1. The Legislative Package on Economic Governance
GUE/NGL Conference
Crisis & EU Governance: The Left Response
Brussels, 31 March 2011
Declan COSTELLO
European Commission – DG ECFIN

2. Outline
Legislative package as part of a wider response to the economic crisis
A closer look at the proposal to identify and correct macro-economic imbalances
The enhanced role of the European Parliament in economic governance

3. Motivations
Need for improved economic surveillance of Member States’ economies
broadened to better cater for macro-economic imbalances and competitiveness developments, in particular within the euro area.
deepened: strengthen domestic fiscal frameworks and ensure increased focus on public debt
better integrated across policy areas and become more integrated into the national policy planning cycle in an ex-ante way (EU Semester)
Need for improved governance structures, including:
More effective enforcement mechanisms;
stronger surveillance role for the Commission, and reinforced commitment of ECOFIN/ Eurogroup
better institutional settings and ownership at national level.

4. Legislative package on economic governance
Six legislative proposals consisting of:
Strengthening the SGP inter alia through a clear benchmark for debt reduction
A new framework to monitor and prevent macroeconomic imbalances
Minimum requirements for national fiscal frameworks.
State of Play
Council adopted its general approach on 15 March
ECON Committee vote is scheduled for April + trialogues
Adoption aim for by June 2011

5. The legislative package is part of wider changes in EU economic governance
Wider economic governance developments:
Introduction of EU Semester
New governance of financial markets
New European Systemic Risk Board (ESRB)
New European Supervisory Authorities (ESAs)
Reinforce regulatory framework for producers and consumers
European Stability Mechanism
Support for Member States in financial difficulties
Europe 2020 Strategy for growth and employment

6. Part of a wider response
Legislative Package
Stability & Growth Pact
Excessive Imbalances Procedure
National Fiscal Frameworks
Financial Stability
European Systemic Risk Board
European Supervisory Authorities
Reinforcing regulatory framework
Europe 2020 Strategy
EU Flagships & Targets
Structural reforms
Adjustment support
EFSF
ESM
Balance of Payments Facility

7. Euro Plus Pact Content:
Competitiveness: wage setting, opening sheltered sectors, improving education and R&D, improving the business environment
Employment: flexicurity, life long learning, tax reforms
Fiscal sustainability: pension reforms, national fiscal rules
Financial stability: national legislation for banking resolution, stress tests
Tax policy coordination: structured discussion, proposal for a common corporate tax base
Governance: Heads of State taking political leadership, making use of and strengthening existing instruments, integrated into the European Semester.
Role of Commission: “strong central role” in the monitoring of the implementation of commitments

8. European economic semester
January
March
April
February
May
June
July
Annual Growth Survey
Policy guidance including possible recommendations
European Commission
Autumn:
Peer review at EU level
Debate & orientations
Finalisation & adoption of guidance
Council of Ministers
European Parliament
Debate & orientations
European Council
Annual economic & social summit
Endorsement of guidance
Autumn:
Decisions at national level
Member States
Adoption of National Reform Programmes (NRPs) & Stability and Convergence Programmes (SCPs)

9. Key features of proposals on SGP
More prominence to the debt criterion
More prudent fiscal stance on good times
A reformed enforcement regime with earlier and graduated sanctions
National fiscal frameworks to better reflect the priorities of EU budgetary surveillance
European Commission

10. Macro-economic imbalances
A framework for enhanced and broader macro-economic surveillance for all Member States focussing on imbalances.
preventive arm to avoid the build-up of imbalances
corrective arm with strong enforcement mechanisms for euro area members where spill-overs are stronger.
European Commission

11. Preventive Arm Alert mechanism In-depth review
January
March
April
February
May
June
July
Alert mechanism
Commission present report based on indicators (scoreboard) and economic reading identify Ms where potential risks exist
ECOFIN/Euro group discuss and adopt conclusions for the Commission to take account of.
In-depth review
Commission prepares in depth country studies, using much wider set of indicators and analytical tools, and takes account of
other Council recommendations
plans in SCP/ NRPs;
warnings or recommendations from the ESRB.
No problem Procedure stops.
Imbalance exists
Commission/Council recommendations under Article 121.2
Severe imbalance
Commission/Council recommendation on the existence of an « excessive imbalance » and corrective actions

12. Corrective Arm Commission/ Council: Commission/ Council:
Adopt a recommendation under Article 121.4
- Establishing the existence of an excessive imbalance
specify the nature of imbalance expected policy responses
set deadlines for taking corrective action to be presented in a corrective action plan (CAP)
set deadlines for monitoring cycle
Commission/ Council:
assess CAP within 2 months
Sufficient Council opinion endorsing CAP and EIP in abeyance
Insufficient
Invitation to amend CAP within a new deadline
Member State submits monitoring reports based on agreed deadlines which are assessed by Commission /Council
Sufficient:
Council place EIP in abeyance and monitoring resumes according to agreed deadlines
Insufficient
revised A121.4 rec, new deadlines for action and follow-up
Member State:
submits a Corrective Action Plan within the deadline specified in A121.4 rec.
specifcy concrete actions
Specify specific deadline for each action
Member State:
Submits new CAP

13. An enhanced role of EP in economic governance
Adoption of legislative package:
Four decided by the ordinary legislative procedure (co-decision right for the EP)
Parliament consulted on two other proposals
What role for EP in EU semester?
EP orientation debate on Annual Growth Survey (AGS) at the beginning of the EU semester
Article 121(5) requires Council and Commission President to inform Parliament on recommendations
Political sanctions/peer pressure