– having regard to the proposal for a Council regulation (COM(2012)0336) (the 'BoP proposal'),
– having regard to the request for consent submitted by the Council in accordance with Article 352 of the Treaty on the Functioning of the European Union (C7-XXXX/2013),
– having regard to the Treaty on the functioning of the European Union (TFEU), in particular Articles 143 and 352 thereof,
– having regard to the Commission proposal of 23 November 2011 for a Regulation by the European Parliament and by the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area, the amendments thereto adopted by Parliament on 13 June 2012 and the provisional text of the final agreement with Council (the 'Gauzès report'),
– having regard to the Commission proposal of 23 November 2011 for a Regulation by the European Parliament and by the Council on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area, the amendments thereto adopted by Parliament on 13 June 2012 and the provisional text of the final agreement with Council (the 'Ferreira report'),
– having regard to Council Regulation (EC) No 332/2002 of 18 February 2002, establishing a facility providing medium-term financial assistance for Member States' balances of payments(1),
– having regard to its resolution of 20 November 2012 with recommendations to the Commission on the report of the Presidents of the European Council, the Commission, the European Central Bank and the Eurogroup ‘Towards a genuine Economic and Monetary Union’(2),
– having regard to Rule 81(3) of its Rules of Procedure,
– having regard to the interim report of the Committee on Economic and Monetary Affairs (A7-0129/2013),
A. whereas, pursuant to Article 352 of the Treaty on the Functioning of the European Union (TFEU), the Council, acting in accordance with a special legislative procedure, will adopt a regulation on establishing a facility for providing financial assistance for Member States whose currency is not the euro, acting unanimously, after obtaining the consent of Parliament;
B. whereas a balance of payments (BoP) facility was established in 2002 by Council Regulation (EC) No 332/2002, enabling financial assistance to Member States whose currency is not the euro;
C. whereas the total amount available in that facility has been increased from the initial EUR 12 000 million to EUR 25 000 million in December 2008 and to EUR 50 000 million in May 2009, in response to the financial crisis; whereas out of the EUR 50 000 million, EUR 13 400 million have been disbursed to Romania, Latvia and Hungary, in addition to a precautionary reservation of EUR 1 400 million to Romania;
D. whereas Hungary, Romania and Latvia were the first Member States to request and benefit from Union financial assistance at the beginning of the financial and economic crisis by means of a BoP facility; whereas the economic and financial crisis has seriously hit several non-euro area Member States;
E. whereas the global economic crisis has had a severe impact on all Member States, provoking a deterioration of their public deficit, balance of payment as well as the overall debt.
F. whereas the European Stability Mechanism (ESM), which was established in October 2012, is the main support mechanism for euro area Member States, with a lending capacity of EUR 500 000 million, provided by subscribed capital; whereas the ESM will, in the future, under certain conditions, be able to fund banks in difficulties directly;
G. whereas in its resolution of 20 November 2012, Parliament requested that the ESM evolve towards Community-method management, that it be made accountable to Parliament and that key decisions, such as the granting of financial assistance to a Member State and the conclusion of memorandums, should be subject to proper scrutiny by Parliament;
H. whereas it is critical that the facility contains democratic accountability mechanisms as well as consideration of the functioning of national parliaments;
I. whereas the BoP proposal does not provide for Member States whose currency is not the euro to benefit from financial instruments which are fully comparable to those within the ESM at their disposal;
J. whereas updating Regulation (EC) No 332/2002 would help ensuring a level playing field between euro area and non-euro area Member States and would simplify the procedure for activating the balance of payments facility;
K. whereas it is important to safeguard the role of the social partners and respect different national practice and institutions for wage formation when implementing Regulation (EC) No 332/2002 and the Regulation to be adopted on the basis of the BoP proposal, in particular when drafting and implementing macroeconomic adjustment programmes; whereas this is a horizontal issue for the whole of the Union and therefore consistency between euro area and non-euro area Members States is motivated in this regard.
