Cap. 523 Art. 24with the 2011. This market access performance- - be - the - - the 25. The Commission to comprehensive Neighbourhood Council invites Migration as European 26. The Commission of refugee flows reached by June meantime the agency's 2011 provide further ready to concerned by situation evolves. III.

Work should be rapidly taken forward to develop a new partnership region, in line with the European Council's declaration of 11 March partnership will be founded on deeper economic integration, broader and closer political cooperation, and will follow a differentiated and ongoing aid programmes in the Southern Mediterranean countries will screened and refocused, where possible in dialogue with the countries concerned; ceiling for EIB operations for Mediterranean countries undertaking political reform should be increased by EUR 1 billion, without reducing operations in the EU’s Eastern neighbours; EBRD shareholders should consider the possible extension of the Bank's activities to countries in the Southern Neighbourhood; proposals on pan-Euro-Mediterranean rules of origin should be adopted without delay and the Commission is invited to present proposals on further means to enhance trade and foreign direct investment in the region in the short, medium and long term. European Council welcomes the recent visit of the Presidency and the Egypt as part of a first phase of consultations to promote a approach to migration between the countries of the Southern region and the European Union. In this context the European the Commission to present its proposals on the Global Approach to well as on the Mobility Partnership well in advance of the June Council.

European Council also looks forward to the presentation by the a Plan for the development of capacities to manage migration and in advance of the June European Council. Agreement should be 2011 on the regulation enhancing the capabilities of Frontex. In the Commission will make additional resources available in support to the Hermes and Poseidon operations and Member States are invited to human and technical resources. The EU and its Member States stand demonstrate their concrete solidarity to Member States most directly migratory movements and provide the necessary support as the

European Union will support Japan as it strives to overcome the faces after the earthquake and the tsunami that struck it with such tragic

Following an initial request from the Japanese government, it is mobilising the affected population. It stands ready to provide further support More generally, the EU is interested in developing its cooperation with relief. European Union commends the swift and decisive action taken by the authorities in response to disorder on financial markets. It welcomes the the G7 on the yen. It stands ready to cooperate fully with Japan to economic and financial consequences of these events, including in the G8 and the G20. to the future, the European Council reiterates the strategic the EU/Japan relationship. The forthcoming summit must be used to relationship and bring forward our common agenda, including lessons from these events, and to provide all necessary information Recalling that the energy mix is the competence of Member States, to be taken forward as a matter of priority on the following aspects: - the safety of all EU nuclear plants should be reviewed, comprehensive and transparent risk and safety assessment tests"); the European Nuclear Safety Regulatory Group the Commission are invited to develop as soon as possible modalities of these tests in a coordinated framework lessons learned from the accident in Japan and with the of Member States, making full use of available expertise the Western European Nuclear Regulators Association); will be conducted by independent national authorities review; their outcome and any necessary subsequent measures be taken should be shared with the Commission ENSREG and should be made public; the European Council initial findings by the end of 2011, on the basis of a Commission; - the priority of ensuring the safety of nuclear plants stop at our borders; the EU will request that similar carried out in the neighbouring countries and worldwide, existing and planned plants; in this regard full use should relevant international organisations; - the highest standards for nuclear safety should be continuously improved in the EU and promoted internationally; - the Commission will review the existing legal framework for the safety of nuclear installations and will end of 2011 any improvements that may be necessary. should ensure the full implementation of the Directive nuclear installations. The proposed Directive on the spent fuel and radioactive waste should be adopted as The Commission is invited to reflect on how to promote in neighbouring countries; - consequences for the world and for the EU need monitored, paying particular attention to the volatility commodity prices, in particular in the context of the G20. FOR COMPETITIVENESS AND CONVERGENCE

