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Economic and Financial Affairs Council, 15 March 2022
Main results
Sanctions on Russia
Over breakfast, economy and finance ministers discussed the economic and financial consequencesof the sanctions imposed on Russia after its unprovoked and unjustified military invasion in Ukraine. They discussed the current state of play of implementation, as well as the consequences of those sanctions which fall under their sphere of competence.
The sanctions which we have adopted are having a considerable impact on the Russian economy. They have disorganised the Russian financial system and they have paralysed the Russian Central Bank. The sanctions make sure that Putin’s regime is now starting to pay the price for its military aggression. We stand ready to adopt complementary sanctions whenever necessary. Concerning the protection of our economies, we want close coordination at a European level, as we did during the Covid crisis.
Bruno Le Maire, French Minister for Economic Affairs, Finance and Recovery
EU economy and finance ministers are following developments closely. On 25 February, they issued a statement together with the European Commission and the European Central Bank outlining their unity, their commitment to consider all possible sanctions, as well as their will to strengthen the economic independence of Europe.
On 2 March, EU economy and finance ministers held an informal video conference dedicated entirely to the discussion of sanctions. Member states agreed to take further measures to avoid any circumvention of the sanctions. Since then, the Council adopted additional packages of sanctions, including on crypto assets.
Today, the Council reached agreement (general approach) on the Carbon Border Adjustment Mechanism (CBAM) regulation, which is one of the key elements of the European Union’s ‘Fit for 55’ package.
The main objective of this environmental measure is to avoid carbon leakage. It will also encourage partner countries to establish carbon pricing policies to fight climate change.
For that purpose, CBAM targets imports of carbon-intensive products, in full compliance with international trade rules, to prevent offsetting the EU’s greenhouse gas emissions reduction efforts through imports of products manufactured in non-EU countries, where climate change policies are less ambitious than in the European Union. It will also help prevent the relocation of the production or the import of carbon-intensive products.
The agreement in the Council on the Carbon Border Adjustment Mechanism is a victory for European climate policy. It will give us a tool to speed up the decarbonisation of our industry, while protecting it from companies from countries with less ambitious climate goals. It will also incentivize other countries to become more sustainable and emit less. Finally, this mechanism responds to our European ambitious strategy that is to accelerate Europe’s energy independence.
Bruno Le Maire, French Minister for Economic Affairs, Finance and Recovery
The Council still has to make sufficient progress on a number of issues which are closely relatedto CBAM, but are not part of the draft legal text of the CBAM regulation. This concerns in particular the phase-out of the free allowances allocated to industry sectors covered by the CBAM, established by the EU ETS directive, and appropriate solutions on the issue of limiting potential carbon leakage from exports, so that economic efficiency, environmental integrity and WTO compatibility of the CBAM are ensured.
Once sufficient progress will have been achieved at the Council, the Council will start negotiations with the European Parliament, after the latter has agreed its position.
Corporate taxation: Fair and effective taxation for multinational groups
Member states have made progress towards an agreement on the directive, presented in December 2021 by the European Commission, to implement the minimum tax component of the OECD's international tax reform at EU level.
The ‘Pillar 2’ directive should, once effectively implemented, limit the race to the bottom in corporate tax rates. Large multinationals, with a combined annual turnover of at least EUR 750 million, will be taxed at a minimum rate of 15%. The new rules will reduce the risk of base erosion and profit shifting, and ensure that the largest multinational groups pay the agreed global minimum rate of corporate tax.
We have made major progress on the minimum taxation directive. An agreement is within reach to end the race to the bottom. Multinational companies will have to pay a minimum of 15% of taxes worldwide.
Bruno Le Maire, French Minister for Economic Affairs, Finance and Recovery
The Commission presented its fiscal guidance for 2023 which should help member states in the preparation of their Stability and Convergence Programmes due in April. In response to this, the Eurogroup issued a statement yesterday.
The Commission also provided an update of the state of play on the economic governance review following public consultation and discussions in the relevant committee with member states.
The Council has, for the first time, adopted conclusions on export credits that make three major advances.
Firstly, they commit member states to adapt their export credit policies to the objectives of fighting against climate change. This progress directly echoes the dynamic initiated in April 2021 by France with the Export Finance for Future coalition, whose commitments are now taken up by all EU member states. Secondly, these conclusions strengthen the EU's assertiveness on the international scene, by pushing for the modernisation of the export credit rules at the OECD. Thirdly, in the wake of the work undertaken by the European Commission on the Trade Policy Review, these conclusions lay the foundations for a new EU export credit strategy, for which a phase of in-depth diagnosis of needs will begin.
The Council adopted conclusions on the implementation of the e-commerce package. The VAT e-commerce package entered into force on 1 July 2021. It provided for a number of changes in the VAT legislation to overcome the barriers to cross-border online sales and to address challenges arising from the VAT regimes for distance sales of goods and business-to-consumer supplies of services, and for the importation of low value consignments.
The sanctions which we have adopted are having a considerable impact on the Russian economy. They have disorganised the Russian financial system and they have paralysed the Russian Central Bank. The sanctions make sure that Putin’s regime is now starting to pay the price for its military aggression. We stand ready to adopt complementary sanctions whenever necessary. Concerning the protection of our economies, we want close coordination at a European level, as we did during the Covid crisis.