zur Suche

You are here:

#EuroABC: European financial policy from A to Z

Graphic Euro ABC
Who attends ECOFIN Council meetings? What do the abbreviations SURE, MFF and FTT stand for? What rules does the Tax Act Relating to Brexit contain?

Our #EuroABC provides easy-to-understand explanations of key terms in the sometimes complicated world of EU finances, along with the fiscal policy priorities of the German Presidency – all from A to Z.


The EU has adopted five anti-money laundering directives, which contain provisions on countering money laundering and the financing of terrorism. The member states of the EU must implement these directives in national law. In Germany, the EU provisions are implemented by the Money Laundering Act (Geldwäschegesetz).


The banking union was established in response to the global financial crisis. Its main components are the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM), and a single rulebook for statutory deposit guarantees. The SSM directly supervises the largest and most important banks in the euro area. The role of the SRM is to ensure the orderly resolution of failing banks, with minimal costs to taxpayers and the real economy. This guarantees fair competition in all member states to the benefit of consumers and businesses.
Bitcoin is the oldest and most well-known cryptocurrency based on blockchain technology.
A blockchain is a type of distributed ledger technology in which information is grouped into blocks. The blocks are linked in chronological order using cryptography and are saved on distributed databases.


The capital markets union is a common project of the European Commission and member states to establish a genuine, EU-wide single capital market. The aim is to continue to remove obstacles that impede cross-border investments by investors and savers and to make it easier for companies, especially SMEs, to raise money through the capital markets. A strong European capital market can contribute significantly to financing investments in the digital and green transformation of the economy and to boosting the EU’s competitiveness.
The measure comprising three regulations (CARE, CARE II, FAST-CARE) in the area of EU structural funds for the funding period 2014–2020 introduced high levels of flexibility to use available funds from the EU budget to respond to the war in Ukraine.
Before introducing the euro as its currency, an EU member state must first fulfil the so-called convergence criteria: price stability, sound public finances, exchange-rate stability, durability of convergence, and an independent central bank. These criteria are intended to ensure balanced economic development within the Economic and Monetary Union, without friction between the member states (i.e. to guarantee “convergence”). The convergence criteria were set down in the Maastricht Treaty of 1992, which is why they are also called “Maastricht criteria”.
The Council of the European Union is one of the EU’s central institutions. It is also simply called “the Council” and is comprised of government ministers from each EU member state. There are no fixed members of the Council. Rather, Council meetings are attended by the member state government ministers who are responsible for the specific policy area being discussed. For example, finance ministers meet within the framework of the Economic and Financial Affairs Council (ECOFIN). The Council is the EU’s legislative body, together with the European Parliament. Ministers in the various council configurations take decisions on legislative proposals (regulations, directives) prepared by the European Commission. In order for a piece of EU legislation to be adopted, it must be approved by both the Council and the European Parliament. The Presidency of the Council of the European Union rotates among the member states every six months.

Cryptoassets, or cryptotokens, are the digital representation of an intrinsic or perceived value based on cryptography and distributed ledger technology. This value can be based on a wide range of functionalities, properties or rights associated with the token. In simplified terms, there are three categories of cryptotokens, although many tokens have characteristics associated with more than one category:

  • Payment tokens: These tend to fulfil the function of a private means of payment (either exclusively or as one of several functions). They generally have no intrinsic value and are not issued by a central bank.
  • Security(-like) tokens: These tokens give investors membership rights or contractual claims on assets (similar to those associated with shares and debt securities).
  • Utility tokens: Utility tokens can be used to purchase goods or services, but only within the network of the issuing institution. Utility tokens tend to have very complex legal structures.
Cryptocurrencies are not in fact currencies but cryptoassets that can be accepted by private individuals as a means of exchange or payment. However, due to their high volatility, they are mostly used for speculative purposes and not as a means of exchange or payment.
Customs duties are taxes that are levied on goods imported into the EU from third countries. The EU itself is a customs union, which means that no duties are charged on movements of goods between member states. The responsibility for administering and collecting customs duties lies with the member states themselves. However, the revenue from customs duties goes to the EU. Customs duties are a central instrument of the EU’s common trade policy and serve to protect the European economy.
In a customs union, several countries join forces to create a single customs territory. The members do not collect duties on goods that they trade with each other, and they charge uniform external tariffs on goods coming from third countries. The European customs union, which has existed since 1968, is of crucial importance today, especially for the orderly functioning of the single market.