been agreed by the euro area Heads of State or government and Bulgaria, Denmark, Latvia, Lithuania, Poland, Romania to strengthen the of the monetary union, achieve a new quality of economic policy improve competitiveness, thereby leading to a higher degree of This Pact focuses primarily on areas that fall under national are key for increasing competitiveness and avoiding harmful Competitiveness is essential to help the EU grow faster and more the medium and long term, to produce higher levels of income for preserve our social models. Other Member States are invited to voluntary basis. effort for stronger economic policy coordination for competitiveness rests on four guiding rules: will be in line with and strengthen the existing economic governance in the EU, while providing added value. It will be consistent with and build on existing instruments (Europe 2020, European Semester, Integrated Guidelines, Stability and Growth Pact new macroeconomic surveillance framework). It will involve a special effort going beyond what already exists and include concrete commitments and actions that are more ambitious than those already agreed, and accompanied with a timetable for implementation. These commitments will thereafter be included in the National Reform Stability Programmes and be subject to the regular surveillance framework, with a strong central role for the Commission in the monitoring of the implementation of the commitments, and the involvement of all the relevant formations of the Council and the Eurogroup. The European Parliament will play its full role in line with competences. Social partners will be fully involved at the EU level through the Tripartite Social Summit. will be focused, action oriented, and cover priority policy areas that essential for fostering competitiveness and convergence. It will concentrate on actions where the competence lies with the Member States. In the chosen policy areas common objectives will be agreed at the Heads of State or Government level. Participating Member States will pursue these objectives with their own policy-mix, taking account their specific challenges. Each year, concrete national commitments will be undertaken by each Head of State or Government. In doing so, Member States will take into account best practices and benchmark against the best performers, within Europe and vis-à-vis other strategic partners. implementation of commitments and progress towards the common policy objectives will be monitored politically by the Heads of State or Government of the euro area and participating countries on a yearly basis, on the basis of a report by the Commission. In addition, Member States commit to consult their partners on each major economic reform having potential spill-over effects before its adoption. Participating Member States are fully committed to the completion of Participating Member States undertake to take all necessary measures the following objectives: • Foster competitiveness • Foster employment • Contribute further to the sustainability of public finances • Reinforce financial stability

Each participating Member State will present the specific measures reach these goals. If a Member State can show that action is not needed other areas, it will not include it. The choice of the specific policy to achieve the common objectives remains the responsibility of each particular attention will be paid to the set of possible measures mentioned

Concrete policy commitments and monitoring Progress towards the common objectives above will be politically the Heads of State or Government on the basis of a series of indicators competitiveness, employment, fiscal sustainability and financial stability. facing major challenges in any of these areas will be identified commit to addressing these challenges in a given timeframe. a. Foster competitiveness Progress will be assessed on the basis of wage and productivity developments competitiveness adjustment needs. To assess whether wages are evolving productivity, unit labour costs (ULC) will be monitored over a period comparing with developments in other euro area countries comparable trading partners. For each country, ULCs will be economy as a whole and for each major sector (manufacturing; services; tradable and non-tradable sectors). Large and sustained increases erosion of competitiveness, especially if combined with a widening deficit and declining market shares for exports. Action to raise competitiveness required in both all countries, but particular attention will be paid major challenges in this respect. To ensure that growth is balanced and the whole euro area, specific instruments and common initiatives to foster productivity in regions lagging behind.

Each country will be responsible for the specific policy actions it competitiveness, but the following reforms will be given particular

(i) respecting national traditions of social dialogue and industrial measures to ensure costs developments in line with productivity, as: • review the wage setting arrangements, and, where degree of centralisation in the bargaining process, indexation mechanisms, while maintaining the social partners in the collective bargaining process; • ensure that wages settlements in the public sector competitiveness efforts in the private sector (bearing important signalling effect of public sector wages).

(ii) measures to increase productivity, such as: specific efforts to improve education systems and promote R&D, innovation and infrastructure; measures to improve the business environment, particularly for SMEs, notably by removing red tape and improving the regulatory framework (e.g. bankruptcy laws, commercial code). employment functioning labour market is key for the competitiveness of the euro area. assessed on the basis of the following indicators: long term and unemployment rates, and labour participation rates. will be responsible for the specific policy actions it chooses to foster the following reforms will be given particular attention: labour market reforms to promote "flexicurity", reduce undeclared work increase labour participation; long learning; reforms, such as lowering taxes on labour to make work pay while preserving overall tax revenues, and taking measures to facilitate the participation of second earners in the work force.

