Economic governance package explained

The EP is currently considering the so-called two-pack, which are two proposals for stepping up financial discipline within the Eurozone. Draft reports by two MEPs propose amending them so that Commission's surveillance powers are more closely controlled and eurozone members in financial difficulties could be placed under bankruptcy style legal protection.

The two-pack builds on the six-pack, a group of economic governance regulations that entered into force on 13 December 2011. The six-pack aims to restore economic stability in the EU by reducing competitiveness and macro-economic imbalances between member states as well as creating strict rules on public debt, sustainable public spending and better surveillance.

The Commission has now proposed the two-pack in order to step up surveillance of eurozone members' national budgets and have more oversight of the economic policy plans of those that are in financial difficulties. The Parliament and the Council will now need to approve the two proposals and agree on possible amendments. This why members of the EP's economic and monetary committee produced reports on each of the two proposed regulations. The committee is expected to vote on the two regulations in May and the two reports will then form the basis for further negotiations with the Council, which represents national governments.

Commission monitoring

The report on monitoring draft budgetary plans by the Portuguese Social-Democrat Elisa Ferreira supports a more active role for the Commission but at the same time calls for a close supervision of their supervisory powers. She said: "There is a need for some rebalancing of powers to allow for more national ownership and a better democratic process."

Countries that have adopted the euro should consult the Commission and other members of the eurozone before adopting any major economic and fiscal policy reform plans with potential spillover effects. They should submit their plans to the Commission for monitoring in advance of the plans becoming binding. However, Ms Ferreira says the Commission should not automatically be entrusted with the power to ask a country to change its budget plans. In addition she stresses that deficit reduction timetables should be extended in cases of severe economic downturns to allow breathing room for fostering growth.

Bankruptcy protection

The report by the French Christian-Democrat Jean-Paul Gauzès looked at the proposal for strengthening economic and budgetary surveillance of eurozone countries experiencing serious financial problems. It states that the Commission could decide to place a country under legal protection, after which the Council would have 10 days to repeal this decision. Once placed under such protection, a country could not be declared to have defaulted, its creditors would need to make themselves known to the Commission within two months and loan interests would be frozen. The country in question would have to submit a recovery and debt settlement plan to the Commission and implement adequate measures.

Mr Gauzès said such a rule would provide more clarity in scenarios where the country is on the verge of a default. "It would provide a good substitute to the current ad hoc methods which vary case by case."