The Week in Europe 17-23/11/00

The EU's economic position rated 'best for ten years'…

The economic situation of the EU is the best for ten years and is expected to stay sound, according to the economic forecasts for 2000-2002, released on 22 November. GDP growth is likely to average 3.4% in the EU this year, the highest since 1989. It is forecast to slow slightly to 3.1% next year and 3.0% in 2002, as a result of the increase in oil prices. This will keep inflation at or just above 2%, although the core level remains low. Around 2.6m jobs will be created this year, as employment growth accelerates to 1.6% - the strongest performance since 1990. Unemployment is predicted to fall from 8.4% to 7.3% in 2002. Pay is expected to increase by about 2.8% across the EU, just ahead of consumer prices, and to 3.2% in 2001 and 3.3% in 2002, following the unexpected increase in inflation this year. The rise in unit labour costs will remain subdued. Government finances are generally improving, from a deficit of 0.7% of GDP in 1999 to a surplus of 1.2% of GDP this year and 0.2% in 2001. Receipts from this year's telecom licence auctions have bolstered the figures. A surplus of 0.3% of GDP is forecast for 2002 (with a 0.3% deficit for the euro zone). The forecasts are at http://europa.eu.int/comm/economy_finance/document/ecofore/index_en.htm [Background text: IP/00/1333]

…and partners see growth, too

The candidate countries can expect sustained high growth averaging more than 4% a year in 2000-2002, Commission analysts believe. The economic forecasts for 13 countries preparing to join the EU, published for the first time on 22 November, forecast that GDP growth will be 4.2% for the ten transition countries (of Central and Eastern Europe) this year, almost twice the 2.2% of last year. It is expected to continue rising to 4.4% in 2002. With Turkey, Malta and Cyprus, average GDP growth for the 13 countries is predicted to reach 4.8% this year, slowing to 4.4% in 2001 and 2002. An upturn in the Russian economy and strong or accelerating domestic demand are also sustaining economic growth. Restructuring is likely to mean a rise in unemployment this year, although the outlook will improve. Most countries should see positive employment growth from next year, with the jobless rate falling slightly to an average of 11.6% in the ten transition countries in 2002. Inflation will stay around current levels in many countries, but fall significantly in the two worst affected, Romania and Turkey. Trade and current account deficits are likely to remain relatively high, and domestic demand will push up imports. Average government deficits should continue to fall. The forecasts are available from

http://europa.eu.int/comm/economy_finance/document/eesuppc/2000_4/main_en.htm [Background text: IP/00/1334]

· R&D in Central and Eastern Europe is reviewed in a Eurostat report published on 20 November.[Background text: ES 130/2000]

BSE testing to be widened

All at-risk cattle in the EU over 30 months will be tested for BSE, the Agriculture Council decided on 21 November. This extended testing programme will come into effect on 1 January, and will apply to bovine animals entering the food chain. It could be widened further from 1 July to include apparently healthy animals, after a review of experience with the initial programme. France undertook not to export products it has banned on its domestic market, such as T-bone steak, as well as destroying specified risk material. At their 16-hour meeting through the night, ministers decided also to ban the use of meat and meal in animal feed. EU countries that have adopted national measures (on French beef) agreed to notify them to the Commission. These will be reviewed by the Scientific Steering Committee, and a decision taken by 30 November in order to lift them or go further by strengthening the Community framework against BSE. · The Council also adopted the EU's position for world trade negotiations on agriculture. [Background text: IP/00/1331]

CEE backs rapid reaction force

Fifteen non-EU countries, including Turkey, agreed on 21 November to contribute to a European rapid reaction force. They consist of the 13 candidate countries, mostly from Central and Eastern Europe, plus Norway and Iceland. The decision follows the EU Member States' agreement the previous day to contribute a total of 100,000 troops, 400 aircraft and 100 ships.

By 2003 the EU plans to be able to deploy a 60,000-strong force for at least a year. It could be used to tackle regional conflicts or humanitarian crises, and is intended to complement NATO. A declaration is available from http://ue.eu.int

Quality standards for auditors

Quality rules for company auditors should include safeguards of independence and other standards, the Commission has proposed. Its Recommendation on 21 November sets out minimum standards for external quality assurance systems that apply to the audits required for 3m limited liability companies in the EU. These systems seek to ensure that statutory audits comply with established standards, including ethical rules such as independence. Some shareholder groups have expressed concerns about accountants becoming too close to the companies they inspect. The Recommendation should also make companies' financial information more reliable and comparable. At the moment, the difference between audit regimes in Member States can make it difficult for investors to make meaningful comparisons. Furthermore, not every EU country requires auditors to be covered by a quality assurance scheme. Commissioner Frits Bolkestein said the move would contribute to the efficient functioning of capital markets in the EU, by encouraging cross-border investment and promoting investor confidence. The full text can be downloaded from

http://europa.eu.int/comm/internal_market/en/company/audit/news/quality.htm [Background text: IP/00/1327]

· A proposal to simplify VAT invoicing rules was put forward by the Commission on 20 November. It will also permit electronic invoicing EU-wide.[Background text: IP/00/1325]

Immigration debate opened

The Commission launched a debate on asylum and immigration policy on 22 November, by publishing two Communications. Drawn up in response to the mandate given by the European Council in Tampere in October 1999, the two papers have two main themes. First, differences in procedures between the Member States has led to secondary migration within the EU. This in turn has made it harder to combat the criminal networks that exploit people seeking to enter the EU. Second, past policies such as 'zero immigration' need reforming to deal with the present position, including labour market demands and the rights of refugees and asylum-seekers. In addition, no Member State can tackle the situation on its own; instead, they should work together to develop a common framework for accepting immigrants at EU level, the Commission suggests. Common procedures and standards could be determined for asylum-seekers, too. Discussions on immigration on asylum are planned for the second half of next year, under the Belgian Presidency. [Background text: IP/00/1340 ]

