Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Chairman and committee Members for inviting me to speak here today in advance of the ECOFIN Council of Ministers meeting on Friday, 15 November, in Brussels. I expect that we will have a busy meeting ahead. A number of key issues will be discussed and hopefully significant progress will be made. I understand that the committee has already received the draft agenda and I will shortly discuss each of the agenda points.
When I last spoke to the committee we had just concluded our Presidency. At the start of July, we passed the baton to our Lithuanian colleagues who are now well advanced in their Presidency term. They have set a theme that we fully support called A Credible, Growing and Open Europe. Friday’s meeting will be their fourth ECOFIN meeting as they held a meeting in July, an informal meeting in Vilnius in September and a meeting in October.

In the Chairman's letter to me he asked if I would provide a brief overview of the proceedings that took place at the October meeting and I shall turn to that issue. The October meeting took place in Luxembourg on 15 October. As Members will all appreciate, that was budget day here and it was not possible for me to attend the ECOFIN meeting. My colleague, Minister of State, Deputy Paschal Donohoe, ably deputised for me at the meeting and there was an extensive range of issues discussed.

The ECOFIN meeting took place just a week before the European Council meeting, so the Finance Ministers were involved in preparing for that meeting. They particularly focused on the issues relating to the development of EMU and access to finance for SMEs. On the latter point, the Council discussed an initiative led by the Commission and the European Investment Bank aimed at facilitating access to finance for SMEs. This is something that we support. The Council also took stock of lessons learned from the 2013 European Semester process and considered possible improvements for next year. Finally, the Council also covered the outcome of the G20 and IMF-World Bank meetings that had taken place a few days before the October ECOFIN meeting and adopted Council conclusions in preparation for the upcoming UN Framework Convention on Climate Change.

That morning, as usual, Ministers held a breakfast meeting to review the economic situation. They also discussed backstop arrangements for banks in the context of the asset quality review and stress test exercise and the proposed single resolution mechanism, SRM. They also discussed how to accommodate public investment in the preventative arm of the EU’s Stability and Growth Pact.

The October ECOFIN also formally adopted regulations creating a single supervisory mechanism, SSM, for the oversight of banks and other credit institutions. Members might recall that agreement on the issue was reached earlier in the year during the Irish Presidency. The SSM will be composed of the ECB and the supervisory authorities of the member states. It will cover the euro-area as well as the non-eurozone countries that chose to participate. The ECB will assume its supervisory tasks 12 months after the entry into force of the legislation, subject to operational arrangements.

I shall turn to the ECOFIN agenda. Members will see that it is a full agenda and I suspect that it will be a long meeting. I shall outline the key issues that are likely to arise and afterwards I will be happy to take questions and observations from committee members.

First, I remind Members that this is a draft agenda and there may still be changes between now and the meeting in terms of content and the order of the discussion. In addition, work is ongoing at the level of officials so there can also be more substantial changes in terms of how the discussions will evolve.

The formal ECOFIN meeting is scheduled to commence at 10.30 a.m. on Friday. Earlier that morning, as usual, we will have a breakfast meeting during which Vice President Rehn will comment on economic developments following the publication of the European Commission’s autumn forecasts on 5 November. I expect that he may also provide an update on other Commission publications due this week such as the annual growth survey and the alert mechanism report, which marks the beginning of the next Semester process. There will also be an informal session that will cover items relating to banking union and I shall address these issues shortly.

According to the agenda the first items to be considered are the legislative deliberations which will, as normal, take place in public session. There are two issues to be discussed, savings taxation and the standard VAT return. The savings taxation file was last discussed at ECOFIN in May of this year. The aim of the EU Savings Directive is to enable interest payments, made in one member state to individuals resident for tax purposes in another member state, to be made subject to effective taxation in accordance with the laws of the latter member state. The Lithuanian Presidency hopes to reach agreement on the matter by the end of the year. Some member states still have difficulties with the file and I suspect that we might come back to the issue again at the December ECOFIN meeting.

With regard to a standard VAT return, the Commission will make a presentation and there probably will not be much discussion on this point at the meeting. The Commission see this as a business-friendly initiative and generally we are supportive of such measures. We will need to be vigilant regarding the outcome of the discussion as it might necessitate changes to our relatively simple VAT return form.

The next item for discussion is the fourth Anti-Money Laundering Directive. The Presidency's intention is to present a state of play paper and to assess the responses from member states. There are a number of open issues on the file and progress at official and technical levels has been slow. The intention is to finish the file by the end of the year.

As members will know, we are working hard on banking union at the ECOFIN. This week I anticipate having a long discussion, possibly late into the evening, on banking union and the single resolution mechanism, SRM. The task of completing all aspects of banking union is urgent if we want to break the link between the sovereign and the banking sector. This is a priority issue for Ireland.

As I mentioned earlier, the single supervisory mechanism was formally adopted by ECOFIN in October. This is an important step in creating a banking union for Europe. Last June the European Council decided that, in transition towards the SSM, a balance sheet assessment will be conducted, comprising an asset quality review and subsequently a stress test. This is to ensure that banks are adequately capitalised in advance of the ECB taking control of supervision. There will be discussion on this point, and in particular on how to address any capital shortfall if it were to materialise.

Another banking issue, the single resolution mechanism is also on the agenda for Friday’s meeting. This is the next essential step in creating a banking union. The October meeting of the European Council underlined the commitment to reach a Council general approach on the issue by year end. The Presidency is aiming for a general agreement on the issue at this week’s meeting. There are still a number of open issues such as scope, financing and governance. We will actively work to ensure that as much progress as possible is achieved on Friday. Our view is that it is important that the SRM should have a broad scope covering all banks that have potential to cause systemic difficulties either within individual member states or to the Union as a whole. We support the Commission’s proposal in this regard as even relatively small distressed banks have been the source of considerable systemic difficulties.

Broad scope is also important to ensure a level playing field for European banks. In addition, in our view, the ESM should be the clear public backstop for the SRM. This is particularly important in the early years when the single resolution fund is being built up.

Under the heading of any other business, the Presidency will, as normal, provide an update on other key financial services dossiers. This is an information item and I do not expect a major discussion on any of the items at this particular meeting.

The first non-legislative issue is the EU’s contribution to international accounting standards. In April 2013, Commissioner Barnier appointed Mr. Philippe Maystadt as a special adviser with a view to strengthening the European contribution to the international financial reporting standards setting process. Mr. Maystadt will present his report on the EU’s contribution to international accounting standards to Ministers. It is likely the report and its recommendations will play a significant role in shaping the conclusions of the expected Commission review of the international accounting standards regulation.

I understand the banking union item at this stage on the agenda could be to allow the Presidency update on the earlier discussions. The final items listed relate to EU statistics. The objective of the discussion will be to adopt Council conclusions on the annual statistical package, including the report on information requirements under EMU prepared by officials. The conclusions emphasise the role of high quality statistics and emphasise the importance of statistical independence. At the moment, nothing has been signalled under the any other business heading in this section.

We have a busy meeting on Friday. We will debate a number of key issues that are very important to Ireland and the EU. We will work with the Presidency and our colleagues from the other member states to ensure that progress is made. I thank the committee members for their attention and, at this point, I am happy to respond to any questions or observations that committee members may have.