EU diplomats say there is a consensus among member states that economic surveillance has to be broadened to cover macro-economic policies.
At their June summit, EU leaders agreed on "developing a scoreboard to better monitor competitiveness developments and allow for early detection of unsustainable or dangerous trends".
A "semester" of economic policy coordination will allow for surveillance of broad economic and budgetary guidelines, such as assumptions on growth and interest rates (EurActiv 08/09/10).
"There shouldn't be any country with excessively optimistic assumptions," says Zsolt Darvas, a research fellow at the Bruegel economic think-tank.
According to Commission proposals submitted in May, the "competitiveness scoreboard" would review macro-economic indicators such as productivity, unit labour costs, employment, public debt and private sector credit in order to detect asset price booms and excessive credit growth at an early stage.
"The balance of payments imbalances that we've seen in Ireland, Spain or the Baltic countries, for example, shouldn't be replicated in future without reaction" at European level, explained a diplomat from one of the large EU countries.
Devil in the detail
But as is often the case with EU negotiations, the devil lies in the detail. "What indicators will be chosen?" the diplomat asked. "What will be the thresholds? The Commission proposed a list of indicators but which ones are going to stay? Is it going to be the commercial balance, the balance of payments, labour productivity? Such kinds of choices are not neutral."
"Concretely, on the modalities, on the legal basis, there is still a lot of technical work to be done," the diplomat added. "And this is a job for economists."
Another diplomat said there was "a converging agreement that debt levels should be looked at".
But he admitted that discussions on indicators remained at a very early stage for now. "It is something we feel is still in discussion," the diplomat said, mentioning a country's trade balance or how much of its debt is held by foreign countries as possible options.
The issue has not yet been discussed at ministerial level for the moment, he added, and discussions are not expected at the summit on Thursday.
"Sooner or later, it will come up at ministerial level," he said, suggesting there will be little time to wrap up negotiations in time for the next EU summit on 28-29 October.