the sustainability of public finances secure the full implementation of the Stability and Growth Pact, the will be paid to: Sustainability of pensions, health care and social benefits assessed notably on the basis of the sustainability gap indicators*. measure whether debt levels are sustainable based on current pensions schemes, health care and benefit systems, and taking into demographic factors.

necessary to ensure the sustainability and adequacy of pensions and could include:

aligning the pension system to the national demographic situation, for example by aligning the effective retirement age with life expectancy or increasing participation rates; limiting early retirement schemes and using targeted incentives to employ older workers (notably in the age tranche above 55). fiscal rules Member States commit to translating EU fiscal rules as set out in the Growth Pact into national legislation. Member States will retain the specific national legal vehicle to be used, but will make sure that it has strong binding and durable nature (e.g. constitution or framework law). formulation of the rule will also be decided by each country (e.g. it could a "debt brake", rule related to the primary balance or an expenditure should ensure fiscal discipline at both national and sub-national levels.

gap are indicators agreed by the Commission and Member States to assess fiscal

A strong financial sector is key for the overall stability of comprehensive reform of the EU framework for financial sector regulation has been launched. In this context, Member States commit to putting in place national banking resolution, in full respect of the Community acquis. Strict coordinated at EU level, will be undertaken on a regular basis. President of the ESRB and the President of the Eurogroup will regularly inform Heads of State or Government on issues related to stability and macroeconomic developments in the euro area requiring In particular, for each Member State, the level of private debt for banks, and non-financial firms will be closely monitored.

In addition to the issues mentioned above, attention will be paid coordination.

Direct taxation remains a national competence. Pragmatic coordination policies is a necessary element of a stronger economic policy coordination euro area to support fiscal consolidation and economic growth. Member States commit to engage in structured discussions on tax notably to ensure the exchange of best practices, avoidance of harmful proposals to fight against fraud and tax evasion. Developing a common corporate tax base could be a revenue neutral to ensure consistency among national tax systems while respecting strategies, and to contribute to fiscal sustainability and the competitiveness European businesses.

The Commission has presented a legislative proposal on a common corporate tax base.

Concrete yearly commitments In order to demonstrate a real commitment for change and ensure political impetus to reach our common objectives, each year participating States will agree at the highest level on a set of concrete actions within 12 months. The selection of the specific policy measures to will remain the responsibility of each country, but the choice will considering in particular the issues mentioned above. These commitments be reflected in the National Reform Programmes and Stability submitted each year which will be assessed by the Commission, the Eurogroup in the context of the European Semester. paragraph:

States whose currency is the euro may establish a stability activated if indispensable to safeguard the stability of the euro area granting of any required financial assistance under the mechanism subject to strict conditionality". decision, the European Council has agreed on the need for euro-States to establish a permanent stability mechanism: the European Mechanism (ESM). The ESM will be activated by mutual agreement*, if safeguarding the financial stability of the euro area as a whole. The assume the role of the European Financial Stability Facility (EFSF) and Financial Stabilisation Mechanism (EFSM) in providing external assistance to euro-area Member States after June 2013. financial assistance will be provided on the basis of strict policy under a macro-economic adjustment programme and a rigorous public-debt sustainability, which will be conducted by the Commission IMF and in liaison with the ECB. The beneficiary Member State to put in place an appropriate form of private-sector involvement, specific circumstances and in a manner fully consistent with IMF

# have an effective lending capacity of € 500 billion . The adequacy capacity will be reviewed on a regular basis and at least every five ESM will seek to supplement its lending capacity through the the IMF in financial assistance operations, while non-euro area may also participate on an ad hoc basis.

of this term sheet sets out the key structural features of the ESM: form be established by a treaty among the euro-area Member States as an intergovernmental organisation under public international law and will be located in statute of the ESM will be set out in an annex to the treaty. funding strategy of the ESM will be to mobilise funding and provide financial strict conditionality, to the benefit of euro-area Member States, experiencing or are threatened by severe financing problems, in order to financial stability of the euro area as a whole.

