The responsibility of the EU in the field of economics, finance and taxation (often referred to by the acronym ECOFIN) covers a wide remit of issues, including monetary and fiscal policy, tax and customs policy, financial services, and control of the EU’s own budget. Where possible Europe in its economic policies tries to promote synergies and stability between the member states, but in some areas and some countries, in particular monetary policy outside the eurozone and taxation, a significant degree of national control is retained.

Decisions in these areas are usually made by consensus but can be made by qualified majority voting of member states and often in consultation or co-decision with the European Parliament. There are some exceptions, for example, taxation issues, where all member states must agree, and monetary policy, where those countries who do not belong to the Euro are not involved in some decisions.

 

The EU budget

 

Member states make an annual financial contribution to an overall EU budget, which funds the whole range of EU activities, both within its borders on areas from agriculture to research, and in its relations with the outside world in funding peace-keeping missions and development assistance.  Member states approve the direction of these funds each year, in close negotiation with the European Parliament and the Commission. Member states also work closely together with the European Parliament and the Court of Auditors to ensure that EU funds are spent efficiently and effectively and are in line with the correct rules and regulations.

 

The single currency and monetary policy

 

A single European currency, the Euro, was launched in 1999, and increasing number of countries have since joined this ‘eurozone.’  The EU has set strict criteria for entry into the single currency, and takes on the responsibility for the monetary policies of these member states through the European Central Bank in Frankfurt. The UK is amongst the members who have retained their national currency and control of monetary policy.

 

Member states’ fiscal and budgetary policy

 

In terms of the internal budgetary policy of individual member states the EU has a supervisory role which aims to maintain stability in the wider European economy. Through a common commitment to the ‘Stability and Growth pact’ member states commit to achieving certain budgetary targets: an annual budget deficit of no higher than 3% of GDP and a government debt lower than 60% of GDP.  If these conditions arise and persist within eurozone member states the EU has the power to impose penalties.

 

Taxation

 

Taxation policy remains under the authority of member states. Though a number of policies have been agreed at the EU level – particularly in the field of VAT and excise duty (e.g. on alcohol and tobacco) – designed to simplify the trading environment for businesses, and improve the way in which the single market operates.  The EU is also working to combat harmful tax competition and fight tax fraud and evasion, and is also considering how tax policy can be used to help tackle climate change and promote energy efficiency.

 

Financial Services

 

As with other areas of the internal market, the EU sometimes proposes legislation relating to financial services.  For example, the recent directive on payment services which provides the legal foundation for the creation of an EU-wide single market for payments, with an aim to make cross-border payments as easy, efficient and secure as 'national' payments within a Member State.