FRANKFURT (MNI) – The European Central Bank formalized its call for
more automatic sanctions in EU governance on Tuesday, publishing its
legal opinion of the European Commission’s reforms to economic
governance.
The central bank also urged the European Union to reconsider
changes made to the Stability and Growth Pact in 2005, which allows
member states more leeway to escape sanctions.
The central bank assured that its recommendations would not require
a change to European treaties, but suggested that the European Council
be open to treaty changes at some point.
The ECB reiterated that the Commission’s proposals “represent an
important broadening and strengthening of the EU economic and budgetary
surveillance framework and go some way in improving enforcement in the
euro area.”
Still, “they fall short of the necessary quantum leap in the
surveillance of the euro area which the ECB deems necessary to ensure
its stability and smooth functioning.”
The following is the full text of the key elements of the ECB’s
legal opinion on governance reform. This and the full legal opinion can
be found on the ECB’s website:
The European Commissions proposals contribute to an important
broadening and strengthening of the EUs economic and budgetary
surveillance. But for the euro area, a more ambitious governance
structure must be foreseen, to ensure the smooth functioning of Economic
and Monetary Union. The Governing Council of the European Central Bank
(ECB) calls upon the European Parliament and Council to strengthen the
proposals along the following lines.
1. Greater automaticity in all surveillance procedures, including
the new macroeconomic surveillance framework. When Member States do not
comply with recommendations to adjust their policies, this should lead
to the consequences foreseen in the preventive and corrective
procedures, and the Council of the European Union (“the Council”) should
have less room for halting or suspending procedures against the Member
States. A simple way of achieving this would be a formal declaration by
the Council, or at least the Eurogroup, committing itself to voting, as
a rule, in favour of the continuation of procedures where recommended or
proposed by the European Commission. Thus, the Council would voluntarily
constrain its discretion and would need to justify instances in which it
did not follow its own rule. Also, broader use of reverse majority
voting should be considered.
2. Setting strict deadlines to avoid lengthy procedures and
deleting “escape clauses.” Not allowing the Council or the Commission to
(i) extend the deadline for correcting an excessive deficit during a
severe economic downturn of a general nature, or (ii) reduce or cancel
financial sanctions either on grounds of exceptional economic
circumstances or following a request by the Member State concerned,
would enhance automaticity.
3. The new macroeconomic surveillance framework should have a clear
focus on euro area countries with large current account deficits,
significant competitiveness losses and high levels of public and private
debt, as well as any other vulnerability threatening Economic and
Monetary Union.
4. Introduction of political and reputational measures fostering
early compliance with the surveillance framework. This includes
increased reporting obligations for Member States and the submission of
reports by the Council to the European Council in the event of
non-compliance with Council recommendations, as well as the possibility
of the European Commission conducting missions to Member States, in
liaison with the ECB for euro area and ERM II countries if the ECB deems
it appropriate.
5. Earlier and more gradual application of financial sanctions
within the macroeconomic surveillance framework to provide clear
incentives for appropriate macroeconomic policies. The excessive
imbalance procedure should oblige Member States to lodge an
interest-bearing deposit following the first instance of non-compliance
and should sanction them with a fine in case of repeated non-compliance.
The proceeds from any financial sanctions imposed on euro area countries
as part of budgetary and macroeconomic surveillance should be assigned
to the future European Stability Mechanism.
6. Ambitious benchmarks when establishing the existence of an
excessive deficit. The scope for considering any “relevant factors” when
establishing the existence of an excessive deficit — whether on the
basis of the deficit criterion or on the basis of the debt criterion —
should be clearly reduced, notably when these are factors that could be
regarded as mitigating the Member States failure to comply with these
criteria. As regards the deficit criterion, such factors should be taken
into account only if the deficit ratio of the country concerned is close
to the 3% of GDP reference value and deviates from this value only
temporarily (irrespective of whether the countrys debt ratio is above
or below the 60% reference value). And as regards the debt criterion,
such factors should be considered only if a government debt ratio in
excess of 60% of GDP is projected to decline. Also, the backward-looking
numerical benchmark used to assess whether a debt ratio above 60% of GDP
is sufficiently diminishing should be applied without delay.
7. Ambitious requirements as regards the adjustment path towards a
countrys medium-term budgetary objective. Under the revised budgetary
surveillance procedure, the question of whether sufficient progress is
being made towards a countrys medium-term budgetary objective should be
evaluated on the basis of an overall assessment using the structural
balance as the point of reference, including analysis of expenditure net
of discretionary revenue measures. In this context, the annual
improvement in the structural balance should be significantly higher
than 0.5% of GDP where a countrys government debt exceeds the reference
value of 60% of GDP or there are fiscal sustainability risks.
8. Guaranteeing the quality and independence of fiscal and economic
analysis, which requires the establishment of an advisory body at the EU
level comprising persons of recognised competence. That body would
provide ex post assessment of the conduct of budgetary and macroeconomic
surveillance by the Council and the Commission.
9. A commitment by the Member States to swiftly implement strong
national budgetary frameworks in order to facilitate compliance with
their obligations under the Stability and Growth Pact. This would
require that the proposed fiscal frameworks directive be transposed into
national law as faithfully as possible, and no later than end-2012. The
Eurogroup could issue a formal statement to that effect. Also, the
directive has to establish clear consequences in the event that national
authorities do not comply with their budgetary obligations. For euro
area countries, a new directive chapter is required in order to make
independent national fiscal policy institutions mandatory. The measures
in the directive should not prevent Member States from developing
stronger frameworks. The EU should consider obliging Member States to
adopt clear borrowing frameworks.
10. Improvements to the quality of annual and quarterly statistics
in the general government accounts, in terms of both timeliness and
reliability, by supporting the implementation under the fiscal
frameworks directive of public accounting systems established on an
accrual basis that are linked to ESA 95-based national accounts.
Weaknesses in the collection and reporting of data have to be addressed
immediately.
The EU should also consider reversing the changes to the Stability
and Growth Pact of 2005 which allowed Member States greater leeway under
the Pact.
Finally, while none of the amendments proposed by the ECB requires
changes to the Treaties, the EU should, at some point in time, consider
reforming them to further strengthen economic governance.
The ECBs Opinion is available in full in English on the ECBs
website at: [respective link]. It will also be published in all other EU
languages on the ECBs website and in the Official Journal of the
European Union in due course.
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