23 October Ecofin

Date: 26/10/1995

FINLAND won the approval of EU finance ministers for its programme setting out how it intends to join an economic and monetary union by the end of the decade. The Finnish government avoided the criticism sometimes voiced about other 'convergence' programmes by avoiding over-optimistic forecasts. In a written conclusion, Ecofin found that the “programme is based on reasonable underlying macro-economic assumptions”. The question of membership of the Exchange Rate Mechanism for the markka was not raised and Finance Minister Iiro Viinanen suggested Finland would not join this year. Ecofin did, however, welcome the appreciation of the markka since 1993 and said the “prospects for exchange rate stability are now good”.

MINISTERS moved on to a discussion of the links between job creation and macro-economic policy launched by last December's Essen summit. While some ministers urged the European Commission to avoid setting targets for jobs growth, the rest of the debate was uncontroversial. Ecofin and the Council of Social Affairs Ministers will continue to draft separate reports on jobs issues and will, in the words of Spanish Finance Minister Pedro Solbes, aim to draw up a single “short and succinct” report for the Madrid summit in December.

EU loans and guarantees to third countries returned to the finance ministers' agenda after an inconclusive debate in September. The EU's loan guarantee fund, established in 1992, is set to reach its lending ceiling by the end of 1997 unless the rules on lending are changed. Ministers asked EU ambassadors to look into the possibilities of effectively raising this ceiling by only covering 75&percent; of total European Investment Bank loans outside the EU.

TAXES on energy use also returned to the agenda, but finance ministers were once again unable to find a compromise on the key issue: whether member states should commit themselves to introduce a harmonised tax on carbon energy use by the end of the century. All that could be agreed was that their officials should try to draft a compromise text on this one article and the Council should set a date for making a decision.

INTERNAL Market Commissioner Mario Monti gave ministers a presentation on the experience of harmonising excise duties. He also pointed out that, on first sight, using value-added tax breaks to compensate for income losses for farmers is “not in line with” three EU laws. The German government is seeking a way to compensate farmers for income lost through agrimonetary fluctuations.

CENTRAL and Eastern European finance ministers held one of their regular “structured dialogue” meetings with their EU counterparts in the afternoon. They concentrated on reform of the financial sector in Eastern Europe. Topics covered included the banking crisis and bad loans, how to set up independent and effective supervisory authorities, bank privatisation, developing capital markets and liberalising capital movements.