Det Politisk-Økonomiske Udvalg 2008-09
KOM (2009) 0114 Bilag 1
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COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels,
COM(2009) 114
COMMUNICATION FOR THE SPRING EUROPEAN COUNCIL
Driving European recovery
VOLUME 2: ANNEXES
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Annex I
A PROGRAMME FOR FINANCIAL MARKET REFORM
To deliver responsible and reliable financial markets for the future, the Commission will
propose an ambitious new reform programme in the course of this year with five key
objectives:
(a)
Providing the EU with a
supervisory framework
that detects potential risks
early, deals with them effectively before they have an impact, and meets the
challenge of complex international financial markets;
Filling the gaps where European or national
regulation
is insufficient or
incomplete, based on a "safety first" approach;
Ensuring that European investors and small and medium-sized companies can
be
confident
about their savings, access to credit and their rights as investors in
financial products;
Improving
risk management
in financial firms and aligning pay incentives
with sustainable performance;
Ensuring
more
effective
sanctions
against
market
wrongdoing.
(b)
(c)
(d)
(e)
Reforming the European supervisory framework
One of the major lessons of the crisis was that when it came to the crunch, cross-border
supervisory cooperation was ineffective and unresponsive. The EU's supervisory system has
failed to adjust to the complexity, internationalisation and inter-linkages of financial markets.
Building on the recommendations of the de Larosière Group, the Commission will present a
European financial supervision package before the end of May 2009, for decision at the June
European Council. The legislative changes to give effect to these proposals will follow in the
autumn and should be adopted in time for the renewed supervisory arrangements to be up and
running by the end of 2010. The package will include measures to establish a
European body
to oversee the stability of the financial system as a whole
and proposals on the architecture
of a
European financial supervision system.
It is also crucial to strengthen the EU's
crisis management and intervention mechanisms.
Appropriate crisis intervention tools must be available in all Member States to allow early
intervention in ailing banks or insurance firms to stabilise the financial sector, ensure
confidence in the financial system and guarantee the continuity of key financial services,
whilst minimising the costs to the taxpayer. Given the increasing degree to which the EU
financial market is integrated, cross-border crisis arrangements need to be efficient and
generate confidence among Member States. The Commission will publish a White Paper on
early intervention by June 2009.
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Stronger, more comprehensive and 'safety-first' regulation
The crisis exposed certain shortcomings in current European and national regulatory
frameworks. It also brought to light the problems of a fragmented and incomplete regulatory
coverage of the financial sector. Parts of the financial system were free from any effective
regulatory oversight. Some complex financial products were inadequately understood or
regulated. Debates have very much focused on
hedge funds and private equity.
By the end
of April the Commission will come forward with legislative proposals to ensure appropriate
oversight and regulation of these and other systemically important market players.
Equally, there needs to be
better capitalisation and less debt and leverage.
The
Commission is therefore reviewing the prudential treatment of bank's trading activities and
will reinforce both the level and the quality of capital. In particular, it will:
•
reinforce capital requirements for
trading book activities
(i.e. the capital
requirements related to assets that banks hold for short-term resale). This proposal
will be introduced in the context of the revision of the Capital Requirements
Directive (CRD), to be presented by June 2009;
•
upgrade capital requirements for
complex securitisations,
both in the banking
and the trading book. This proposal will also be introduced in the context of the
revision of the Capital Requirements Directive (CRD), to be proposed by June
2009;
•
mitigate any excessive
procyclicality
of existing capital requirements through
measures including the possibility of building up additional reserves in good
times. It is also crucial to provide good and transparent accounting treatment of
these counter-cyclical buffers ('dynamic provisioning'). Conversely, banks should
be allowed to reduce capital buffers during difficult times, thus ensuring adequate
availability of capital over the whole economic cycle. A report on "excessive"
pro-cyclicality in the CRD will be presented by the end of 2009;
•
initiate a rolling programme of actions to introduce a far more
consistent set of
supervisory rules.
Key differences in national legislation stemming from
exceptions, derogations, additions made at national level or ambiguities contained
in current directives should be identified and removed, so a harmonised core set of
standards is defined and applied throughout the Member States;
•
work on measures supplementary to
risk-based requirements
in the CRD. In the
G-20 and the Basel Committee fora, the Commission has already raised the need
for a new and simple metric to supplement the existing risk-based capital
requirements (e.g. addressing leverage and/or liquidity risk). The international
dimension and the need for coordination and coherence are important when
developing this work. Nevertheless, the specific needs of the EU banking system
may require the EU to adopt different measures that are most suited to its own
needs. The Commission will present proposals in autumn 2009.
The EU also needs to act to avert the dangers of
complex financial products
that pose
systemic risks. The Commission will come forward with initiatives to make sure that the
industry uses central counterparty clearing for such products. On 19 February, the industry
confirmed its engagement to use EU-based central clearing for eligible EU contracts by end-
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July 2009. Signatories will work closely with infrastructure providers, regulators and the
European authorities including the ECB in resolving outstanding technical, regulatory, legal
and practical issues. Moreover, as part of a review of complex financial products the
Commission will present a report on the use of derivatives by June 2009 and will follow this
up with appropriate initiatives to increase transparency and address any financial stability
concerns.