1. Welcomes the BoP proposal as a first step towards achieving a level playing field between euro area and non-euro area Member States; acknowledges that the task is not simple given the features of the mechanisms recently created for the euro area;
2. Believes that the BoP financial assistance can play an important role in helping Member States to improve their administrative capacity to absorb Union funds more effectively;
3. Is of the opinion, however, that a number of amendments, outlined in this interim report, are needed in order to achieve an acceptable outcome; therefore requests in the interest of transparent decision-making that the Council and the Commission await the adoption of this interim report before adopting the regulation on the basis of the BoP proposal;
4. Highlights that Article 352 TFEU is a suitable legal basis for the Regulation to be adopted on the basis of the BoP proposal and stresses that this basis allows the establishment of new types of Union financial assistance and of a framework for such assistance beyond the scope of the assistance provided under Article 143 TFEU;
5. Regrets that the Commission did not conduct a wide consultation before the adoption of the BoP proposal, and that the Commission did not provide reasons to suggest that this was because of exceptional urgency, as required pursuant to Article 2 of Protocol No 2 on the application of the principles of subsidiarity and proportionality annexed to the TFEU and to the Treaty on European Union (TEU);
6. Points out and regrets that no reference was made to the application of the principles of subsidiarity and proportionality as required by Article 5 of Protocol No 2 on the application of the principles of subsidiarity and proportionality annexed to the TFEU and to the TEU; asks the Commission and Council to make an explicit reference to the above mentioned principles before submission of the draft Regulation for consent of the European Parliament;
7. Asks the Council and the Commission to take account of the following requests before submission of the draft Regulation for consent of the European Parliament:
(i) the Union budget is the ultimate collateral for all assistance measures under the BoP proposal; against this background, the Commission should present appropriate solutions beyond existing provisions as to how Parliament's budgetary oversight role of the Union budget could be more substantially taken into account in the BoP proposal and implemented so as to allow for true accountability;
(ii) the Commission should clarify the relationship between any assistance that might be granted to a non-euro area Member State under Regulation (EU) No 407/2010 establishing the European Financial Stability Mechanism(3) and the provisions and instruments established pursuant to the Regulation to be adopted on the basis of the BoP proposal after the discontinuation of the European Financial Stability Mechanism (EFSM);
(iii) since the EFSM will soon be discontinued, as announced by EU leaders at the 2010 European Council, in light of the entry into force of the ESM Treaty, the outstanding funding capacity in the EFSM (approximately EUR 10 000 million) could be transferred to the BoP facility, which would increase its firepower from EUR 50 000 million to EUR 60 000 million; once Member States reimburse the loans taken out from the EFSM, the Union budget guarantee will no longer be needed for the reimbursed amount, thus freeing the budget for guaranteeing new loans. Upon the discontinuation of the EFSM, the remaining EFSM capacity will no longer be used in the EFSM framework and could be used from then onwards under the BoP facility;
(iv) no effective link or material conditionality should be established between the BoP facility and the use of structural funds in the BoP proposal; conditions relating to the use of structural funds should, if needed, be addressed in the relevant Cohesion Policy legislative act;
(v) Article 2(4) of the BoP proposal, on the consultation requirement with the Commission where financial assistance outside the Union is sought, should not apply to a Member State receiving financial assistance on a precautionary basis in the form of a credit line which is not conditioned to the adoption of new policy measures by the concerned Member State, as long as the credit line is not drawn;
(vi) it is necessary to enhance the transparency and accountability within the enhanced surveillance process by adapting the economic dialogue in a way that allows the relevant national parliament as well as the European Parliament to invite the Commission, the Council, the European Central Bank (ECB) and the International Monetary Fund (IMF) for an exchange of views;
(vii) the Commission should present its draft recommendation to grant a loan to a Member State together with the draft macroeconomic adjustment programme to the European Parliament;
(viii) regarding the conditions and the procedures for granting loans, the European Central Bank (ECB) should have less involvement in the preparation of the adjustment programmes; in its opinion on the BoP proposal of 7 January 2013 (CON/2013/2), the ECB considers it inappropriate to assume such a role for a non-euro area Member State; therefore, as the ECB suggested it, Article 3(3) 'acting in liaison with the ECB' and Article 3(8) 'in liaison with the ECB' should be replaced by 'taking into account the view of the ECB, should the ECB decide to give advice in this respect';
(ix) in general, more clarity and specifications are required for the elaboration and assessment of the macroeconomic adjustment programme, particularly regarding policy and procedural requirements aiming at re-establishing "a sustainable balance of payments position and at restoring its capacity to finance itself fully on the financial markets";
