Tag Archives: Economic recession

EU Youth Strategy

Outline of the Community (European Union) legislation about EU Youth Strategy

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Education training youth sport > Youth

EU Youth Strategy

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 27 April 2009 – An EU Strategy for Youth: Investing and Empowering – A renewed open method of coordination to address youth challenges and opportunities [COM(2009) 200 final – Not published in the Official Journal].

Summary

The communication provides a strategy for future youth policies. It seeks to establish a cross-sectoral approach to empower young people in Europe to face a number of current challenges, in particular regarding education, employment, social inclusion and health. Young people should be given the resources and opportunities to achieve autonomy.

The current framework of cooperation, which will expire in 2009, has introduced a youth dimension in other policy fields as well as served to influence national policy-making. Nevertheless, the framework needs to be developed further, both in terms of its coordination and its impact on other policy areas. The scope of the framework also needs to be enlarged to reach young people with fewer opportunities.

The EU’s vision for young people is based on two approaches: investing in and empowering youth. The proposed new strategy pays particular attention to youth with fewer opportunities. Collaboration between youth and other policy areas, as well as collaborative policy-making through the renewed open method of coordination (OMC) will be improved. In the context of the latter, young people will also be able to express themselves in a structured dialogue.

The new long-term strategy consists of three overarching and interconnected aims that are closely associated with those of the renewed social agenda, with several fields of action proposed under each aim. Each field of action consists of a short-term objective and specific actions to be undertaken by Member States and the Commission, based on their respective spheres of competence. These will be assessed every three years.

Under the aim of creating more education and employment opportunities for young people, the following fields of action are proposed:

education: non-formal education should be better integrated to complement formal education, its quality should be developed and outcomes recognised;
employment: to facilitate the transition of young people from school, inactivity or unemployment to work, national and European employment policy actions should respect the principles of flexicurity. Moreover, education should aim to provide the skills demanded by the labour market;
creativity and entrepreneurship: the development of talent, creative skills, entrepreneurial mindsets and cultural expressions should be promoted among young people.

The following fields of action are proposed under the aim of improving young people’s access and full participation in society:

health and sport: to prevent and treat obesity, injury, addictions and substance abuse, promote the adoption of healthy lifestyles among young people and encourage collaboration between youth workers, health professionals and sporting organisations;
participation: to increase young people’s participation in the civic life of their communities as well as in representative democracy, provide support to youth organisations, encourage the participation of non-organised youth and provide better information services for young people.

The aim of fostering mutual solidarity between young people and society incorporates the following fields of action:

social inclusion: to prevent the social exclusion of young people, the relevant actors such as parents, teachers as well as social and youth workers should be mobilised;
volunteering: to support volunteering by young people, more opportunities, including cross-border, should be developed, obstacles removed and recognition of the value of non-formal education enhanced;
youth and the world: the existing youth networks and tools should be used to involve young people in global policy-making.

Youth work can provide an added value to the fight against unemployment, school failure and social exclusion. More support and recognition should thus be given to youth work, which should also become increasingly professional. To achieve this, Member States and the Commission are invited to promote the financing and quality of youth work, as well as the skills and mobility of youth workers. The Commission is committed to further examining the economic and social contribution of youth work.

For the new integrated cooperation framework in the field of youth, cross-sectoral policy approaches need to be developed at all levels. For the monitoring of its implementation, permanent and regular dialogue should be established at the EU level and between Member States and young people. With a view to improving policy-making, peer-learning exercises in the form of high-level seminars for political cooperation and clusters for technical expertise are proposed, which would also see the involvement of relevant stakeholders. Policy-making should also be evidence-based. To this end, current tools to acquire knowledge of the youth field should be used and further developed. The Commission also proposes to further develop other evidence-seeking instruments, such as studies and Eurobarometer surveys. Furthermore, existing EU programmes and funds, most notably the Youth-in-Action programme, should be used to support youth policy and to provide opportunities for young people, and measures should be taken to ensure the widespread availability of information about these opportunities.

Supporting developing countries in coping with the crisis

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Supporting developing countries in coping with the crisis

Outline of the Community (European Union) legislation about Supporting developing countries in coping with the crisis

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Development > Sectoral development policies

Supporting developing countries in coping with the crisis

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 8 April 2009 – Supporting developing countries in coping with the crisis [COM(2009) 160 final – Not published in the Official Journal].

Summary

Developing countries are particularly vulnerable to the effects of the international financial crisis. Development policies have improved their economic situation, but their resilience capacity remains limited.

