Solutions needed for today as well as tomorrow
At the start of yet another meeting by the leaders of the EU countries attempting to find solutions to the current financial and economic crisis, European Parliament President Martin Schulz has called for “a long-term vision accompanied by short-term pragmatism”. He also stressed that the “well-tested” EU legislative method should be used to confront the crisis.
In this press kit you will find a fuller statement by President Schulz as well as the most recent examples of how the normal legislative method, with the Commission as initiator and the Parliament as co-legislator, has proved to be the most effective in yielding results which are both concrete and have the necessary democratic legitimacy.
To name but one example, the so-called “six-pack”, which provides for binding rules on budgetary discipline but simultaneously recognizes the need for stimulating jobs and growth, has long since been passed by the Parliament.
Other proposals made by the Parliament some two years or even longer ago have now finally made it onto the table.
1. Statement by European Parliament President Martin Schulz
2. EP proposals and positions since 2010
3. Laws passed by the EP
4. Recent releases on economic affairs and the multi annual financial framework
5. Statements from committee chairs
"We are living in extraordinary times, which require extraordinary decisions. The European Council needs to show determination, courage and vision to combat the crisis that poses an existential threat to the euro zone and is shaking the very foundations of the European Union.
I very much hope that this European Council will be a breakthrough marking the beginning of the end of the crisis, that it will reassure citizens that our responsible policies can restore growth and jobs and that it will restore financial markets' confidence in the euro.
For that to happen, a long-term vision must be accompanied by short-term pragmatism. The euro area needs a road-map towards a banking union, a fiscal union and the political union. But it also needs very concrete measures right now to stop the crisis from spiralling out of control. If you want to stop the fire you do not sit down to design better fire detectors, you run for a fire extinguisher.
Measures to reduce the spreads and crippling interest rates are now necessary to restore full confidence in the euro. They should be part of the package of measures that move us towards the three unions. A plan to stimulate growth and create jobs would be another vital element of this package.
The well-tested community method of decision-making, which involves all three EU institutions -- the Council, Commission and Parliament -- should be the tool shaping our response to the crisis.
The European Parliament will be a constructive partner. It is ready to scrutinise and adopt all anti-crisis measures as quickly as it is possible, while preserving the prerogatives of the EU institutions."
Back in 2010 the European Parliament identified tighter economic governance, better EU supervision of the banking sector and the pooling of sovereign debt as the key factors to address the then infant Eurozone crisis. All along it made proposals to address these areas. These proposals are now to a large extent reflected in the policy options paper prepared by the task force headed by Herman Van Rompuy.
Parliament will be pushing, as it always has, for policy to be developed through the normal EU framework rather than through intergovernmental accords which have systematically failed to deliver the goods.
Van Rompuy policy options paper
Building block 1: Stronger banking supervision
Building block 2: Economic governance and sovereign debt mutualisation
Building block 3: Stronger economic policy coordination and coherence
Building block 4: Democratic legitimacy
While leaders have been searching for a one stop miracle cure to the Eurozone and post Lehman crises, laws hammered out by the Commission, Parliament and Council have been developed at a frantic pace. Ingrained into the very heart of the EU structure with the European Court of Justice and Commission empowered to watch over their proper implementation, these laws will form the backbone to Europe's crisis response.
In all cases, without an exception, it has been Parliament which has pushed for the more ambitious approach when shaping these laws. The table below gives a brief overview of some of the recent relevant laws and details the ambitions the EP pushed through or defended despite the considerable reticence of numerous Member States.
Economic governance 'six pack' (concluded 2011)
A stronger Commission;
democratic processes hardwired into the system;
much closer attention to macro-economic imbalances
Economic governance 'two pack' (ongoing negotiations with Council)
More intelligent governance which promotes economic growth;
setting up of mechanisms to incentivise closer budgetary coordination (redemption fund and a roadmap towards Eurobonds);
Stronger Commission but with appropriate checks and balances
EU financial supervision (concluded 2011)
Much stronger role for EU financial watchdogs;
Would have liked the European Banking Authority to have direct and permanent supervision of banks and a single EU bank crisis resolution fund
Short selling and credit default swaps (concluded 2011)
Ban on trading in sovereign credit default swaps if related bonds are not also owned
Bank capital requirements: CRD III (concluded 2010) and CRD IV (ongoing negotiations with council
CRD III: bonus caps introduced for very first time;
CRD IV: bonuses should be capped more tightly (bonus should not be greater than salary)
Economic governance with a wider vision
13-06-2012 - Plenary Session
The next round of economic governance legislation must be geared more towards growth and new European Commission powers to vet Eurozone countries' budgets should be better democratically controlled, MEPs said on Wednesday when adopting Parliament's position on the so-called "two pack". The biggest changes to the Commission proposal are a new chapter on coordinating debt issuance, including the partial pooling of Eurozone debt, and legal protection for countries about to default.
