PREPARATIONS FOR THE CANNES EUROPEAN COUNCIL

- BROAD GUIDELINES OF MEMBER STATES' AND COMMUNITY ECONOMIC POLICIES

After a wide-ranging exchange of views, the Council approved the draft broad guidelines of the economic policies of the Member States and of the Community and agreed to forward the draft guidelines to the Cannes European Council.

In the light of the European Council's conclusions on the subject, the ECOFIN Council will return to the issue with a view to formal adoption of the recommendation setting out the broad economic guidelines by which the Member States and the Community are to steer their economic policies.

- MEMBER STATES' PROGRESS IN THEIR JOB CREATION POLICIES

The Council took note of the 3rd report of the Economic Policy Committee on Member States' progress in their job creation policies, and approved the broad thrust of the report.

The Presidency will be preparing a summary analysis of the employment situation for the Cannes European Council.

Under this item of the agenda, the Council also received an interim report from the Economic Policy Committee on social benefits, taxation and the labour market, a subject which will be dealt with at the Madrid European Council.

- PREPARATIONS FOR THE THIRD STAGE OF ECONOMIC AND MONETARY UNION - REPORT FROM THE PRESIDENT OF THE ECOFIN COUNCIL TO THE EUROPEAN COUNCIL

The ECOFIN Council restated its determination to prepare the transition to the single currency by 1999 at the latest, in strict accordance with the Maastricht Treaty. It restated its commitment to fully observing the convergence criteria. It welcomed the contributions represented by the green paper drawn up by the Commission as well as those of the proceedings of the EMI.

The President of the ECOFIN Council recommended to the European Council that it:

- instruct the ECOFIN Council to define, in consultation with the Commission and the EMI, a reference scenario guaranteeing full compliance with the Treaty, this being a pre-condition for the irreversibility necessary at the start of stage 3, with a view to reporting back to the Madrid European Council in December 1995;

- ask the Commission to undertake the necessary consultations with a view to reporting back to the European Council in Madrid;

- note the work already completed on defining the technical characteristics of coins and ask the ECOFIN Council to continue with all the necessary work;

- ask Member States to take all the necessary steps to see that public services consider the practical arrangements for switching their operations to the single currency when the time comes;

- request the ECOFIN Council to examine, together with the EMI, the future relationship between the currencies of the Member Countries of the Monetary Union and of the other States of the European Union.

The President of the ECOFIN Council noted the importance of the preparatory discussions already completed on the definition of the characteristics of notes and coins needed for the single currency. He noted:

- the consensus achieved on the range of denominations;

- the progress achieved on the appearance of the coins and notes, and the EMI Council's preference for identical notes in all Member States, possibly with a separate national symbol;

- the experts' proceedings, which had led to a proposal for design motifs to feature on the coins which was consistent with the motifs for the notes agreed on by the Council of the EMI.

- TRANS-EUROPEAN NETWORKS

The Council discussed the situation as regards the financing of priority trans-European network projects on the basis of information supplied by Commissioner KINNOCK on funding from the budget and from the EIB President on contributions from the Bank.

The Council welcomed the progress made with the implementation of 14 priority transport projects adopted in Essen, as a result of the amount of work carried out in close cooperation between the European institutions.

The 14 projects, although at different stages of maturity, are all being worked upon: for more than half of them, which are also the most significant financially, preparatory studies are under way, and in some cases completed; for the others, construction work has already begun.

The Council welcomed the agreement reached today in the Transport Council on the common position concerning Community guidelines on trans­European networks and the work done within the Community institutions on the Financial Regulation for the trans­European networks, the adoption of which, due to take place soon, is necessary to speed up the implementation of those projects.

The Council also discussed the use of the appropriations for the "networks" heading adopted for 1995 and earmarked for 1996 and the appropriations available for the period 1997-1999 for the major projects defined as priorities in Essen.

At the close of discussion, it agreed that work on the question would continue between now and the European Council in Cannes with a view to reaching a conclusion.

