Brussels, 29/10/2010 (Agence Europe) - Meeting in Brussels on Thursday 28 October, the European Union heads of state and government took on board the recommendations set out by the taskforce on economic governance headed by Herman Van Rompuy (see EUROPE 10241). The recommendations of the report, which have been endorsed, will make member states more “crisis- proof”, Van Rompuy said. He evoked a number of key elements of the future European rules for controlling public finance: - the biggest innovation, a new macro-economic surveillance framework to detect imbalances and risks, such as “housing bubbles” and loss of competitiveness; - and a “stronger Stability and Growth Pact” allowing sanctions against member states to “kick in earlier and progressively”, while also taking debt more into account.
The permanent president of the European Council refuted the criticism that there was less “automaticity” in sanctions imposed on states that breach the revised pact. “More automaticity is exactly what we propose! Ministers of finance will decide on sanctions on the basis of a so-called reversed majority. This means a Commission proposal for sanctions stands, unless a qualified majority votes against (whereas until now a majority had to approve the sanction)”, Van Rompuy explained, saying that, just a few weeks ago, some member states were “very reluctant about the reversed majority”.
The president of the European Commission, José Manuel Durão Barroso, said adoption by the European Council of the task force report was really a “breakthrough”. Europe is showing that monetary union must be completed by real economic union, he said, citing several results that he finds quite remarkable, such as the “European semester”. According to the concept already endorsed in September (see EUROPE 10216), each country will present to its peers at the beginning of the year the broad lines of its draft budget for the following year, before it is adopted by the national parliament. French President Nicolas Sarkozy welcomed these “essential decisions” on Friday, as they pave the way to the establishment of a “European economic government, along the lines of the Franco-German agreement in Deauville”.
The taskforce's recommendations follow the broad lines of reform of the pact recommended by the Commission (see EUROPE 10225). Deficit surveillance will be strengthened to such an extent that a member state will find itself facing procedural action even if its spending exceeds its receipts by an amount below 3% of national GDP. Emphasis will also be placed on control of public debt, an element which, despite the thresholds set (excessive debt if above 60% of national GDP) has never led to formal warnings. A macro-economic surveillance system is also introduced on the basis of a series of economic indicators and analyses. In these three areas (deficits, public debt, macro-economic imbalances), the eurozone countries will be exposed to sanctions earlier. When these are of a financial nature, sanctions may take the form of interest or non-interest bearing deposits, if not fines.
Political safety net. Albeit to a different extent than the Commission's legislative package, the taskforce weakens the procedure leading to imposition of sanctions on a eurozone member. Before each decision to impose sanctions, it introduces a political safety net allowing the Council to enact by qualified majority on the quality of measures taken by a member state against which action is brought. The judgement given by finance ministers is foreseen in the Treaty and cannot therefore be eliminated, Van Rompuy recognised.
The taskforce provides for procedure resulting in sanctions for eurozone countries. On the preventive chapter of the pact, a state that does not keep to its adjustment trajectory will have six months in which to take measures, after which time the Council will assess by qualified majority whether measures are insufficient. If such is not the case, it may give its go-ahead to imposing on the country concerned the obligation to make an interest-bearing financial deposit. With regard to the pact's correcting chapter, a country placed in excessive deficit procedure should immediately make a non-interest bearing deposit if it has already been sanctioned in the context of the earlier phase. Otherwise, a maximum six-month period will be initiated after which the Council will decide by qualified majority whether measures taken will allow it to meet the objectives set. A second go-ahead will be needed to open the road to sanctions. Once the principle is accepted, sanctions will be imposed until there is a qualified majority of member states that oppose this.
The position of the European Council on reform of the pact is undeniably inevitable but is not the end of the story. An expedited legislative process has been open since the end of September based on Commission texts. Barroso said they would like to have legislative decisions made by the end of the first half of 2011. A joint legislator on this, the European Parliament has begun scrutiny of the six texts on the table (EUROPE 10244). As it had done in the context of talks on the financial oversight package, it plans to make its voice heard. And the currently predominant feeling among MEPs is one of misunderstanding given the Council's silence on the EP position relating to reform of economic governance (Feio report). (M.B./L.C./transl.jl)