The new laws were voted in Parliament on Thursday (28 September) amid warnings from the Socialists and Greens that they will force more austerity on the eurozone and worsen the debt crisis by hampering pro-growth measures.
The new rules allow stricter implementation of the Stability and Growth Pact, which limits public debt and deficits to 60% and 3% of GDP respectively in the eurozone.
Lack of budget discipline was laid bare last year when Greece revealed that previous governments had been falsifying the country's accounts and running huge budget deficits for years, triggering a rout on financial markets which extended to other euro zone countries.
"With the adoption of the 'six-pack', the EU significantly strengthens its budget discipline and moves towards a true economic governance," said Parliament President Jerzy Buzek after the vote. "We can not turn the clock back, but the package will ensure that member states budgets will be credible [in the future]," he said.
A breakthrough on the 'six-pack' came earlier this month when Parliament negotiators reached agreement with EU member states representatives. The deal was struck after France backed down on its opposition to new measures requiring a majority of eurozone members to block debt warnings issued by the European Commission.
France and Germany had undermined the Stability and Growth pace in 2002 when they ignored successive Commission warnings that they were exceeding the pact's deficit limits.
But ignoring Commission warnings will not be an option in the future as those will be released automatically after 10 days in case eurozone countries fail to block or approve them. "And if governments do vote to reject a warning, they will need to explain themselves to the European Parliament in public," the House said in an explanatory statement.
In addition to the six-pack, Buzek called on all eurozone national parliaments to quickly ratify changes to the EU's €440 billion bailout fund – the European Financial Stability Facility. "Any delay is playing with fire," Buzek warned.
The German Bundestag is holding a crucial vote on the expanded EFSF on Thursday, while the Slovak parliament is expected to ratify before the next EU summit on 17-18 October.
The new rules include:
- More automatic procedures using reversed qualified majority voting (RQMV) to issue warnings and sanctions against debt offenders. Member states will need a qualified majority to block them.
- A European semester which is an annual national budget assessment procedure by the European Commission
- More power for the Commission which can ask for more information and can conduct spot checks at national level
- A new fine (0.2% GDP) for fraudulent statistics on deficits and debt
- A sanction held in an interest bearing deposit (0.1% GDP) for countries which fail to act on recommendations to rectify a macroeconomic imbalance
- Greater independence of statistical bodies and standards for the compilation of statistics
- Safeguards for social bargaining processes and wage setting
- A call for Eurobonds
- Public hearings where finance ministers will either in person or represented by the rotating presidency exchange views on debt problems
- Surveillance of macroeconomic imbalances including both current account deficits and surpluses
- A scoreboard with thresholds governing macroeconomic imbalances
- Greater transparency on texts and discussions, involving the European Parliament and national parliaments
- More refined indicators for macroeconomic imbalances, to ensure that spillover effects of national policies across member states are taken into account alongside macroeconomic imbalances, the real economy and social indicators