Their monetary and budgetary policies are particularly constrained by inflation peaks, exchange rate volatility, deteriorating external balances, rising food prices and increasing energy costs. The European Union (EU) has chosen to support the countries that are most vulnerable to the effects of the crisis as a priority. These countries may be identified by combining several criteria corresponding to the main channels by which the crisis has been spread to developing countries, in particular:

dependence on export revenues and the degree of integration into world trade;
dependence on international financial flows and transfers;
capacity to react in response to the crisis.

Funding aid

The EU provides the largest portion of Official Development Aid (ODA), almost EUR 50 billion or 59 % of ODA overall. Its contribution is increasing, but Member States should nevertheless commit to add a further EUR 20 billion of aid in order to meet their objectives set for 2010 (0.56 % of Gross Domestic Income).

This increase in ODA is essential for participating in economic recovery and meeting the Millennium Development Goals (MDGs). Aid must be supplemented by the use and mobilisation of other development resources and instruments. This is the case for export credits, investment guarantees, technology transfer and innovative development funding mechanisms (e.g. voluntary solidarity levies, such as the airline tax applied by some Member States).

The Commission recommends that Member States adopt counter-cyclical development policies consisting of:

adapting 2009 and 2010 strategies and programmes, and re-directing EIB loans to key sectors in order to eliminate the crisis and boost economic activity (infrastructures, energy, activities related to climate change, green growth and the financial sector);
accelerating payment and making advances on aid commitments and budgetary support for all countries, in particular for those in a situation of emergency;
giving macro-economic assistance, for ENP countries, accession and pre-accession countries, in cooperation with the IMF.

Aid effectiveness

The fragmentation of agencies and bilateral or multilateral donors, and the lack of stability and predictability of funding have a high cost. It would be possible to make gains in effectiveness each year, which could translate into billions of euros allocated to supporting reforms, projects and action. The EU has adopted a European programme for aid effectiveness and a Code of Conduct on the Division of Labour. In 2008, it committed to the Accra Agenda for Action and plays an essential role in rationalising international development aid architecture.

The Commission proposes to accelerate the implementation of these programmes, as well as the application of the Commission Recommendations aimed at ensuring maximum impact for EU aid.

Recovery measures

In order to combat the social effects of the crisis and to contribute to the MDGs, particular support must be given to social protection systems and labour markets. Thus in 2009 and 2010, almost EUR 500 million will be committed under the European Development Fund (EDF), in order to protect public spending in essential sectors. This funding is to be implemented through:

the FLEX system which allows export losses to be compensated for according to the years preceding the crisis;
the additional and temporary “vulnerability FLEX” system, established expressly to respond more quickly and in a targeted way to the crisis in the most vulnerable countries.

Growth and employment are also promoted by the funding of infrastructures (EU-Africa Trust Fund), through support for agriculture and the creation of links between places of production and sale, by means of measures to foster private trade and the increase of credit facilities (in particular, the EIB’s investment facility, the Facility for Euro-Mediterranean Investment and Partnership (FEMIP), and the ENP investment facility for Eastern Europe).

The support provided by the EU in the context of the crisis also includes measures adopted to meet the food crisis (particularly the Food Facility with a budget of EUR 1 billion) which persists in many countries.

Recovery strategies take into account objectives for sustainable development and tackling climate change, including in the Least Developed Countries (LDCs).

Sustainable economic development necessitates the strengthening of economic and financial governance, including tax governance. Fighting corruption and the introduction of a healthy macro-economic and regulatory environment should be the key elements in political dialogue between the EU and its partner countries.

The EU should also work towards a better balance of the global governance system (particularly within the United Nations, the International Monetary Fund (IMF) and the World Bank), in order to make these authorities more complementary and to ensure greater representation for developing countries.

Single market: improving its functioning

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Single market: improving its functioning

Outline of the Community (European Union) legislation about Single market: improving its functioning

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Internal market: general framework

Single market: improving its functioning

Document or Iniciative

Commission Recommendation 2009/524/EC of 29 June 2009 on measures to improve the functioning of the single market (Text with EEA relevance).

Summary

This Recommendation aims to improve the functioning of the single market. It presents a set of measures intended to guarantee the application of the Community rules and to promote best practices which already exist in certain Member States.

Improving coordination and cooperation

This Recommendation invites Member States to designate a new authority or to use the existing structures in their national administration to ensure that a body assumes responsibility for coordination with regard to the single market. Government ministries and public bodies must also cooperate with each other.