The Commission will also introduce legislation to simplify and harmonise the national
substantive laws regarding
securities holding
and transaction in the EU by the end of 2009.
While the
UCITS
regulatory framework has worked well during the crisis in shielding
investors from exposure to risks other than market risk, some weaknesses have been revealed.
Particular attention will be paid to money market funds and the lessons from the alleged
Madoff fraud.
Reinforcing the protection of investors, consumers and small companies
The interests of European investors, consumers and SMEs, must be at the centre of the
reform. Additional measures are needed to
reinforce depositor, investor and policy holder
protection,
covering the overall adequacy and scope of a broad range of existing financial
market directives.
An effective and comprehensive legal framework for
retail financial services
needs to be put
into place. The Commission will therefore:
•
come forward with a Communication by April 2009 on
retail investment
products.
This will explain the legislative actions that the Commission will
propose to strengthen the effectiveness of safeguards to be respected when
financial institutions market, sell or recommend packaged investment products to
retail investors. These measures will aim to create a regulatory environment that
takes account of consumer behaviour, delivers clear comparable pre-contractual
information to investors, places clear responsibilities on financial intermediaries
to help retail investors in selecting investments adapted to their needs and risk
profile.
•
review, by the end of the year, the adequacy of existing
deposit guarantee
schemes
in banking, securities and insurance and make appropriate legislative
proposals;
•
reflect on how to ensure
responsible lending and borrowing,
including a reliable
framework on credit intermediation. A public hearing on
responsible lending and
borrowing
will be organised in July 2009. Follow-up measures will be presented
by autumn 2009;
•
ensure that the
voice of European investors
is much more strongly heard on all
financial issues. The Commission therefore proposes to provide direct funding to
facilitate the capacity-building of investor stakeholders to represent their interests
in financial services policies at EU level, through training, research and
information. A proposal will be presented by the end of 2009;
•
promote the strengthening of
financial education
throughout Europe, by
continuing to help teachers to incorporate financial matters into the school
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curriculum, while respecting the competence of Member States in the field of
education;
•
examine ways to ensure that
foreclosure procedures
are avoided wherever
possible, to prevent citizens from losing their homes. A report setting out best
practices in this area will be published by the end of this year;
•
come forward by mid-2009 with proposals to ensure that the full benefits of a
Single Euro Payments Area
are realised.
Improving risk management and getting pay incentives right
Pay and bonuses inside many financial institutions have been inappropriate and too orientated
towards
excessive risk-taking.
Questionable profits and short-termism have been rewarded.
Long-term planning was ignored. Controls by shareholders were almost non-existent. If
financial institutions are to earn back the trust and confidence of the European investors and
businesses, action must be taken on corporate governance and remuneration structures.
The Commission will strengthen its 2004 Recommendation on
remuneration of directors
of
listed companies by April 2009. On remuneration schemes in the financial sector, perverse
incentives and excessive risk-taking must be urgently addressed throughout firms. In April the
Commission will therefore also table a new Recommendation specifically on
remuneration
in financial services.
In autumn, the Commission will, in the context of the revision of the
Capital Requirements Directive as well as in other relevant sectoral legislation, provide that
supervisory authorities may impose
capital ‘sanctions’
on financial institutions whose
remuneration policy is found to generate unacceptable risk.
More generally, the Commission will examine the application of the Basel Committee
recommendations on
corporate governance
for banks. By the end of 2009 the Commission
will report on current practices. Regulatory action may have to be initiated on the basis of this
analysis.
Making sanctions more of a deterrent
If confidence is to return to markets and adequate incentives for good behaviour are to be put
in place, investors, consumers and companies must be confident that misbehaviour within the
financial industry will be dealt with quickly, fairly and effectively. At present,
sanctioning
regimes
are often weak and quite heterogeneous. The Commission is examining this issue
and will report to the ECOFIN Council in autumn 2009. In this context, the Commission will
review the
Market Abuse Directive
by autumn 2009. In the light of this review, it will make
proposals on how Member State sanctions should be strengthened and adequately enforced..
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Annex II
STRUCTURAL REFORM STIMULI MEASURES IN RESPONSE TO THE EERP
1.
An overview and some first general insights.
Structural reform measures are a central part of the EERP.
The December European
Council endorsed a multifaceted European Economic Recovery Programme (EERP).
Inter
alia,
it called for an overall fiscal stimulus equivalent to 1.5% of EU27 GDP as well as for
priority to be given to structural reform measures as part of the Lisbon strategy for Growth
and Jobs. Thus, the EERP recognised that while the aim of structural reforms is to tackle
long-run strategic challenges, many measures can immediately contribute to recovery efforts
by sustaining aggregate demand, supporting employment, addressing competitiveness
problems and protecting incomes of disadvantaged groups.
Member States have taken relevant action across a broad spectrum of policy areas.
Based
on information drawn from National Reform Programmes, stability/convergence programmes
and a consultation with national authorities via the Economic Policy Committee and the
Employment Committee, some 500 measures have been identified which are relevant for the
recovery process in 2009 and 2010. These can be grouped under four broad policy types
namely: i) measures and reforms aimed towards supporting industrial sectors, businesses and
companies; ii) measures and reforms aimed at supporting a good functioning of labour
markets; iii) measures and reforms aimed at supporting investment activity; iv) measures and
reforms that support household purchasing power, including social policies.