(x) with reference to Article 4(1), regarding conditions for granting a precautionary conditioned credit line (PCCL), the BoP proposal would benefit from more operational clarity on two concepts, namely 'sustainability of the external position' and the 'presence or absence of bank solvency problems that would pose systemic threats to the banking system stability'; with that purpose such concepts should be specified directly in Article 4 with explicit references to the appropriate indicators foreseen in relevant Union texts (CRD IV, ESRB, ESAs regulations, '6pack', fiscal sustainability reports) or at the very least by means of delegated acts. In the same rationale, Article 4 should make explicit that the global assessment foreseen should be carried out by the Commission and should be made public, as appropriate. A reference to the assessments foreseen in the framework of the macroeconomic imbalances procedure as established by Regulation (EU) No 1176/2011 should also be added to eligibility criteria;
(xi) more clarity and more precise guidelines are needed with regard to Article 4(2) referring to conditions for granting a enhanced conditions credit line (ECCL), of the BoP proposal as to the thresholds and criteria of the assessment at which a Member State is no longer eligible for a PCCL, but still eligible for a ECCL as well as clarity on the procedures leading to the assessment referred to in such paragraph;
(xii) more clarity is needed with regard to Article 6(5) of the BoP proposal on the transition process from an ECCL to a loan in the event of a deterioration of the economic situation, especially as regards the timing and the determining factors of that transition;
(xiii) an indirect bank recapitalisation instrument for non-euro Member States should be established, particularly in light of the potential participation of these Member States in the upcoming single supervisory mechanism and of the need to provide them with a fiscal backstop.
An indirect bank recapitalisation instrument is proposed instead of a direct one, because putting the latter in place under the BoP framework would directly expose the Union budget to the risk presented by the financial institution being recapitalised.
That indirect instrument would take the form of a loan for bank recapitalisation, alongside the three existing instruments for financial assistance under the BoP (PCCLs, ECCLs and loans). There are no legal challenges standing in the way of a loan for bank recapitalisation, which would be disbursed to the government of the Member State concerned for the purpose of recapitalising its financial institutions, under strict conditionality;
(xiv) other than the indirect bank recapitalisation instrument above, the possibility of changing the ESM treaty and of allowing non-euro Members States, participating in the single supervisory mechanism, to benefit from the bank recapitalisation tool of the ESM could be considered. In that case, the Member States would make a capital contribution specifically to the bank recapitalisation instrument of the ESM.
The idea of setting up an ESM subsidiary to be used for direct recapitalisation, which would limit the negative impact that buying bank equity could have on the ESM's credit rating and lending capacity, should be explored and developed further, with a view to also encompassing those non-euro Member States participating in the single supervisory mechanism;
(xv) it should be kept in mind that any future single bank resolution fund, as part of the banking union framework, should also be inclusive towards non-euro Member States;
(xvi) the final agreement of the Parliament and the Council negotiating teams on the substance of the Gauzès report is welcome but it is important that the Regulation to be adopted on the basis of the BoP proposal reflect the current state of play, in particular as regards:
transparency of Commission decisions (Articles 2(3) and 2(5) of the Gauzès report);
– specifications concerning the reinforcement of the efficiency and the effectiveness of revenue collection capacity and the fight against tax fraud and evasion, with a view to safeguarding tax revenues (Article 9 of the Gauzès report);
– parameters to take into account when subjecting a Member State to enhanced surveillance (Article 2(1)) and specifications for the conduct of Member States under enhanced surveillance, including the mention of an adapted role for the ECB (Article 3(1)) as referred to in point (viii) of this paragraph;
transparency and accountability to European Parliament and where relevant to the national parliaments, including obligations to disclose macroeconomic adjustment programmes and the expected distribution of the adjustment effort (Articles 2, 3, 7 and 18 of the Gauzès report);
the consideration of the practice and institutions of wage formation and the observance of Articles 151 and 152 TFEU and of Article 28 of the Charter of Fundamental Rights of the European Union in the context of the Union strategy for growth and jobs as well as specifications regarding the obligation to involve social partners and civil society in accordance with national law and practice;
specifications regarding the evaluation on the government debt sustainability analysis, including disclosure requirements (Article 6 of the Gauzès report);
additional specifications regarding the mandate of technical assistance provided to Member States under programme (Article 7(8) of the Gauzès report);
the need for realistic, updated and disclosed forecasts (Articles 6 and 7(5) of the Gauzès report);
the recognition and role of spill-over effects (Article 1(1), Article 3(6) and 7(5) of the Gauzès report);
comprehensive audit of a Member State’s public finances within the macroeconomic adjustment programme (Article 7(9) of the Gauzès report);
