HC Deb 22 October 1992 vol 212 cc365-6W
Mr. Burns

To ask the Chancellor of the Exchequer if he will make a statement on the outcome of the latest meeting of the European Community's Economic and Finance Council.

Sir John Cope

The Economic and Finance Council of the European Community met in Luxembourg under my presidency on 19 October.

The Council discussed three issues related to the current review of the Community's future financing: overseas loan guarantees; aspects of the cohesion fund agreed at Maastricht; and the inter-institutional agreement on budgetary discipline and improvement of the budgetary procedure, between the Council, the Commission and the European Parliament. On loan guarantees, the Council agreed in principle to establish a self-standing fund, to make provision against liabilities on loans to third countries guaranteed by the Community. Payments into the fund would be set as a proportion of the value of new loans, and would be financed by a reserve in the financial perspective and the Community budget.

Of the cohesion fund the Council discussed the rules of eligibility and allocation criteria for the fund, and how the provisions of the Maastricht cohesion protocol on macroeconomic conditionality should be applied. All member states agreed that the criterion laid down in article 104c of the Maastricht treaty, on excessive budget deficits, should be the basis of the macroeconomic test; on other aspects no conclusions were reached.

The Council also had the opportunity to give first reactions to the Commission's proposal for a new inter-institutional agreement. The Council agreed that the Commission draft formed a good basis for discussion, and that the Presidency should report member states' initial reactions to the European Parliament.

The Council discussed the need for improved offers of market access for financial services from a number of countries in the GATT round and agreed that the presidency and the Commission should lobby those countries accordingly on behalf of the Community and its member states.

The call for a review of recent economic and financial events in the conclusions of the special European Council was remitted to the Committee of Central Bank Governors and the Monetary Committee for further work.

The Council agreed to the release of the remainder of Russia's share of the Community's 1.25 becu loan to the former Soviet Union for food and medical aid. The Council also adopted a balance of payments loan to Bulgaria but the first tranche will not be released until Bulgaria has reached satisfactory rescheduling agreements with its creditors in the Paris Club. A request from Poland for a structural adjustment loan was remitted to the Monetary Committee for further consideration.

The Council discussed future relations with Poland, Hungary and Czechoslovakia with Mr. Attali, the President of the EBRD in preparation for the presidency's meeting with those countries on 28 October. The Council also agreed in principle to continue to provide technical assistance funding from the PHARE and TACIS programmes to be administered by the EBRD.

Following the resolution of outstanding problems, the Council adopted the package of eight indirect tax proposals on the structures and rates for VAT and excise duties provisionally agreed at the 27 July meeting of Finance Ministers. This was a key objective for the United Kingdom presidency as agreement was necessary for the introduction of the single market on 1 January 1992.

The agreement includes an undertaking from the United Kingdom that we will progressively reduce the duty differential, between intermediate products (fortified wines) exceeding 15 per cent. alcohol by volume (abv) and those intermediate products up to 15 per cent. abv, to 25 per cent. by the end of 1995. The undertaking also provides for the use of the names "British Sherry", "Irish Sherry" and "Cyprus Sherry" to end by 1 January 1996. In return Spain will discontinue their present action against the United Kingdom in the European Court of Justice.

There was no substantive discussion of the 7th VAT Directive on second-hand goods, including works of art. The Commission explained why such a directive was necessary and it was agreed that the proposal should he remitted to working groups for further discussion.