The European Commission should have more control over fiscal policy in EU Member States, but not the free rein it asked for, says the Economic and Monetary Affairs Committee in texts, voted on Monday, stating a position on the economic governance "two pack". This increased power must be democratically controlled and serve to spur economic growth, MEPs say.
The vote was not without acrimony as centre left and centre right groups were divided on whether the timing was right for a vote. "The world was a different place when the Commission made its proposals and the Council is also shifting its position on how much austerity is needed", said Elisa Ferreira (S&D, PT), one of the rapporteurs, said before the vote.
"Changes in the political environment happen all the time. We should vote because this legislation should enter into force as quickly as possible in view of the persisting crisis" Jean-Paul Gauzes (EPP, FR), the other rapporteur, replied. A slim majority was then secured for the votes to be taken.
Both texts were subsequently adopted with only slim majorities and a decision was then taken not to open negotiations with the Council and instead turn to the plenary to test the level of backing of the whole house. The first negotiation meeting, scheduled for Tuesday, is therefore cancelled.
More Commission oversight but no blank cheque
At the insistence of the Socialists in particular, the Commission's day-to-day exercise of its increased powers would be monitored more closely by Member States and the European Parliament, so as to ensure oversight, accountability and legitimacy. To this end, the extra powers would be granted through "delegated acts", enabling Parliament or the Council to revoke them, and would need to be renewed every three years.
The text dealing with exceptional Commission powers in countries facing bankruptcy nonetheless places the Commission in a stronger position than it would have been under its initial proposals, notably by providing for greater use of the "reversed qualified majority" rule for votes in the Council.
For example, this rule would apply when the Commission recommends corrective measures to be taken by a country or when it requires new debt reduction plans to be submitted. Such decisions would be considered adopted unless the Council rejected them outright.
Growth as the ultimate goal
In line with shifting sentiment, both texts stress the need to ensure that fiscal monitoring does not hamper growth. The Commission's country-by-country assessments would therefore need to be more comprehensive, to ensure that budget cuts are not made at the cost of killing off investments with growth potential. Moreover, for countries being asked to undertake significant cuts these efforts must not harm investments in education and healthcare.
Member States would also be required to detail which of their investments had a growth and jobs potential and the deficit reduction timetables would be applied more flexibly in exceptional circumstances or in a severe economic downturn.
Coordinating debt issuance
The adopted texts take up the debt issuance reporting requirements advocated by Member States in their common position on the "two pack", but also go much further. For example, a specific process for coordinating debt issuance annually is proposed and countries would be required to report in advance on their debt issuance plans to the Commission and Council.
Most importantly on the matter, a European Debt Redemption Fund would be set up and, one month after the legislation's entry into force, the Commission would present a roadmap for introducing Eurobonds and a proposal for a growth instrument which would mobilise around 1% of GDP per year over a ten-year period for infrastructure investment.
However, the centre right group stressed that it would fully support the principle of a redemption fund only if the proposal were backed by an analysis which the text calls on the Commission to carry out by the end of this year.
Sharing reform burdens
MEPs also added a requirement for the Commission to consider negative spillover effects caused by the policies of other Member States when looking closely at the accounts of a country deemed to be in serious financial difficulty. This could result in reforms being asked not only of the country in difficulty, but also of other Member States that are seemingly in good health.
Legal protection from bankruptcy
A further addition to the Commission's proposals is a provision on legal protection to countries facing bankruptcy, to give them more stability and predictability in tackling their problems. Such a rule would provide more clarity where a country is on the verge of default. Once 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 interest rates would be frozen.
In the chair: Sharon Bowles (ALDE, UK)