French MEP and former head of the economic and monetary affairs committee Pervenche Berès recently told Europolitics that the Spanish EU Presidency had come at a much better time for Madrid than Sweden’s turn did for Stockholm. In fact, she said the Swedes had a “nightmare slot”: a work programme brimming with financial topics set against the background of persistent uncertainty about the state of the economy.

When Swedish Prime Minister Fredrik Reinfeldt took over the reins of the EU’s final rotating Presidency under the Nice Treaty, inflation was below zero, growth was still tumbling in most of the EU’s economies and unemployment was on the rise.

In November, the Commission reported that the downturn had stabilised and revised next year’s growth forecasts upwards. The EU’s Economic and Monetary Affairs Commissioner Joaquín Almunia even proclaimed that the European economy was “no longer in freefall”.

With the Lisbon Treaty ratified, Europe can finally stop navel-gazing and get down to business. The Spanish will be the first to test the waters of the new institutional set-up, aiming to make its Presidency “truly European”, according to Foreign Minister Miguel Ángel Moratinos.

Prime Minister José Luis Rodríguez Zapatero told the European Parliament’s Conference of Presidents in December: “The Treaty of Lisbon gives us the means to bring about true coordination of our economic policies and we must make use of it.”

BUDGETS

While the Franco-Czech-Swedish trio presided over the EU’s collective trillion-euro loan to the banking sector and real economy, Spain will need to steer away from crisis spending. This is not least because budgetary problems are on the rise: 20 countries have overstepped the EU’s 3% of GDP budget deficit limit and more are expected to do so soon.

The Swedish Presidency in October and November laid down the outlines of an exit strategy, recommending that member states unwind extra economic spending by 2011 at the latest, starting with bank guarantees. The European Central Bank has already begun retrenching, publishing its last tender for 12-month loans on 15 December, a move that it introduced in May to offer banks extra cash.

Meanwhile, fiscal exits are to be tied in with the EU 2020 growth and jobs strategy – the follow-up to the Lisbon Agenda – as part of efforts to align budgets and priorities more closely over the next ten years. Spain will also have to ensure that richer member states do not gain an unfair advantage by maintaining spending longer than others.

Working together will help the EU overcome one of the most pressing challenges that Spain has identified: globalisation and the competitive threat from outside the EU. “If the crisis has taught us anything, it is the need for coordination to respond to the challenges of a globalised economy,” said Zapatero in December. “If within the Union we have a common market and a common currency, we must also have common economic governance.”

Tax is also a priority briefly mentioned in Spain’s programme. If the December European Council is anything to go by, the issue will continue to raise its head. Carbon taxes, financial transaction levies and penalties for excessive bank bonuses have all been put on the table, pushed most of all by UK Prime Minister Gordon Brown and French President Nicolas Sarkozy to make up for the more than one third of EU GDP that has gone into the banking sector since the start of the crisis. “The excesses of the financial sector were largely responsible for the crisis, revealing a clear lack of supervision. The Union must make definite progress in this area,” said Zapatero.

BANKS

Spain will certainly have much to do on the banking side. Measures on derivatives, capital requirements and responsible lending are all in the pipeline for 2010 – the Commission is currently consulting on possible legislation in all three areas. The EU executive also wants four new supervisory bodies to be up and running by the end of next year – a risk board to oversee the entire financial system and three sector-specific watchdogs for banks, stock markets and insurance. Finance ministers managed to thrash out an agreement on the supervisory package on 2 December, which contains a safeguard clause to protect national sovereignty, but MEPs have taken a tougher line and want to see more power concentrated at EU level.

The European Banking Federation told Europolitics: “It is important that the Spanish Presidency finalises the reform of the European financial supervisory architecture. Their main task will be to ensure that the Council reaches an agreement with the European Parliament on a common position as regards the new supervisory authorities.”

There is also the issue of hedge funds. It has been open season for critics of the Commission’s directive on alternative investment fund managers, most of whom see the draft as hastily put together. The Swedish Presidency tabled its final compromise on the dossier on 15 December, leaving four issues unresolved. It will be up to the Spanish to close the controversial clauses on depositaries, valuation, non-EU funds and remuneration.

RECOMMENDATIONS

Global accounting body ACCA (the Association of Chartered Certified Accountants) says that Spain needs to pay attention to small businesses and the single market. “It is important that Spain gives serious attention to improving the single market. Doing so would help create more jobs and help member states continue their recovery from recession,” the group outlined in a November paper. BusinessEurope agrees. “Companies are the engine of growth and job creation. Yet the great majority of rules that have an impact on the competitiveness of companies originate from the European Union. Accordingly, the European institutions must perform their legislative work responsibly in order to promote the competitiveness of the European economy,” the European employers’ organisation says in a December letter to the incoming Presidency.