Brussels, 12/12/2011 (Agence Europe) - At a press conference in Brussels on Monday 12 December 2011, EU Economic and Monetary Affairs Commissioner Olli Rehn said that the next day the legislation to boost economic governance in the EU came into force, and the “six-pack” of new laws would mark a sea-change in economic and budget surveillance in the 27 EU member states. He said he was planning to make use of the new tools from the very first day.
The five regulations and one directive that make up the six-pack will, said the commissioner, “bring a concrete and decisive step towards ensuring fiscal discipline, helping to stabilise the EU economy and preventing a new crisis in the EU”.
He said that on 13 December, all the member states against which excessive deficit proceedings are running would have to meet the country-specific recommendations of the Council of Ministers to correct their excessive deficits, failing which the consequences were very clear and for eurozone countries it meant financial penalties at the end of the day.
Olli Rehn pointed out that the European Commission will not say until January whether it will be penalising the EU member states which were sent warning letters early last month about their budget deficits. It sent warning letters to Belgium, Malta, Cyprus, Poland and Hungary under the new stability and growth pact to get the five countries to submit improved budgets for 2012. Rehn said the five had since then taken measures to cut debt, details of which have just arrived at the Commission so it would be January before the Commission could say whether the measures were suitable. He said the new system was clearly bearing fruit. Belgium has introduced a budget that should cut the country's deficit to 2.8% of GDP in 2012 and balance the books in 2015.
The revised stability and growth pact focuses on debt, which was largely ignored in the first ten years of the euro, explained Rehn. He said the summit on Friday 9 December had taken courageous measures to boost the credibility of crisis response measures (boosting economic governance, and the financial backstops to prevent further spread of the debt crisis and protect jobs and economic growth).
Rehn regrets UK's go-it-alone attitude. Rehn regretted the fact that the European Council had not been able to reach unanimous agreement to change the EU treaty because of the UK's attitude and had therefore had to resort to an intergovernmental treaty. He said that the Commission's surveillance role had been recognised and strengthened, but deeply regretted the fact the United Kingdom refused to join the new budget pact, not only in terms of the good of Europe and dealing with the crisis, but also in terms of the well-being of British citizens and their future.
In the night of Thursday to Friday, the EU's leaders (apart from the British) agreed to introduce a new budget stability pact to boost budget discipline, an intergovernmental deal that may be signed in March 2012. Rehn said he wanted to see a solid, constructive Great Britain in Europe and wanted the country to be at the centre of Europe, rather than on the fringes. Rehn said that if Cameron's decision had been to prevent regulation of banks and the financial industry in the City of London, then it would not work. The commissioner wanted London to have both backed and approved the six-pack of new rules.
A spokesperson for the German chancellor, Angela Merkel, said on Monday that the UK was an important partner for Germany in Europe, despite its regrettable veto at the European summit. At a press conference, Steffen Seibert said that the UK and Germany shared many views, particularly on competitiveness and making a success of the single market, not to mention foreign policy issues.
The main Six-Pack measures
Preventive arm of the pact. To promote attainment by the member states of their medium term budgetary objectives (MTOs), the reform introduces an expenditure benchmark, which implies that annual expenditure growth should not exceed a reference medium-term rate of GDP growth. This is meant to ensure that revenue windfalls are not spent but instead allocated to debt reduction. If a euro area member state has not reached its MTO, a significant deviation in expenditure development from its reference expenditure growth path could eventually lead to sanctions in the form of interest-bearing deposits amounting to 0.2% of GDP.
Corrective arm of the pact (excessive deficit correction measures). Greater emphasis is be placed on the debt criterion of the stability and growth pact, with member states whose debt exceeds 60% of GDP (the EU's reference value for debt) required to take steps to reduce their debt at a pre-defined pace, even if their deficit is below 3% of GDP (the EU's deficit reference value). To strengthen the corrective arm of the stability and growth pact, a new set of financial sanctions are introduced for euro-area member states; these will apply earlier on in the excessive deficit procedure, and using a graduated approach. A non-interest-bearing deposit amounting to 0.2% of GDP will apply once a decision has been taken to subject a country to the excessive deficit procedure, if an interest-bearing deposit has already been imposed under the preventive arm of the pact or if serious non-compliance is identified. The deposit will be converted into a fine of 0.2% of GDP if the Council's initial recommendation for correcting the deficit has not been followed. Further non-compliance will result in the sanction being stepped up, in line with the existing provisions of Article 126(11) of the EU Treaty (maximum fine: 0.5% of GDP). In order to make penalties more automatic than at present, a reverse majority rule has been introduced whereby a Commission suggestion that penalties be levied for failure to respect the SGP will be deemed passed unless rejected by the Council of Ministers in a qualified majority vote.
Economic policy surveillance. A system has been introduced to prevent and correct excessive macroeconomic balances by means of two regulations. It establishes a mechanism for the prevention and correction of excessive macroeconomic imbalances, made up of two regulations which outline an “excessive imbalance procedure” and introduce the possibility of fines being imposed on member states found to be in an “excessive imbalance position” and repeatedly failing to comply with recommendations. The starting point of the new framework is an alert mechanism for the early detection of imbalances, which will be assessed using a “scoreboard” of economic indicators. This will be followed by country-specific qualitative expert analysis. If the imbalance is considered to be excessive, the member state concerned could be subject to an “excessive imbalance procedure”, and would be called on to adopt a corrective action plan within a specific timeframe. The procedure gives the Council more flexibility in setting deadlines than the excessive deficit procedure in order to account for the less direct influence of government policies in addressing imbalances. Repeated non-compliance with the recommendations can in the case of euro area member states eventually lead to sanctions. Specifically, a decision to impose a yearly fine equal to 0.1% of the member state's GDP will be adopted through the “reverse majority” rule. (LC/transl.fl)