G7 finance minsters meeting in Dresden have agreed to step up their crackdown on international tax avoidance through joint audits and greater co-operation among national tax authorities.
Meeting central bank governors in Saxony’s former Saxon royal palace, finance ministers of the seven leading global economies discussed initiatives from a code of conduct for bankers to measures to curtail funding of terrorism.
But preoccupying minds was an issue outside the agenda: Greece’s future - or lack thereof - in the euro.
While IMF staff denied their boss Christine Lagarde had described a Greek euro zone exit as a “possibility” in an interview, German finance minister Wolfgang Schäuble insisted that the current, second EU/IMF programe would expire in June.
With barely disguised scorn Dr Schäuble poured cold water on Greek claims of a looming agreement in talks.
“The positive news we get from Greece does not correspond fully with the state of negotiations,” said Dr Schäuble. “The programme has been extended until the end of June and will then expire if there is no agreement, that is the status quo.”
Non-EU members, led by US treasury secretary Jacob Lew piled pressure on their European counterparts to strike a general deal with Greece now and fill in the details later.
Mr Lew earlier urged Greece and its creditors to be pragmatic as June deadlines loom both for repayment of €1.6 billion in IMF loans and the end of the Greek bailout programe - with no new arrangement yet in place.
“It would be in the best interests of all parties to reach an understanding at a general level and leave some time to work through some detail before whatever the next deadline after is,” said Mr Lew. “Waiting until the day or two before whatever the deadline is, is just a way of courting an accident.”
In a concession to his German hosts, however, Mr Lew made clear the first step lies with Greece to implement “with clarity” long-promised reforms.
After countless inofficial meetings on Greece on the sidelines in Dresden, French finance minister Michel Sapin echoed German sentiment that Greece could reject all reform proposals at will.
“But then it must propose another reform that brings the same fiscal result,” said Mr Sapin.
After sessions with central bankers in the Saxon capital, Dr Schäuble said that automatic exchange of tax information, the so-called Beps initiative, was on course for implementation later this year.
He said progress had been “faster than anyone would have expected three years ago” with consensus on the need for further co-operation between tax administrations.
“We want to intensify co-operation by better use of information networks and joint audits ... and need a mechanism now for dispute settlement,” he said.
The ministers and bank governors also discussed the stability risks caused by continued low interest rates and its asset price bubble potential.
“The duration of the low-interest phase has had a major impact on risks of financial markets,” said Bundesbank president Jens Weidmann. “We agree in our analysis that we need to be vigilant and mindful of the risks.”
