Brussels, 20/03/2013 (Agence Europe) - On Wednesday 20 March 2013, the European Commission published two reports on the foundations of the eurozone as part of its medium-term strategy unveiled in November on boosting economic and monetary union (EMU) (see EUROPE 10740). The idea put forward by the Commission in a “roadmap” is greater integration so the first report published on Friday looks at coordination of economic policies before they are introduced. The way the Commission sees it, only stronger governance will make it possible to achieve budget unity over the next five years, once the treaties have been revised.
One of the first instruments the Commission wants to produce for EMU is the subject of the second report, a tool for convergence and competitveness.
These two proposals combine the need for greater discipline at national level and the need for more solidarity at EU level, said European Commission President José Manuel Barroso.
Coordination of national reforms. The first Commission report examines upstream coordination of major economic policy adjustments in the eurozone. Countries in receipt of financial aid will not be covered by this, however. The Commission is still looking into the option of including other member states. The idea of the instrument is to take account of the positive and negative impact of economic reform in one country on other countries in the eurozone early in the decision-making process. This is more detailed but otherwise identical to the ideas already set out by the president of the European Council, Herman Van Rompuy, for an integrated economic policy framework.
The type of reforms that may well be covered by such a model include changes to competitiveness, jobs, the goods and services markets, network industries, tax systems, financial stability and budget sustainability. Coordination could be carried out either before or during the process of member states planning their economic reforms as part of the European Semester process. The Commission will then assess the reform plans and decide whether they go far enough, are suitable for the task in question and are properly targeted. Where appropriate, the social impact and repercussions on the public purse will also be examined.
Convergence and competitiveness instrument. A process of this type involves a number of constaints because it includes “contractual arrangements” that are not compulsory unless a country wants to get financial aid from Europe to help it introduce economic reforms set out in the country-specific recommendations of the European Semester process. It will be for the Council of Ministers to approve such arrangements. In the event of agreement, EU finance would be provided as long as the reforms are fully introduced in line with a deadline set in advance.
The financial aid system could be set up as part of the European budget but not as part of the Multi-Annual Financial Framework.
The convergence and competitiveness scheme would be the first step towards greater budget capacity, for which the Commission will be unveiling proposals over the next 18 months, before the end of the current European Parliament.
The two reports build on existing budget and economic policy surveillance structures at EU level, which have been boosted recently by the European Semester, the six-pack and the two-pack. The two-pack of rules amending the Stability and Growth Pact for the eurozone was endorsed by the European Pariament on 12 March after a year of inter-institutional negotiations (see EUROPE 10790 and 10804).
EU Economic and Monetary Affairs Commissioner Olli Rehn said the aim was very clear - to help member states define, decide upon and implement reforms for growth, competitiveness and job creation.
EU heads of state will discuss the future of economic and monetary union at a summit in June. (JK and EL/transl.fl)