It is too early to comprehensively assess the impact of these measures, but some first insights
can already be drawn. As shown on Table 1, a substantial part of the measures (32% of the
measures in the data set) fall under the heading of "supporting investment activity", reflecting
a degree of commonality across Member States. Of the 500 measures for which information is
available, some 30% are classified as "supporting industrial sectors, business and companies",
whilst lowest share (16%) is for to "supporting the labour market", which may reflect the
lagging impact of the slowdown on the labour market so far. More than half (55%) are
considered to bolster "aggregate demand", and a large share (28%) are considered relevant for
supporting employment. Interestingly, approximately half of all measures were already
planned as part of medium-term reform strategies, and the other half can be considered as a
new response of governments to the slowdown.
The fiscal space is diminishing and there is growing evidence that measures have cross-
border spill-over effects raising questions as regards the effectiveness and protection of the
single market.
A first reading suggests that many measures are in areas identified as
potentially useful in the EERP, and there are no obvious cases of rolling-back past reform
measures or repeating major policy errors, e.g. widening access to early retirement schemes
which reduces labour supply or large scale direct employment creation schemes which have
proved ineffective. There is nonetheless an opportunity to better understand the effectiveness
of measures in coming months. An exchange of best practices can help to improve mutual
learning and enhance the effectiveness of measures in order to use the potential of the single
market to the full.
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Table 1: Overview of structural reform measures relevant for recovery programmes
based on available information
Policy type
1. Supporting
industrial
sectors,
businesses
and
companies
2. Supporting
a good
functioning of
labour
markets
4. Supporting
3. Supporting
the
Sustaining
the
household
aggregate
investment
purchasing demand
activity
power
Economic policy objectives
Status
Member
States
Protecting
Addressing
Sustaining
incomes of
competitiven
employment
disadvantage
ess problems
d groups
Implementati
on of
medium term
agenda
Frontloading/
upgrading of
New action
medium term
agenda
BE
BG
CZ
DK
DE
EE
IE
EL
ES
FR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SI
SK
FI
SE
UK
total EU27
% Total
6
6
6
2
11
2
2
5
21
19
6
3
8
4
6
6
3
8
11
8
11
11
7
3
2
5
5
187
31%
12
8
2
0
6
3
0
7
5
6
2
0
2
3
1
2
2
3
3
4
5
6
1
2
2
6
4
97
16%
5
7
18
3
6
9
6
6
9
11
8
7
8
13
7
6
3
3
9
19
5
3
9
2
4
3
6
195
32%
6
1
2
2
12
0
2
4
13
13
5
2
5
11
5
2
2
5
9
3
5
5
0
0
2
8
4
128
21%
9
9
25
7
18
9
8
11
20
26
9
10
6
14
10
12
6
14
16
20
19
9
10
5
6
6
9
323
55%
14
9
10
0
13
7
2
4
10
7
4
4
2
7
5
7
4
3
6
6
9
4
6
3
6
7
6
165
28%
3
3
1
0
0
0
0
5
10
2
4
1
5
1
2
0
2
0
2
3
1
0
5
0
2
1
4
57
10%
6
1
0
0
4
0
1
3
4
1
2
0
4
3
1
1
0
2
0
2
3
2
0
0
0
1
3
44
7%
6
11
15
2
2
9
6
12
5
10
6
6
9
10
6
3
4
3
4
18
1
0
5
1
3
2
1
160
38%
1
2
0
1
4
2
1
0
2
3
1
0
3
2
0
2
3
2
0
2
3
0
0
1
1
3
8
47
11%
18
6
11
3
24
1
1
3
12
16
10
4
3
11
7
7
2
10
3
8
12
21
2
4
6
4
7
216
51%
Note: In some cases, a measure can be relevantly classified under two policy type headings or to contribute to multiple policy
objectives. The resulting "double counting" implies that in the summary tables reported below, the total sum of measures are
not always equal to 503, but can be more or less. For example, they have been classified 607 times under the different policy
types. Finally, the status of 80 measures needs clarification and these measures have, therefore, not been included.
2.
A closer look at individual policy areas
Measures aimed at supporting industrial sectors, businesses and companies
These account for 31% of all actions (see Table 2). The majority of these measures (60%) are
designed to alleviate financing constraints of businesses and SMEs, which seems to reflect the
very restrictive credit conditions facing companies. They are envisaged in practically all
Member States. Many measures are very similar in nature to existing SME access-to-finance
schemes which address market failures associated with information asymmetries, and thus
they tend to focus either on increasing the volumes of subsidised loans or loan guarantees
available and/or their concessionary nature. Measures bolstering sector-specific demand
represent about 16% of the proposed actions. Most measures are fiscal incentives or direct
subsidies to consumers in the car, tourism and construction sectors, sometimes also related to
environmental policy objectives, such as CO
2
emissions.
