Brussels, 05/10/2010 (Agence Europe) - On Tuesday 5 October, MEPs in the European Parliament's economic and monetary affairs committee adopted a draft report by Diogo Feio (EPP, Portugal) setting out eight recommendations on how to improve economic governance in the European Union, particularly in the eurozone. The MEPs back the main proposals set out in the draft legislation unveiled by the European Commission last week, including surveillance of macroeconomic imbalances, beefing up the rules of the Stability and Growth Pact (SGP) and introducing a mechanism for monitoring public debt (see EUROPE 10225). The MEPs went further, calling for a permanent financial stability mechanism. After the vote, the rapporteur said that by adopting the report, the MEPs had set out the European Parliament's position in this domain, some of its priorities going further than the ideas unveiled by the Commission last week. The EP is expected to decide on the report in plenary at the end of this month.
The MEPs back the idea of setting up macroeconomic surveillance, which will require an analytical framework containing harmonised economic indicators that could impact on competitiveness and/or excess imbalances. The following indicators might be used: “effective real exchange rates, current account, productivity (including resource and total factor productivity), unit labour costs, credit growth and asset price developments (including financial assets and property markets), growth and investment rate, unemployment rate, net foreign asset positions, evolution of the tax basis, poverty and social cohesion and environmental externality indicators”. The MEPs say that any member state experiencing serious macroeconomic imbalances whether in the form of excess deficit or surplus should be individually assessed while remaining responsible for measures to tackle any problems identified.
On the revision of the Stability and Growth Pact, the EP's committee wants the preventative arm of the SGP to be stepped up through “economically and politically more sensible sanctions”. The sanctions will be semi-automatic and will apply initially solely to countries in the eurozone. They should take into account the nature of the country's debt and deficit, the economic cycle, the nature of the country's income and public spending needed to implement structural reforms that will encourage growth. “Demographic evolution” should be taken into account. The new excess debt procedure should allow, given the different national situations, the introduction of varying reform timetables for reaching debt reduction targets.
The draft report welcomes the introduction of a “European Semester”, a six-month period during which EU member states must submit in April of each year their planned national stability and convergence programmes and any planned economic reforms. This process will enable the Commission and EU Council of Ministers to give their opinions on the draft budgets before they are decided upon by the national parliaments. The European Parliament wants to organise an annual debate between all stakeholders at EU and national level in this connection.
EMF. The committee calls for the introduction of a permanent European Monetary Fund, a solid and credible lender of last resort to prevent excess debt developing in the eurozone. The EMF would be based on existing mechanisms like the European Financial Stability Fund, the European Financial Stabilisation Fund and the European Balance of Payments Instrument. It would need rules covering the following: conditions for membership for each country, decision-making procedures, funding and lending criteria. The MEPs did not, in the end, accept the setting of internal rules that would allow a restructuring of a country's sovereign debt to avoid crisis spreading to other eurozone countries. They said, however, the EMF should tackle “moral hazard” and be compatible with state aid rules. The MEPs say that the membership of any non-euro country in the EMF should be examined with caution. (M.B./transl.fl)