bolkestein will emphasise, as he did at the July Council of Finance Ministers (see MEMO/02/171), that changes to the regulatory structure will determine how the financial sector is regulated for years to come and that as much consensus as possible is needed. There will need to be full consistency with the Treaty, rules (notably the 1999 Council Decision (1999/468/EC) which defines how EU implementing legislation must be exercised), the European Council’s Stockholm Resolution (on the basis of a report from a group of Wise Men chaired by Alexandre Lamfalussy) and the Commission’s agreement with the European Parliament on the implementation of the arrangements laid down in the Stockholm Resolution. He will reiterate his support for increased political accountability on financial sector issues, but stress that the Commission will insist that its own right of initiative is not constrained or undermined and that the institutional and political rights of the European Parliament in the decision-taking process are respected in full. Any attempt to “move the goalposts” could lead to delays to the Financial Services Action Plan. Mr Bolkestein will assure the EFC and the Presidency of the Commission’s cooperation in preparing and setting up the new structures.

3URSRVHG'LUHFWLYHRQ3URVSHFWXVHV -7 Commissioner Bolkestein is due to outline the Commission’s amended proposal for a Directive on Prospectuses (see IP/02/1209 and MEMO/02/180). This was presented on 9 August to meet the European Parliament’s deadline for a first debate in committee on 27 August and at the request of the Danish Presidency, which wishes to reach an agreement by the end of 2002, in accordance with the wishes of the EU’s Heads of State and Government at the Barcelona European Council. Mr Bolkestein will stress that rapid adoption is essential for two reasons. First, because European companies want to raise capital and have access to investors across the EU without having to comply with 15 different regulations. Second, because making the “single passport” for prospectuses work (i.e. allowing companies to use the same prospectus in all Member States once it has been approved in one) can help restore confidence in corporate disclosure in capital markets.

4 The amended proposal incorporates 50 out of 64 European Parliament amendments, and reflects discussions in the Council of Ministers’ expert group. It is designed to find common ground by seeking more flexible solutions, for example: - lighter touch prospectus requirements for SMEs, which would not be obliged to draft a prospectus if less than ¼   LV RIIHUHG WR WKH SXEOLF DQG ZKLFK would benefit from increased flexibility - allowing issuers to choose the competent regulatory authority for denominations over ¼ZKLFKDUHGHVLJQHGWREHWUDGHGE\SURIHVVLRQDOV - leaving to the issuer choice on the format of the prospectus (single or split document) - combining stringent disclosure requirements based on international standards (IOSCO) - which will considerably upgrade the quality of information given and improve investor protection - with different schedules for prospectuses depending on the nature of the issuer and the type of securities involved - new simplified prospectus formats for frequent issuers (issues on a continuous or repeated basis) - the obligation to update information at least once a year would now be limited to a reference to the annual financial statements (that have to be published in any case) - a company wishing to issue securities or admit them to trading in any EU Member State, would simply need to notify its prospectus to the authority at choice and show that it has already been approved in another Member State. The prospectus “passport” – the whole point of which is to ensure that a prospectus approved in one Member State is acceptable in all others - can only work if it sets out maximum disclosure standards applying throughout the EU. If the Directive permitted additional national requirements for prospectuses, its whole raison d’être would be lost. The Directive would not require any Member State to weaken its regulatory framework. The proposal only concerns initial disclosure requirements for authorising a prospectus and would not affect other conditions for admission to listing. Those listing requirements are mostly determined by national rules. Neither would the proposal prevent competition between exchanges, which would continue to decide whether or not an issuer’s securities should be traded on their markets. Exchanges would maintain their own rule books and ask for certain minimum requirements to list companies (such as market capitalisation, minimum turnover, size of the free float and years of existence of the company). The requirement of high quality standards would thus be an integral part of their branding as quality stock exchanges. Before presenting the amended proposal, the Commission held extensive contacts with market participants. But the industry continues to have ample opportunity to make its views known to the Commission and to the European Parliament, as well as to Member State governments.

/XQFKLWHPV Over lunch Ministers will discuss with Mr Klaus Haensch the ongoing work in the field of EMU in the Convention. The Commission's position in this area is included in the Commission Communication of 22 May 2002 (IP/02/750). The impact of EU enlargement is a key element behind the Commission's proposals.

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