An example are measures in support of demand in the car industry (AT, DE, ES, FR, IT, LU,
RO) which couple tax exemptions for cars with lower CO
2
emissions with a direct financial
incentive for scrapping an old vehicle when buying a new one. Measures providing non-
financial support to businesses concern mainly reductions in administrative burdens or the
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expansion of special public SME support services: they are envisaged in 12 Member States.
Sector-specific direct subsidies to firms are only proposed in nine Member State (BE, CY,
EL, ES, FR, IT, LU, AT, SE) and concern fiscal advantages and aid to lengthen the maturity
structure of debt for companies in the real estate sector as well as the creation of a fund to aid
strategically important sectors. It can also be mentioned that in many countries, investments in
social services infrastructures (incl. health care, social housing, child care, long-term care) are
intended to boost the construction sector and generate labour demand, while improving access
to various social services (CZ, DE, DK, FI, IE, HU, LT, PT,RO, SK, SE, UK).
As noted above, measures which provide specific support to individual sectors warrant
reflection to ensure efficiency at EU level. A key question is whether the focus of sector
specific actions should be on supporting workers, with a high priority on demand side
measures.
Table 2: Summary of structural reform measures; business sector and labour markets
1. Supporting industrial sectors, businesses and companies
1.1 Easing
financing
constraints
for
businesses/
SMEs
4
3
6
2
8
0
1
3
7
9
1
0
7
1
3
4
0
7
7
5
6
8
6
2
2
4
4
110
60%
1.3 Non-
financial
measures
supporting
business
(e.g.
regulatory)
1
2
0
0
0
1
0
0
4
0
1
0
0
2
0
2
1
0
1
2
3
2
0
0
0
0
0
22
12%
1.5 Partial
state
takeovers of
large non-
financial
companies
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0%
2. Supporting a good functioning of labour markets
2.4
Unemploy
ment
benefit
system
and social
assistance
1
1
0
0
2
1
0
3
1
1
0
0
0
0
0
0
0
0
0
0
1
1
0
0
1
0
0
13
13%
2.5 Easing
labour market
transitions
(training,
placement,
other job-
search help)
4
4
0
0
3
1
0
3
2
2
1
0
0
1
0
1
2
1
2
1
4
2
0
2
1
2
3
41
40%
Member
States
1.2 Sector-
specific
demand
support
1.4 Sector-
specific
direct
subsidies
2.1
Promoting
wage
moderatio
n.
2.2
Temporary
working-
time
reduction
2.3
Reduction
of tax on
labour
BE
BG
CZ
DK
DE
EE
IE
EL
ES
FR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SI
SK
FI
SE
UK
Total EU27
% Total
0
1
0
0
3
0
1
0
2
7
1
1
1
0
2
0
2
1
1
1
2
2
0
1
0
0
1
30
16%
1
0
0
0
0
0
0
2
7
3
1
2
0
0
1
0
0
0
2
0
0
0
0
0
0
1
0
20
11%
0
1
0
0
0
1
0
0
0
0
0
0
1
1
0
0
0
0
0
0
0
2
0
0
0
0
0
6
6%
0
1
0
0
2
0
0
0
0
1
0
0
0
0
1
0
0
2
1
0
0
0
1
0
0
0
0
9
9%
7
1
2
0
1
0
0
1
2
3
2
0
0
1
0
0
1
0
0
2
3
1
1
0
1
4
0
33
32%
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Measures and reforms aimed at supporting a good functioning of labour markets
These account for 16% of measures in the information set. Many of them facilitate flexibility
within firms (through retraining and working time arrangement) or labour market transitions
(through job placement, training, and encouragement to geographical mobility). Temporary
working-time reductions and flexible working-time arrangements might prove to be a key
instrument to prevent mass lay-offs during times of crisis. Measures extending or introducing
new forms of support to short-time schemes are recorded in AT, BG, DE, LU, NL, PT and SI
.
In some countries, these arrangements have been agreed or in the process of negotiation with
social partners (AT, LT) and, in some cases, the cancelled hours of work are used for training
and lifelong learning activities (DE, CZ, HU, SI). A wide variety of reforms focus on easing
labour market transitions by increasing training opportunities (e.g. in BG, FI, IE, IT, PT) and
strengthening the public employment agencies to limit the friction in the labour market and
enhance the matching process between workers and firms (AT, ES, DE, EL, FR, PT, RO,
UK). The improvement of the job-search counselling to the unemployed and the
modernization of public employment services (PES) are a priority in several Member States
(for example in BE, DE, DK, ES, FI, FR, HU, LT, NL, SE, SK, UK). Some countries are
making recently laid off people and new unemployed people a priority group for ALMPs (e.g.
BG, EL, ES and FR). Others are providing funds to encourage start-ups (AT, PT) or self-
employment (CZ, ES, LT, SE, SI). Reduction of taxes on labour is applied in many Member
States (32% of labour market measures) and can boost both labour demand and labour supply
while supporting household purchasing power. General cuts in social security contributions
have for example been implemented or planned in SE and RO, whereas targeted tax cuts
(generally on the low-skilled and low-paid) are recorded in several Member States (such as
AT, BE, BG, CZ, DE, ES, FR, IT, FI, MT, PL, PT, RO and SE ). These actions need to be
seen together with targeted changes in the design of unemployment benefit systems, which
have been applied or planned in a number of countries. Such measures tend to take two main
directions, either guaranteeing an adequate safety net by increasing the level of
unemployment benefits (BG, FR), extending their duration (LT, RO) or coverage (ES, FR,
FI), or fostering activation (e.g. BG, CZ, DK, IT, SK).