assessment of whether deviations from the programme are within or beyond Member State control, assessment of the consequences resulting from the macroeconomic adjustment programme and the explicit protection of health care and education sectors (Articles 7(5) and 7(7) of the Gauzès report);
the Member State under assistance shall consider, in close cooperation with the Commission, whether to take all necessary measures to invite private investors to maintain their overall exposure on a voluntary basis (Article 7(6) of the Gauzès report);
economic dialogue with the Commission, the ECB and the IMF (Article 3(9) of the Gauzès report);
regular communication of the review mission assessment in post-programme surveillance to the competent committee of the European Parliament and to the parliament of the Member State concerned, including the possibility to conduct an economic dialogue (Articles 14(3) and 14(5) of the Gauzès report);
reverse qualified majority voting in the Council regarding corrective measures under post-programme surveillance (Article 14(4) of the Gauzès report);
report on a review of the Regulation to be adopted on the basis of the BoP proposal (in line with Article 19 of the Gauzès report);
(xvii) Article 6(2) of the BoP proposal on enhanced surveillance integrates a certain number of elements which reflect the substance of the Ferreira report. Therefore, the BoP proposal should be updated with the aim of ensuring a level playing field so as to reflect the agreement of the Parliament and the Council negotiating teams on the relevant parts of the Ferreira report, namely:
on standards and procedures regarding specifications for reporting requirements, including delegated acts for these reporting requirements (Article 10 of the Ferreira Report);
monitoring requirements on the quality of public finances including provisions regarding the impact of foreseen budgetary measures on the targets set by the Union’s Strategy for growth and jobs (EU2020 targets) and the adaptations that an assistance programme entails on the National Reform Programmes as well as a description and quantification of budgetary measures, including foreseen tax policy reforms and potential spill-over effects of foreseen measures for other Member States (Article 6 of the Ferreira Report);
indications on the expected economic returns on non-defence public investment projects having a significant budgetary impact (Article 4(1) of the Ferreira Report);
8. Instructs its President to forward this resolution to the European Council, the Council, the Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund.
The underlying BoP Proposal is in essence a welcome initiative to streamline procedures in financial assistance between the euro area and the non-euro area. Some modifications and additions are however needed, and these are outlined in this interim report.
The interim report is drafted as, regrettably, under the present procedure Parliament can only approve or reject the final proposal for a regulation and has no possibility to make amendments to its substance. Moreover, following the initial proposal of 22 June 2012 (COM(2012)0388), the Commission is now due to update the BoP Proposal based on the provisional agreement in the Gauzès report of the two-pack, where financial assistance procedures for the euro area are specified. However, this update is not due to happen through an updated proposal, but changes are to be directly integrated into the final text due to be adopted by the Council. Against this background, it is therefore all the more important that Parliament’s position is outlined in a transparent manner in the interest of basic democratic legitimacy, as well in the interest of achieving a positive outcome on the final text of the regulation.
The present interim report cannot aspire to cover all issues raised in this crucial proposal for a regulation. It does however attempt to outline critical points that need to be addressed before such a regulation is finally adopted. A major issue in this regard is the streamlining of the BoP Proposal with the provisional agreement of the two-pack. This provisional agreement, among other things, substantially enhances the transparency and accountability of the procedure of requesting and granting financial assistance to Member States in difficulties and it is imperative that a similar increase in transparency and accountability be taken over to the present proposal.
Moreover, this interim report demands more clarity in some central concepts of the proposal and seeks to introduce procedures for financial assistance that are both clear, fair and do not impose unnecessary consultations where these are not warranted. Furthermore, the role of the EU budget as the ultimate collateral in the financial assistance granted under this regulation should be reflected in appropriate procedures of accountability towards the European Parliament.
This interim report should be placed into the wider context of current EU economic reforms. Policymakers are currently laying the foundation of the future Banking Union. The latter has three main components: a single supervisory mechanism (SSM), a single resolution authority and a single deposit guarantee scheme. Council, Parliament and the Commission have just completed negotiations on the first pillar of the structure, which envisages an ECB based single supervisor for Eurozone Member States. The mechanism is also open to non-euro Member States who wish to opt-in to single supervision. The Commission is expected to release a proposal for a single resolution fund in the course of 2013. While details about the upcoming proposal are not known at this stage, it will be of the utmost importance that any future single resolution fund is also open to non-euro Member States. Centralised supervision will have little value added if bank resolution costs are ultimately born at the national level.