The European Commission also considers it pertinent to bring together responsibilities for a number of single market related activities within a single authority.

Cooperation between national authorities is strongly encouraged, on the one hand in order to make the existing networks such as the IMI, RAPEX or RASFF more operational and, on the other hand, to ensure that the responses to Commission requests concerning the application of single market rules at national level are more effective. From this perspective, this Recommendation encourages Member States to follow the example of cooperation between Nordic and Baltic countries in the context of market surveillance.

Improving the transposition of single market rules

Member States are invited to prepare actively for the transposition, application and enforcement of single market directives at national level.

It is crucial that relevant information is communicated between national administrations and national, regional and devolved parliaments in order to raise awareness of negotiations and the process for the transposition of Community rules. To this end, some Member States draw up national impact assessments when a directive is tabled by the Commission.

Improving market monitoring and the application of rules

The Commission recommends that Member States take measures aimed at monitoring the market, by using analysis carried out by academics, consultants, National Statistical offices or complaint handling bodies.

Local stakeholders are also strongly encouraged to participate in the market monitoring process.

In addition, officials responsible for applying single market rules should be able to receive continued training on Community law in general and single market rules in particular.

Promoting problem-solving mechanisms

This Recommendation encourages Member States to develop non-judicial problem-solving mechanisms and to participate in existing Community systems such as SOLVIT.

As far as the national judiciary is concerned, Member States must provide to judges basic training in Community law and single market rules to enable them to take better account of the requirements of Community law in their judgments.

Assessing national legislation

It is important that Member States should ensure the monitoring and assessment of national legislation implementing single market rules in order to rectify any deficiency or error in the application of Community rules without delay.

The Commission proposes that Member States should develop ex-post impact assessment reports or audits to monitor the implementation of single market directives.

Informing citizens and businesses about their rights

Citizens and businesses can obtain information about their rights from the Community information services within national administrations. It is therefore vital to ensure increased coordination between the national contact points responsible for these Community information services.

The Your Europe portal should be more visible and provide clearer information online.

Information campaigns and programmes should be launched to report the benefits and opportunities offered by the single market.

Context

The Communication “A single market for 21st century Europe” emphasised a number of shortcomings of the single market due to poor application of and non-compliance with Community rules. The Commission has therefore reviewed the single market with the aim of proposing specific measures for citizens and businesses to ensure that they benefit from the economic advantages created by this market.

Responding to the crisis in the European automotive industry

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Responding to the crisis in the European automotive industry

Outline of the Community (European Union) legislation about Responding to the crisis in the European automotive industry

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Motor vehicles > Interactions between the automobile industry and specific policies

Responding to the crisis in the European automotive industry

Document or Iniciative

Communication from the Commission of 25 February 2009 – Responding to the crisis in the European automotive industry [COM(2009) 104 final – Not published in the Official Journal].

Summary

This Communication has the aim of getting the European automotive sector, which has suffered badly since the crisis of October 2008, moving again.

The position of the automotive sector in Europe

The European Union is the world’s largest producer of motor vehicles, producing over 18 million vehicles a year – a third of the world’s passenger cars. More than two million people work directly for this sector and twelve million indirectly.

The automotive sector therefore plays a strategic role in the Union. It makes a major contribution to GDP with an annual turnover of 780 billion EUR and a value added of more than 140 billion EUR.

However, since the beginning of the crisis during the last quarter of 2008, industrial production has dropped by 8.4%. The automotive sector is encountering many difficulties for the following reasons:

demand for passenger and commercial vehicles has dropped significantly, in particular due to the reduction in credit availability and declining purchasing power;
some companies in the automotive industry are having financial difficulties, in particular due to the reduction in credit;
long-term structural problems of overcapacity (currently 20% in Europe) are a handicap for automotive producers.

In addition, the forecast is for a reduction in demand for vehicles of between 12% and 18% in 2009, which will probably lead to a fall in production and threaten the jobs of 15 to 20% of the workers in the sector.

Planned strategy

The automotive sector must react quickly to the crisis by concentrating on three main challenges:

technology;
environment;
safety.

Europe must invest in research and development in “green vehicles” so as to implement a low-carbon economy. European regulations will enter into force in 2012 to this effect.

Industry and the public sector have an essential role to play in an approach which has four main aims:

to support demand in order to assist with remedying the effects of the credit squeeze;
to facilitate the adjustment by cushioning the costs associated with restructuring;
to encourage the modernisation of industry;
to adapt industry to the challenges of climate change.

The CARS 21 process is a strategic framework and may be modified according to future road transport and sustainable mobility requirements.

