EU finance ministers met in Luxembourg on Tuesday to discuss a number of important issues and to prepare for the European Council in October and the G20 finance ministers meeting in November.

EU macro-prudential oversight will be strengthened

The ministers agreed on an approach regarding macro-prudential supervision.  Ministers agreed to establish a specific body responsible for macro-prudential oversight across the EU financial system, the European Systematic Risk Board (ESRB). The ESRB will identify risks to financial stability and, where necessary, issue risk warnings and recommendations for action to address such risks.

As a consequence of the agreed approach and the broad political support on this matter, the Council invites the Presidency to start negotiations with the European Parliament on the Regulation, on the basis of this approach with a view to reaching agreement at first reading.

Swedish Minister for Finance Anders Borg was particularly pleased with the agreement to create a new body, responsible for macro-supervision: “This is a crucial step in putting in place a financial supervisory system that will help prevent future financial crises.”

Swedish Minister for Financial Markets Mats Odell added, “Today we have made serious progress on a matter of fundamental importance.”

Agreement on principles for fiscal policy exit

The ECOFIN Council agreed on conclusions in preparing for the European Council on 29-30 October, regarding principles for fiscal policy exit. More specifically, ministers reiterated the message from the Informal ECOFIN meeting in Göteborg that exit strategies should be comprehensive and encompass the following elements: 1) a timely withdrawal of the extraordinary measures; 2) further structural fiscal consolidation well beyond 0.5 per cent of GDP per year; 3) comprehensive structural reforms; and 4) strengthened national budgetary frameworks. Exit strategies should be designed within the framework of the Stability and Growth Pact.
 

Enhanced coordination and more efficient regulation to strengthen stability arrangements

As part of the creation of a new financial supervisory infrastructure, ministers also discussed the way forward regarding the strengthening of EU financial stability arrangements and agreed on a range of measures to be taken in the next 6 to 12 month period based on a road map. This work will continue along two closely interrelated strands. One will enhance the coordination arrangements among governments and other relevant parties, and carry out further work on burden-sharing between Member States. The other strand will develop more efficient regulation as regards, in particular, early intervention and bank resolution. The ECOFIN Council will return to this issue at the meeting in December.
 

A thorough discussion on climate financing

Ministers had an extensive and thorough discussion on climate financing. The ministers made some progress in understanding and clarifying each others’ positions.However, the Council could not today reach agreement on the draft council conclusions. At the center of the discussions were the issues of internal burden-sharing. Nevertheless, in the context of a global and comprehensive agreement, the EU stands ready to contribute its fair share of international support. Environment ministers will continue talks on the other aspects of the EU mandate for climate change negotiations in Copenhagen. Ultimately, the European Council will address climate financing at the end of October. Minister for Finance Anders Borg commented: “The results of today’s discussion were disappointing, showing a lack of commitment by certain member states. However, the components of an agreement were on the table and with more pragmatism from certain capitals, we will resolve these issues and the EU will drive the climate process forward.”
 

Agreement on terms of reference ahead of G20

In preparing for the G20 Finance Ministers meeting on 6-7 November, Ministers discussed the Terms of Reference concerning inter alia, climate finance, exit strategies and the Framework for Strong, Sustainable and Balanced Growth.