EXCESSIVE GOVERNMENT DEFICIT PROCEDURE

The Council agreed to:

- a Decision abrogating the Decision on the existence of an excessive deficit in Germany. German public authorities' net funding requirements had fallen to 2,5% of GDP in 1994 - and thus below the reference threshold of 3% - and would remain there in the years to come;

- the Decisions on the existence of excessive deficits in Austria, Finland and Sweden.

Once the texts have been finalized in the official languages of the European Union these Decisions will be formally adopted.

HARMONIZED INDICES OF CONSUMER PRICES

The Council reviewed the progress of discussions on the proposal for a Regulation concerning harmonized indices of consumer prices.

It noted that there was broad agreement on the draft, although certain aspects had yet to be finalized to enable the Regulation to be adopted at its next meeting, after receipt of the European Parliament's Opinion.

The Regulation is needed in order to assess, on a uniform statistical basis, the progress made by Member States in fulfilling their obligations regarding the achievement of a high degree of price stability, which is an important criterion in the process of achieving EMU.

FINANCIAL PERSPECTIVE - CATEGORIES 3 AND 4

The Council noted the answers given by the Commission in response to requests made by certain delegations at the previous meeting for further information on the financial programming for internal policies.

It adopted conclusions drawing attention to the need to comply with the ceilings of the financial perspective and asking the Commission to act on the Council's request for regular twice-yearly updates of the financial programming in this area.

EXCISE DUTIES ON BIOFUELS

The Council had a brief discussion on the difficulties arising in connection with the Commission's proposal concerning excise duties on biofuels.

It then asked the Commission to continue looking for an appropriate solution to the problem.

VAT

The Council received a Commission report on the approximation of VAT rates together with a proposal for a Directive on the taxation of agricultural outputs.

It agreed to postpone the substantive examination of this item until a future meeting.

COMBATING FRAUD

Following up the conclusions of the Essen European Council, which had asked the Institutions and the Member States to act together to combat fraud, the Council:

- examined the Commission's annual report on fraud and its 1995 work programme in this area and adopted a series of conclusions on the matter (See Annex I);

- noted the findings from an initial examination, by the Advisory Committee for the Coordination of Fraud Prevention, of the reports submitted by the Member States on the measures they were implementing at national level to combat the waste and misuse of Community funds; on this point it adopted conclusions involving a number of recommendations for continuing the discussions in the second half of 1995, the results of which will have to be submitted to the Madrid European Council in December (see Annex II);

- noted that there was an agreement in principle on the whole of the draft joint guideline concerning the Regulation on the protection of the European Communities' financial interests; the Regulation will establish for the first time a common framework for combating the waste and misuse of Community funds in all areas covered by Community policies.

The joint guideline will be adopted in the near future, after the texts have been finalized and a number of parliamentary reservations have been withdrawn.

ANNEX I

Council conclusions on fraud and the 1995 work programme in this area

THE COUNCIL OF THE EUROPEAN UNION,

- recalling the Essen European Council conclusions on the need for fraud, wastefulness and mismanagement to be combated with the greatest rigour and the call for concerted action by the institutions and the Member States, as well as the ECOFIN Council conclusions on combating fraud;

- recalling that under EC Article 209a "Member States shall take the same measures to counter fraud affecting the financial interests of the Community as they take to counter fraud affecting their own financial interests";

- recalling the procedures provided for in Articles 169 to 171 as amended by the EC Treaty;

- taking note of the report of the European Court of Auditors for the financial year 1993 and the relevant special reports and pointing to the Council's interest in seeing the Court's comments followed up with a view to tight, efficient management and financial control;

- having examined the Commission's annual report on the fight against fraud in 1994 and its work programme for 1995;

- taking note of the proceedings of the Advisory Committee for the Coordination of Fraud Prevention on 31 May 1995,

HAS ADOPTED THE FOLLOWING CONCLUSIONS:

1. In general terms, the Council:

- stresses the need for the utmost vigour in waging war on fraud, which damages the Community's financial interests as well as the credibility and effectiveness of the policies pursued;

- considers that this ongoing task, covering both expenditure and revenue, is inconceivable without close cooperation between the Commission and the Member States, in clear compliance with their respective spheres of responsibility;

- points to the decisive role here of the Advisory Committee for the Coordination of Fraud Prevention;

