End of Mandate Report 2013

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Brussels, 4 April 2013

ECO End of Mandate Report

for the period 2010-2013

Section for Economic and Monetary Union

and Economic and Social Cohesion

President: Michael Smyth

CES1633-2013_00_00_TRA_TCD

ECO End of Mandate Report 2010-2013

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TABLE OF CONTENTS

Page

1.Economic governance and Economic and Monetary Union...... 2

2.Regulation of financial markets...... 3

3.Taxation...... 5

4.The Budget of the European Union...... 6

5.Cohesion Policy...... 7

Appendix I – Key statistics for the 2010-2013 term of office...... 9

Appendix II – List of adopted opinions October 2010 – March 2013...... 10

1.Economic governance and Economic and Monetary Union

The crisis has exposed and amplified the need for greater co-ordination of economic policies in the Economic and Monetary Union (EMU). Already at the beginning of 2011, in an opinion on the newly established European semester of policy coordination, the EESC stressed that enhancing the coordination of the EU economic policies should be done by ensuring equal attention to the need for stability and job-creating growth. The Committee expressed the view that, at least for countries in the euro area, European economic policy coordination should be the first step towards a genuine common economic policy and the coordination of budget policies.

A number of weaknesses in the economic governance of the EMU were corrected through a new set of rules on budgetary surveillance and macroeconomic imbalances – five Regulations and one Directive, also known as the Six-pack. In an opinion commenting on the Commission proposal for an effective enforcement of budgetary surveillance in the euro area, the EESC pointed out that the sustainability of public finances would be best ensured through a stronger emphasis on preventive rather than corrective approaches, and that mechanisms based on incentives are more likely to be successful than those based solely on punitive measures. As regards the prevention and correction of macroeconomic imbalances, the Committee took the view that the scoreboard for assessing imbalances should be composed of a wide range of economic, financial and social indicators. Moreover, the Committee pointed to the risk that any restrictive rebalancing measures could have the effect of fuelling procyclical policies, intensifying and prolonging the current phase of economic contraction.

The European political debate in the first half of 2012 focused on the creation of a fiscal union through the signature of the Fiscal Compact (formally, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) by 25 EU Member States and on the different proposals for debt mutualisation. While the Fiscal Compact further improves the European framework for economic policy coordination by setting strict budgetary rules and reinforcing surveillance and coordination of economic policies, the EESC has clearly stated that this Treaty alone would not bring a resolution to the current crisis.

Against this background, the Committee put a strong emphasis on growth promotion, which could, for example, be achieved through the issuance of common debt instruments. In an own-initiative opinion on "Restarting growth" the Committee proposed two distinct types of EU bonds that could (i)stabilise debt (untraded bonds composed of converted national debt of up to 60% of GDP) and (ii)help resolve the issue of growth (traded bonds to attract funds into the EU and co-finance EIB and EIF investment projects). This would be a part of a European "New Deal" – a comprehensive plan for growth that would create the conditions to realise effective common economic and fiscal governance. These are the essential proposals that were also put forward at the high-level conference on the sovereign debt crisis which the Committee organised in June 2012.

From this perspective, the Committee welcomed the Commission Green paper on the feasibility of introducing Stability bonds. The EESC took the view that the partial substitution of Stability Bonds for national bonds with joint and several guarantees was the most practicable and overall the most acceptable option proposed by the Commission in its Green Paper. However, it was also highlighted that the Commission must fully exercise its right of initiative and frame proposals that match the scale of the current crisis instead of relying on intergovernmental sticking-plasters. This would foster fiscal responsibility and integration, pooling of risks stemming from sovereign debt, restoration of long-term creditworthiness, and ultimately could facilitate the implementation of structural reforms and attract investments.

In an own-initiative opinion on "Smart and inclusive growth", the EESC took the view that the triple objective of the Europe 2020 strategy, i.e., smart, sustainable and inclusive-cohesive growth, is generally appropriate, but in order to achieve it a well-balanced macroeconomic policy mix and structural reforms together with more and better instruments are needed. The EU needs to show that it has the necessary political will and a specific vision of substantially closer integration. Implementation of measures should be accelerated and the role of the European Central Bank should be strengthened.

Work in progress is focused on the instruments for achieving deeper economic integration and better and more effective policy coordination. In this regard, the Committee has just adopted an opinion on the implementation of the broad economic policy guidelines, which should feed into the 2013 European semester and provide the basis for a thorough revision of these guidelines in 2014.

