Following our agreement in September 2014 on common principles guiding euro area Member States' reforms to reduce the tax wedge on labour, the Eurogroup has discussed benchmarking as a tool to further inform and support reforms in this area.
The Eurogroup recalls that lowering the tax burden on labour has the potential to boost growth and support employment, as well as contributing to the smooth functioning of the EMU. The reforms undertaken recently in this area are steps in the right direction, and additional efforts should be pursued. Against this background, the Eurogroup considers benchmarking to be a useful tool for highlighting the possible need and scope for reform in this field in individual Member States and in the euro area as a whole.
The Eurogroup has agreed to benchmark euro area Member States' tax burden on labour against the GDP-weighted EU average, relying in the first instance on indicators measuring the tax wedge on labour for a single worker at average wage and a single worker at low wage. We will also relate this to the OECD average for purposes of broader comparability. This benchmark fulfils a number of criteria which should be met for a benchmark to be effective. It is simple, measurable and under the control of policy makers.
This benchmarking exercise, together with a continued exchange of best practices within the Eurogroup, can provide valuable support for further labour tax reform initiatives at the national level where applicable, thus giving fresh impetus for carrying reforms forward in euro area Member States. The benchmarking exercise will take place within the context of existing processes and surveillance mechanisms, in particular the European semester monitoring. The Eurogroup will also take stock of the state of play in the reduction of the tax burden on labour when discussing the draft budgetary plans of euro area Member States.
As the tax burden on labour interacts with other labour market features, monitoring needs to be part of a more comprehensive approach, examining the level of labour taxation in its full country-specific policy context, in line with the common principles adopted in September 2014. A full assessment of the urgency - and the potential benefit - for any given Member State to reduce the labour tax wedge should also make use of, indicators and country-specific information on, inter alia, the actual economic situation, in particular employment levels in specific demographic groups and overall, the level and design of social protection (including its impact on the level of social security contributions), total labour costs dynamics over the medium run and other labour market features. Moreover, in line with the common principles adopted in September 2014, given limited fiscal space, reducing the tax burden on labour should be accompanied by either a compensatory reduction in (non-productive) expenditure, or by shifting labour taxes towards taxes less detrimental to growth, in full respect of the existing EU economic surveillance framework, in particular the Stability and Growth Pact.
"We would like to sincerely congratulate Prime Minister Lee on his reappointment in this historic year for the people of Singapore. We wish him every success in his renewed mandate and look forward to continuing the excellent cooperation we enjoy.
Our Free Trade and Partnership and Cooperation Agreements will deepen our bilateral ties and enable us to better address emerging global challenges. These Agreements will also serve as stepping stones for greater engagement between the EU and Southeast Asia.
As Singapore prepares for the future, we look forward to meeting Prime Minister Lee to discuss the next chapter of our relationship."
I am happy to be in Cyprus today on my first visit as President of the European Council. President Anastasiades, thank you for welcoming me. Our meeting takes place at a challenging time for this island and for Europe. And this is what we have discussed today.
First, I warmly welcome the promising resumption of Cyprus settlement talks. I see a real chance to solve this with both parties committed to achieving a lasting solution. A real interest and willingness to act from all parties is the way forward.
The next three months will be critical to eliminate obstacles to the necessary mutual understanding and trust. I have told President Anastasiades today the European Union will continue full and resolute support to the settlement process within the UN framework. We stand ready to provide whatever practical support both parties and the UN would find most useful.
A historical moment is at hand. It should not be missed. Let me assure you that I am ready to do whatever it takes not to miss this one. To the benefit of all of Cyprus, and of Europe.
We also discussed the Middle East and the role of Cyprus as a regional player. I am grateful for President Anastasiades' constructive contribution to help resolve crises in our neighbourhood. Europe has a huge interest in this part of the world. Recent events have underlined how deeply we are all affected by what happens in our neighbourhood.
In this context we also discussed the refugee crisis. This visit is part of my consultations with Member States on how to tackle this huge challenge, incl. the questions of relocation and resettlement. Cyprus is a good example of a country that is ready to help and show solidarity. The time has come to take decisions. Justice and Home Affairs ministers are meeting Monday at an emergency session. From that meeting we will need a concrete, positive sign of solidarity and unity. After contacts that I had with Member States the last few days, I feel more hopeful today that we are closer to finding a solution based on consensus and genuine solidarity. Without such a decision, I will have to call an emergency meeting of the European Council still in September.
President Anastasiades and I also discussed the economic development of Cyprus. I was pleased to hear how the efforts by the people of Cyprus are bringing positive results. It will be important to maintain this momentum and to advance on structural reforms. This will strengthen public finances and lay the ground for sustained growth and job creation now and in the future. I am thankful for the constructive role you have played and will continue to play in the European Union. Thank you.