- in the same spirit, supports the Commission's steps to develop its liaison with the competent authorities in the Member States, in order to place action against all forms of crime and organized financial misconduct within the appropriate international context, in the course of combating fraud;

- considers that, in a commendable attempt to be exhaustive, the Commission's annual report for 1994 describes progress in all areas of the fight against fraud. As regards the presentation of the report, the tables of figures should make it possible to compare data over time;

- notes the increase in the number of cases detected and, like the Commission, sees this as evidence of more effective detection and enforcement systems;

- notes the Commission's operational role (investigations, expenditure and development of intelligence) and calls on the Commission to take advantage of the efforts made by the Member States;

- stresses the need to give greater publicity to anti­fraud action and its results.

2. The Council endorses the Commission's comments, particularly as regards:

- the fact that fraud cannot be combated solely by detecting and punishing acts committed and must be combated in the first place by helping to remove the causes allowing or even encouraging fraud; the Council approves any measure with that end in view;

- the concern to see work completed on all of the Commission proposals relating to action against fraud, both those for the revision of Council Regulation (EEC, Euratom) No 1552/89 or on the protection of the Communities' financial interests and the proposal for a Council act drawing up a Convention on the protection of the Communities' financial interests under criminal law;

- greater use of risk analysis, particularly in order to make the best possible use of the financial and human resources assigned to combating fraud;

- the Commission's efforts to diversify relevant information sources; it supports the Commission's efforts to combine the various databases containing information of use in combating fraud (IRENE and PRE­IRENE in particular).

It expresses interest in making those databases accessible to competent authorities in the Member States, with due regard for security, reliability and data protection requirements;

- further cooperation between the Joint Research Centre (Ispra) and UCLAF in order to develop scientific backup for operational anti­fraud activities;

- the intention of devising ways of combating fraud affecting the customs transit procedure and transnational operations generally.

3. The Council also wishes to press the following points:

- it reiterates that Community legislation must be framed in a simple, clear and enforceable manner so as to keep the risk of fraud or irregularities to a minimum; it should be the Commission's constant concern to adjust existing legislation in the light of the prevalence of fraud and irregularities in certain areas.

It calls on the Commission to supply by the end of the year a detailed list of legislation revised in 1994 and 1995 together with a planned revision programme for 1996.

This exercise should take into consideration proven or suspected cases of fraud or irregularity exposed in the annual and special reports from the European Court of Auditors;

- it stresses the obligation for Member States to detect and prosecute cases of fraud and irregularity and to keep the Commission constantly informed of developments and respond promptly to the Commission's requests. It recalls that, in accordance with the Essen European Council conclusions, Member States have drawn up reports on the measures taken at national level;

- it calls on the Commission to supplement reporting legislation, as necessary, and periodically to reassess its incentive effect;

- it calls for significant further efforts to improve the rate of recovery of sums wrongfully received as well as procedures to obtain reimbursement of sums involved in fraud and irregularity cases;

- it considers that the strengthening of the Commission's resources within UCLAF should be reflected in an amalgamation of the budget appropriations earmarked for action against fraud;

- it takes favourable note of the Commission's intention of submitting a vade mecum by the end of 1995 on the Community anti­fraud arrangements;

- it welcomes the presentation of the work programme which is in line with the strategic programme and notes that the Commission will be putting forward its next work programme, for 1996, at the end of 1995 so that it can be submitted to the ECOFIN Council in January 1996.

ANNEX II

Council conclusions on further work on combating fraud in the second half of 1995

A. In response to the request by the Essen European Council, the Member States have submitted their reports on the measures they are implementing domestically to combat wastefulness and the misuse of Community resources.

Those reports contain detailed information on Member States' legal and administrative instruments to protect financial interests and on the organization of internal structures.

B. So that the reports can be submitted to the European Council in December 1995 and in the light of the progress already achieved, the Council recommends that work in the second half of the year should focus on the progress still to be made at both national and Community levels as well as in the context of partnership between the two levels.

1. As regards action to be taken at the level of the Member States, emphasis should be placed on the following points:

* Making full use of existing legal and administrative provisions;

* improving internal coordination between the various institutions and departments as regards control;

* the need for regular internal audits to maintain the improved performance level of the controls and protective measures.