It appears to be essential to reinstate easy access to credit, by re-establishing financing at reasonable conditions and by restoring liquidity, so that consumers may once again purchase new vehicles.

Aid must be given to the financial sector and to small and medium-sized enterprises (SMEs). A temporary State aid framework was adopted in December 2008 (pdf ). This provides for subsidised loans for the manufacture of “green products” such as “green cars”.

The Commission and the European Investment Bank have planned to support industry that decides to invest in future technologies, in particular green technologies, through the 7^th Research Framework Programme and the research partnership planned therein. This is a partnership between the public and the private sector covering:

the design of “green” vehicles (passenger cars, buses, trucks, urban vehicles, etc.);
infrastructure (for electric cars and hydrogen vehicles);
logistics.

The Commission has also studied the possibility of adopting a scrapping scheme.

The question of employment must also remain at the heart of the strategy for the automotive sector. The Commission proposes to implement the following measures via the European Social Fund (ESF):

support for short-time workers;
supporting company restructuring in this sector;
financing retraining;
anticipating change requirements;
matching skills.

Fair competition must become the basic principle in force on the market and a return to protectionism must be avoided.

2009 Annual Statement on the Euro Area

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2009 Annual Statement on the Euro Area

Outline of the Community (European Union) legislation about 2009 Annual Statement on the Euro Area

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Economic and monetary affairs > Stability and growth pact and economic policy coordination

2009 Annual Statement on the Euro Area

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank of 7 October 2009 – Annual Statement on the Euro Area 2009 [COM(2009) 527 final – Not published in the Official Journal].

Summary

Following the economic crisis which began in summer 2007 and peaked in 2008, signs of stability are beginning to emerge in the financial system. Throughout the crisis, the euro has effectively protected the euro area from turbulent exchange and interest rate movements that have previously been so detrimental for European Union (EU) countries in times of financial market stress. The ability of the euro area to act quickly and coordinate with central banks has helped to stabilise the whole international monetary system.

The financial crisis has demonstrated benefits of euro membership, increasing its attractiveness for non-euro area EU countries. Benefits include domestic institutions being granted access to euro central bank liquidity.

However the euro is not able to shield the euro area from all economic problems – in particular those related to imbalances. The crisis emphasised certain weaknesses within the euro area. Imbalances within the euro area meant that some economies were left more exposed to the crisis than others. Prior to the crisis many euro area countries ignored the risk of imbalances, but the financial crisis has demonstrated the need for change.

The euro area’s response to the crisis

There was a lack of satisfactory supervisory arrangements, which failed to act quickly and provide a coordinated response when the crisis began. Initial responses tended to be primarily defined by euro area countries’ individual domestic considerations. In October 2008, the first Eurogroup summit helped to generate an EU-level response, whereby the Commission provided a common strategy for the implementation of national banking rescue plans.

The Commission has since presented its formal legal proposals for a new framework of European financial supervision. The objective of these proposals is to heighten the prudential supervision of individual financial institutions as well as the financial system as a whole.

Alongside the internal policies, the EU is also at the head of the regulatory reform of financial markets, helping to form and develop the initiatives and commitments of the G20.

Fiscal consolidation within the euro area, in accordance with the Stability and Growth Pact, meant that most countries were better able to deal with the crisis than before. However, fiscal consolidation was unfinished in some euro area member countries, where levels of public debt remained high and public finances become dependant on fiscal revenues. As a result, some euro area countries were unable to adequately contribute to the joint fiscal stimulus that the European Economic Recovery Plan set out.

As a result of their close economic and financial relationship with a common currency and single monetary policy, coordination is essential for countries in the euro area. The euro area’s response to the crisis could have been quicker and more effective if coordination between the member countries had been more efficient.

The way forward – a broader macroeconomic surveillance

The crisis has demonstrated the need for euro area member countries to progress on and apply the EMU@10 reform agenda. In this communication of 7 May 2008 the Commission proposed a reform policy agenda to improve the functioning of the Economic and Monetary Union (EMU) against the fast-changing global environment, ageing populations and increasing energy and climate change concerns. The external policy area of the reform agenda proposed that the euro area should play a prominent role in global economic governance.

Imbalances within the euro area were not dealt with prior to the financial crisis. A broader surveillance is therefore required to establish a coordinated policy response. This broader surveillance should include financial market developments. Too much debt in the private sector resulted in unsustainable economic trends. Such financial imbalances need to be discovered and treated earlier.

