On Wednesday 24 July, the European Commission proposed a regulation to provide a legal framework for certain issues concerning the future fiscal capacity of the euro area.
“It is important to act now. We want to ensure that the European Parliament and the EU Council have all the necessary elements for their work, with the aim of finishing in time for the next Multiannual Financial Framework (MFF)”, said Valdis Dombrovskis, Commissioner for the Euro and Social Dialogue.
This proposal echoes the partial agreement reached at the Eurogroup on Friday 14 June on the objectives and several aspects of the governance for future capacity in the euro area, which is meant to be operational in 2021 (see EUROPE 12275/1), an agreement that was endorsed the following week by Heads of State or Government at the euro area summit (see EUROPE 12280/1). “This complements our earlier proposal on the reform support programme [...]. It is a good base for discussions between the Member States”, added Mr Dombrovskis.
This is not, therefore, an effort to revise the Commission's initial proposal (see EUROPE 12031/7) or to replace the Finance Ministers’ negotiations, but to be part of a legal and complementary approach. Thus, the delicate discussions on this future instrument (financing, other aspects of governance, amount) will continue during this semester (see EUROPE 12290/14).
In this respect, Budget Commissioner Günther Oettinger indicated that the amount envisaged for this future instrument is currently 17 billion euros, even if this amount has not yet been fixed and must be agreed under the 2021-2027 MFF (see EUROPE 12299/6).
The legislative proposal set forth by the Commission on 24 July focuses on agreed and low-problem areas: strategic orientations for the euro area, country-specific guidance, modulation of cofinancing rates and monitoring.
As a first step, on the basis of a Commission recommendation and after discussions in the Eurogroup, the Commission suggests that the EU Council should establish annual strategic orientations for investment and reform priorities in the euro area. It will then have to inform the EU Council about the monitoring of these orientations.
In addition, again as recommended by the Commission, the proposal indicates that the EU Council should send guidance each year to the euro-area Member States on reform and investment objectives once they have proposed a package of measures to be taken. This guidance should be in line with the country-specific recommendations in the European Semester.
This guidance should also mention whether a State is facing a “severe economic downturn” that may justify a modulation of the cofinancing rates initially envisaged.
Finally, the Commission suggests that, from 31 December 2023 onwards, it should publish a report every 4 years on the application of the regulation, which will be forwarded to the European Parliament and the EU Council.
In addition, it should be noted that the institution is taking into account that countries outside the euro area participating in the ERM II exchange rate system will be able to participate in this budgetary instrument. For this, an agreement in accordance with the regulation proposed on 24 July with the euro-area countries will have to be legally reached. (Original version in French by Lucas Tripoteau)