05/09/2011 September 2011 – Economic governance: an outline of Sylvie Goulard’s report

During the last European Council that took place in July, European leaders called for the speedy conclusion of both the legislative package on strengthening the Stability and Growth Pact and on the new macroeconomic surveillance. Made up of six texts, the “economic governance” package is currently on the table at the Council of the EU and the European Parliament. Sylvie Goulard, MEP, is rapporteur on the text about effective establishment of budgetary surveillance in the Eurozone.

Sylvie Goulard, MEP (ADLE)

During the last plenary vote (June 23rd 2011), the European Parliament adopted the economic governance package but the final decision on the legislative resolution was postponed and evaluation of the package is only provisional.

Several points of contention remain dividing the Liberals and the European left on one side and the EPP on the other side. In France, the French socialist delegation is fiercely opposed to five of these six reports. In their opinion, these reports are a poor response to the crisis.

In this context, the European Parliament’s next plenary session is going to be highly scrutinised. Sylvie Goulard’s report is expected to be voted upon along with all six texts of the economic governance package. At their meeting on August 30th, the Economic and Monetary Affairs Committee emphasised the fact that the economic governance package would remain “the basis on which to build long-term stability of the economy”.

Responding to the fears raised by MEPs regarding the plans that were outlined over the summer on long-term economic governance, the Polish Finance Minister stated that concluding the “package of six” was a priority of the Polish Presidency.

Inside the economic governance package

The packet has six proposals : four are related to budgetary aspects, particularly a reform of the Stability and Growth Pact (SGP), while two new regulations aim to detect macroeconomic imbalances as they appear in the Union and the Eurozone and to resolve them.

 Among the main points in the Sylvie Goulard report on effective implementation of budgetary surveillance in the Eurozone is the strengthening of budgetary discipline. This will help identify ahead of time instances where Member States are deviating from solid budgetary practices; this can be achieved with the help of a decision-making process that does not get bogged down in political wrangling. As such, Member States can no longer shirk responsibility for their commitments with the reverse qualified majority which is supported by the Liberals. The European Commission proposal is deemed adopted unless the Council rejects it.

It also relates to harmonising national rules for adopting budgets with, in parallel, a principle of independence for national statistics institutes and the establishment of sanctions for States that falsify their data.

The criteria for the debt have been clarified: it must represent a maximum of 60% of GDP. In case of deficit, the Member States can impose progressive sanctions : interest-bearing deposit, non-interest bearing deposit, and then fines if the Member State is still not taking the necessary measures to try correct their excessive deficit.

Sylvie Goulard is an ALDE MEP and member of the ECON committee, as well as coordinator of her group for economic and monetary issues

The report specifies another point – promoting macroeconomic convergence through the introduction of a new procedure with a list of indicators to identify macroeconomic imbalances. All Member States are monitored on the basis of a symmetry principle taking into consideration deficits and surpluses.

In her report, Sylvie Goulard noted that the European Parliament wanted to innovate by introducing more democracy. To this end, the European Parliament is establishing a transparent “economic dialogue” with Member States and also with European Institutions. Furthermore, the “European Semester” is written into the legislation and dialogue between Europe and the national parliaments has been instigated.

The parliament also wants to create Eurobonds : jointly issued debt of the Eurozone Member States. According to Sylvie Goulard, the joint issuing of Eurobonds, in strictly specified conditions, would enable Europe to benefit from liquidity on the global market. On this basis, European Commissioner Olli Rehn has committed to working on proposals in a report on euro-bonds to be released before the end of 2011. The legislative proposal is expected to focus on joint debt being limited to a part of the total debt, with a liquidity premium to contain the cost to non-indebted States.

The Council continues to disagree on two points : the introduction of reverse qualified majority in the preventative part of the SGP and the symmetry principle for macroeconomic imbalances.

Main dates of events

June 2011 : Vote in plenary session without the first reading being closed
April 2011 : adoption of the reports in the ECOFIN Committee
March 2011 : Adoption of the general approach of Council
December 2010 : Submission of the six reports to Parliament
September 2010 : European Commission proposals

Two European countries have prevented the agreement being finalised between the European Parliament and the Hungarian Presidency: Germany wants to exempt countries that are running a surplus from macroeconomic surveillance and France want the alerts issued by the European Commission against States regarding Stability Pact violations to be adopted automatically.

Some MEPs such as the president of the European Parliament’s Economic and Monetary Affairs Committee have stressed the urgent need for reforms to tackle the crisis. “We acutely need further reforms of our macroeconomic governance framework to strengthen the long-term credibility of the euro” said Sharon Bowles.

The coming debates on economic governance promise to be stormy. “Rarely have we seen a legislative package less worthy of its name. The six texts are not at all about economic governance. The sole objective is to intensify the Stability Pact, thus preventing Member States from getting their respective economies moving again”, said Liêm Hoang-Ngoc, Socialist shadow rapporteur on one of the six texts in question.

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