Before the issue of bank resolution comes into play however, financial institutions may also be faced with recapitalisation needs. In the absence of a solid bank recapitalisation instrument, such a bank may fail and warrant the use of a resolution fund. In order to prevent and not just treat the problem at hand, bank recapitalisation tools are required.
While this interim report welcomes the greater variety of financial assistance instruments available to non-euro Member States under the BoP Proposal, it also draws attention to the lack of a bank recapitalisation instrument in the toolkit of financial assistance available to non-euro Member States.
In order to provide a true level playing field between euro area and non-euro area Member States, it is necessary to move into a direction which also makes bank recapitalisation possible in non-euro area Member States. As this issue is rather complex, the remainder of this explanatory statement is dedicated to outlining the problem at hand, as well as to presenting a number of potential solutions to it.
Bank recapitalisation for non-euro area Member States
At the June 2012 European Summit, Heads of State and Government announced that once the Single Supervisory Mechanism (SSM) is up and running, the ESM could be used to directly recapitalise Eurozone banks. The same possibility would however not be open to non-euro Member States opting-in to single supervision.
Non-euro members have access to the Balance of Payments (BoP) instrument, whose toolkit is however rather limited compared to the ESM. There appear to be no legal challenges which prevent the BoP instrument from being used for bank recapitalisation. Nonetheless, the instrument is limited in the amount of funding it has at its disposal. It is believed that the maximum firepower of the BoP instrument cannot exceed 60bn EUR. This funding limitation is owed to the fact that it is guaranteed by the EU budget. In case one of the Member States taking out loans was to default on its repayments, the EU could risk defaulting on its own obligations.
If a financial institution were recapitalised directly via the BoP instrument, then the EU budget would in turn be exposed to that financial institution. The risk is significantly lower if it grants a loan to a Member State and not to a financial institution directly.
When non-euro Member States join the euro area, they will be able to benefit from all the instruments of the ESM. In the meantime, it is useful to consider two alternatives for bank recapitalisation, namely:
A. Adding a novel instrument in the form of a loan for indirect bank recapitalisation, alongside the three existing instruments for financial assistance under the BoP, namely PCCLs, ECCLs and loans. Such a loan would be disbursed to the government of the member state concerned for the purpose of recapitalising its financial institutions. Since the EFSM will soon be discontinued, as announced by EU leaders at the 2010 European Council, in light of the entry into force of the ESM Treaty, the outstanding funding capacity in the EFSM (approximately 10bn EUR) should be transferred to the BoP facility. This would increase its firepower from 50bn EUR to 60bnEUR.
B. Changing the ESM treaty and allowing opt-in non-euro members to contribute to the ESM paid-in capital explicitly for the purpose of having a bank recapitalisation backstop. Changing the ESM treaty may however prove to be a difficult undertaking.
RESULT OF FINAL VOTE IN COMMITTEE
Result of final vote
Members present for the final vote
Elena Băsescu, Sharon Bowles, Udo Bullmann, George Sabin Cutaş, Leonardo Domenici, Derk Jan Eppink, Markus Ferber, Elisa Ferreira, Ildikó Gáll-Pelcz, Jean-Paul Gauzès, Sven Giegold, Liem Hoang Ngoc, Gunnar Hökmark, Othmar Karas, Wolf Klinz, Rodi Kratsa-Tsagaropoulou, Philippe Lamberts, Astrid Lulling, Hans-Peter Martin, Arlene McCarthy, Sławomir Nitras, Alfredo Pallone, Antolín Sánchez Presedo, Olle Schmidt, Peter Simon, Peter Skinner, Theodor Dumitru Stolojan, Ivo Strejček, Marianne Thyssen, Pablo Zalba Bidegain
Substitute(s) present for the final vote
Sophie Auconie, Lajos Bokros, Herbert Dorfmann, Ashley Fox, Anne E. Jensen, Eva Joly, Thomas Mann, Marisa Matias
Substitute(s) under Rule 187(2) present for the final vote