Proposal for a Regulation of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area - Montesquieu Instituut

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COUNCIL OFBrussels, 25 November 2011

THE EUROPEAN UNION

17230/11

Interinstitutional File:

2011/0385 (COD)

ECOFIN 805 UEM 335 CODEC 2112

PROPOSAL

from:

European Commission

dated: 25 November 2011

No Cion doc.: COM(2011) 819 final

Subject: Proposal for a Regulation of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area

Delegations will find attached a proposal from the Commission, submitted under a covering letter from Mr Jordi AYET PUIGARNAU, Director, to Mr Uwe CORSEPIUS, Secretary-General of the Council of the European Union.

EUROPEAN COMMISSION

Brussels, 23.11.2011 COM(2011) 819 final

2011/385 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the strengthening of economic and budgetary surveillance of Member States

experiencing or threatened with serious difficulties with respect to their financial

stability in the euro area

2011/385 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the strengthening of economic and budgetary surveillance of Member States

experiencing or threatened with serious difficulties with respect to their financial

stability in the euro area

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 136, in combination with Article 121(6) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Central Bank,

After transmission of the draft legislative act to the national Parliaments,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) The unprecedented global crisis that has hit the world over the last three years has seriously damaged economic growth and financial stability and provoked a strong deterioration in the government deficit and debt position of the Member States, leading a number of them to seek financial assistance outside the framework of the Union.

effects. This enhanced surveillance should include a wider access to the information needed for a close monitoring of the economic, fiscal and financial situation and a regular reporting to the Economic and Financial Committee (EFC) or to any sub- committee the latter may designate for that purpose. The same modalities of surveillance should apply to Member States requesting precautionary assistance from the European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM) the International Monetary Fund (IMF) or another international financial institution.

(5) The surveillance of the economic and fiscal situation should be strongly reinforced for Member States under macro-economic adjustment programme. Because of the comprehensive nature of the latter, the other processes of economic and fiscal surveillance should be suspended for the duration of the macro-economic adjustment programme, with a view to avoiding a duplication of reporting obligations.

(6) Rules should be provided in order to enhance the dialogue between the Union institutions, in particular the European Parliament, the Council and the Commission, and to ensure greater transparency and accountability.

(7) A decision regarding the non-compliance of a Member State with its adjustment programme would also entail a suspension of payments or commitments of Union funds as provided by Article 21(6) of Regulation (EU) No XXX laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the common strategic framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1083/2006,

HAVE ADOPTED THIS REGULATION:

Article 1

Member State concerned shall be given the possibility to express its views beforehand. The Commission shall decide every six months whether to prolong the enhanced surveillance.

• 2. 

  The Commission shall decide to make a Member State receiving a financial assistance on a precautionary basis from one or several other States, the EFSF, the ESM or any other International Financial Institution, such as the IMF, subject to enhanced surveillance. The Commission shall establish a list of the precautionary financial assistance instruments concerned and keep it updated to take into account possible changes in the financial support policy of the EFSF, ESM or of any other relevant International Financial Institution.
• 3. 

  Paragraph 2 shall not apply to a Member State receiving a financial assistance on a precautionary basis in the form of a credit line which is not conditioned to the adoption of new policy measures by the concerned Member State, as long as the credit line is not drawn.

Article 3

Enhanced surveillance

• 1. 

  A Member State under enhanced surveillance shall, in consultation and cooperation with the Commission, acting in liaison with the European Central Bank (ECB), adopt measures aimed at addressing the sources or potential sources of difficulties.
• 2. 

  The closer monitoring of the fiscal situation laid down in Article 7, paragraphs 2, 3 and 6, of Regulation (EU) No XXX of the European Parliament and of the Council shall apply to a Member State under enhanced surveillance, irrespective of the existence of an excessive deficit. The report in accordance with paragraph 3 of this Article shall be submitted on a quarterly basis.
• 3. 

  On a request from the Commission, the Member State under enhanced surveillance

shall:

• 4. 

  The Commission shall conduct, in liaison with the ECB, regular review missions in the Member State under surveillance to verify the progresses made in the implementation of the measures mentioned in paragraph 1, 2 and 3. It shall communicate every quarter its findings to the Economic and Financial Committee (EFC) - or to any subcommittee the latter may designate for that purpose - and assess notably whether further measures are needed. These review missions shall replace the onsite monitoring foreseen in Article 10a(2) of Regulation (EC) No 1467/97.
• 5. 

  Where it is concluded - on the basis of the assessment foreseen in paragraph 4 - that further measures are needed and the financial situation of the Member State concerned has significant adverse effects on the financial stability of the euro area, the Council, acting by qualified majority on a proposal from the Commission, may recommend to the Member State concerned to seek financial assistance and to prepare a macro-economic adjustment programme. The Council may decide to make this recommendation public.
• 6. 

  Where a recommendation under paragraph 5 is made public:

(a) the relevant Committee of the European Parliament may invite representatives of the Member State concerned to participate to an exchange of views;

(b) representatives of the Commission may be invited by the parliament of the Member State concerned to participate to an exchange of views.

