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Chairwoman Berès,
Members of the European Parliament,
Ladies and gentlemen,
The end of this week brings to a close Germany's presidency in the European Union.
On 5 June I chaired the last of a total of six ECOFIN meetings.
Now before I hand the reins over to our Portuguese friends on the first of July, I have the honour of appearing before you today in the European Parliament.
I should like to report to you, the Members of Parliament, about the political results which have been achieved in the Council over the past several months.
As is in accordance with our tradition of co-operation in Europe and our democratic customs.
There were high expectations of the German presidency.
Of course it was and is clear to us all that in the complex field of taxes and finances it is not possible to completely conclude all major projects within a period of six months.
This shows once again that European integration is a long road along which we must progress step by step.
The question which we have to ask ourselves about our presidency is:
Have we, in the last half year, helped set the right course for Europe's future? So that Europe will prosper and can improve and fully utilise its economic potential.
In the realm of fiscal and economic policy we shall in the last analysis be judged by the results achieved:
reducing budget deficits,
the stability of the Euro,
economic growth and
employment.
Today we can confidently state that Europe is coming along well.
The European Commission, the International Monetary Fund and the OECD – all these institutions are agreed and have significantly raised their growth forecasts for the EU.
Thus the Commission now expects gross domestic product to rise by 2.9 per cent this year. In 2008 as well this momentum is expected hardly to slacken.
In the meantime the upturn is being fuelled by a revival of the internal economy, in particular by lively investment demand.
And it is accompanied by increased employment. The Commission estimates that in this year and in 2008 together 5 ½ million additional jobs will be created in Europe.
Which also makes us confident that:
Nothing stands in the way of sustained economic growth in the EU.
Prices on the whole are largely stable. Moreover, the EU does not exhibit any foreign trade imbalance worth mentioning.
Finally, the situation of public-sector budgets has improved considerably: the Commission currently foresees a deficit ratio of only 1.2 % and a government debt ratio of just under 60 % for the European Union this year.
For the coming year as well these figures are clearly set to continue on their downwards trend.
In particular against the background of the debate on the imbalances in the world economy and in major economic powers – and to boost our self-confidence – we must clearly realise that:
The European Union is a great community of stability and growth.
The EU as an open economic area not only profits from the growth in world trade.
With its successful intra-European integration it makes an important and continuing contribution to the development of the world economy.
More than 490 million people in the now 27 Member States account for more than a fourth of the world economic product. This makes the European Union the largest internal market in the world.
This brings opportunities, but also the obligation that we Europeans should help form the process of globalisation actively and with an eye to fairness – from an economic perspective but also concerning social and environmental issues.
Our awareness of the size and strength of the European Union must not, however, cause us to overlook the economic problems that certainly do continue to exist for some Member States.
Thus seven Member States are currently still involved in the excessive deficit procedure.
In some EU states the trends of productivity, wages and competitiveness holds heightened risks which we must continue to keep a close eye on in future.
Over and above that, we all continue to face the economic and fiscal challenges which stem from the ageing of our societies in Europe.
We must and cannot therefore flag in our efforts to achieve additional permanent improvements.
We know that in the end the way to achieve competitiveness and sustained growth in a stable macroeconomic environment is through structural reforms which enhance the flexibility of our national economies and their markets.
Therefore my clear message as the still reigning ECOFIN chairman is the same as at the beginning of my presidency:
The time is now more opportune than it has been in a long time to advance the necessary reforms for more growth and employment now and to further consolidate public-sector budgets now in the Member States.
This is the message which we, together with Portugal and Slovenia as the trio presidency, have sent to all the Member States.
Portugal and Slovenia follow Germany in the Council presidency.
For the promotion of growth, employment and sound public finances, we have agreed with Portugal and Slovenia three objectives for the work in ECOFIN.
First: To apply efficiently and effectively the procedures of fiscal and economic policy in the EU.
Second: To improve the quality of public finances.
And third: To make further progress towards the completion of the internal market, particularly with financial services and taxes.