The votes come after the Economic and Monetary Affairs Committee approved the two texts, but with majorities deemed too slim to provide a clear mandate for negotiating with Member States. Now, with a plenary mandate, Parliament's negotiators will enter into talks with them in order to reach a deal on the legislation.
Jean-Paul Gauzès (EPP, FR), rapporteur for the rules dealing with countries in significant financial trouble, said, "with such rules in place two years ago we would have avoided the problems currently experienced by some countries since early and clear actions would have been taken".
Elisa Ferreira (S&D, PT), rapporteur on the text which steps up budgetary reporting requirements for all Eurozone countries, argued that the legislation must respond to a broader political context. "Fiscal discipline cannot be the Alpha and Omega of our strategy. We need to rebalance our short term objectives to also address growth and the vicious spiral of high debt-financing interest rates", she said.
Redemption fund, Eurobonds and infrastructure investment
Parliament's position adds a very direct growth dimension to the package and provides some immediate fix solutions to reduce debts. Most importantly, a European Debt Redemption Fund would be set up to group together all Eurozone members' debt which exceeds 60% of their GDP. Currently amounting to around €2.3 trillion, this debt would then be repaid over 25 years and at a lower average interest rate. This would provide breathing space for countries to carry out difficult structural reforms and would also help to break the spiral of high interest rates, higher debt, and less growth.
As to longer-term solutions, one month after the legislation's entry into force, the Commission would also be required to present a roadmap for introducing Eurobonds and a proposal for a growth instrument which would mobilise 1% of GDP per year, or around €100 billion, over ten years, for infrastructure investments.
More Commission oversight but no blank cheque
The Commission's 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 need to be renewed every three years and Parliament or the Council would be able to revoke them.
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 own 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 budget 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 make significant cuts, these efforts must not harm investments in education and healthcare, particularly in countries in severe financial difficulty. The Commission would also be required to look at spillover effects, to be sure that a country's difficulties do not also stem for bad policy elsewhere in the Eurozone.
Member States would also be required to detail which of their investments has growth and jobs potential, and deficit reduction timetables would be applied more flexibly in exceptional circumstances or in a severe economic downturn.
Finally, the texts also entrench the rights of social partners and civil society to express their views on Commission recommendations and be better included in policy formulation.
Legal protection from bankruptcy
A new rule would empower the Commission to place a country on the verge of default under legal protection, to give it more clarity, stability and predictability in tackling its problems. 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.
The Gauzès resolution was adopted with 471 votes in favour, 97 against and 78 abstentions, and the Ferreira one with 501 votes in favour, 138 against and 36 abstentions.
Member states want to continue hiding debts
21-06-2012 - Rapporteur statement
This morning Parliament suspended trialogue negotiations with Member States on legislation regarding the disclosure of information of national and regional public accounts. The EP negotiating team led by the rapporteur Sharon Bowles (ALDE, UK) issued the following statement:
"Three years down the line and some EU governments are incredibly still blind to the most basic lessons to come out of the sovereign debt crisis.
While this afternoon EU finance ministers will be discussing ways to solve the crisis, Member States are simultaneously refusing to release key data on public liabilities linked to pensions and bank bailouts, making it difficult to believe that future banking union talks can succeed.
The Danish Presidency announced to Parliament negotiators today that a blocking minority of four large Member States staunchly oppose releasing data on government liabilities stemming from public pension schemes, guarantees to banks and public corporations where they have a large impact on public budgets.
With memories still fresh of the disastrous consequences of statistical cover-ups in Greece, the Parliament believes it is highly irresponsible behaviour on the part of those Member States.
