Six successes in the shadow of the economic crisis - Main contents

Sweden took over the Presidency at a time when the EU faced major challenges in the wake of the severe economic crisis. A new architecture for financial supervision, exit strategies from Member States' crisis measures, new financial market regulations, better conditions for crisis management, fighting VAT fraud on emissions rights and a new growth strategy for Europe are six issues on economy and finance ministers' agenda on which the EU made important progress in the autumn.

"I am pleased that the Swedish Presidency made substantial progress in important areas", says Swedish Minister for Finance Anders Borg. "When we have experienced such a serious crisis, it is extra important that we succeed in drawing lessons from it and present substantive proposals for improvements to reduce the risk of similar crises in the future".

Under the Swedish Presidency, ECOFIN has worked both on measures to mitigate the effects of the crisis and on measures to create better conditions for handling future crises.

New supervisory architecture

One of the most important issues for the Swedish Presidency has been to address the shortcomings in financial market regulations that became obvious during the crisis.

"The crisis made it clear that supervision cannot be conducted solely at the national level. Regional financial markets have evolved at the same pace as the internal market and therefore supervision must also have more of a helicopter perspective", says Borg.

The finance ministers have agreed on a new architecture with strong European institutions that will provide cross-border supervision of financial markets and work to prevent the emergence of new crises. A joint body, the European Systemic Risk Board (ESRB) will be established to supervise overall financial system stability. At the same time three new authorities will be created to supervise the banking, insurance and securities sector. This new architecture will now be negotiated with the European Parliament and introduced in 2010.

"Achieving an agreement on supervision has been an uphill battle, but happily Member States had the stamina to go all the way. We have now laid the foundation for ensuring that the necessary supervisory institutions will be put in place in the EU", notes Anders Borg.

Exit strategy principles

To restore confidence in the financial markets and to reduce the impact of the crisis on growth and employment, a series of extraordinary support measures have been taken in the past year. Even though it is still too early to withdraw these measures, it is important even now to make clear how and when these measures will be phased out.

"Even though the recovery is too fragile to begin phasing out these measures at this time, it has nevertheless been tremendously important for us to identify already now the principles to be followed", says Borg. “This increases confidence in long-term fiscal sustainability. It also increases confidence that financial markets will function as intended”.

The fiscal policy crisis measures will be rapidly withdrawn beginning in 2011 at the latest. In addition, public finances will be strengthened by another 0.5 per cent of GDP a year. Furthermore, structural reforms will be taken and the national budgetary frameworks will be strengthened.

The exit from the measures in the financial markets is to be conducted in a coordinated manner, with the timing to depend on the situation in each country. The general guarantee programmes should be phased out first.

Ending an unhealthy bonus culture/ New financial market regulations

The Council has adopted new European capital requirement rules. These rules reduce the possibility of reselling risks and will make banks more resistant to losses in bad times. Thus there is less risk that households and businesses will be hit by a new credit crunch.

As part of the new capital requirement rules, Member States have agreed on new binding EU rules for remuneration policies in banks and securities firms. These rules support responsibility for banks' sound and sustainable growth in the long run. Furthermore, they will prevent high-risk behaviour that may threaten financial system stability.

"Individuals intent on enriching themselves will not be allowed to do this at the expense of society and its stability", says Anders Borg.

Better crisis management conditions

The crisis drew EU Member States' attention to the importance of early action when problems arise and also of being able to inform each other. The Swedish Presidency has therefore continued the work to develop and strengthen the various arrangements in the EU for stability and crisis management. The work is being pursued on two tracks: one track concerns improving financial market regulations and the other concerns creating a clearer framework for cooperation between Member States and between the relevant authorities.

Better conditions for fighting VAT fraud

It is important to safeguard EU common funding. ECOFIN has therefore agreed on general guidelines aimed at fighting VAT fraud on emissions rights. These guidelines will help Member States to combat the widespread fraud in a more appropriate way.

The EU 2020: a new growth strategy

"The Presidency has set the scene for economic growth in the EU in the coming decade”. The finance ministers have now sent a clear signal that increased employment and long-term fiscal sustainability are key in improving EU growth potential", concludes Swedish Minister for Finance Anders Borg.