Finally, important measures to promote wage developments in line with productivity have
been taken by some non-euro area countries, especially those with large current account
imbalances. While EE, LV and LT have cut the public sector wage bill, BG has aligned
incomes in the public sector to productivity growth: these developments may contribute to
restore competitiveness positions. The overview again point to the need to look at policy
responses also from the perspective of cross-country spill-over effects, for example, for
temporary working time reductions and targeted transfer payments.
Measures to support investment activity
These account for 32% of measures in the information set (see Table 3). Regarding physical
infrastructure (42% of investment measures), many measures consist of investment in roads,
railroads, ports and airports, but also measures to increase the share of renewable energy.
Also, most transport infrastructure projects imply regular implementation of medium term
agendas, in many cases co-financed from Structural and Cohesion funds. Energy efficiency
measures (25%) vary according to their targeted beneficiary, i.e., households or firms. Such
projects usually consist of financial instruments for promoting investments (e.g. subsidies,
loans with lower interest rates, tax credits), regulatory instruments (regulations for buildings,
regulations on energy saving production), and public grants for certain types of investment.
R&D and innovation (33%) measures mostly consist of funding activities (i.e., increase R&D
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spending), both across the economy, specifically targeted at start-ups, SMEs, sectors (e.g.
automobile), specific purposes (e.g. green transport, biotechnologies), and institutions (such
as universities). Other measures concern patent regulations, develop or implement R&D plans
and support the recruitment of researchers. While the majority of infrastructure measures have
specific budgets and clear timelines, the budgets and transposition of R&D investment
measures are less certain. Nevertheless, a number of Member States have announced
ambitious new increase in investment funding (for example DE). AT, LU, FI, ES, and UK are
among countries that plan significant increase in investment in 2009-2010 either as new or
frontloaded projects. Recently acceded Member States appear to prioritise existing
commitments that are often co-financed by the Structural Funds.
A first assessment tentatively suggests that more than half of measures could come on stream
in 2009 and 2010, thus bolstering aggregate demand in this period. Some projects may
produce positive spill-over effects on other Member States and contribute to value added at
EU level. For example, about a third of countries plan to modernise railway infrastructure,
including projects in the TEN-T network, and about half of all physical infrastructure
investments are co-financed from Structural Funds. Going forward, the demand will need to
focus on efficiency especially as public investment budgets will come under pressure given
fiscal consolidation needs. One key question is whether more emphasis should be placed ion
the maintenance of existing infrastructure and the upgrading private housing (e.g. energy
efficiency) as opposed to large scale new projects.
Table 3: Summary of structural reform measures – investment and purchasing power
3. Supporting the investment activity
4. Supporting the household purchasing
power
4.3
Household
subsidy for
certain type
of
goods/servic
es
Member
States
3.1 Physical
infrastructure
3.2 Energy
efficiency
3.3 R&D and
innovation
4.1 Income
support,
general
4.2 Income
support,
targeted
BE
BG
CZ
DK
DE
EE
IE
EL
ES
FR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SI
SK
FI
SE
UK
Total EU27
% Total
3
1
8
1
2
2
2
1
1
4
1
3
0
6
4
3
1
1
1
9
2
2
3
1
1
1
3
67
42%
1
1
1
1
2
1
4
0
1
1
3
2
0
3
1
0
2
1
4
3
3
0
1
1
1
0
2
40
25%
0
3
8
1
0
6
0
3
1
1
4
1
3
4
2
0
0
1
3
4
0
1
4
0
2
0
0
52
33%
2
0
2
2
4
0
0
1
8
3
0
0
1
4
1
0
2
3
1
1
1
1
0
0
2
2
2
43
36%
4
1
0
0
5
0
1
3
3
5
4
1
4
4
1
1
0
2
6
1
4
2
0
0
0
5
1
58
48%
0
0
0
0
1
0
1
0
2
4
1
1
0
1
3
0
0
0
2
0
0
2
0
0
0
0
1
19
16%
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Measures to support household purchasing power
Those account for 21% of all measures in the information set (see Table3), and of these some
60% are targeted towards specific groups, in particular low income households (but also
pensioners and families with children). By focussing on groups with relatively high marginal
propensity to consume such measures may be efficient in terms of impact on consumption.
General tax reductions have been most pronounced in those Member States where these tax
cuts, in particular on labour income, have been part of a longer term structural policy agenda
to lower taxes on labour (AT, SE, DK, FI and EL). This suggests positive effects of ensuring
that short term countercyclical policies are consistent with the long term structural policy
agenda. Other countries have made more limited changes to tax bands or other parametric
changes (such as LU, ES, MT, LV). General income tax reductions have the advantage of
being transparent, easily implemented, unbiased towards specific sectors, and increase
incentives to work. However, they are not targeted and are often costly from a fiscal
perspective, which may explain their limited scope in many Member States.