The surveillance must be broadened to ensure sustainable public finances. Low growth together with an increasing debt puts public finances in a precarious position at a time when the impact of ageing is beginning to emerge. A concrete strategic commitment is required to achieve a strengthened fiscal cooperation, which adequately balances concerns of stabilisation and sustainability in accordance with the Stability and Growth Pact.

Coordination across policies and euro area countries must be improved to allow judicious exit strategies. Such coordination must consist of common understandings on the appropriate timing, pace and sequencing of normalisation of policy settings.

European financial supervision

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European financial supervision

Outline of the Community (European Union) legislation about European financial supervision

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

European financial supervision

Document or Iniciative

Communication from the Commission of 27 May 2009 – European financial supervision [COM(2009) 252 final – Not published in the Official Journal].

Summary

This Communication sets out the basic architecture for a new European financial supervisory framework. The European Commission proposes that this framework be composed of two new pillars:

the European Systemic Risk Council (ESRC);
the European System of Financial Supervisors (ESFS).

The European Systemic Risk Council (ESRC)

The financial crisis revealed the shortcomings of a system that was lacking in macro-financial supervision. Under the new system, it is essential to be able to identify risks to stability and to introduce an effective warning system. The current macro-prudential measure is too fragmented. It should be developed further.

The ESRC should be an independent body, responsible for safeguarding financial stability in the area of macro-prudential supervision at European level. It will not have any legally binding powers and shall be responsible for the following tasks:

collecting information and identifying potential threats;
prioritising risks according to their significance;
issuing warnings where applicable;
making recommendations if required;
monitoring the measures that are taken;
cooperating with the IMF, the FSB and third country counterparts.

Macro-prudential supervision will mainly be carried out by central banks. In this regard, the Commission proposes that the ESRC be composed of:

the President of the European Central Bank (ECB), responsible for the presidency of the ESRC;
a Vice-President (elected by the members of the ESRC);
the central bank governors from the 27 Member States;
the Vice-President of the ECB;
the Chairpersons from the three European supervisory authorities;
a member of the European Commission.

Each national central bank governor shall be accompanied by a representative of the national supervisory authorities, admitted as observers.

It is planned that the ESRC shall form part of the European legal and institutional framework. The Commission proposes that the ESRC should be established on the basis of Article 95 of the EC Treaty as a body without legal personality.

The European System of Financial Supervisors (ESFS)

The ESFS corresponds to a micro-prudential approach. Its duties are to set up a system which is in line with the objective of a stable and single market for financial services in the European Union. It will also be responsible for linking national supervisors into a strong Community network.

The ESFS shall form an operational European network. The three Committees of Supervisors are to be replaced by the following authorities, having a legal personality:

the European Banking Authority (EBA);
the European Insurance and Occupational Pensions Authority (EIOPA);
the European Securities Authority (ESA).

These three authorities shall:

establish a single set of harmonised rules;
ensure consistent application of EU rules;
manage disagreement between national supervisors;
make recommendations if there is a manifest breach of Community law;
create a common supervisory culture and consistent supervisory practices;
have full supervisory powers for some specific entities;
ensure a coordinated response in crisis situations;
collect micro-prudential information.

The ESFS shall be composed of:

the three supervisory authorities described above;
a steering committee;
national supervisory authorities.

With the establishment of the ESFS, and the three European Supervisory Authorities described above, the Commission intends to introduce a “single rule book” which will ensure uniform application of rules in the EU in order to safeguard the effective functioning of the internal market.

The ESFS is to be established on the basis of Article 95 of the EC Treaty.

Context

The October 2008 financial crisis revealed many shortcomings in financial supervision. As a response to this crisis, the Commission mandated a group chaired by Mr Larosière to propose recommendations in order to strengthen European supervisory arrangements. The Larosière Group thus presented a report on 25 February 2009 introducing a new system, which is set out in this Communication.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Remuneration policies in the financial services sector

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Remuneration policies in the financial services sector

Outline of the Community (European Union) legislation about Remuneration policies in the financial services sector

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Remuneration policies in the financial services sector

Document or Iniciative

Commission Recommendation 2009/384/EC of 30 April 2009 on remuneration policies in the financial services sector.

Summary

This Recommendation sets out general principles applicable to remuneration practices in the financial services sector which aim at avoiding any excessive risk-taking in this sector, particularly by banks and investment firms.

The Recommendation applies to:

financial undertakings having their registered office or their head office in the territory of a Member State;
remuneration of those categories of staff whose professional activities have a material impact on the risk profile of the financial undertaking.