By these criteria, with a view of the part played by Germany as chairman in the first half of 2007, I would draw a quite positive balance of the work in the Council.
One thing to start with: there is now clarity about the future financing of the European Union through the year 2013.
The German presidency succeeded in achieving unity in the Council on the decision on the system of own resources. It is an important step towards a fairer sharing of the burdens among the Member States.
This implements the political decision of the European Council of December 2005. Now the Member States still have to ratify the decision on the system of own resources. Then it will enter into force retroactively as of 1 January 2007.
There is also good news to report about European monetary union: the success story of the Euro has continued unabated in the past six months.
At the beginning of the year Slovenia became the 13th Member State introduce the common currency, and the very first of the “new” Member States to do so.
In the meantime we have also been able to commence the procedures which will enable Malta and Cyprus to introduce the Euro on 1 January 2008.
Thus monetary union will then have grown to include 15 members.
This shows that accession to the Euro zone is open to all Member States which meet the convergence criteria – as provided in the Treaty establishing the European Community.
And: the Euro is attractive and is becoming ever more popular – in Europe and around the world – due to the favourable and stable conditions for financing and investment which it offers.
The conclusion to be drawn from this is obvious: with the reliable course steered by the European Central Bank, in compliance with its price stability mandate agreed in the EU Treaty, the Euro will remain a monetary policy success story.
For the work in the Council itself the German presidency was resolved to see to it that procedures were streamlined and well-targeted.
In concrete terms, we were able notably to streamline the procedures for the annual evaluation of the stability and convergence programmes of the now 27 Member States.
In our presidency, in February we held a horizontal debate in greater depth based for the first time on all the programmes, namely on:
budgetary consolidation in good times,
avoiding pro-cyclical fiscal policies and
the sustainability of public finances.
As I see it, here not only have the relevant issues been raised. The horizontal approach has also enlarged our options for a political discussion and in this way advanced the matter.
And in actual fact: A key message ran like a leitmotif through our fiscal policy debates in ECOFIN and in the Eurogroup:
We must make use of the current good economic times further to consolidate public-sector budgets and to boost the sustainability of public finances.
On this basis we were able to agree on the contribution of ECOFIN to the Lisbon Strategy, which directs concrete fiscal and economic policy recommendations to the individual Member States and, for the first time, to the Euro zone.
Then, at their spring summit in March, the Heads of State and Government also adopted our central message.
Extremely encouraging signs for the further consolidation efforts came from the lifting of the deficit procedures for France, Greece, Malta and of course – I say this with some pride – for Germany.
However, this is encouraging and reinforcing for all the other Member States as well. For it shows that the reformed Stability and Growth Pact works!
In spite of some scepticism before the reform, it now proves to be true that economically well-founded consolidation strategies attain the objective.
Fiscal discipline in Europe is stronger as a result.
In April in the Eurogroup we reached the “Berlin Agreement”: all the Member States of the Monetary Union intend to achieve their medium-term fiscal policy objectives by 2010 at the latest.
All this means important progress on the road to sustainable public-sector finances.
In order to strengthen the sustainability of public finances and to create the fiscal leeway for the necessary future-oriented investment it is not enough “only“ to consolidate. The structure and “quality” of public finances also need to be looked at.
At the informal ECOFIN meeting in Berlin in April we had detailed discussions on how public funds could be utilised more efficiently.
We also discussed how to structure state revenue to promote growth and how to ensure its sustainability.
The differences, some of them large, between Member States here indicate that a European exchange of experience and opinions can help us make progress.
Here there are still many issues which need to be examined more closely.
With the informal ECOFIN we advanced this important discussion process and with the latest Council conclusions in June we agreed on the further work to be done on this.
Another area in which significant progress was achieved during Germany's presidency is the integration of European financial markets.
It was precisely here that co-operation with the European Parliament bore fruit, for which I would like to thank you.
Thus we got the Holdings Directive in the financial sector signed and sealed.
Henceforth the financial supervisory authorities will work together more closely when investigating cross-border mergers and purchases of large holdings of banks, insurance companies and securities firms.
