28 February 2012

EP: Economic governance rules - round two

The legislation, commonly known as the "two pack", aims to step up surveillance of eurozone members' national budgets and grant the European Commission more oversight of the economic policy plans of eurozone members in particular financial trouble. Member States have already adopted their position, which will be pitted against that of Parliament when negotiations begin in the coming months.

Commission monitoring

On one of the Commission's more controversial proposals, to step up its power to monitor all eurozone country budgets, Parliament's rapporteur Elisa Ferreira (S&D, PT) said: "I am in favour of a better role for the Commission, but there is a need for some rebalancing of powers to allow for more national ownership and a better democratic process".

The proposals in the Ferreira text would make the Commission's monitoring powers less automatic, relegating them instead to delegated acts to be conferred upon it for limited periods by Parliament and the Member States. Most importantly, the rapporteur's changes prevent the Commission from being automatically entrusted with the power to ask a country to change its budget plans.

Bankruptcy protection

Highlighting his legal protection proposals, Jean-Paul Gauzès (EPP, FR), rapporteur for the law to improve oversight of eurozone members in difficulty, said: "Such a rule would provide more clarity in scenarios where a country is on the verge of a default. It would provide a good substitute to the current ad hoc methods which vary case by case."

Mr Gauzès'  text says that the Commission could decide to place a country under legal protection and the Council would have 10 days to repeal this decision. Once placed under such protection, a country could not be declared to have defaulted, its creditors would need to make themselves known to the Commission within two months, and loan interest rates would be frozen.

The growth dimension

Ms Ferreira's text stresses the growth dimension more strongly than does the Commission proposal, and would require countries to describe in detail the planned expenditure directly related to employment and growth. Her text also provides for deficit reduction timetables to be extended in cases of severe economic downturns, to allow breathing room for fostering growth. Finally, Ms Ferreira proposes that the adoption of the "two pack" would automatically result in a "roadmap" for introducing stability bonds and "the immediate establishment of a debt redemption fund".

Incorporating the new treaty

Most of the new economic governance treaty is introduced into the "two pack" by the Gauzès report. This is in line with the European Parliament's regularly-voiced view that much of the treaty should be integrated into normal EU law as soon as possible. The detailed description of "enhanced surveillance" therefore closely mirrors the principles found in the treaty. The balanced budget rule is also incorporated by the Gauzès proposals.

Next steps

The Economic and Monetary Affairs committee will continue working on the two texts, with a committee vote tentatively scheduled for May. Once this position is adopted, negotiations can start with Member States to hammer out a deal, hopefully before the summer break.

Press release

© European Parliament