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European Commission - Economic and Financial AffairsEuropean Commission - Economic and Financial Affairs
© Thinkstock.com EU economic governance: Commission delivers comprehensive package of proposals for legislative measures
The Commission has adopted a legislative package of proposals that represents the most sweeping transformation of economic policy-making in the EU and euro area since the launch of EMU. It consists of six pieces of legislation: four proposals deal with fiscal issues, including a wide-ranging reform of the Stability and Growth Pact (SGP), while two regulations propose measures that would address emerging macroeconomic imbalances. The legislative package is the result of intense preparatory work and consultations with a broad range of stakeholders, including the Task Force on Economic Governance chaired by Council President Van Rompuy.

The proposals will now be examined by the Council, the European Parliament and the European Economic and Social Committee.
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© Thinkstock.com EU economic governance: Commission delivers comprehensive package of proposals for legislative measures

The legislative package reinforces Member States’ compliance with the Stability and Growth Pact (SGP) by establishing the new concept of prudent fiscal policy-making (PFPM) and should ensure convergence by Member States towards their Medium-Term Objectives. It also addresses excessive debt – rather than just deficits – more proactively than in the past. Macroeconomic surveillance will also be tightened. A new Excessive Imbalance Procedure (EIP) will prevent and correct macroeconomic imbalances and divergences in competitiveness. On the basis of a scoreboard composed of economic indicators, as well as expert judgement, the Commission may launch in-depth reviews of Member States at risk of developing macroeconomic imbalances. Based on the Commission assessment, the Council may then issue preventive, or in more serious cases prescriptive, recommendations.

Stronger enforcement is a major part of the new legislative package. Two regulations detail a set of gradual sanctions for non-compliant Member States, including non-interest bearing deposits which would be converted to fines in the event of repeated non-compliance. To reduce discretion in enforcement, a new “reverse voting mechanism” is also envisaged. Under the new voting rules, which would apply when imposing sanctions, a Commission proposal will be considered adopted unless the Council overturns it by a qualified majority.

Finally, effective enforcement of the SGP requires that EU provisions are applied at the national level. A new Directive, therefore, stipulates minimum requirements to be followed by Member States to ensure that their national budgetary frameworks are consistent with the EMU budgetary framework.

Let us now maintain the momentum to reinforce economic governance. It is a matter of complementing the already strong monetary union with a genuine and real economic union. It is high time to achieve that.

Oli Rehn, Commissioner for Economic and Monetary Affairs
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Directorate-General for Economic and Financial Affairs