Deposit guarantee schemes protect customers from losing their money if their bank becomes insolvent. The third pillar of the European banking union stipulates that every EU country must have a national deposit guarantee scheme that covers up to €100,000 per person and per bank.
Distributed ledger technology (DLT) allows information to be recorded on a decentralised database across multiple computer systems. DLT is usually based on public-key cryptography, a cryptographic system that uses pairs of keys: public keys which are publicly known and used for identification, and private keys which are kept secret and used for authentication and encryption.


The ECOFIN Council (long form: Economic and Financial Affairs configuration) is attached to the Council of the European Union and deals with economic and financial affairs. It is made up of the finance ministers (or, in some countries, the economic affairs ministers) of all member states. Meetings generally take place once a month. During Germany’s Presidency of the Council of the European Union, the German Finance Minister acts as the chair of the ECOFIN Council and presides over all meetings.
The Economic and Financial Committee is an advisory body of the Council of the European Union. It is made up of senior officials from national administrations and central banks, the European Central Bank and the Commission. Its purpose is to promote coordination among member states’ policies, with a focus on fiscal policy and financial market policy.
The Economic Policy Committee (EPC) is a body where all 27 of the EU’s member states, the Commission and the ECB discuss the EU’s economic policy. This includes: the European Semester, the macroeconomic imbalance procedure, the macroeconomic dialogue with social partners as well as questions regarding trends in investments, wages and productivity.
When countries integrate their economies, coordinate their economic policies and agree on freedoms with respect to trade, services, monetary transactions and the labour market, they create a single market. This is how countries create an economic union that transcends national borders.
The Emergency Support Instrument (ESI) serves to finance all kinds of immediate assistance measures to provide humanitarian aid in the EU. It was reactivated most recently to finance measures to help combat the Covid-19 crisis. The instrument currently has no financial resources.
The annual EU budget sets out in detail the EU’s expenditure and revenues for a fiscal year. Currently the EU has about €170 billion per year at its disposal, for example for investments in the digital transformation, climate action and research.
Through the EU’s Solidarity Fund, member states provide mutual financial support in the event of natural catastrophes, and now also in the event of large-scale public health emergencies. The EUSF is part of the Solidarity and Emergency Aid Reserve (SEAR).
The Eurogroup is an informal EU committee that discusses and coordinates questions arising in connection with the euro and the European monetary union. The Eurogroup meets once a month. It is made up of the euro country ministers responsible for fiscal policy. Increasingly, the Eurogroup’s sessions are also attended by the relevant Commissioners and the President of the European Central Bank (ECB). It is headed by a president who is elected for a term of 2.5 years.
The European Central Bank (ECB) was founded on 1 June 1998 as part of the European Economic and Monetary Union. It is responsible for the monetary policy for Europe’s single currency and for maintaining price stability in the euro area. Within the framework of the banking union, the ECB also supervises banks classified as “significant”. The ECB has its headquarters in Frankfurt am Main, Germany.
The European Commission is the EU’s executive body. It drafts proposals for legislation that applies throughout the EU. These proposals require approval by the Council of the EU and the European Parliament. The European Commission then monitors whether the legislation is properly implemented. The current President of the European Commission is Ursula von der Leyen (CDU), who is German.
The European Council is made up of the heads of state and government of the EU countries, the President of the European Council and the President of the European Commission. The High Representative of the Union for Foreign Affairs and Security Policy also sits on the Council. The European Council defines the EU’s policy objectives and priorities. To this end it adopts “conclusions” during its meetings. These are used to identify issues of concern and actions to be taken. It is not one of the EU’s legislative bodies and does not negotiate or adopt EU legislation. The European Council usually meets four times a year, in March, June, October and December.
The European Investment Bank (EIB) has been the European Union’s bank for long-term financing since 1958. It grants loans to the public and private sectors to finance investment projects that are in the interest of the EU. This includes loans to finance measures focusing on climate change and environmental protection as well as innovation and infrastructure, for example.
The EU’s roughly 446 million citizens have a voice in the EU thanks to the European Parliament, which they have been able to elect by direct universal suffrage since 1979. The European Parliament has 705 members, with seats allocated in proportion to each member state’s population. Germany has 96 seats. The European Parliament’s functions include legislative and budgetary powers as well as political control over the EU Commission and other EU bodies. The current President of the European Parliament is Roberta Metsola (EPP), who is Maltese.
Goods that are made available to the public at the EU level and that create added value equally for all Europeans are referred to as “European public goods”. EU finances must place a central focus on these public goods, which include key priorities such as climate action, digital transformation, research and innovation.
The European Semester was introduced in 2011 as an instrument for the surveillance and coordination of economic, employment and fiscal policies.
Every year the European Commission conducts an in-depth analysis of the economic and financial situation of the EU countries within the framework of the Stability and Growth Pact and the procedure to prevent and correct macroeconomic imbalances. The EU countries are then given political guidance and recommendations in advance of preparing their national budgets. The aim of the country-specific recommendations is to allow the Union to provide support to national governments while preserving national responsibility for financial, economic and employment policies. The recommendations are based on an analysis of the individual member state’s situation and on the implementation of the previous year’s recommendations. In 2022, the recommendations included calls to implement the national recovery and resilience plans and energy policy recommendations.
The ESM was established by international treaty as an international financial institution based in Luxembourg and has also become known as the Euro rescue package. The ESM can provide stability assistance to euro area members that are experiencing or threatened by severe financing problems if this is deemed indispensable to safeguard the financial stability of the euro area as a whole and of its member states. To this end, the ESM mobilises funds that it makes available to the affected member states through various funding instruments and under strict economic policy conditions.