The economic governance package (the so-called 'six-pack') agreed last Autumn requires Member States to start releasing data on public sector liabilities, but now it seems that this "coalition of the shy" are trying to wriggle out of this promise, or prevaricate over the delivery of data.
It is saddening and worrying that the gulf between what government representatives say and in the end do is still as wide as ever. This is not the road to credibility."
Sharon Bowles (ALDE, UK), rapporteur
Theodor Dumitru Stolojan (EPP, RO)
Edward Scicluna (S&D, MT)
Philippe Lamberts (Greens/EFA, BE)
Vicky Ford (ECR, UK), also 'six pack' rapporteur for the budgetary frameworks directive
Eurobonds and other tools for debt solidarity
18-06-2012 - Economic and monetary affairs committee
EU Member States' very short term debt should be pooled immediately through Eurobills (i.e. debt with a maturity of less than a year), and in the longer run, the EU should consider not only Eurobonds but also a form of federal debt on the US model , argues a non-legislative text presented to the Economic and Monetary Affairs Committee on Monday.
Presenting her proposals, Sylvie Goulard (ALDE, FR), set out a potential roadmap which would address not just the immediate needs of the Eurozone crisis but also longer-term ones resulting from the deepening of the EU's economic governance.
"Eurobonds are neither a panacea nor an idea be totally excluded. What is clear is that we need solutions today for those countries which are undergoing extreme structural changes. If these structural changes stop the whole Eurozone will suffer", Ms Goulard said at the beginning of her presentation.
Immediate needs - a redemption fund and Eurobills
As EU countries are now financing their debt at dramatically different interest rates (spreads), instruments should be put in place to address the problem, argues the text. Eurobonds would require various building blocks to be in place, and this cannot be done immediately, it says. It therefore proposes setting up a European Redemption Fund to pool Member States' debt in excess of 60% of their GDP and, most innovatively, creating Eurobills.
Eurobills would ease the most pressing debt financing needs of countries by pooling short term debt due to be repaid in less than one year (around €900 billion), notes the text. Debt with longer term maturities would remain the responsibility of each Member State. A debt agency would issue the debt, but the issuance timetable would continue to be decided by Member States. Issuing debt yearly would give fiscal surveillance authorities solid bargaining power which would reduce the risk of some countries slowing down on their economic reforms.
Stabilising the Eurozone - Eurobonds and possibly more
A stable Eurozone will happen through tighter surveillance, including of banks, the text argues. But it will also require better integration of debt financing. To this end, the text proposes mutualising any debts beneath the 60% of GDP threshold (the Breugel Blue bond proposal), and then establishing Eurobonds further down the line.
The possibility of using Eurobonds to raise funding would be open only to those Member States that comply with the EU economic governance rules and a European debt agency would need to be established for this purpose. Furthermore, proper democratic oversight would need to be ensured for all related issues, such as national fiscal policies.
The text also proposes going beyond Eurobonds to consider an EU federal debt model. This could be similar to the US system, in which American Treasury bonds coexist with those issued by the federal states. Debt issued at European level could be used to finance EU investments in European public goods such as infrastructure or research and development, the text argues.
MEPs demand robust and flexible budget and reformed revenue system for the EU
13-06-2012 - Plenary session
The EU needs a robust budget to meets its political goals, MEPs tell EU leaders, who discuss the 2014-2020 budget plan on 28-29 June. The long-term budget should be flexible enough to cope with new challenges and contributions from national coffers should be replaced by other ways of funding the EU budget, says Parliament in a resolution adopted on Wednesday.
In the resolution, adopted by 541 votes to 100, with 36 abstentions, MEPs insist that the budget frame for 2014-2020 should "provide enhanced budgetary flexibility within and across headings, as well as between financial years ... in order to ensure that budgetary resources can be appropriately aligned with evolving circumstances and priorities".
They believe that the lack of flexibility in the current system has made it very difficult to react to new challenges. It was for instance hard to find financing for the nuclear fusion research project ITER, a new priority that arose in the middle of the current budget period. The smaller the budget is, the greater the need to be able to reshuffle resources to deal with unexpected events.
Parliament' blessing is needed before the Council can adopt the Multiannual Financial Framework (MFF), or budget plan, (by a unanimous vote). It therefore demands fully-fledged negotiations with the Council on all MFF-related aspects.
