The new economic governance rules to strengthen eurozone budgetary discipline, known as the ‘two-pack’, are expected to be passed in a vote today (13 June) in the European Parliament.
During a parliamentary debate yesterday (12 June) in Strasbourg, MEPs appeared divided over the proposals that are supposed to step up Commission powers over surveillance of eurozone countries' national budgets and oversight of the economic policy plans.
The two-pack builds on the ‘six-pack’, a group of economic governance regulations that entered into force on 13 December 2011.
Under proposal tabled in November, the European Commission would be able to administer countries that have sought international financial assistance to keep them from bankruptcy (see background).
MEP Ramon Tremosa i Balcells (ALDE, Spain) said the Parliament would vote on an instrument that will help Europe out of its finance crisis, namely the redemption fund. MEP Derk Jan Eppink (Belgium, ECR) warned that the draft report on budgetary control goes way beyond the EU legislation.
The MEPs’ debate didn’t give a clear indication on who is supporting the final proposal and who will vote against it, but leader of the Socialists and Democrats group Hannes Swoboda told EURACTIV in an interview that he hoped the proposal will be passed.
“I would say there will be a 55% majority,” said Swoboda, who hopes for strong support especially from the political groups that drafted the Parliament’s responses – the European People’s Party and the Socialists and Democrats.
The two-pack was approved by a very slim majority of the Parliament’s Economic and Monetary Affairs Committee in mid-May.
Because of the split result, MEPs decided to postpone opening trialogue negotiations with EU ministers and referred both proposals to the plenary in order to gauge the level of support of the house for the texts and avoid EU ministers taking advantage of the Parliament’s weakness as revealed by the committee vote.
The divisions between political groups rest primarily on the timing. While the European People’s Party wants the rules to be adopted rapidly, the Socialists want to postpone adoption to take into account the political changes expected from parliamentary elections in Greece on 17 June.
Monitoring of budget proposals
The first leg of the two-pack concerns the monitoring of draft budgetary plans of eurozone nations. It also requires that the countries consult the Commission and other members of the eurozone before adopting any major economic and fiscal policy reforms.
The second regulation is responsible for strengthening economic and budgetary surveillance of euro member countries experiencing serious financial problems. According to the new rules, the European Commission could place a country under legal protection and demand a debt settlement plan and implementation of other measures.
The amended proposals give the Commission more control over eurozone countries’ fiscal policy but those increased powers would be subject to more democratic control and the budget cuts couldn’t be made at the expense of killing growth.
The committee draft reports also propose setting up a European Debt Redemption Fund to mutualise all the eurozone countries' debts in excess of 60% (around €2.3 trillion).
The repayment of this debt would then be carried out over 25 years, thereby buying time for structural reforms to be carried out. It would also require the Commission to present a roadmap for introducing eurobonds as well as to present a mechanism for funding infrastructure investment equal to 1% of GDP (around €100 billion).
The European Commission presented the two new regulations (1 and 2) on 23 November 2011, hoping to draw a line under the leniency that allowed Greece and other eurozone countries to let their public debt and deficits explode.
The two new regulations include the following:
- All eurozone countries would need to submit draft budgets each year to the Commission by 15 October for prior examination.
- The Commission would then have the power to request changes and ask for the budget to be redrafted if member states whose finance situation is deemed unsustainable.
- The Commission might be asked to defend its decision before national parliaments.
- National debt forecasts would have to be done by independent institutes.
The two regulations are being adopted under Article 136 of the EU treaty, which allows eurozone countries to adopt more stringent rules for themselves.
It excludes countries that do not use the single currency.
- European Parliament: Amended draft proposals of two-pack 1
- European Parliament: Amended draft proposals of two-pack 2
- European Parliament: Economic governance "two pack" - Q&A
- European Commission: Six-pack? Two-pack? Fiscal compact? A short guide to the new EU fiscal governance
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