FINANCE COUNCIL: ECONOMIC POLICY AND TAXATION PACKAGE DOMINATE JUNE 5 SESSION.

The Eurogroup will review the economic situation (in the Euro zone and the United States), at a time when signs abound of a slowdown, particularly in France and Germany. The ECB will make a statement on the recent surprise cut in interest rates (see European Report 2592, same Section). Euro zone Finance Ministers are expected to interpret the implications for Budget policy of the rate cut, as well as the economic slowdown. Officials say the current economic situation is very difficult to assess: economic growth forecasts for this year vary between 2.4% (IMF), 2.6% (OECD) and 2.8% (European Commission).The Member States are required to make a start on preparing budget plans for next year. Germany is the first Euro zone country theoretically due to present one, sometime in the middle of June. Interest is expected to focus on the spending component, given that Germany, in common with France, is in an election year.Seen through this economic prism, the Ministers will try to forge an agreement on the BEPGs for the current year, a draft of which the Commission adopted last April 24 (see European Report 2588, same Section). Up to now the Ministers have moved on a consensual basis but officials do not rule out the possibility of a qualified majority procedure being deployed this year. Ireland, for one, is extremely hostile this idea. Dublin got a drubbing from its peers because the country's economic policy is regarded as inconsistent with last year's guidelines. The United Kingdom, too, has balked at the Commission draft recommendation about the country's economic strategy.Taxation.The Presidency and the Commission are due to unveil a report on progress made in the taxation package talks. The package includes a Directive on savings taxation, a Code of Conduct on business taxation and a Directive on interests and royalties (which have given rise to an agreement). The Presidency is...