5 June, Ecofin

Date: 11/06/1998

FINANCE ministers met first in their capacity as governors of the European Investment Bank on the occasion of the organisation's 40th anniversary. They agreed to boost the EIB's capital from 62 billion ecu to 100 billion ecu from 1 January 1999. The EIB is only allowed to lend the equivalent of 250&percent; of subscribed capital which means that, with 142 billion ecu outstanding, the bank is touching its ceiling. Raising the limit to 100 billion ecu will allow the bank to lend up to 250 billion ecu. EIB president Sir Brian Unwin said the capital increase would allow the bank to “contribute a high level of support both within the EU and outside it, especially in the countries that are applicants for accession”.

MINISTERS then discussed Taxation Commissioner Mario Monti's plan to introduce a common system for taxing interest from savings. He told ministers his plan would allow member states to choose whether to withhold a 20&percent; tax from interest paid to non-residents or inform their home tax authority of interest received. UK Finance Minister Gordon Brown, who chaired the meeting, stated afterwards that he would block the proposal if it applied to the market for Eurobonds - debt instruments denominated in currency other than that of the body which issues them. “We are not prepared to lose business as a result of this proposal,” he said. “We will stand up for British interests.”

BROWN issued a statement on behalf of ministers regarding the recent economic problems in Russia, saying the EU was monitoring the situation “very closely” and calling on the new government to implement its programme of reform and follow the strictures of the International Monetary Fund.

MINISTERS changed 'broad economic guidelines' drafted by the European Commission, striking out references which they felt were not within the 'competence' of EU institutions. The guidelines referred to the need to control payment of subsidies, implement single market directives in full and warned that budget deficits were “creeping up”. Ministers backed a monetary committee proposal that these references be removed, then passed on the guidelines for adoption at the Cardiff summit on 15-16 June.

GERMAN Finance Minister Theo Waigel welcomed support “in principle” from several ministers for his government's wish to reduce its net contributions to the EU's budget. Belgium's Philippe Maystadt and France's Dominique Strauss-Kahn showed “understanding”. Waigel warned that “anyone who thought that this issue is only a theoretical discussion is making a mistake”.

HORST Köhler, head of the German savings banks' association, was approved unanimously as president of the European Bank for Reconstruction and Development.