12.05.2010 - The Commission puts forward concrete, broad-based initiatives to strengthen economic policy coordination in the wake of the Greek sovereign debt crisis.
The recent financial crisis and the need for financial support to the Greek economy have underlined vividly the interdependence of the EU's economies, in particular inside the euro area. Urgent action has been taken to deal with the immediate needs of the crisis but far-reaching lessons should be drawn from it to strengthen the EU's system of economic governance for the future. Consistent with its intentions at the beginning of its term, the Commission is releasing today a Communication aimed to reinforce decisively economic policy coordination.
>> Communication COM(2010)250 final.
Reinforcing economic policy coordination
>> Press release IP/10/561Mastering economic interdependence: Commission proposes reinforced economic governance in the EU
Reinforcing the preventive dimension of budgetary surveillance, in particular in good times, must be an integral part of closer coordination of fiscal policy. Also, compliance with the rules needs to be improved and more focus needs to be given to public debt to ensure the long-term sustainability of public finances. Member States should make sure having in place effective national fiscal frameworks. Recurrent breaches of the Pact should be subjected to a more expeditious treatment.
To prevent the occurrence of severe imbalances it is therefore important to expand economic surveillance beyond the budgetary dimension to address other macroeconomic imbalances, including competitiveness developments and underlying structural challenges. It is proposed to upgrade the peer review of macroeconomic imbalances now carried out by the Eurogroup into a structured surveillance framework for euro-area Member States by making use of Article 136 TFEU.
Specifying the proposals in Europe2020 to better align economic surveillance, every year a "European Semester" would encapsulate the surveillance cycle of budgetary and structural policies so that Member States would benefit from early coordination at European level as they prepare their national budgets and national reform programmes.
Early guidance at the beginning of each year from the European Council on economic policies would facilitate the preparation of Stability and Convergence Programmes and National Reform Programmes. For the euro area a horizontal assessment of the fiscal stance should be carried out on the basis of the national Stability Programmes and the Commission forecasts.
Financial distress in one Member State can jeopardise the macro-financial stability of the euro area as a whole. Beyond urgent action that was taken earlier in May, a clear and credible set of procedures for the provision of financial support to euro area Member States in financial distress is necessary to preserve the financial stability of the euro area in the medium and long term.
When crisis prevention fails, financial assistance should be provided by the euro area in the form of lending, while the associated policy programme and conditionality should be set within Article 136 TFEU. To raise the necessary funds, the Commission would issue debt instruments when the need occurs, as is the case for balance of payment support to non-euro-area Member States.
The Commission stands ready to follow-up swiftly with legislative proposals, including amending the regulations underpinning the Stability and Growth Pact, to enhance the prevention and correction of macroeconomic imbalances within the euro area, and to establish a more permanent framework for crisis management.