Several countries have adjusted social security contributions paid by employees (for example
DE, CZ, DK, NL). Such measures benefit by concentrating the increase in disposable incomes
and the reduction in work disincentives on low and middle class households. Finally, a
relatively large number of countries have introduced income support measures that target low
income households (for example AT, BE, BG, ES, EL, DE, NL, PT, RO, UK), although they
often are of a quite limited overall size in terms of budget impact. As low income households
also covers unemployed persons it would seem to be a group that is particularly hit by the
crisis. While in some cases questions could be posed as regards negative incentives to work
this may overall be less of a concern in a context of a shortfall of labour demand. A more
important concern may instead relate to the prospects of reversibility given that these
measures generally top-up of transfers or allowances (for example higher allowances to meet
higher energy costs which may now be on their way down). A particularly relevant issue to
consider in the context of changes to tax and benefits is the interplay between short term
efficiency and effectiveness to stimulate aggregate demand and the challenge to provide
proper incentives for employment and growth in the medium term.
Some Member States are introducing temporary or one-off measures to increase social
benefits, such one-off payments in child benefits (AT, DE) and a temporary special
allowances (FR), one off payment for heating charges to low income households (BG) and a
lump-sum to the unemployed, low-income pensioners and persons with disabilities on the
basis of specific criteria in EL .Member States have reviewed their capacity to monitor closely
the social impacts of the crisis. Such monitoring exists in some countries (CZ, DK, DE, LT,
PT, FI, SE) or is being set up in others (FR, EE, EL, AT, SK, UK).
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Annex III
MEMBER STATES’ RECOVERY MEASURES AND INTERNAL MARKET RULES
The internal market represents the home basis for EU business. Its smooth functioning is
essential for growth and job creation. It provides the Union with tools to better cope with
external shocks. At the same time, the internal market guarantees a high degree of protection
of health and environment as well as safety.
For EU countries the internal market has been of paramount importance when reaping the
productivity gains from openness. Focusing on intra-EU trade, recent research confirms the
important role of the internal market for productivity growth
1
. Findings stress the importance
of the Single Market, a common currency and eliminating border controls for doing business
within the EU and underline the economic potential of further improvements of the
functioning of the internal market.
Following the European Recovery Plan, in order to fight against the negative consequences of
the financial crisis on their domestic economies, Member States have undertaken a number of
recovery initiatives. These initiatives, while being designed domestically have a European
dimension as regards their impact.
In view of further maximising the benefits of the recovery measures for individual Member
States and for the European Union as a whole, Member States are invited to fully profit from
the possibilities foreseen in the EU legislation and flexibilities the Commission has
established within the EU rules.
Also providing the Commission with the information about the intended recovery measures
offers Member States additional transparency and constitutes opportunity for early exchange
of information as well as helps to avoid gold plating.
In order to best assist Member States in designing their recovery measures, the Commission
wishes to recall the main principles to be followed in order to ensure compatibility of the
recovery measures with the EU legislation.
1.
R
ECOVERY MEASURES AND INTERNAL MARKET PRINCIPLES
In general, recovery measures must be characterised by:
– Non-discrimination of products, service-providers or investment on the basis of
their nationality or origin;
1
It is estimated that average productivity would be reduced by 13% if bilateral trade within the EU was
eliminated. Furthermore, it is also estimated that productivity can increase by 2% if trade costs within
the EU are further reduced by 5%.
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– Prohibition of quantitative restrictions or quotas;
– Prohibition of national campaigns promoting or inciting the purchasing of national
products, services or capital;
– With regard to public procurement, avoidance of measures aiming to award a
supply contract or work contract to tenderers offering/using national products;
– Avoidance of restrictive conditions in tax benefits schemes or subsidies schemes;
– Setting of maximum price that makes the sale of imported products or services
more difficult than the sale of domestic products or services.
Full details are set out in table below.
While designing their recovery measures, Member States shall refrain from creating any
direct or indirect barriers to the free movement of capital and investment within the Internal
Market and in the global context.
Member States may opt for nationalisation of undertakings as an economic policy option
which is fully compatible with the Treaty (Art. 295 EC). Just like in case of privatisation,
nationalisation process will have to be conducted in full respect of EU law and the principles
of the Treaty. Such recovery measures will have to be characterised by non-discrimination as
well as compensation and the respect of shareholders' rights as necessary elements to ensure
that the measures can be considered proportionate.
The Commission together with Member States will work to ensure that any national measures
do not further add to the current economic downturn and do not provoke further negative
economic policy reactions inconsistent with Treaty principles.
2.
R
ECOVERY MEASURES AND PUBLIC PROCUREMENT RULES
The EC public procurement Directives 2004/17/EC and 2004/18/EC set out minimum
standards for the award of public contracts above certain thresholds
2
.
The Directives themselves allow for some flexibility in the application of the rules, in order to
speed up procurement procedures and thereby support Member States' action on economic
recovery. Directive 2004/18/EC provides for an accelerated procurement procedure in cases
where urgency renders impracticable the regular time limits. Following the conclusions of the
European Council of last December, the Commission recognized that the exceptional nature
of the current economic situation can justify the use of this accelerated procedure for major
public projects. This will bring the time limits of the procedure down from 87 to 30 days.
