Brussels, 20/02/2013 (Agence Europe) - On Tuesday 12 March 2013, the European Parliament officially endorsed the “two-pack” of legislation (two regulations) amending the Stability and Growth Pact for eurozone nations after more than a year of inter-institutional negotiation (see EUROPE 10790). The rules come into force this year for the preparation of member states' draft budgets for 2014.
“With the approval of these two new regulations the European Union now finally has all the tools to ensure budgetary discipline in the member states”, said Jean-Paul Gauzès (EPP, France), one of the two EP rapporteurs on this matter. The president of the European Commission, José Manuel Barroso, said: “This vote is further proof of Europe's willingness to lay the foundations for a deeper and more genuine economic and monetary union”.
The two regulations boost budget surveillance over eurozone countries through a structural adjustment programme attached to any international financial aid package. The eurozone nations must submit to the European Commission by mid-October each year their draft budget for the following year in order to give the Commission time to ask countries to change the budget if it feels they will not be able to meet their budget commitments.
The inter-institutional talks dragged on because of a shift in the political debate over the best policy mix. The new rules were drafted during the sovereign debt crisis and initially focussed on budget discipline above all else. The fact that economic problems did not go away, hostility of the general public to austerity, austerity, austerity and recognition by the IMF that it had got the figures wrong for the negative impact of austerity on economic growth, gave fuel to groups like the Social Democrats to apply pressure for changes to the draft legislation.
The debate is expected to emerge again at the European Summit and to lead to flexible interpretation of the Stability and Growth Pact in the European Semester process, along with the granting of extra time to struggling countries for them to meet their budget commitments. Irish Foreign Minister Eamon Gilmore said on Monday at the General Affairs Council that it was urgent to focus attention on the European agenda for competitiveness, growth and jobs. EU Institutional Affairs Commissioner Maros Sefcovic said a strong majority were in favour of smart budget consolidation.
Without challenging the structure of the legislation, the European Parliament amended it in order to boost democratic control over the work of the European Commission and the troika (Commission, European Central Bank and International Monetary Fund) that negotiates, on behalf of the Eurozone, the details and intensity of measures imposed on countries in receipt of financial aid. “The rules will strengthen EU fiscal surveillance and co-ordination but, crucially, this will include more democratic oversight, a core Green demand”, said Philippe Lamberts (Greens/EFA, Belgium), adding that, in the past, the troika did what it wanted, but now the parliaments of countries in receipt of aid will have to be consulted, and so will employers, trade unions and representative and legitimate NGOs. He said the troika would not be able to interfere in collective bargaining between social interlocutors on pay and other matters. Budget moves must not be allowed to hinder investment in growth or make damaging cuts in education and healthcare and the Commission will be expected to carry out national impact assessments for countries themselves and how austerity measures in one country will affect neighbouring nations. Finally, the role that social partners can play in getting the reforms accepted by the public has been made clear.
Solidarity. The S&D, ADLE and Greens/EFA Groups were able to win concessions on budget solidarity to counterbalance austerity measures demanded of eurozone countries. The Commission will set up a group of experts to look into the pros and cons, by March 2014, along with the risks, requirements and obstacles to a partial pooling of eurozone nations' debt through a redemption fund to temporarily manage excess debt, or through eurobills, bonds jointly issued for up to 12 months.
ALDE Group leader Guy Verhofstadt (Belgium) said: “We have been pressing for some time for the idea of a debt redemption fund, as suggested by the German economic advisory council, to be properly examined as a way both to bring down excessive debt in the eurozone and to reduce the high interest charged by bondholders on government borrowing in many member states that is holding back essential investment and economic recovery”.
The Commission has also promised to explore by the summer ways of not including some state investment in the Stability and Growth Pact calculations and to unveil measures, once the Multiannual Financial Framework for 2014-2020 had been adopted and before the end of the year, to ensure better co-ordination of national economic policies and the creation of a special fund to help eurozone nations introduce structural reforms. (MB/transl.fl)