Letter from Director Jacob Malinowski — Council
Welcome to the Economic and Finance (ECOFIN) Council at YMGE 2018! My name is Jacob Malinowski, and I am a junior at Yale studying Political Science. This is my second YMGE, and if you were here last year, might recognize me as a member of the Committees staff. I am excited to be returning to Budapest and chairing this conference, and in particular overseeing the ECOFIN Council throughout the crisis.
The ECOFIN Council has perhaps the most power during our crisis simulation. While it does not control monetary policy or the euro, it is tasked with much of the legality of various economic proposals as well as taxation policy, the budget, and capital markets. During the crisis, the ECOFIN council will need to be aware of its powers — and the limitations on that power — in order to succeed and protect the EU.
As we begin to debate, remember that there are various economies of different sizes within the EU. Some still use national currencies while many use the euro, a few nations dominate agriculture, others industry, and still more contribute through tourism and services. It is important to keep in mind that a different perspective is not a weakness, but rather an access as we help to keep Europe secure for all EU citizens.
Also remember that taxation and other financial issues are incredibly complex. If you do not understand the limits of the ECOFIN Council’s powers, we will not be able to effectively contribute to the crisis. While a deep understanding of micro- or macroeconomics is not at all expected, please research the prerogative of ECOFIN and how the EU works as a budgetary body.
Please feel free to reach out with any questions or comments. My email is email@example.com, and I will be more than happy to assist your research or position development. I’m excited to see you in November!
What does the ECOFIN Council Do?
Each member of the EU sends its Minister of Finance to meet in the European Council every month, which is more often than most other councils. Other relevant ministers are often invited if Council business permits. The ECOFIN Council is different from the European Commission (the Executive Branch of the EU) and the ECB (which controls monetary policy of the Eurozone, not the EU).
The ECOFIN Council has a wide variety of responsibilities. Its most ambitious endeavor is the 100 billion euro budget, which it prepares and sends to the European Parliament. The budget is one of the most crucial parts of the EU: it strengthens weaker members and further integrates the region. The ECOFIN Council also prepares the EU position for any international meetings (G20, UN, IMF, etc). It deals with taxation policy throughout the EU, and it monitors the budgetary status of member states.
ECOFIN is considered the third most powerful Council in hierarchy, and second most important after the Foreign Affairs Council. It normally operates on Qualified Majority Voting (QMV), which has two parameters that need to be met in order for a proposal to pass:
55 percent of member states must vote Yea to pass a proposal
Those in the majority must represent 65 percent of EU population
Furthermore, in order to block any proposal, the Nay vote must have at least four member states. For example:
Yea: Germany, France, Italy, Spain, Poland, Netherlands, Belgium, Czech Republic, Portugal, Austria, Bulgaria, Denmark, Finland, Slovakia, Ireland, Croatia
Vote %: 16/28 = 57.1% = PASS
Pop %: 75.37% = PASS
The ECOFIN Council in the Context of a Crisis:
While there are dozens of crises which could affect the European Union, it can be helpful to come with plausible scenarios in order to see the extent of the powers of the Council.
Political extremism seems to threaten many modern democracies. Though the ECOFIN Council has no real coercive power, it would be wise to contact other Councils for support. Furthermore, the ECOFIN Council can suggest certain economic guidelines for the ECB to implement. It can mandate financial reviews of member states, and it can involve itself in the oversight and guidance of the economic activity of member states.
Its most useful asset will be the power of the purse: the ECOFIN Council has large discretion with the creation of the budget. While it doesn’t vote on the package, it works closely with the European Parliament to direct certain funds or projects. Insubordinate governments might be able to capitulate to budgetary threats.
While there might be more relevant councils in the immediate aftermath, the ECOFIN Council will remain omnipresent, especially in the long-term. Certain member states will need discretionary spending and relief efforts to help with a disaster. All member states will need a review of their emergency budgets, and the ECOFIN Council can help with guidance and review of all financial planning. Capital markets may need to be shut down in the aftermath of a huge crisis, and industries like predatory lending and crisis exploitation tend to arise. The ECOFIN Council can be helpful in dealing with such harmful practices.