3 June Economic and Finance Council

Date: 06/06/1996

FINANCE ministers approved the Commission's proposed broad economic guidelines for next year and its report on member states' performance in the light of last year's guidelines. The recommendations for 1996 will be submitted to the Florence summit, then formally adopted by ministers in July. But Germany's Finance Minister Theo Waigel spoke out against his colleagues' decision to approve the Commission's recommendation on this year's 'excessive deficit procedure'. Under this programme, member states' budgetary performance is judged against the Maastricht Treaty's guideline targets of 3&percent; of GDP for the deficit and 60&percent; of GDP for the public debt stock. The Commission called for Luxembourg and Ireland to remain off the list of countries missing the targets and Denmark to be removed from the blacklist for the first time. Waigel, fearful that this would send markets a “false signal”, lodged a vote of abstention with the Council's secretariat-general.

MINISTERS also debated two papers from the monetary committee and the European Monetary Institute summarising the draft agreements reached on monetary union at the informal Ecofin in Verona in April. This caused a disagreement during lunchtime discussions between German representatives and others, including the Commission, over how to incorporate Waigel's idea for a budgetary 'stability pact' into Union law. The Germans are continuing to insist that sanctions against countries overshooting the Maastricht targets should be automatic, while the Commission believes this to be contrary to the treaty. All sides agree that a final decision is not needed until the December summit in Dublin.

THE UK government vetoed a series of proposals under its policy of non-cooperation launched in protest at the continuing world-wide ban on British beef exports. Initiatives blocked included a letter to the Lebanese government about EU support for reconstruction, joint action on supporting elections in Bosnia, a proposal to allow on-the-spot checks by Commission officers to combat fraud, and a resolution to the problem of reduced rates of value added tax on cut flowers.

THE cut flowers dispute - caused by the fact that seven member states continue to apply reduced VAT rates on these products contrary to EU regulations - was not ready for agreement anyway. Apart from the UK, Finland, Denmark and Sweden also opposed the latest proposals from the presidency aimed at ending the disagreement.

RECOMMENDATIONS from the EMI to extend the term of its President Alexandre Lamfalussy until the end of June 1997 and then replace him with Dutch National Bank President Wim Duisenberg were agreed in principle by the ministers. This decision must now be taken in unanimity by presidents and prime ministers at the Florence summit. It is still unclear whether UK Prime Minister John Major will block the proposal as part of his non-cooperation campaign.