BRUSSELS (MNI) – Below are exerts from a statement on improving
economic governance in the European Union made by European Council
President Herman Van Rompuy, who chairs a task force on the topic. The
proposals will now be debated by EU heads of state and government at a
meeting on October 28 and 29:

“The recommendations and concrete proposals contained in the report
of the Task force go in five directions.

“First direction: broader economic surveillance. We recommend to
create a mechanism for macro-economic surveillance. This is in my view
the biggest innovation.

“An early warning system will detect the risk of real estate
bubbles or of unsustainable patterns on the balance of payments, or
strong divergences in competitiveness. These types of risks were
neglected in the first decade of the euro.

“The crisis has shown that sound budgets are not enough to
guarantee sustainable economic growth. That’s why we recommend this
surveillance mechanism, as a macro-economic pendant of the
budget-focused Pact.

“Ultimately this may result in sanctions for countries in the
Eurozone only. It will strengthen the economic pillar of the Economic
and Monetary Union.

“Second direction: greater fiscal discipline, a stronger Stability
and Growth Pact. In earlier meetings, we had already agreed on the main
principles:

“A wider range of sanctions and measures, both financial and
political;

“More focus on the debt criterion, which used to be disregarded;

“An adapted timing, with sanctions kicking in at an earlier stage.

“Today we also reached consensus on how to implement these general
principles. One element is the agreement on more automaticity in the
decision making. For the decision on all new sanctions, the so-called
reversed majority rule will apply: a Commission recommendation on
sanctions will be adopted unless a qualified majority of Member States
in the Council votes against.

“Two further remarks on the Pact.

“Firstly, balanced budgets are not a goal in themselves. We take
these measures because fiscal sustainability creates confidence and lays
the basis for economic growth and jobs.

“Secondly, the Task Force’s commitment to a stronger Pact was high
from the beginning to the end. I was impressed by the determination of
the Member-States to impose these self-constraints on themselves.

“The full package now at the table will make our Economic and
Monetary Union more solid.

“Third direction: the Task-Force recommends: deeper and broader
coordination, notably through the “European Semester”.

“I will not go into this, because it was already decided and will
apply as of 2011.

“Fourth direction: a more robust framework for crisis management.

“The Task Force considers there is a need for a credible crisis
resolution framework for the euro area in the medium term. It should be
capable of addressing financial distress and preventing contagion from
one country to another. It must avoid the moral hazard implicit in any
ex-ante rescue scheme.

“The precise features and operational means of such a crisis
mechanism will require further work.

“Fifth and final direction: stronger institutions.

“At the national level, the Task Force recommends the use or
setting up of public institutions or bodies to provide independent
analysis and forecasts on domestic fiscal policy matters.

“Taken separately, some of these reforms may seem small steps.
Together, they are a major step forward.”

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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