The Committee has also started its work on the future of the European project and the architecture of EMU in particular. Taking into account the Commission Blueprint for a deep and genuine EMU as well as the related Roadmap agreed by the European Council in December 2012 and on the basis of the Committee's previous proposals for "Restarting growth", the EESC's vision on the future shape of EMU will be presented in two opinions – one on the general role of the euro and the political instruments the EMU needs, and another one commenting specifically on the Commission Blueprint. The opinions will take due account of the results of the public hearing on the Economic and political future of the EU that was organised in February 2013. They will be presented to the European decision-makers with the aim to feed into the June 2013 European Summit which is scheduled to agree on further steps for the completion of EMU.

2.Regulation of financial markets

One of the reasons for the financial crisis was inadequate and ineffective regulation and supervision of the financial markets. The crisis also showed the contradictions between a financial system and banking groups that operate on a global dimension while being regulated as bodies covered at national level. Already before the current mandate the Committee, in its opinion on the "de Larosière Report" in October 2009, laid down some fundamental principals of regulation and supervision.

One of the important findings of the de Larosière Group addressed the Credit Rating Agencies (CRAs), their authorisation, monitoring and supervision and the use of the ratings. CRAs have played a particularly controversial role during the recent years of crisis. The EESC has closely examined this topic and has in three opinions recommended the strict and rigorous regulation of CRAs.

As early as November 2012 the EESC had already forwarded its opinion and its recommendations on the "Roadmap towards a Banking Union" to the decision-making bodies in the Council and Parliament. The Banking Union's aim is to place the banking sector on a sounder footing and restore confidence in the Euro as part of a longer term vision for economic and fiscal integration. The EESC welcomes the package of measures covered by the Roadmap and proposals for the supervision of credit institutions at EU level. Member States must be ready to hand over some of their powers in the interests of "socially and economically efficient" EU governance. It calls for the urgent implementation of the Single Supervisory Mechanism (SSM) and supports the role of the European Central Bank (ECB) supervisory board, as well as the ECB's added powers, resources, and responsibility for supervising all banks, however small.

A complementary and equally important step towards an effective crisis management framework is the establishment of a policy framework to manage bank failures in an orderly way and to avoid contagion to other institutions by equipping the relevant authorities with common and effective tools and powers to address banking crises pre-emptively, safeguarding financial stability and minimising taxpayer exposure to losses. Currently there is no harmonisation of the procedures for resolving credit institutions at EU level and in its opinion on "Recovery and resolution of credit institutions" the EESC welcomes the legislative proposal for such a framework that introduces new tools and procedures. The professional advice of stakeholders affected by the resolution plans should also be sought on relevant matters where appropriate. The Committee is aware that the new preventive, early intervention and resolution tools and procedures alone can hardly resolve systemic crises but if applied appropriately and consistently, they could contribute to preventing them from happening.

However, stabilisation and functioning of the system go far beyond the mere regulatory framework. The EESC insisted in its opinion "Financial education and responsible consumption of financial products" that ensuring that all segments of the population are sufficiently financially aware throughout their lives was crucial to maintaining confidence in a well-regulated financial system, and to ensuring its development and stability. In a going local event organised by the EESC in Vienna, Austria, financial education stances and programmes that have been implemented were debated involving representatives of the Commission, the OECD, central banks and organised civil society. With its brochure"Financial Education for all", the EESC is disseminating information on financial education initiatives in order to encourage stakeholders in providing financial education programmes and offering transparent financial products.

Another area that is of particular relevance in the financial sector is the lack of effective counterweight to the legitimate representation of the financial sector's interests. The Committee has thoroughly investigated this topic and found in its opinion "How to involve civil society organisations in financial regulation" that it is crucially important for civil society organisations not just to set basic objectives and call for a general tightening-up of the rules, but to put forward knowledgeable and practical proposals and arguments. This will require considerable efforts to ensure that the organisations can enter discussions on an equal footing with the legislator and with other stakeholders. A hearing with the participation of Commissioner Barnier collected the voices of civil society and initiated an exchange of information and an open dialogue with relevant organisations.

3.Taxation

The current economic and financial crisis has given a new impetus to taxation policy. As regards the contribution of the financial sector to public revenue raising the EESC already in July 2010 adopted by a large majority an own initiative opinion proposing the introduction of a Financial Transaction Tax (FTT). In October 2010 the Commission followed and presented a strategy paper on the "Taxation of the Financial Sector" in which many of the points raised by the Committee were taken on board. In June 2011 the EESC adopted its opinion on this communication and here again the recommendations of the Committee proved to be forward-looking: "…if it emerges that the adoption of an FTT at global level is not feasible, then the EESC would envisage the adoption of an EU FTT". The Commission presented its legislative proposal for an EU wide FTT in September 2011, which the Committee consequently received favourably. Following a blockage of this initiative in the Council, the Commission in October 2012 prepared the ground for enhanced cooperation following requests by 11 Member States who wish to apply an FTT.