Social rules for road transport

The Commission has proposed three measures to improve working conditions for lorry drivers and make competition fairer. The first proposal would introduce a driver's certificate to ensure that national and EU rules on working conditions are not breached. This would address the problem of non-EU drivers forced to accept low wages, almost unlimited hours and poor welfare cover - which also has an adverse effect on competition. Second, the Commission plans to clear the way for agreement on working time rules in road transport by excluding self-employed drivers from its scope for three years. The third proposal would help to coordinate weekend journeys by heavy goods vehicles. It would harmonise the timing of the bans (used by eight EU countries) and set up a system for notifying which days are affected.[Background text: IP/00/1335]

Review of investment services

Changes to EU rules on investment companies were put forward on 16 November to encourage market integration and improve protection for investors. Directive 93/22 needs updating to reflect profound changes in securities trading systems since it came into force five years ago, said Commissioner Frits Bolkestein. A review suggests that the 'single passport' system could include inter-professional business and services to retail investors. It also discusses common principles to apply to all trading systems, including electronic ones, which could deal with potential distortions of competition between exchanges and trading systems. [Background texts: IP/00/1314,IP/00/1315 & MEMO/00/81]

The EU is asking for $4bn in trade sanctions to be authorised in a dispute over US export subsidies. This is the value of subsidies granted under the US Foreign Sales Corporation scheme, which the World Trade Organisation found to be illegal. The EU also wants a ruling on a replacement scheme.

[Background text: IP/00/1321]

Agendas of the Commission's weekly meetings are now available online at

http://europa.eu.int/comm/secretariat_general/meeting/index_en.htm [Background text: IP/00/1345]

Internal reform plans have been published by the Commission, on its structure and workings. [Background text: IP/00/1346]

Enlargements news

NEGOTIATIONS PRODUCE SOME TRANSITIONAL AGREEMENTS

The November 14 negotiating session at deputy level between the EU and some of the candidate countries produced at least one novelty: a chapter closed with transitional requests granted. The measures granted are not spectacular, but they do represent a small breakthrough given that so few transitional requests have been granted to date. It is notable too that it is Poland that won this small victory, in respect of compliance with some EU financial services rules, in the chapter of free movement of services.

What Poland has won is EU agreement for cooperative banks to enjoy a partial exemption from EU rules until the end of 2007, the exclusion of some small cooperative banks and savings unions from the scope of EU rules, a deferral until the end of 2003 in rules concerning calculation of banks' own funds and tangible assets, and a phasing-in of the level of investor compensation through to the end of 2007 (with corresponding limits on the freedom of operation in the rest of the EU of Polish investment companies not meeting EU compensation levels). These are not the first transitional measures that Poland has won - it obtained provisional agreement at its last negotiations at deputy level (that is, the sub-ministerial level), in October, to defer implementation of some elements of VAT charging for restaurants in the chapter on taxation. But the taxation chapter is still not closed - and today Poland closed (provisionally, at any rate) the chapter on services.

CZECH REPUBLIC MISSES OUT ON ITS NEGOTIATIONS

For the first time since these enlargement negotiations started, in March 1998, one of the candidates found itself in the position of having nothing to negotiate at a scheduled session, and its meeting was cancelled. The victim was the Czech Republic, at the 16 November session at ambassador level in Brussels. And the cancellation was not because the candidate had no further problems to discuss, but because the EU was unable to agree negotiating positions. The culprit for the delay was Austria, which blocked scheduled talks on energy with its neighbour (because of tensions over the Czech nuclear power plant at Temelin), and talks on environment because it is insisting on automatic re-examination - on environmental grounds - of energy matters.

Austria is waiting for the a working group in the Council of Ministers - on atomic questions - to finalise a report on nuclear energy in the candidate countries. EU ambassadors have asked the group to complete its work before the end of the year, to avoid further delay. But most other Member States reject Austria's demand that once the report is received, all energy questions should be reopened with the candidates. Instead, the majority EU view is that questions should be reopened only in the specific cases where the report raises them.

Council sources suggest that the delay that the Czech Republic has suffered may yet be recuperated. There are strong pressures for an advance to be made at the ministerial negotiating session scheduled on 5 December in Brussels. But at the same time, the Czech Republic received another mild setback when European Enlargement Commissioner Günter Verheugen suggested in a speech in Brussels on November 16 that the country had over-reacted to the economic ranking that accompanied the Commission's Regular Reports. The Commission assessment was accurate: "It's a question of track record", Verheugen told a meeting of candidate country representatives at the EU's Economic and Social Committee. But the sensitivity of the Czech Republic to this relatively minor aside in the Commission's otherwise largely positive assessment meant that "this rosy picture has been unnecessarily clouded".

Five other candidates did hold talks at ambassador level at the 16 November session. Cyprus provisionally closed the chapter of free movement of goods, Bulgaria closed culture and external relations (while inconclusive discussions left open company law and freedom of movement of capital), Hungary closed social affairs (with free movement of services still left open), and Malta closed company law and economic and monetary union (leaving open free movement of capital, competition policy, fisheries and social policy and employment). Lithuania closed no chapters. It is still negotiating on freedom of movement of services, freedom of movement of capital, company law, transport, social policy, telecommunications, and environment.

Informační centrum Evropské unie při Delegaci Evropské komise v České republice

European Union Information Centre of the Delegation of the European Commission to the Czech Republic

24.11.2000