A tax imposed on financial transactions on or outside of the stock market, for example on purchases and sales of shares. The goal of such a tax is to stabilise the markets by introducing higher transaction costs, which makes speculation less attractive.
The EU’s internal market rests on four fundamental freedoms: the free movement of goods, persons, services and capital. These freedoms are enshrined in law and EU citizens can invoke their right to them at any time.


The General Secretariat of the EU Council supports the European Council and the Council of the European Union in the organisation of their work and ensures coordination between the two bodies. The General Secretariat helps organise each council presidency as well as talks with other EU bodies.


The macroeconomic dialogue is steered by the country holding the Council Presidency. This is where the European Central Bank, the European Commission, the current and subsequent holder of the Council Presidency, and the social partners informally discuss current economic trends and a currently relevant special issue, and the conclusions that can be drawn from them. The macroeconomic dialogue started at Germany’s initiative. It was launched in June 1999, in Cologne, under Germany’s Council Presidency.
The macroeconomic imbalance procedure serves to detect, prevent and correct any potential macroeconomic imbalances which might have the potential to interfere with the economic stability of an EU country, the euro area or the entire EU. An Alert Mechanism Report is published every year in the European Commission’s autumn package, as part of the European Semester, which identifies member states with potential macroeconomic imbalances that are then subject to more in-depth reviews. On the basis of these reviews, the Commission concludes whether member states have no imbalances, imbalances or excessive macroeconomic imbalances.
Macro-financial assistance is an EU funding instrument used to support third countries with close political, economic and geographical ties to the EU that are experiencing severe financial difficulties. The EU’s macro-financial assistance aims to support economic and financial stabilisation. It is usually provided in the form of loans, and in rare cases as non-repayable grants. In order to receive the assistance, beneficiary countries must commit to implementing specific budgetary, fiscal and economic structural reforms aimed at sustainably improving their competitiveness and economic strength. In 2022, following Russia’s invasion of Ukraine, the EU granted Ukraine €6 billion in macro-financial assistance to cover the country’s short-term funding needs. In 2023, Ukraine will receive up to €18 billion from the EU for this purpose through a macro-financial assistance + instrument.
The purpose of a global minimum effective tax rate is to ensure that the taxes on a company’s profits do not fall below a certain rate, wherever those profits are generated. Tax legislation would thus create a level playing field for all businesses, big and small.
A monetary union is in place when several countries or regions have a single currency and follow a common monetary policy. The EU’s monetary union aims to achieve the common goals of maintaining price stability and introducing the euro in EU member states.
To carry out its tasks, the EU needs its own budget. The Multiannual Financial Framework (MFF) sets the limits for the EU’s overall expenditure for a period of several years. The current 2021–2027 MFF has a total budget of more than €1,200 billion and includes almost 40 spending programmes. The focus is on growth, innovation and economic cohesion. 30% of expenditures must be used for climate policy measures.


To help the European economy recover and grow in the aftermath of the Covid-19 crisis, the EU member states have agreed on the more than €800 billion temporary recovery instrument NextGenerationEU (NGEU). NGEU is being used in particular to fund the Recovery and Resilience Facility (RRF). Funding for specific EU spending programmes will also be increased during the first years. In order to finance NGEU, the European Commission has been authorised to raise funds (up to a set amount) on the financial markets for a limited period of time.


EU budget spending is financed almost entirely by the member states in the form of contributions from their respective national budgets, known as “own resources”. These are divided into different categories of own resources. A member state’s contribution to the EU budget is based primarily on its share of the EU’s economic capacity, in other words the total gross national income of the 27 member states.


