EU summit calls time on banking secrecy

European leaders on Wednesday targeted a year-end deadline to undo banking secrecy, ultimately hoping to recoup a trillion euros in lost tax each year to help beat recession and unemployment.

EU summit calls time on banking secrecy
Photo: Bertrand Langlois/AFP

A four-hour summit also touching on energy policy and Syria saw the European Union agree to introduce "before the year ends" a system for the automatic exchange of limited information between countries on personal savings accounts.

Leaders also agreed to revisit rules governing registration for multinational companies as well as anti money-laundering measures and cooperation on sales tax, or VAT.

"Tax evasion is a serious crime, one which, thanks to protracted legal proceedings and trifling penalties, can be committed virtually with impunity," European Parliament head Martin Schulz told the summit.

EU President Herman Van Rompuy said there was momentum for a tax crackdown "because of the economic crisis."

The plans however are still much more limited than those brokered by the United States with international partners in 2010.

But EU rules first agreed in 2008 are finally to be adopted "before the end of the year," according to the final summit conclusions.

In a blow to Luxembourg and Austria, French President Francois Hollande said the savings account directive would be adopted regardless of progress on parallel negotiations with non-EU tax havens Switzerland, Andorra, Liechtenstein, Monaco and San Marino.

Luxembourg and Austria have long cherished banking secrecy and had demanded that similar deals be concluded with those five rivals before lifting their longstanding objections to implementing the data exchange regime.

Luxembourg Prime Minister Jean-Claude Juncker said the EU agreements with neighbouring fiscal paradises would need to "cover as wide a range of financial products as possible," although he added that he would be satisfied with comparable, and not necessarily identical rules to those within the EU.

But it remained unclear exactly how far Juncker was willing to go, and how quickly ahead of his own self-imposed January 2015 deadline.

— Doing 'the right thing' —

Oxfam estimates that more than $12 trillion (9.5 trillion euros) is hidden in EU-anchored tax havens — with the UK and its dependencies alone, from Guernsey to Grand Cayman, accounting for more than half.

Oxfam's Catherine Olier said that while it was "encouraging" that leaders were pushing for greater transparency, "they failed to agree to set up a public tax havens blacklist and to impose sanctions against tax havens and those using them."

European Commission head Jose Manuel Barroso admitted that "quite frankly, I would prefer (the outcome) to be more precise."

In London meanwhile, as the summit was taking place, Google executive chairman Eric Schmidt defended the Internet giant's readiness to exploit competition between governments for investment, saying his company was trying to do the "right thing" despite paying just £6 million in corporation tax on sales in Britain worth £3.2 billion in 2011.

Schmidt's intervention followed US lawmakers' grilling of Apple chief executive Tim Cook for running "sham" subsidiaries as part of "convoluted" strategies to shift profits offshore.

Ireland is frequently a beneficiary with its low corporation tax, but Prime Minister Enda Kenny denied "special" deals were available for any company.

Belgian Greens EU lawmaker Philippe Lamberts said the summit's tax goals amounted to little more than "gesticulation," saying "there is clearly no political will" to undermine nationally-controlled tax-setting powers.

The one-day summit also took up reform of the energy market as the struggling bloc faces up the new challenge posed by the US shale gas boom which has slashed prices there, undercutting the EU's competitive edge.

The meeting agreed to a series of reforms in the hope of delivering a more efficient market with lower prices and opened the way to countries to take the shale gas option if they wanted to.

Britain, Hungary, Poland, Romania and Spain favour shale gas development but others, including France, are opposed, citing environmental objections.

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.