The next round of EU economic governance legislation will do more to deliver growth and the European Commission's new powers to vet eurozone countries' budgets will be better democratically controlled, thanks to the “two pack” economic governance legislation voted by Parliament on Tuesday 12 March. The rules also lay down clear procedures for countries seeking the EU's financial help.
MEPs, led by French EPP member Jean-Paul Gauzès and Portuguese Social Democrat Elisa Ferreira, did not radically change the original goals of the legislative package but they did add many provisions to ensure it takes more account of the need to stimulate growth and employment. They also inserted many clauses to improve transparency and democratic accountability.
Growth, not just fiscal consolidation
Parliament's amendments ensure that the new laws will do more to deliver growth. For example, the Commission's country-by-country budget assessments will need to be more comprehensive, to ensure that budget cuts are not made at the cost of killing off investments with growth potential.
Where countries are asked to make substantial cuts, their efforts must not harm investments in education and healthcare, particularly in countries in severe financial difficulty, say MEPs. Moreover, a country’s deficit reduction timetables would have to be applied more flexibly in exceptional circumstances or in severe economic downturns.
Better oversight of Commission powers
The Commission's exercise of its increased powers would be monitored more closely by member states and the European Parliament, so as to ensure better accountability and legitimacy. For example, the Commission's powers to impose extra reporting requirements will have to be renewed every three years and Parliament or Council would be able to revoke them.
The work of the so-called "Troika" (Commission, ECB and IMF) in overseeing economic reforms in countries in difficulty, will also be subject to more oversight, thereby increasing transparency and democratic accountability.
Redemption fund, eurobills and infrastructure investment
The last piece of the agreement, which Parliament insisted upon, addresses the question of a European redemption fund.
The compromise agreed with member states requires the Commission to "establish an Expert Group to deepen the analysis on the possible merits, risks, requirements and obstacles of partial substitution of national issuance of debt through joint issuance in the form of a redemption fund and eurobills".
The expert group will present its conclusions by March 2014 and the Commission will then be asked to assess and, if appropriate, table proposals before the end of its mandate.
The Commission also undertook to explore by summer 2013 ways to create headroom within the Stability and Growth Pact for certain non-recurrent public investments. By the end of 2013 it should also develop a system to provide financial support for countries to undertake competitiveness-boosting reforms.
The deal must now be formally approved by the Council.The rules should apply to the next budgeting period of the eurozone countries, i.e. their 2014 budgets.
The Gauzès text was approved by 528 votes to 81, with 71 abstentions.
The Ferreira text was approved by 526 votes to 86, with 66 abstentions.