Furthermore, the authorities will utilise a transparent examination procedure with uniform criteria, which will help the internal market to function better.
We also succeeded in getting the Payments Services Directive adopted in the Council; most recently it was approved by the European Parliament as well.
The Directive paves the way for EU-standardised products in payments transactions.
I am particularly proud of this achievement during Germany's presidency.
For it is precisely our citizens who will derive considerable tangible benefits from it. Payments within the EU across national borders should be quicker and cheaper in future.
I am convinced that it is precisely such European measures the benefits of which are clearly apparent to our citizens which we need if we want to improve the acceptance and attractiveness of European integration.
In ECOFIN as in the circle of the G 8 the German presidency acting in its double rôle also kicked off the discussion for more transparency with hedge funds.
In the Council we reached agreement that this special type of investment funds could in principle improve the efficiency of the financial markets through its investment behaviour.
At the same time, however, we cannot simply pass over the risks which may result for financial market stability.
The Council therefore called upon lenders and investors to consider whether the present degree of transparency of the activities of hedge funds seems appropriate to them.
The German presidency was able to bring together a common position for this approach in the EU.
This successful common positioning of Europe is in the end one of the reasons that it proved possible to make progress on this important topic at the level of the G 8 as well and that developments in the hedge fund sector continue to be carefully observed.
Tax issues are – as I hardly need to tell you – a difficult topic of European policy. Particularly because unanimity among the Member States is needed to make decisions here.
Nonetheless, we were able to make progress on the tax dossiers as well.
After intensive consultations we were able to agree in the Council on main elements of the “VAT package” and achieve a political agreement on it.
Besides changes in the place of supply of services, the package will also bring facilities in the refunding and payment of turnover tax, which will also benefit enterprises in the internal market.
We now all expect that by the end of 2007 our Portuguese friends will succeed in clearing up the remaining open points and completely wrapping up the VAT package.
It will be particularly important to get Luxembourg as well to agree to the transition to the destination principle for telecommunications, radio and television as well as electronic services provided to private persons.
In addition, it proved possible during Germany's presidency to reach effective agreements for combating tax fraud.
Thus inter alia the Commission is now to examine by the end of the year the possible effects of a general introduction of the “reverse charge model” for turnover tax.
In particular it is to consider the possibility of a pilot project on this to run for a limited period of time in an interested Member State.
The results of our consultations on the code of conduct for business taxation were disappointing. Here not all the Member States were able to bring themselves to agree to an expanded work mandate.
The debate on the common consolidated corporate tax base took place at a conference held in Berlin in May.
In the Council only a progress report by the Commission was presented on this during Germany's presidency.
The actual negotiations will begin next year when the Commission presents its proposal for a Directive as announced.
Germany will – I should like to reaffirm this here – continue to press for significant progress on European integration to be made in the field of taxes as well.
We need this progress in order to for the internal market to function smoothly on the basis of fair competition.
Finally, it is in particular the finance ministers in the European Union who bear responsibility for ensuring that the sovereign tax systems of the individual Member States regarding direct taxes are also compatible with the requirements of a uniform and undistorted internal market.
This is exactly what we most recently stressed once again with the Council's conclusions at the end of March.
And I regard this conclusion not just as noble words, but as the obligation to make headway on the co-ordination of tax policy among the Member States.
Ladies and gentlemen,
As to the details of the way forward in ECOFIN, my Portuguese colleague, Minister Fernando Teixeira dos Santos, will be reporting to you very soon.
Here I should like to limit myself to referring once again to the joint ECOFIN framework programme of Portugal, Slovenia and Germany as trio presidency.
For the first time, we as trio presidency have set the course for the work through mid 2008. In this way we ensure the continuity and reliability of the work in the
Council.
I wish my two counterparts from Portugal and Slovenia the good fortune they need to achieve what we have together resolved to do in the interest of Europe.
I expressly solicit your active co-operation and support in the European Parliament.
Germany will now support its partners in word and deed during their coming presidencies.
So that we may advance on the long road of European integration, sometimes with difficulty, but step by step.
