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The European Council last week reviewed the â‚¬400 billion fiscal stimulus being injected into the EU economy. The council emphasized that concerted action and coordination were an essential part of Europe's strategy for recovery and declared that the council would do all that it can to restore growth.
In its meeting, the council said that the single market was central to making the recession in Europe shorter and less severe. Stressing the need to get lending flowing again to businesses and households, it agreed to speed up agreement on pending legislative proposals on the financial sector. The European Council also reverted to the issue of energy security. It specifically agreed on orientations for setting up a crisis mechanism to deal with disruptions of supplies. It took further steps in preparation of the Copenhagen Conference on climate change.
Arguably, the guarantee and early recapitalization measures taken by member states within the framework of common principles have prevented a financial meltdown. However, further measures may be necessary for restoring the functioning of credit markets and facilitating the flow of lending to the real economy by dealing with impaired banking assets on the basis of full disclosure to supervisory authorities. The European Council called on the member states to act in a coordinated manner, in line with the guidelines provided by the Commission communication of 25 February 2009 and in full respect of competition rules.
Some experts believe that the magnitude and the underlying causes of the ongoing global financial and economic crisis demonstrate the need to reshape macroeconomic global management and the regulatory framework for financial markets. Prudential rules, crisis management arrangements and the supervisory framework must be strengthened at the national, European and global levels.
Financial regulations should dampen rather than amplify economic cycles. The European Council urged the FSF, Basel Committee on Banking Supervision and Commission to accelerate their work and to swiftly submit appropriate recommendations. In this connection, the European Council called on the Council and the European Parliament to rapidly reach agreement on the legislative acts relating to credit rating agencies, the solvency of insurance companies, the capital requirements for banks, and cross-border payments and electronic money, so as allow their adoption before the parliamentary recess.
The European Council realizes that it will take time for the positive effects to work their way through the economy, but believes that the size of the fiscal effort will generate new investments, boost demand, create jobs and help the EU move to a low-carbon economy.
According to EU publications, overall, some â‚¬30 billion are being made available from EU resources. The European Council welcomed the progress reached in particular on advanced payments from the structural and cohesion funds, the agreement on the application on a voluntary basis of reduced value-added tax rates as well as on the European Investment Bank actions to boost financing possibilities for small and medium-sized entities.
The rapid increase of unemployment is a cause of great concern. Hence the council welcomes stimulating employment, in particular by promoting the acquisition of the new skills required by new jobs. The council concluded that mobility has also proven to significantly contribute to economic growth. Particular attention should therefore be given to the most vulnerable and to new risks of exclusion. In this context, the European Employment Summit to be held in May 2009 will allow for an exchange of experiences on the extent to which the recovery measures taken have succeeded in supporting employment. It will examine in particular issues such as maintaining employment levels through mobility, upgrading skills and anticipating labor market needs, with a view to identifying concrete orientations.
The European Council gathers together the heads of state or government of the member states of the European Union and the President of the Commission. It came into being in 1974 and was given formal status by the Single European Act. Its members are assisted by the Ministers for Foreign Affairs and by a Member of the Commission. The European Council meets at least once every six months under the chairmanship of the head of state or government of the member State which holds the presidency of the Council of the European Union, which rotates twice a year. In practice, the European Council meets at least four times a year, and special European Councils are also organized. Since 2000, in accordance with the Lisbon strategy, the March Council addresses economic, social and environmental issues.
The author is the head of the International Department at GSCB Law Firm.