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Heinäluoma: Finland's EU Presidency has been a success

Ministry of Finance 15.12.2006 16.24
Press release 147/2006

According to Minister of Finance Eero Heinäluoma Finland’s EU Presidency has been a success. The set objectives have been achieved at least satisfactorily, and issues have progressed in a typically Finnish, low-key fashion.

- The Union’s Chemicals Regulation was finalised, and the European Chemicals Agency can now begin operating as planned. Accession negotiations with Turkey and the enlargement discussion in general are back on track following the meeting of the European Council, which finished today. Similarly, the development of a common migration policy has now begun at the EU level. In addition, the way the Services Directive and the Lebanon crisis were handled is an excellent demonstration of how well the pragmatic Finnish approach works.

Heinäluoma considers the results of his own sector, the Ministry of Finance, good.

- It is very important that the EU countries are now unanimous over the main direction of the EU economic policy. The acceleration of economic growth has provided us with an opportunity to make structural reforms that will be crucial in the longer term, and we have seized on that opportunity. The credibility of the Stability and Growth Pact has been restored, and instead of constantly patching up public deficits, we can now concentrate on solutions for the future.

Heinäluoma is of the view that the continued good implementation of the agreed economic policies beyond the Finnish Presidency will form the basis for a permanent improvement in employment and economic development within the EU countries. The EU’s acceptability will largely depend on whether its objectives for employment, competitiveness and welfare will actually be achieved.

Heinäluoma points out that Finland did not set out to find solutions to the large institutional questions of the EU, such as the Treaty establishing a Constitution for Europe. Instead, it set to achieve results in issues most directly related to the welfare of EU citizens. This was achieved, which is also important for future progress on the institutional reforms of the EU.

In Heinäluoma’s opinion, one of the most significant individual decisions made by the EU finance ministers was the agreement on the amount and allocation of lending to third countries by the European Investment Bank. The agreement defines the use of this important EU foreign policy tool until 2013. From Finland’s point of view it was important to ensure a multiple increase in lending to Russia and to projects that are beneficial to EU countries. Such lending will focus on projects related to the Support Fund of the Northern Dimension Environmental Partnership. These projects are important, among other things, for achieving improvements in the environmental condition of the Baltic Sea.

The Ministry of Finance has received criticism over its attempt to pursue inflation adjustments to alcohol taxation, in particular. Heinäluoma considers this peculiar.

- The inflation adjustments to the minimum levels of alcohol taxation were an objective unanimously agreed to by the finance ministers last year. Their implementation now failed due the objection of one country. However, attitudes to alcohol taxes have clearly changed with concern over alcohol-related problems spreading from Scandinavia to the South. An even larger review will now have to take place, as the finance ministers were insistent that the Commission prepares a comprehensive report on the matter during the first half of next year.

- The inflation review of alcohol taxation has overshadowed the fact that agreement was reached on the directive on tax-free goods imported by persons travelling from a third country. This is of significance to Finland. The directive makes Finland’s temporary maximum restriction of 16 litres on the import of beer one of the permanent and common restrictions within EU legislation. This is crucial in light of the objectives of our alcohol policy, as this regulation allows us to significantly restrict alcohol trade in Finland that is based on, for example, imports by travellers from Russia.



Tax matters:

In relation to imports of goods by travellers, Finland was granted an important exemption from the requirement to allow travellers from third countries to import goods tax-free into the EU: the tax-free import of beer will be restricted to a maximum of 16 litres. Because the price level for alcohol in Finland’s neighbouring country Russia is low, the restriction on imports is of even greater significance than increasing the minimum taxes on alcohol. Due to the objection of one member country (the Czech Republic) agreement could not be reached on the alcohol tax reform, but it was agreed that the Commission would undertake a comprehensive review on the taxation of alcoholic beverages in the spring. Agreement was reached on the maximum limits on goods imported by travellers from third countries: imports by land travellers will be duty- and tax-free up to the value of 300 euros, imports by air or sea travellers up to 430 euros. Consensus was also reached on the continuation of the special system for electronic services, which is part of the VAT package until the end of 2008. (An extension by 2 years, the previous extension was for 6 months only.)

The European Investment Bank (EIB):

It was agreed to renew the EIB’s external lending mandate for 2007-2013. This relates to the EIB’s authorisation to grant loans to countries outside the EU. The maximum amount of the loan mandates is EUR 27.8 billion. One of the significant achievements of Finland’s previous Presidency was opening up EIB lending to Russia. Now that special mandate has been permanently incorporated into the common lending mandate, and its monetary value increased from the EUR 600 million in the current mandate to EUR 3.7 billion.

Energy and climate policies:

Agreement was reached on short- and long-term energy policies. For the short term, ministers agreed that tax concessions are not an appropriate or effective means of compensating for the high energy prices. All in all, this was one of the most concrete policy outlines any of the council formations managed to agree on during the Finnish Presidency.
The ministers of all EFTA countries conveyed the willingness of their countries to join in the EU emissions trading scheme.

Operation of international financial institutions:
During the EU Presidency, the 25 EU countries adapted a unified stand on the reform of the International Monetary Fund (IMF). This was crucial, as it allowed for a decision to be made in Singapore on the largest IMF reform since it was founded in 1945.
During the Finnish Presidency, EU representation at international forums (IMF, G7/G8 and G20) was also agreed on. In practice this meant agreement on arrangements that will strengthen the voice of the EU at these forums.

Financial markets:

Agreement was reached on further measures in relation to the development of crisis management in the EU financial markets, based on the crisis management simulation exercise held in spring 2006. The issue is significant for securing the stability of the EU and worldwide economy in the event of a future financial market crisis (of which there were several in the 1990s).
The ministers agreed on support for the Single Euro Payments Area (SEPA), and made a commitment to use SEPA products in the public sector under certain conditions.
With regard to the clearing of securities, the Council has expressed its support for the Code of Conduct that the Commission prepared in cooperation with market operators. The Code aims to reduce the costs involved in clearing securities, and to increase competition between service providers.

Leading cooperation on EU Member States’ economic policy: during Finland’s Presidency, the implementation of the Stability and Growth Pact and the Lisbon Strategy, both reformed in 2005, was evaluated for the first time. EU countries are committed to balancing their budgets during a boom and improving their long-term sustainability. In accordance with the new framework for the Stability and Growth Pact, Member States have set new medium-term budget objectives to enhance sustainability. Countries with excessive public deficits are now adjusting their budget balances. This is partly due to market conditions, but structural deficits have also diminished. Finland also reached an agreement on advancing the Lisbon Strategy in relation to energy policy, innovation, the labour markets and reducing the administrative burden faced by companies.

The EU budget:

Progress has been excellent in the preparation of policy programmes and related regulations (approximately 40 in total) for the coming budget season: agreement has been reached on all of the most important programmes, including seven research framework programmes, to allow them to start from the beginning of 2007 in accordance with the timetable set for the objectives.

Unanimity was reached on the first EU budget of the new budget period in the budget trilogy held between the Council, the Parliament and the Commission on 28 November. The decision will keep the cost increases at a reasonable level. At the same time the renewal of the EU’s Financial Regulation was agreed on, which will clarify, for example, the regulatory basis for the transparency of EU subsidies.

Enlargement of the Eurozone:

It was decided to allow Slovenia to join the Eurozone from the beginning of 2007. A joint view was formed on the interpretation of the inflation criterion for the Eurozone.