The 6-pack: tools for a stronger economic governance
Download
Report
Transcript The 6-pack: tools for a stronger economic governance
1
The 6-pack: tools for a stronger
Economic Governance
2
2 legs + 1 common foundation = 6 legislative proposals
Fiscal surveillance
Macroeconomic surveillance
- Revisions to both the preventive arm
and the corrective arm of the Stability
and Growth Pact
New regulation on prevention
and correction of
macroeconomic imbalances
- New Directive on national fiscal
frameworks
Enforcement
Enforcement
New regulation on effective
enforcement of budgetary
surveillance
New regulation on effective
enforcement of macroeconomic
surveillance
2
Fiscal surveillance: Reinforcing the preventive arm
Where do we stand?
Central concept of the Stability and Growth Pact is the medium-term budgetary
objective (MTO) = a numerical value for the structural deficit which ensures:
(i) a safety margin against breaching 3% of GDP;
(ii) sustainable public finances or rapid progress towards sustainability
(iii) room for stabilisation over the cycle
Adjustment path towards MTO = 0.5%; more in good and less in bad times.
Enforcement through peer pressure (Council recommendations).
What are the current difficulties?
Central concept is based on the structural balance which is not observable
difficulties with estimates, time-lag, etc…
Enforcement through peer pressure lacks teeth
3
Fiscal surveillance: Preventive arm
What would change in practice?
Innovation: an expenditure rule = operational guidance for adjustment path towards
MTO
Def: expenditure growth should not exceed a reference rate of potential GDP growth
If significant deviations from the rule = 0.5% of GDP in one or 0.25% of GDP in two
consecutive years recommendation + interest-bearing deposit for euro area MS
Faster adjustment path (>0.5%) if debt > 60% of GDP or pronounced risks in overall debt
sustainability
Safeguard clauses: can deviate from the rule if unusual event or severe economic
downturn for the euro area or the EU as a whole
4
Fiscal surveillance: More focus on debt in the corrective arm
Innovation: more focus on
debt + numerical benchmark
Where do we stand?
The core concept is to tackle gross policy
errors:
- government deficit in excess of 3%
- government debt ratio in excess of
60% of GDP or not sufficiently diminishing
towards the reference value.
What are the current difficulties?
No definition of the concept of “sufficiently
diminishing debt” EDP only launched on the
basis of deficit criterion
EDP can be launched if deficit
below 3% of GDP but debt ratio in
excess of 60% of GDP and nondiminishing at satisfactory pace
Definition of satisfactory pace by a
numerical
benchmark
=
differential with respect to the 60%
of GDP reference value declines
over 3 years in the order of onetwentieth per year.
No-automaticity: Non-respect of
numerical benchmark for debt will
not automatically result in EDP:
decision will involve assessment of
all relevant factors.
Transition period for countries in
EDP: 3 years
5
Fiscal surveillance: More effective enforcement mechanisms
Innovation: timely, graduated and effective
mechanisms for compliance
Where do we stand?
No enforcement mechanism in
the preventive arm.
Sanction in the corrective arm
but very late in the procedure
(Art 126(11))
Cohesion Fund commitments
conditional on compliance with
effective action in EDP (Art
126(8)) but only to a subset of
Member States.
Never applied so far!
New sanctions for euro-area MS both in the
preventive and the corrective arm.
Preventive arm: interest-bearing deposit in case of
significant deviations from expenditure rule
Corrective arm:
(i) non-interest-bearing deposit when EDP is
opened (Art 126.6);
(ii) fine in case MS do not take effective action to
correct excessive deficit (Art 126.8).
Reverse QMV voting: Commission proposal for
sanctions adopted unless the Council rejects it.
Size of the sanctions: 0.2% of GDP
Fines collected assigned to stability mechanisms
to provide financial assistance.
6
Fiscal surveillance: national fiscal frameworks better reflecting
EU framework
Where do we stand?
Considerable variation in the
quality of national fiscal
framework
Well-designed fiscal
frameworks can substantially
contribute to sound fiscal
policies
EU budgetary framework
insufficiently entrenched in
national frameworks
Need for strengthening
national ownership and having
uniform requirements as
regards the rules and
procedures forming the
budgetary frameworks of the
MS
Innovation: minimum characteristics for national
budgetary frameworks
Accounting and statistical reporting
Rules for preparation of the forecasts for budgetary
planning
Country-specific numerical fiscal rules
Budgetary procedures
Medium-term budgetary frameworks
Independent monitoring and analysis
Regulation of fiscal relationships between public
authorities across sub-sectors of general government
Implementation by end-2013
7
8
The prevention and correction of macroconomic
imbalances (EIP)
• A regulation enhanced and broader macroeconomic surveillance for all Member States
focussing on macroeconomic imbalances.
– preventive arm to avoid the build-up of imbalances
– corrective arm with strong enforcement mechanisms for
euro area members where spill-overs are stronger
• A Regulation with enforecment measures for noncompliances (Euro-area only)
9
The preventive arm of the EIP
No problem
Procedure stops.
Alert
mechanism
Commission
present report
based on
scoreboard
indicators and
economic reading
identify Member
States where
potential risks exist
ECOFIN/Euro
group discuss for
the Commission to
take account of.
In-depth review
Commission prepares in depth
country studies, using much wider
set of indicators and analytical
tools, and takes account of
- other Council recommendations
- plans in SCP/ NRPs;
-warnings or recommendations from
the ESRB.
Imbalance exists
Commission/Council
recommendations
under Article 121.2
Severe imbalance
Commission/Council
recommendation on
the existence of an
« excessive
imbalance » under
article 121.4
The corrective arm of the EIP
Commission/
Council:
assess corrective
action plan (CAP)
within 2 months
Sufficient CAP
Commission/Council
recommendation
endorsing CAP listing
corrective actions and
the deadlines for taking
them (*)
Insufficient CAP
Commission/ Council
recommendation
inviting Member States
to submit new CAP
within 2 months as a
rule
Member State:
submits monitoring
reports on corrective
actions based on
agreed reporting
deadlines
Member State:
Submits new CAP
Commission/Council:
-Assess corrective
actions in monitoring
reports / assess CAP
Commission/Council:
-Assess corrective
actions in monitoring
reports / CAP
Sufficient actions:
Council place EIP in
abeyance and
monitoring continues
according to agreed
deadlines
Sufficient:
Council place EIP in
abeyance and
monitoring continues
according to agreed
deadlines
Insufficient actions:
Commission/Council
adopt decision on noncompliance and a
recommendation
setting new deadlines
for corrective action
Imposition of interestbearing deposit
Insufficient
Commission/Council
adopt second
successive decision on
non-compliance
Interest-bearing
deposit becomes fines
Sufficient CAP:
Endorsement of actions
and start of monitoring
(see *)
Insufficient CAP:
Commission/Council
adopt second
successive decision on
insufficient CAP.
Imposition of fine
10
11
Next steps
• Finalisation of legal texts
• Finalisation of the design of the initial scoreboard
of early-warning indicators
• Implementation of the EIP as part of the European
Semester starting with a first Alert Mechansim
Report