Many tax obstacles for EU business and citizens remain and make cross-border activities too cumbersome and expensive, whilst at the same time distorting competition. The introduction of a Common Consolidated Corporate Tax Base (CCCTB) has received new momentum after a long stand-still. The EESC, after a thorough in-depth analysis, supports the Commission proposal, whilst forwarding a series of detailed recommendations to enhance the practicality of the proposed instruments and measures. Furthermore, the EESC has adopted opinions on new initiatives such as curbing double taxation in the single market (e.g. withholding taxes on dividend payments) or taxation of interest and royalty payments. The EESC supports the Commission in its efforts to tackle these problems and to find good and practical solutions.

There is substantial scope for coordination with respect to all possible tax policy areas; therefore it is crucial that more efficient cooperation between the tax authorities of Member States is promoted. EESC opinions were, among others, adopted on the Commission communication "Removing cross-border tax obstacles for EU citizens" and on "Administrative Cooperation in the field of excise duties".

The green paper on the review of the VAT system proposes a revision of the actual system having in mind that fraud and deficiencies cause a gap of VAT liability of about 12%. The EESC has prepared an opinion on the green paper and opinions on further proposals presented by the Commission on the basis of the green paper. In November 2011 the EESC adopted unanimously an opinion on introducing a quick reaction mechanism against VAT fraud in which it strongly supports the Commission approach. This is regarded as an important step forward in the efforts to combat tax evasion and fraud. Presently, the EESC is preparing an opinion on the most far-reaching anti-fraud package of the Commission, i.e. the action plan against tax evasion and fraud as well as recommendations on tax havens and aggressive tax planning.

As regards "growth-supporting" taxation and sustainability, in October 2011 the Committee adopted its opinion on the proposal for a reform of the Energy taxation directive in which it supports the Commission approach. The proposal aims at enabling Member States to shift part of the tax-burden from labour or capital to a form of taxation that does not entail negative incentive effects and which furthermore encourages environmentally responsible behaviour and is favourable to energy efficiency, in accordance with the Europe 2020 strategy.

4.The Budget of the European Union

"More Europe" means mutually reinforcing the potential of the Member States, the EU institutions and other economic and social actors. An integrated Europe is stronger than the sum of its parts; coordinated action is smarter than separate, asymmetric policies that cost more and may undermine each other and the Union as a whole. Thus, "More Europe" makes economic sense.

The EU Budget should therefore not be seen as a burden but as a smart means to realise economies of scale, to reduce costs and leverage-up investment and growth. A euro spent at EU level is more effective than one spent at national level ("added European value"). This position was already taken by the EESC in 2008 in its opinion on the "EU Budget Reform". Two further opinions adopted in 2011 on the "EU Budget Review" and most recently in 2012 on the Commission proposal on the next Multiannual Financial Framework 2014-2020 reaffirmed that the EESC did not see a sustainable future without a sustainable budget and was in particular opposed to a nominal freeze or even cuts in the EU budget, as publicly called for by some Member States. Such a stance would not enable the Union to tackle the ambitious challenges stemming from both the Lisbon Treaty and the Europe 2020 strategy.

The Committee also called for the "juste retour" concept to be abandoned, as it undermined solidarity and mutual benefit. A brochure published in all official EU languages provided EESC members with a rationale to disseminate this important message in their Member States of origin. In order to actively involve organised civil society in the debate on the future budget, the EESC hosted two high level conferences, both with the participation of Commissioner Lewandowski, responsible for Budget, and involving EP-rapporteurs, MEPs, Council representatives, academics and other key stakeholders. The events provided for a constructive debate and sent out the clear message to the European Council that the EU Budget had to be strengthened and supported by own resource mechanisms. For the EU to gain credibility in the eyes of the European public and to serve as a clear illustration of both the advantages of Europe and the costs of "non-Europe", the EESC reiterated that the EU budget should be exemplary, efficient, effective and transparent. The call for a shift on the funding side of the EU budget to own resources was equally underlined in an opinion on the "System of Own Resources" in which the EESC supports the Commission in its stance. Concerning the spending side the Committee suggested to the legislative bodies of the EU to give a more interventionist role to the European Investment Bank and more recourse to public-private partnerships and project bonds for growth, jobs and the reduction of poverty.