Another way of simplifying and speeding up procurement procedures, which is of particular
importance for national recovery measures, is a greater use of the possibilities of electronic
procurement provided for by the EU public procurement Directives. In case of a fully
electronic tender procedure, the time limits can be reduced to 25 days.
2
€ 5,15 million for works, € 211 000 for services and supplies.
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As national public procurement legislation and practice often add additional requirements
which go beyond those of the EU public procurement rules and can therefore considerably
slow down and complicate the procurement process
3
, Member States are encouraged to
disburden public procurement procedures by applying a variety of simplification measures
4
.
For example, binding self-declarations should be regarded as a sufficient means of proof
during the tender procedure. Certificates should be valid for more than one tender procedure
or should have to be produced only by the winning bidder.
3.
R
ECOVERY MEASURES AND
S
TATE AIDS RULES
Whilst, Member States enjoy considerable discretion in designing State aid measures to help
companies restructure by making smart and sustainable investments that increase long term
productivity and business prospects, Member States must respect EU State aid rules.
Member States are invited to fully exploit the possibilities offered by EU State aid rules to
help companies to make such investments. In particular, MS can avail themselves of the
possibilities offered by the Commission Regulation (EC) No 800/2008 declaring certain
categories of aid compatible with the common market in application of Articles 87 and 88 of
the Treaty (General block exemption)
5
and by the additional flexibility provided in the new
Temporary Community framework for State aid measures
6
to support access to finance in the
current crisis
7
. For undertakings that are in difficulty due to structural problems going beyond
the current crisis, the Rescue and Restructuring guidelines
8
appear to be the appropriate State
aid framework.
In its very nature, State aid distorts competition in the Internal Market which means that
through economic incentives it impacts on the free movement of goods, services and capital.
Therefore, State aid is only acceptable if its positive effects on the achievement of objectives
of common interest outweigh the negative effects on trade and competition
9
. Furthermore, the
State aid amount must be limited to the minimum necessary and any negative effect may not
go beyond what is indispensable in order to achieve the objective of the State aid scheme
10
.
3
4
5
6
7
8
9
10
For example, national laws often contain disproportionate requirements for documentary evidence,
making life difficult for contracting authorities and undertakings alike.
Member States can for instance draw inspiration from the recommendations of the High Level Group of
Independent Stakeholders on Administrative Burdens (the "Stoiber Group") in its report of 10
December 2008.
Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid
compatible with the common market in application of Articles 87 and 88 of the Treaty (General block
exemption Regulation) (OJ L 214, 9.8.2008, p. 3).
Communication from the Commission – Temporary framework for State aid measures to support access
to finance in the current financial and economic crises (OJ C 16, 22.1.2009, p. 1).
Measures covered by Commission Regulation (EC) No 800/2008 do not need to be notified. Measures
covered by the Temporary Framework need to be modified and the Commission, in close cooperation
with the Member States concerned ensures swift adoption of decisions upon complete notification of
measures complying with the conditions laid down.
Commission Guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 244,
1.10.2004, p. 2).
Article 87 of the EC Treaty.
ECJ of 22 March 1977, Ianelli, Case 74/76: "Those aspects of aid which contravene specific provisions
of the treaty other than Art. 92 and 93 may be so indissolubly linked to the objective of the aid that it is
impossible to evaluate them separately so that their effect on the compatibility or incompatibility of the
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If the aid is subject to conditions which are not inherent to the aid itself and contravene
internal market rules it will for that reason be held to be incompatible with the Treaty. This
would be the case e.g. with an aid scheme which submits the granting of the aid to the fact
that the company would purchase only domestic goods or to limitations in the choice of
subcontractors. Similarly, conditions concerning the localisation of certain activities carried
out by the beneficiary may be permissible only if they are indispensable to achieve the
legitimate objective of the aid (e.g. to help underdeveloped regions in line with the relevant
Commission guidelines
11
).
4.
R
ECOVERY MEASURES AND
D
IRECTIVE
98/34/EC
In accordance with Directive 98/34/EC, technical regulations have to be notified at a draft
stage. Technical regulations include so-called de facto technical regulations which are inter
alia "technical specifications or other requirements or rules on services which are linked to
fiscal or financial measures affecting the consumption of products or services by encouraging
compliance with such technical specifications or other requirements or rules on services;
technical specifications or other requirements or rules on services linked to national social
security systems are not included".
In practice, recovery measures such as fiscal or financial incentives linked to the acquisition
of products presenting certain characteristics affecting the consumption of products by
encouraging compliance purchase of products compliant with certain technical specifications
(such as scrapping schemes linked to CO
2
emissions, Euro emission standards etc.) constitute
de facto
technical regulations and have to be notified to the Commission (which subsequently
circulates them to all Member States) at a draft stage
12
.
The European Court of Justice established that the breach of the notification obligation
renders the adopted technical regulation inapplicable vis-à-vis third parties
13
.
