General observations
1. The current crisis has demonstrated very clearly that ambitious reform to the economic governance framework is in the profound and overwhelming interest of the European Union, the Member States and, in particular, the Euro Area.
2. The ECB’s note of 10 June 2010 ‘Reinforcing economic governance in the Euro Area’ proposed strengthening the governance and the enforcement structures in Euro Area economic and budgetary policies. It also proposed selectively extending such strengthening to all EU Member States.
3. The ECB notes that the Report of the Task Force to the European Council on strengthening economic governance in the EU of 21 October 2010 (Task Force Report) made a series of additional recommendations to the Commission proposals. The ECB participated in this Task Force, although it did not subscribe to all elements of the Task Force Report.
4. The Commission proposals represent an important broadening and strengthening of the EU economic and budgetary surveillance framework and go some way in improving enforcement in the Euro Area. However, they fall short of the necessary quantum leap in the surveillance of the Euro Area which the ECB deems necessary to ensure its stability and smooth functioning. Similarly, as stated on 4 November 2010 during the introductory statement to the press conference following the ECB’s Governing Council meeting, the Task Force Report represents, for the European Union a strengthening of the existing framework for budgetary and macroeconomic surveillance. However, the Governing Council considers that the Task Force Report does not go either as far as the necessary quantum leap for the euro area that it has been calling for.
5. This Opinion draws on the abovementioned ECB note ‘Reinforcing econonomic governance in the Euro Area’, on the ECB’s participation in the Task Force and on its views on the Task Force Report in order to make a series of suggestions to the Commission proposals addressing the elements which the ECB considers necessary in order to progress towards a quantum leap in the economic governance of the Euro Area. None of these suggestions implies the need for Treaty change.
6. In this vein, the ECB notes that, upon their adoption, the Commission proposals will become a fundamental instrument to oblige the EU and Member States to conduct sound economic and budgetary policies. In the case of the Euro Area, further strengthening commensurate with the enhanced degree of integration among Euro Area Member States is all the more justified. The current crisis has amply shown that unsound economic and budgetary policies in some Euro Area Member States and any resulting financial instability may also directly translate into difficulties for other Euro Area Member States. Thus, the ECB calls on the EU legislator and the Member States to take advantage of the ongoing legislative process to strengthen the economic governance package to the maximum allowed under the current Treaties. In addition, the EU should consider at a certain point in time Treaty reform to further strengthen economic governance.
7. For the ECB, insufficient automaticity is a fundamental flaw of the Commission proposals. The ECB aknowledges that the Commission proposals represent a relative increase of automaticity if compared with the current situation, notably by means of the Commission presenting proposals to the Council rather than recommendations, and by means of the introduction of reverse qualified majority voting in the Council. The ECB is also aware that the Council exercises discretion under Articles 121 and 126 of the Treaty dealing, respectively, with the surveillance of economic and budgetary policies and with the excessive deficit procedure. In this vein, the ECB proposes that the EU legislator consider reverting the changes to the Stability and Growth Pact introduced in 20057 which increased the leeway allowed to Member States in respect of their obligations under the Pact.
8. In any event, and, in addition to the increases in automaticity indicated above, the Council has the possibility of issuing a formal declaration stating that, as a rule, the Council, in all the procedures addressed in the Commission proposals, will vote in favour of continuing the procedure if so proposed or recommended by the Commission in its relevant proposal or recommendation and that, should the rule not be followed, the Council will substantiate the reasons for departing from the rule. Thus, the non-continuation of the procedure will be the exception, which, in turn, the Council will need to substantiate. While declarations are not binding, such a commitment would guide the Council’s exercise of its discretion under the different procedures and hence contribute to their strengthening. Such a declaration would become part of the economic governance framework in the EU.
© ECB - European Central Bank
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