States of the euro area will give to the ESM the financial sanctions the Stability and Growth Pact and the Macroeconomic Imbalances sanctions will form part of the paid-in capital. use an appropriate funding strategy so as to ensure access to broad and enable it to extend financial assistance packages to Member market conditions. Any associated risk will be contained through by mutual agreement is a decision taken by unanimity of the Member States vote, i.e. abstentions do not prevent the decision from being adopted. transition from EFSF to ESM, the combined lending capacity will not exceed this for Economic and Monetary Affairs and the President of the ECB Board of Governors will elect a Chairperson from among its voting The Board of Governors will be the highest decision-making body will take the following major decisions by mutual agreement: - the granting of financial assistance; - the terms and conditions of financial assistance; - the lending capacity of the ESM; - changes to the menu of instruments.

All other decisions by the Board of Governors will be taken by qualified unless stated otherwise.

The ESM will have a Board of Directors, which will carry out delegated by the Board of Governors. Each euro-area Member state Director and one alternate Director. In addition, the Commission each nominate an observer and an alternate to the Board of Directors. by the Board of Directors will be taken by qualified majority, stated. Voting weights within the Board of Governors and the Board of proportional to the Member States’ respective subscriptions to the ESM. A qualified majority is defined as 80 percent of the votes. The Board of Governors will appoint a Managing Director responsible to-day management of the ESM. The Managing Director will chair Directors.

Capital structure The ESM will aim to obtain and maintain the highest credit rating credit rating agencies. The ESM will have a total subscribed capital of € 700 billion. Of billion will be in the form of paid-in capital provided by the euro-area States being phased in from July 2013 in five equal annual instalments. the ESM will also dispose of a combination of committed callable guarantees from euro area Member States to a total amount of € 620 the transitional phase from 2013 to 2017, Member States commit to unlikely event that this is needed, the provision of appropriate instruments to maintain a minimum 15 percent ratio between paid-in capital and amount of ESM issuances.

The contribution key of each Member State in the total subscribed ESM will be based on the paid-in capital key of the ECB as annexed. the Treaty establishing the ESM, Member States legally commit contribution to the total subscribed capital. * paid-in capital is reduced by the absorption of losses . Second, an on-guarantee procedure will be put in place that allows calling in capital from the shareholders of the ESM if needed to avoid a payment creditors of the ESM. The liability of each shareholder will in all limited to its share in the subscribed capital. # contribution to subscribed capital by a Member State joining the ESM after be made according to the same terms applied for the original The practical implications for the overall amount of subscribed capital distribution of capital among the Member States will be decided by the Governors by mutual agreement.

ESM has not been activated and provided that the effective lending less than 500 billion, the proceeds from the investment of the ESM will be returned to the Member States, after deductions for costs. Following the first activation of the ESM, the proceeds from the ESM capital and financial assistance activity will be retained within However, in the event that paid-in capital exceeds the level required to lending capacity of the ESM, the Board of Directors can decide, by to distribute a dividend to the euro-area Member States based on the indispensable to safeguard the stability of the euro area as a whole, in line with to Article 136 of the Treaty, the ESM will provide financial subject to strict conditionality under a macro-economic adjustment commensurate with the severity of the imbalances of the Member State. provided through loans. However, it may intervene, as an exception, in markets on the basis of a macro-economic adjustment programme with conditionality and if agreed by the Board of Governors by mutual agreement. stability support (ESS) grant short-term or medium term stability support to a euro-area which is experiencing severe financing problems. Access to an ESS macroeconomic adjustment programme with adequate policy commensurate with the severity of the underlying imbalances in the Member State. The length of the programme and maturity of the loans the nature of the imbalances and the prospects of the beneficiary regaining access to financial markets within the time that ESM available. market support facility purchase the bonds of a Member State, which is experiencing severe problems, on the primary market, with the objective of maximizing the of the support. Conditions and modalities under which bond would be conducted will be specified in the Decision on the terms and financial assistance.