Without prejudice to any legal obligations, Member States are invited to
always notify
the
Commission about their recovery measures which fall in the scope of Directive 98/34/EC on
technical regulations in the interest of transparency and to avoid problems after a scheme has
been put in place. The Commission commits to assess the scheme within 15 working days
and, if appropriate, to provide comments. Bilateral contacts could be rapidly established in
11
12
13
aid viewed as a whole must therefore of necessity be determined in the light of the procedure prescribed
by Art. 93."
Commission Guidelines on national regional aid for 2007-2013 (OJ C 54, 4.3.2006, p. 13).
However, according to Article 10(4) of Directive 98/34/EC no standstill period is laid down for the
adoption of technical specifications, ‘other requirements’ or rules on services linked to fiscal or
financial measures by Member States. However, the Commission and Member State have the right to
issue comments on the notified technical specifications and to issue a so-called detailed opinion where
the measure envisaged may create obstacles to the free movement of goods within the internal market.
With regard to fiscal or financial incentives such comments or detailed opinions may only concern
aspects “which
may hinder trade […] and not the fiscal or financial aspects of the measure”
(Article 8,
point 1, last paragraph).
In its judgment, the Court ruled that Articles 8 and 9 of Directive 83/189/EEC (today Articles 8 and 9 of
Directive 98/34/EC): “are
to be interpreted as meaning that individuals may rely upon them before the
national court which must decline to apply a national technical regulation which has not been notified
in accordance with the directive.”
(“CIA Security”, Case C-194/94, ECR 1996 I-2201).
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order to assist Member States in rendering their proposed measures compatible with the
Single Market rules.
Table: Examples of measures which are not compatible with Articles 28-30 of the EC
Treaty
1.Quantitative
restrictions or quotas
State measures that establish quantitative restrictions and thereby
favour e.g. the national production/economy – such measures
would consist in a total or partial restraint on imports or goods in
transit. Quota systems are quantitative restrictions which apply
when certain import or export ceilings have been reached.
Measures which encourage or give preference to the purchase of
domestic products only, are considered as breaching the free
movement of goods principles, for example the launching by
national authorities of a large campaign encouraging the purchase
of domestic goods rather than imported products
.
It is important
to note that no justification is possible, except for products
covered by rules on geographical indication or designation of
origin.
2. National campaigns to
promote or incite the
purchasing of national
products
3. Financial incentives National measures could promote the sale of new goods and at the
for consumers (example: same time the scrapping of old ones, through a bonus system (in
“scrapping measures”)
general, for environmental or energy efficiency purposes). This
bonus system is linked to the acquisition of products presenting
certain characteristics (meeting certain standards on the level of
quality or of performance). The products most concerned are cars,
household appliances, construction products and other consumer
goods.
Such measures would be compatible with internal
market rules if the characteristics of the product are not set in
a way to discriminate on the basis of Articles 28 to 30 EC
similar products coming from other Member States.
4. Tax benefits/subsidies National recovery measures comprise tax cuts or fiscal
scheme
deductibility measures and various incentives/subsidies schemes
(e.g. for the purchase of “greener” products including cars, better
building isolation, benefit schemes for biofuels, etc.).
On occasion it has been held that tax benefits schemes or subsidies
schemes contravened the free movement of goods rules where
restrictive conditions (technical or not) were attached to these
schemes:
For example the national measure granting a tax advantage to
newspaper publishers on the condition that publications were
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printed in France has been considered as incompatible with Article
28 EC
14
.In another case the granting of subsidies for purchase of
national vehicles was also held to contravene Article 28 EC
15
.
It is not the scheme as such which is incompatible with
Internal Market rules, but a particular condition attached to it
or its feature, which are considered unnecessary and
disproportionate.
5. Price fixing regime
Among the different measures to support household purchasing
power, price controls measures, in particular the setting of
maximum prices, might be contemplated by national authorities. It
should be reminded that although a maximum price applicable
without distinction to domestic products and imported products
does not in itself violate the internal market rules, it may have
such an effect if it is fixed at a level which makes the sale of the
imported product either impossible or more difficult than that of
the domestic product
16
. The same principle applies to price
freezes.
This may concern in particular such products as: petrol, alcohol,
pharmaceutical products.
Price fixing regime cannot make the sale of the imported
product either impossible or more difficult than that of the
domestic product
6. Guaranteed prices for National insurance schemes aimed at guaranteeing to exporters the
the exportation
stability of the cost prices of the elements included in tenders for
export (supply contracts, provision of services, etc)
will be
contrary to Article 28, if only the domestic elements of the
tender may benefit from the insurance.
7. Public procurement National recovery plans include measures to support investments.
restrictions
Regarding public investments, it should be reminded that
measures aiming to award a supply contract or work contract to
tenderers offering/using national products might violate the free
movement of goods rules This is the case where the inclusion in
the contract specification for tender for a public works contract of
a clause stipulating that the materials used must be certified as
complying
with
a
national
technical
standard
17
.
This kind of measures will be covered by public procurement
directives. However, below the thresholds they provide for,
Article 28 EC is still applicable.
14
15
16
17
Court of Justice (Case 14/84 – Commission v France).
Court of Justice (Case 103/84 – Commission v Italy).
Court of Justice (Case 65/75 – Tasca).
Court of Justice (Case 45/87 – Commission v Ireland).
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