2. In the context of an effective partnership, national action must be supported by an impetus from the Community. In this connection it would be useful to identify the role which the Commission could play in:

* collecting, analysing and using the information;

* increasing awareness of the protection of the Community's financial interests;

* circulating at Community level the new methods and techniques of control considered appropriate;

* following up cases of fraud and irregularity and recovering the amounts involved.

3. A comparative examination of the national reports should be used to improve coordination between Member States themselves and with the Commission:

* regarding control verification in the field;

* with the aim of harmonizing the levels of control and preventive measures in the various Member States;

* to improve mutual cooperation procedures;

* regarding the controllability of existing legislation.

4. Lastly, the Council stresses the importance and desirability of consolidating at Community level the main points of the descriptive information contained in the national reports to make them accessible to all the partners concerned in the Community.

OTHER DECISIONS

(Adopted without debate)

South Africa

Following the substantive agreement reached at the General Affairs Council meeting on 12 June, the Council adopted directives authorizing the Commission to negotiate a trade and cooperation agreement between the European Community and the Republic of South Africa and a Protocol to the Lomé Convention covering the terms and conditions of South African accession to the Convention (see Press Release 7839/95 Presse 174).

Relations with the associated CCEE

The Council adopted directives enabling the Commission to negotiate the adjustment of the Europe Agreements with the CCEE, the Free Trade Agreements with the Baltic States and the Agreements on tariff quotas for certain wines following enlargement.

EFTA

The Council adopted a Regulation establishing certain concessions in the form of Community tariff quotas in 1995 for certain processed agricultural products originating in Switzerland and Norway.

The Regulation provides, on a reciprocal basis, for autonomous transitional measures by the Community to take account of the trade that existed in processed agricultural products between the new Member States before they joined the European Union and Switzerland and Norway.

The measures have been adopted pending the outcome of the current negotiations with the abovementioned third countries for the conclusion of additional protocols amending their preferential agreements with the Community to take account of the accession of Austria, Finland and Sweden to the European Union.

The Hague Conference - Private international law

With a view to the meeting of the Commission on General Affairs and Policy of the Hague Conference from 20 to 23 June 1995, the Council agreed on a common approach to drafting a convention on the recognition and enforcement of foreign judgments in civil and commercial matters within the framework of the Hague Conference.

Prudential supervision

The Council adopted, insofar as it was concerned, a Directive amending Directives 77/780/EEC and 89/646/EEC in the field of credit institutions, Directives 73/239/EEC and 92/49/EEC in the field of non­life insurance, Directives 79/267/EEC and 92/96/EEC in the field of life assurance, Directive 93/22/EEC in the field of investment firms and Directive 85/611/EEC in the field of undertakings for collective investment in transferable securities (UCITS), with a view to reinforcing prudential supervision. This is the outcome of the conciliation procedure with the European Parliament (Article 189b of the EC Treaty) which led to the establishment of a joint text at the meeting on 30 March 1995 (see Joint Press Release, 6125/95 Presse 104). The joint text was approved by the European Parliament on 18 May 1995.

Noise emitted by earthmoving machinery

The Council confirmed its agreement to the joint text resulting from the discussions of the Council-Parliament Conciliation Committee on the amendment of Directive 86/662/EEC on noise emitted by earthmoving machinery. The European Parliament having done likewise, the Directive was adopted.

Directive 86/662/EEC fixed until December 1994 the permissible sound power levels of earthmoving machinery, with the corresponding certificates expiring one year later.

The new Directive provides for a two-stage reduction in the noise emitted by certain types of earthmoving machinery. During the first stage, from 30 December 1996 onwards, the current limit values are to be reduced by about 4dB; a further 3dB reduction will take place during the second stage, which commences on 30 December 2001.

As the start of the first stage does not coincide with the deadline set by Directive 86/662/EEC, it has been decided to extend the applicability of the current limit values and the period of validity of certificates granted under those values until 29 December 1996 and 29 December 1997 respectively.

Earthmoving machines with an installed power of more than 500 kW (used mainly in quarries and mines) are not covered by the new Directive.