The Recommendation does not apply to fees and commissions received by intermediaries and external service providers in case of outsourced activities.

Remuneration policy

Remuneration policy should be in line with the business strategy, objectives, values and long-term interests of the financial undertaking, such as sustainable growth prospects or the protection of clients and investors in the course of services provided.

The remuneration policy should be the result of a balance between fixed and variable components. The fixed component should represent a sufficiently high proportion of the total remuneration allowing the undertaking to operate a fully flexible bonus policy.

The structure of the remuneration policy should be updated regularly so that it corresponds to the development of the company.

In the event that remuneration is performance-related, it should be evaluated according to current or future risks without omitting to take into account the cost of the capital employed and the liquidity required.

The procedures followed should be clear and documented and internally transparent.

The (supervisory) board should establish the general principles of the remuneration policy of the financial undertaking and be responsible for its implementation.

Control functions, human resources departments and external experts should also be involved in the design of the remuneration policy.

Remuneration policy should, at least on an annual basis, be subject to central and independent internal review by control functions for compliance with policies and procedures defined by the (supervisory) board.

Disclosure

Information on the remuneration policy should be disclosed by the undertaking in the form of an independent statement or a periodic disclosure and should list:

information on the decision-making process which defines the remuneration policy chosen;
information on linkage between pay and performance;
performance measurement criteria;
the performance criteria on which the entitlement to shares, options or variable components of remuneration is based;
the main parameters and rationale for any annual bonus scheme and any other non-cash benefits.

Supervision

The competent authorities should carry out supervisory activities and take into account when doing so parameters such as:

the size of the financial undertaking;
the nature of its activities;
the complexity of its activities.

Financial undertakings should, in addition, send the competent authorities a statement indicating the level of compliance with the principles given above concerning remuneration policy.

Context

Remuneration practices in the financial undertakings sector, particularly in banks and investment firms, have led to excessive risk-taking. These practices contributed, to a certain extent, to significant losses suffered by large financial undertakings and were, partly, at the origin of the October 2008 financial crisis. The Communication “Driving the European recovery”, published in spring 2009, presents a plan which aims at restoring and maintaining a stable and reliable financial system. This Recommendation on remuneration policies is part of the strategy proposed by the plan.

Related Act

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Report on the application by Member States of the EU of the Commission 2009/384/EC Recommendation on remuneration policies in the financial services sector [COM(2010) 286 final – Not published in the Official Journal].

This Report concerns the application of Recommendation 2009/384/EC in the different Member States.
It notes disparities in the application of the principles laid down in the Recommendation. At present, only 16 Member States have fully or partly applied the Recommendation and 7 Member States apply the measures advocated in the Recommendation across the financial services sector.
Moreover, the Report also notes the reluctance of financial institutions to modify their remuneration practices. These institutions are continuing to filter most of the information relating to their individual remuneration practices.

In view of these still considerable obstacles, the Commission intends to pursue the action undertaken and to contribute to the introduction of global rules on remuneration policy in the financial services sector within the context of the G20 and the FSB.

Taxation of the financial sector

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Taxation of the financial sector

Outline of the Community (European Union) legislation about Taxation of the financial sector

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Taxation of the financial sector

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 7 October 2010 – Taxation of the Financial Sector [COM(2010) 549 final – Not published in the Official Journal].

Summary

This Communication proposes further exploration of two tax instruments which could be applied to the financial sector:

Financial Transactions Tax (FTT);
Financial Activities Tax (FAT).

Why are new taxes on the financial sector required?

The financial sector is regarded as one of the main sectors responsible for the 2008 crisis, particularly for the considerable growth in government debt in the world. As a result, the European Commission believes that the application of specific taxes to this sector could have the following positive effects:

these taxes could complement the essential regulatory measures which aim at enhancing the efficiency and stability of financial markets and reducing their volatility;
these taxes would enable the financial sector to contribute to national budgets in return for the support they received during the crisis;
these taxes could enable the financial sector to contribute more to public finances given that the majority of financial services are exempt from Value Added Tax (VAT) in the European Union (EU).

What is the Financial Transations Tax (FTT)?

The FTT would tax the value of each transaction relating to:

equities;
bonds;
currencies;
derivatives.

According to an estimate based on 2006 figures, if this tax had been implemented in that year, the tax revenues would have been around EUR 60 billion, with a rate of 0.1 % on stocks and bonds transactions.