Article 4

Information on envisaged financial assistance requests

A Member State wishing to obtain financial assistance from one or several other States, the EFSF, the ESM, the International Monetary Fund (IMF) or another institution outside of the Union framework shall immediately inform the Council, the Commission and the ECB of its intention. The EFC, or any subcommittee the latter may designate for that purpose, shall hold a discussion on this envisaged request, after having received an assessment from the Commission.

sound and sustainable economic and financial situation and restoring its capacity to finance itself fully on the financial markets. The draft adjustment programme shall take due account of the current recommendations addressed to the Member State concerned under Articles 121, 126 and/or 148 of the Treaty- and its actions to comply with them - while aiming at broadening, strengthening and deepening the required policy measures.

• 2. 

  The Council, acting by qualified majority on a proposal from the Commission, shall approve the adjustment programme.
• 3. 

  The Commission, in liaison with the ECB, shall monitor the progress made in the implementation of the adjustment programme and inform every three months the EFC or any subcommittee the latter may designate for that purpose. The Member State concerned shall give the Commission its full cooperation. It shall in particular provide to the Commission all the information that the latter deems necessary for the monitoring of the programme. Article 3(3) shall apply.
• 4. 

  The Commission - in liaison with the ECB - shall examine with the Member State concerned the changes that may be needed to its adjustment programme. The Council, acting by a qualified majority on a proposal from the Commission, shall decide on any change to be made to the adjustment programme.
• 5. 

  If the monitoring referred to in paragraph 3 highlights significant deviations from the macro-economic adjustment programme, the Council, acting by qualified majority on a proposal from the Commission, may decide that the Member State concerned does not comply with the policy requirements contained in the adjustment programme.
• 6. 

  A Member State subject to an adjustment programme experiencing insufficient administrative capacity or significant problems in the implementation of its adjustment programme shall seek technical assistance from the Commission.
• 7. 

  The relevant Committee of the European Parliament may invite representatives of the Member State concerned to participate to an exchange of views on the progress made in the implementation of the adjustment programme.

(a) The adjustment programme provided for by Article 6 of this Regulation shall also be deemed to replace as appropriate the reports provided for by Article 3(4a) and Article 5(1a) of Council Regulation (EC) No 1467/97;

(b) The annual budgetary targets in the adjustment programme provided for by Article 6(3) of this Regulation shall be deemed to replace as appropriate the annual budgetary targets foreseen in accordance with Article 3(4) and Article 5(1) of Regulation (EC) No 1467/97 in the mentioned recommendation and notice. If the Member State concerned is subject to notice under Article 126(9)

of the Treaty, the adjustment programme foreseen by Article 6(3) of this Regulation shall also be deemed to replace the indications on measures conducive to those targets foreseen in the notice in accordance with Article 5(1) of Regulation (EC) No 1467/97.

(c) The monitoring provided for by Article 6(3) of this Regulation shall be deemed to replace the monitoring provided for by Article 10(1) and Article 10a of Council Regulation (EC) No 1467/97 and the monitoring underlying any decision provided for by Article 4(2) and 6(2) of Regulation (EC) No 1467/97.

Article 8

Consistency with the excessive imbalances procedure

The implementation of Regulation (EU) No XXX on the prevention and correction of macroeconomic imbalances shall be suspended for the Member States subject to a macro- economic adjustment programme approved by the Council in accordance with Article 6(2) of this Regulation. This suspension shall be applicable for the duration of the macro-economic adjustment programme.

Article 9

Consistency with the European Semester for economic policy coordination

The monitoring provided for by Article 6(3) of this Regulation shall be deemed to replace the monitoring and assessment of the European Semester for economic policy coordination provided for by Article 2a of Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and coordination of economic policies.

Article 11

Post-programme surveillance

• 1. 

  A Member State shall be under post-programme surveillance as long as a minimum of 75% of the financial assistance received from one or several other Member State(s), the EFSM, the EFSF or the ESM has not been repaid. The Council, acting on a qualified majority on a proposal from the Commission, may extend the duration of the post programme surveillance.
• 2. 

  Article 3(3) shall apply. On a request from the Commission, the Member State shall also provide the information mentioned in Article 7(3) of Regulation (EU) No XXX on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area.
• 3. 

  The Commission shall conduct, in liaison with the ECB, regular review missions in the Member State under post programme surveillance to assess its economic, fiscal and financial situation. It shall communicate every semester its findings to the EFC or to any subcommittee the latter may designate for that purpose and assess notably whether corrective measures are needed.
• 4. 

  The Council, acting by qualified majority on a proposal from the Commission, may recommend to the Member State under post programme surveillance to adopt corrective measures.

Article 12

Voting within the Council

For the measures referred to in Articles 2(1), 3, 6(2), 6(4) and 11(4), only members of the Council representing Member States whose currency is the euro shall vote and the Council shall act without taking into account the vote of the member of the Council representing the Member State concerned.

A qualified majority of the members of the Council referred to in the first paragraph shall be calculated in accordance with Article 238(3)(b) of the Treaty.

This Regulation shall be binding in its entirety and directly applicable in the Member States in accordance with the Treaties.

Done at Brussels,

For the European Parliament For the Council

The President The President