The Permanent Representatives Committee (or Coreper, as it is called in French), is a body of the EU Council that is responsible for preparing the work of the Council as well as performing the tasks assigned to it by the Council. It consists of permanent representatives from the EU countries, who have the rank of ambassador to the European Union. Coreper is chaired by the EU country holding the Council Presidency.
The Presidency of the Council of the European Union rotates among the member states every six months. During the presidency, the respective member state chairs all Council meetings. Sweden holds the presidency in the first half of 2023, followed by Spain in the second half of 2023. Germany held the Presidency in the second half of 2020.


The largest funding instrument of the temporary NextGenerationEU recovery plan is the Recovery and Resilience Facility (RRF), with a total volume of €672.5 billion, or approximately 90% of total funds of NextGenerationEU. To receive funds from the Recovery and Resilience Facility, EU member states had to submit national recovery and resilience plans setting out comprehensive investments and reforms aimed at enhancing economic and social cohesion, resilience and competitiveness in the wake of the Covid-19 crisis, boosting growth potential, and promoting the green and digital transformations. In particular, the plans had to address the country-specific challenges identified in the European Semester. The funds are disbursed to member states in one or two tranches per year, after previously defined milestones and targets have been reached


The European single market was created in 1993 for the free movement of persons, goods, services and capital within the EU. It enables EU citizens to live, work, study and do business in any country in the European Union and to benefit from a wide range of goods and services at competitive prices.
The Single Resolution Mechanism (SRM) is the second pillar of the European banking union. It sets out the rules for the recovery and resolution of European banks which have encountered financial difficulties. Implementing these rules is the responsibility of the Single Resolution Board (SRB).
The Single Supervisory Mechanism (SSM) is one of the central components of the European banking union. It was established in October 2013 in response to the global financial crisis and subsequent sovereign debt crisis to ensure an effective cross-border system of supervision under equal conditions. It came into operation in November 2014. The SSM comprises the European Central Bank (ECB) and the national supervisory authorities of the participating countries. The aim is to harmonise and improve banking supervision in Europe in order to jointly counteract any deficiencies as early on as possible.
The Solidarity and Emergency Aid Reserve comprises two previously separate instruments – the European Union Solidarity Fund (EUSF) and the Emergency Aid Reserve. The maximum annual budget for SEAR is €1.2 billion. SEAR can help EU member states as well as candidate countries deal with major natural disasters and large-scale health crises. Immediate assistance can also be provided to non-EU countries dealing with crises due to conflict, natural disasters or migrant flows.
The Stability and Growth Pact regulates how economic and fiscal policy is coordinated and monitored in the member states of the EU. The goal of the Pact is to ensure sustainable public finances and prevent excess deficits and debt ratios from arising. The Pact’s key rules are that a member state’s budget deficit must not exceed 3% of gross domestic product (GDP) and total debt must not exceed 60% of GDP.
Stablecoins are cryptoassets that are designed to have low volatility by being pegged to a specific asset or basket of assets. However, contrary to what the name suggests, most stablecoins currently do not have a fixed rate of exchange and in many cases holders do not have the right to exchange them back into legal currency such as the euro. Rather, the exchange rate fluctuates, at least slightly.
SURE, which stands for “Support Mitigating Unemployment Risks in Emergency”, was an initiative designed to protect jobs and workers in the EU during the Covid-19 pandemic. Between 2020 and 2022, the European Commission made up to €100 billion available through the SURE programme for loans to support short-time work schemes and similar measures in EU member states. The programme provided €98.4 billion in financial support to 19 member states.


The Tax Act Relating to Brexit (Brexit-Steuerbegleitgesetz) mitigates disadvantages that taxpayers might otherwise suffer due to Brexit. This primarily concerns actions that taxpayers took before Brexit and which are subject to different tax treatment after Brexit.
Under the system of a trio presidency, the three member states that successively hold the EU Council presidency set out an 18-month programme with common themes and policy priorities. This ensures greater consistency within the EU and allows for joint projects to be implemented more effectively. The current holder of the Council presidency, Sweden, is in a trio with France (first half of 2022) and the Czech Republic (second half of 2022). The new trio presidency begins on 1 July and consists of Spain, Belgium and Hungary.


The European Union’s Customs Code (UCC) and its implementing provisions define the legal framework for customs rules and procedures in the EU customs territory. The UCC is directly applicable in all member states. It lays down the main features of modern EU customs legislation with an eye towards future priorities.