The advantage of such a tax might lie in the application of the ‘polluter pays’ principle. This tax could reduce ‘undesirable’ operations by penalising short-term transactions. However, it would need to be applied by several financial centres in the world in order to achieve market stability and prevent relocations. For these reasons, the Commission believes that a global FTT would be the most appropriate.

What is the Financial Activities Tax (FAT)?

The FAT is an instrument which has been proposed by the International Monetary Fund (IMF). It has the following elements:

in principle it falls on total profit and wages;
it can be designed to specifically target economic rents and/or risk;
it taxes corporations.

The implementation of this tax, with a rate of 5 %, by the 22 ‘developed economies’ identified in the IMF report to the G-20, could generate the equivalent of 0.28 % of their GDP. At EU level, the tax revenues could be EUR 25 billion.

In principle, the FAT does not change the prices of financial instruments and does not affect the market structure. However, it could encourage profit shifting via relocating income and remuneration outside the EU. Certain technical aspects of this tax still need to be examined further in order to avoid such practices. The Commission believes that the implementation of the FAT would be more relevant at EU level.

Context

In its Resolution on financial transaction taxes of 10 March 2010, the European Parliament asked the Commission and Council to look at how a financial transaction tax could be used to finance development cooperation, help developing countries to combat climate change and contribute to the EU budget. In June 2010, the European Council insisted on the leading role that the EU should take in this area as part of a global strategy. However, there is currently no global consensus on additional tax instruments in the financial sector.

Bank Resolution Funds

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Bank Resolution Funds

Outline of the Community (European Union) legislation about Bank Resolution Funds

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for services > Financial services: banking

Bank Resolution Funds

Document or Iniciative

Communication of 26 May 2010 from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the European Central Bank – Bank Resolution Funds [COM(2010) 254 final – Not published in the Official Journal].

Summary

This Communication defines the European Commission’s intentions concerning the establishment of Bank Resolution Funds.

What is the role of Bank Resolution Funds?

Resolution funds should contribute to financing the orderly resolution of distressed banks. In order to do this, they could implement measures such as:

financing bridge banks;
financing a total or partial transfer of assets and/or liabilities from the ailing entity;
financing a good bank/bad bank split.

Resolution funds may also be used to cover administrative costs, legal and advisory fees.

However, they must not play the role of insurance against failure or be used to bail out failing banks.

How can Bank Resolution Funds be financed?

The Commission considers that financing arrangements for a fund should procure the necessary resources whilst incentivising appropriate behaviour.

Three points could form the basis for calculating contributions to Bank Resolution Funds:

banks’ assets could represent an indicator of the amount which might need to be spent in handling the bank’s resolution. A levy could be established based on the assets and could therefore amount to an additional capital requirement;
banks’ liabilities could also represent indicators of the amount which might need to be spent in handling the bank’s resolution. However, liabilities could be less effective proxies for the degree of risk;
profits and bonuses could be used as a reference in order to determine the amount of levies.

Financing arrangements should meet the following criteria:

avoid any possible arbitrage;
reflect the appropriate risks;
take into account the systemic nature of certain financial entities;
be based on the possible amounts that could be spent if resolution becomes necessary;
avoid competition distortions.

What means of governance should be used for Bank Resolution Funds?

Bank Resolution Funds should remain separate from the national budget and be dedicated only to resolution costs.

The management of these funds should be entrusted to the authorities responsible for the resolution of financial entities acting as independent executive bodies.

The use of resolution funds should also respect the EU State aid rules.

The Commission plans to adopt legislative proposals for crisis management and resolution funds by early 2011.

How can bank resolution funds be integrated into a new financial stability framework?

The Commission has proposed to strengthen capital requirements and to reform financial supervision within the EU. It intends to strengthen Deposit Guarantee Schemes and the corporate governance of financial institutions.

The Commission also intends to implement preventive measures in order to mitigate the risks of bank failures and to reduce the implicit guarantees associated with institutions deemed ‘too big to fail’.

The Commission has also planned to adopt in October 2010 a roadmap on a European framework for crisis management. The aim of the new proposed framework is to make common tools, which enable prompt and effective action to be taken in the event of banking failures, available to Member States. These measures should not lead to costs for taxpayers.

Tools are proposed to complement the action of resolution funds:

Recovery and Resolution Plans;
debt to equity conversions.

Defining a common approach to Bank Resolution Funds

A European and global approach should be defined as regards the creation of Bank Resolution Funds.

Under this new measure, national authorities will continue to be responsible for day to day supervision, and this should be underpinned by a solid cross-border framework which is ready to address possible crises.

