Economic and Finance Council (Hansard, 14 November 1991)

§ Mr. Norman Lamont

The Economic and Finance Council of the European Community met in Brussels on 11 November and the intergovernmental conference on economic and monetary union met afterwards on 11 and 12 November. I represented the United Kingdom at both meetings.

The Council discussed the Italian Government's programme for economic convergence, the first such discussion of a member state's programme under the Council's new framework for multilateral surveillance. The Council focused on the need for improved budgetary discipline.

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The Council agreed to bring forward the remaining tranches of the Community's balance of payments loans to Romania and Bulgaria subject to confirmation from the IMF that their programmes for the two countries would remain on track. The Community will also continue to encourage the members of the G24 outside the Community to increase their assistance to the two countries.

The Council also discussed two proposals for aid to the Soviet Union. It was agreed that the existing 500 million ecu food credit should be disbursed as soon as possible. I urged that the Commission's new proposals for a further 1.25 billion ecu loan should be considered swiftly. It was agreed that the Commission should send a task force to Moscow to consider the operational details of the loan and that ministers should aim for agreement on the first tranche of such a loan on 25 November. I stressed the importance of including provision for feed grains in that first tranche. It was also agreed that both loans would allow a substantial element of the food to be bought from Eastern Europe.

A Commission proposal to revise the financial perspective of the EC budget was also discussed but without agreement and the proposal was remitted to the Budget Council for further consideration.

The Council reached agreement in principle on the VAT technical system directive and the administrative co-operation regulation. These provide for the operation of the intra-Community VAT system in the single market, and enhanced administrative co-operation between the fiscal authorities of member states in support of that system. These measures are vital steps toward the abolition of fiscal frontiers in the Community and the creation of the single market. Agreement brings a welcome end to uncertainty, allowing business and others with an interest, to plan with confidence for the completion of the single market.

I again argued strongly that while tax free and duty-free shopping could not be retained indefinitely in the single market a transitional period longer than that proposed by the Presidency was needed. Member states agreed that intra-Community duty-free shopping should continue for almost eight years: until 1 July 1999. This will be reflected in the VAT technical and excise movements and control directives. Agreement on this transitional period allows businesses a reasonable period of time in which to make the necessary changes to their marketing and investment strategies.

Full legal agreement on these two texts was not possible in the absence of texts in all Community languages, and given the need for certain technical clarifications. I made clear that the United Kingdom's agreement was subject to parliamentary scrutiny, which I look forward to completing shortly through a debate on this and the earlier agreement reached at the 24 June ECOFIN. Consideration of the draft excise movements and control directive was deferred until the next Council meeting.

In the afternon of the same day and in the morning of 12 November Economics and Finance Ministers reconvened at a meeting of the intergovernmental conference on economic and monetary union. Three main issues were discussed: economic and social cohesion, the role of the European Parliament, and the institutional provisions for stage two.

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I stressed that economic and social cohesion in the Community was best achieved through sound macroeconomic policies and progress on the single market. Many member states agreed that proposals for financial arrangements to promote cohesion could be discussed only in next year's review of the future financing of the Community, not in the intergovernmental conference.

There was a brief discussion of the role of the European Parliament in economic and monetary union. I expressed the view that its involvement should be limited. Economic policy would remain largely a national responsibility under EMU, and hence accountability should properly be to national Parliaments. There might, however, be a role for the European Parliament in scrutinising the activities of the Commission and European Central bank. The role of the Parliament was discussed further at an inter-institutional meeting with MEPs in the afternoon of 12 November.

On the institutional provisions for stage two, there was broad agreement on the principle of establishing a European monetary institute and for developing the ECU.