Reform of revenue system
Under the treaties, the EU budget must be "financed wholly from own resources". Parliament says reforms to the current system, introducing alternative sources of income such as a financial transaction tax or a new EU VAT, would reduce EU member states' contributions based on gross national income (GNI) from 75 % to 40 % by 2020 It is "not prepared to give its consent to the next MFF regulation without political agreement on reform of the own resources system, putting an end to existing rebates and other correction mechanisms".
Parliament was the first EU institution to adopt a position on the next long-term budget frame, for 2014 to 2020, and it did so on 8 June last year. The European Commission tabled its proposal on 29 June 2011. The Danish Presidency will present its "negotiating box" at the June summit, when the European Council holds its first discussion on the subject.
EU budget 2014-2020: freezing is not an option, new income sources needed
25-05-2011 - Policy challenges temporary committee
Freezing the EU's long-term budget after 2013 is not a viable option if it is to achieve its policy aims, said the Policy Challenges Committee on Wednesday, voting its stance on the EU's long-term budget for 2014-2020. The budget structure must clearly reflect the EU 2020 sustainable growth strategy, say MEPs, who also advocate new income sources for the budget, and call for an end to all rebates, exceptions, and corrective mechanisms.
Freezing future budgets at the 2013 level - as demanded by some Member States - "is not a viable option", said the committee. MEPs call for an increase of at least 5% over the 2013 level for the next long-term budget, known as the Multi-annual Financial Framework (MFF). They note that even such an increase would make only a small contribution towards achieving the aims to which Member States and Parliament are already committed.
If Member States disagree, then committee members challenge them to say which policy priorities should be dropped. MEPs fear that budget restrictions could jeopardise the already-agreed boost for research and innovation (from today's 1.9% of GDP to 3%), as well as investments in infrastructure, foreign policy priorities and enlargement. Funding for the European Financial Stabilisation Mechanism and the Millennium Development Goals could also be endangered, MEPs warn.
The committee wants regional policy and agriculture funding to remain at current levels, but increases in investment in energy infrastructure. It also acknowledges that further savings could possibly be made on EU administration.
Parliament was the first institution to outline its priorities for the next EU budgetary perspectives. The position adopted in May last year is still that being pushed today.
Alain Lamassoure (EPP, FR), Chair of the budgets committee
"The Parliament's position on the MFF and own resources has long been known. All our priorities are set out in the SURE report, adopted in June 2011. Politicians are always eager to sign up to ambitious objectives, like the Europe2020 strategy or the Millennium Development Goals, but when it comes to allocating the necessary funding, the story changes. The road to hell is paved with good intentions. We have to build a credible EU budget to run until 2020 and deliver on our promises.
That is why Parliament calls for a realistic EU budget for 2014-2020. If this money cannot be made available, then we need to agree where Europe must do less. We also want the budget to be funded from real own resources, as the Treaty stipulates. This could partly replace the GNI contributions from the Member States. As we underlined in our resolution, adopted in Strasbourg this month, we will not give our consent to expenditure, unless there is a political agreement on own resources."
Sharon Bowles (ALDE, UK), Chair of the economic and monetary affairs committee
As all the other summits have shown, there are no silver bullet solutions, but the difficult decisions cannot be dodged forever.
"This time last year I said the council was in the last chance saloon, I haven't changed that view, now we're looking for resuscitation (so ho hopefully someone has brought the defibrilator!)."
"European Leaders need to find ways to alleviate the crisis on our doorstep. In addition to long term planning we need to find a way to lower the cost of borrowing now without constantly resorting to the ESM.
"We need solutions that provide enough time for the measures that have already been taken on budgetary coordination and discipline to prove themselves. During that time we also need to put in place the building blocks for future, longer term integration and stability. This will not all happen at once and will need to be done in stages, but it can not be developed in an air of panic.
"On the positive side Eurobonds and much deeper political integration, are seriously up for discussion. These are momentous decisions and I do not think it is practical to ask ordinary people to leap into long term solutions without testing the water.
"If Europe is serious about solving the Eurozone crisis then all countries should work constructively over the coming days to find a common and achievable roadmap. This will mean greater integration and coordination within the Eurozone, but doors must remain open for others.