The first step in this common approach lies in establishing a system based on a harmonised network of national funds linked to a set of coordinated crisis management arrangements. This system should be re-examined by 2014 with a view to creating EU integrated crisis management and supervisory arrangements, as well as an EU Resolution Fund in the longer term.

Context

In order to mitigate the bank failures caused by the October 2008 financial crisis, the governments of Member States have provided State aid to assist the financial sector. This aid has considerably affected taxpayers and has increased Member States’ public debt. The creation of resolution funds should prevent future recourse to State aid to resolve financial institutions’ failures.

Europe 2020: a strategy for European Union growth

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Europe 2020: a strategy for European Union growth

Outline of the Community (European Union) legislation about Europe 2020: a strategy for European Union growth

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Employment and social policy > European Strategy for Growth

Europe 2020: a strategy for European Union growth

Document or Iniciative

Communication from the Commission of 3 March 2010 – Europe 2020 A strategy for smart, sustainable and inclusive growth [COM(2010) 2020 final – Not published in the Official Journal].

Summary

The Commission presents the strategy which should enable the European Union (EU) to achieve growth that is:

smart, through the development of knowledge and innovation;
sustainable, based on a greener, more resource efficient and more competitive economy;
inclusive, aimed at strengthening employment, and social and territorial cohesion.

In addition, the Commission proposes a series of targets to be achieved by 2020:

increasing the employment rate of the population aged 20-64 to 75 %;
investing 3 % of gross domestic product (GDP) in research and development;
reducing carbon emissions by 20 % (and by 30 % if conditions permit), increasing the share of renewable energies by 20 % and increasing energy efficiency by 20 %;
reducing the school drop out rate to less than 10 % and increasing the proportion of tertiary degrees to 40 %;
reducing the number of people threatened by poverty by 20 million.

The EU 2020 programme

The Commission presents seven flagship initiatives to be put in place at European level and in EU countries:

the Innovation Union, to support the production of innovative products and services, in particular concerning climate change, energy efficiency, health and the ageing population;
the Youth on the move initiative, to enhance the performance of education systems, non-formal and informal learning, student and researcher mobility, but also young people’s entry to the labour market;
the Digital Agenda for Europe initiative, to promote the creation of a digital single market, characterised by a high level of trust and a clear legal framework. Furthermore, fast and subsequently ultra fast internet should be accessible to the population as a whole;
the Resource-efficient Europe initiative, to support the sustainable management of resources and the reduction of carbon emissions, while maintaining the competitiveness of the European economy and its energy security;
the industrial policy for the globalisation era initiative, to help businesses to overcome the economic crisis, integrate into world trade and adopt more environmentally-friendly production methods;
the agenda for new skills and jobs, to improve employment and the sustainability of social models. The aim is to encourage the strategies of flexicurity, worker and student training, but also gender equality and the employment of older workers;
the European Platform against Poverty, to increase cooperation between EU countries, and to follow the Open Method of Coordination in the areas of social exclusion and social protection. The objective of the Platform is to be the economic, social and territorial cohesion of the EU, and the social inclusion of people experiencing poverty.

Introduction of the strategy

The strategy is to be presented through 10 ‘Europe 2020’ integrated guidelines adopted by the June 2010 European Council. They are to replace the current 24 employment guidelines and the broad economic policy guidelines.

The Council may also address policy recommendations to EU countries on economic and budget matters, and all of the thematic areas covered by the strategy.

A substantial part of the strategy is to be implemented by the national, regional and local authorities of the EU countries, associating national parliaments, social partners and civil society. Actions to raise awareness are to be conducted among European citizens.

The Commission shall be responsible for monitoring progress. It shall present yearly reports, including reports on the achievements of the stability and convergence programmes.

Related Acts

Communication of 30 May 2012 from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: Action for stability, growth and jobs [COM (2012) 299 final].
Following the economic crisis, this Communication explores both the role of the EU and the role of EU countries in a new growth initiative, intended to put the EU economy back on a sound footing. The Commission suggests that the EU needs to tap into: external sources of growth; the potential of EU funding of the growth that Europe needs; and the growth potential of the Economic and Monetary Union, of the Internal Market, and of human capital.

Council Decision 2010/707/EU of 21 October 2010 on guidelines for the employment policies of the Member States [Official Journal L 308 of 24.11.2010].

of 13 July 2010 on broad guidelines for the economic policies of the Member States and of the Union [Official Journal L 191 of 23.7.2010].

of 25 and 26 March 2010.
The European Council has approved the main aspects of the ‘Europe 2020’ strategy for jobs and growth.