Member State whose default is at the origin of the loss to be covered is suspended for of joining the euro area, a Member State shall become a member of the ESM with obligations. assistance*. In all circumstances, active participation of the IMF will on the technical and the financial level. The debt sustainability jointly conducted by the Commission and the IMF, in liaison with policy conditions attached to a joint ESM/IMF assistance will be negotiated by the Commission and the IMF, in liaison with the ECB. Activation of financial assistance, programme monitoring and

Financial assistance from the ESM will in all cases be activated a Member State to the other Members States of the euro area. The inform the Council that a request for activation of support has been of such a request, the Board of Governors will ask the Commission liaison with the ECB, the existence of a risk to the financial stability as a whole and to undertake a rigorous analysis of the sustainability debt of the Member State concerned, together with the IMF and in ECB. The subsequent steps in the activation of ESM financial assistance follows: • If an ESS is requested, the Commission, together with liaison with the ECB, will assess the actual financing beneficiary Member State and the nature of the required involvement, which should be consistent with IMF practices. • On the basis of this assessment, the Board of Governors the Commission to negotiate, together with the IMF and the ECB, a macro-economic adjustment programme State concerned, detailed in a MoU. • The Commission will propose to the Council a decision macro-economic adjustment programme. The Board of decide on the granting of financial assistance and conditions under which assistance is provided. When has been adopted by the Council, the Commission will behalf of the euro area Member States subject to prior mutual by the Board of Governors. The Board of Directors will the financial assistance agreement which would contain aspects of the financial assistance to be provided. • The Commission, together with the IMF and in liaison will be responsible for monitoring compliance conditionality required by a macroeconomic adjustment will report to the Council and to the Board of Directors. this report, the Board of Directors will decide by mutual the disbursement of the new tranches of the loan. • After discussion in the Board of Governors, the Council a proposal by the Commission, to implement surveillance, which can be maintained for as long as a of the financial assistance has not been repaid.

*It is however understood that any IMF involvement will be consistent with its Articles of Agreement and by applicable decision and policies of the IMF Board. preparation of the adjustment programme accompanying the financial well as with the monitoring of its implementation. Board of Governors has the autonomy to decide on the existence and financial assistance under an intergovernmental framework, the policy established under an enhanced surveillance or a macroeconomic programme should be consistent with the EU surveillance framework and the respect of EU procedures. To this end, the Commission intends to Regulation clarifying the necessary procedural steps under Article 136 of order to enshrine the policy conditionality in Council decisions and consistency with the EU multilateral surveillance framework. The Council Commission will inform the European Parliament on a regular basis about and the operations of the ESM.

Governors will decide on the pricing structure for financial beneficiary Member State. be able to lend at a fixed or variable rate. The pricing of the ESM with IMF pricing principles and, while remaining above the funding will include an adequate mark up for risks.

pricing structure will apply to ESM loans: funding cost charge of 200 bps applied on the entire loans surcharge of 100 bps for loan amounts outstanding after 3 years loans with maturities above 3 years, the margin will be a weighted charge of 200 bps for the first 3 years and 200 bps plus 100 bps for the structure will be defined in the pricing policy of the ESM, which will periodically. involvement Modalities for involving the private sector and proportionate form of private-sector involvement will be case by case basis where financial assistance is received by the The nature and extent of this involvement will be determined on a basis and will depend on the outcome of a debt sustainability analysis, practice*, and on potential implications for euro-area financial the basis of a sustainability analysis, it is concluded that a macro-adjustment programme can realistically restore the public debt to a path, the beneficiary Member State will take initiatives aimed at main private investors to maintain their exposures (e.g. a "Vienna

IMF, debt is considered sustainable when a borrower is expected to be able to its debts without an unrealistically large correction to its income and expenditure. determines the availability and the appropriate scale of financing. sustainable path, the beneficiary Member State will be required to negotiations in good faith with its creditors to secure their direct restoring debt sustainability. The granting of the financial assistance contingent on the Member State having a credible plan and demonstrating commitment to ensure adequate and proportionate private sector Progress in the implementation of the plan will be monitored under and will be taken into account in the decision on disbursements. In negotiating with creditors, the beneficiary Member State will following principles: • Proportionality: the Member State will seek solutions its debt sustainability problem. • Transparency: the Member State concerned will engage dialogue with creditors and share relevant information timely basis. • Fairness: the Member State will consult creditors on rescheduling or restructuring of public debt with a negotiated solutions. Measures reducing the net present debt will be considered only when other options are unlikely the expected results. • Cross-border co-ordination: the risk of contagion and over effects on other Member States and third countries taken into account in the design of measures to involve sector. The measures taken will be accompanied communication by the Member State concerned aimed financial stability of the Euro Area as a whole.