The Irish Presidency of the Council of the EU has secured agreement, on behalf of euro area member countries, with the European Parliament and the European Commission, on two proposed regulations the "two-pack". One of the proposals is on the monitoring and assessment of draft budgetary plans and on ensuring the correction of excessive deficits. The other is on the strengthening of economic and budgetary surveillance and sets out explicit rules for enhanced surveillance of countries experiencing or threatened with financial difficulties. The agreement reached on 20 February will have to be approved by member countries and the European Parliament. The "two-pack" will be a significant and welcome enhancement of the euro area’s economic governance regime. It is, to a great extent, a natural extension of the measures contained in the ‘six-pack’ which was introduced on 13 December, 2011. The ‘six-pack’ - comprising five regulations and one directive - reformed and strengthened fiscal surveillance under the Stability and Growth Pact and introduced new macroeconomic surveillance.
The ‘two-pack’ is applicable to euro area member countries only.
The proposed surveillance regulation provides for surveillance under a number of circumstances, specifically, where a member state is experiencing severe difficulties with regard to its financial stability and where this is likely to have adverse spillover effect on other Member States, where a member state is in a macroeconomic adjustment programme, and also post-programme surveillance. There are specific features attaching to each of these. However, in the case of enhanced surveillance, it is a matter for the Commission to decide every six months whether to prolong the enhanced surveillance. Under the regulation, a post-programme surveillance process will be put in place and maintained for a member country until the balance outstanding under EU-sourced financial assistance falls below 25% of the total. This covers all EU funding sources, including bilateral loans. It also provides that the Commission shall conduct, in liaison with the ECB, regular review missions in the Member State under post-programme surveillance to assess its economic, fiscal and financial situation.
The reports generated following such missions shall be considered by the European Council which - acting by qualified majority on a proposal from the Commission - may recommend to the Member State concerned to adopt corrective measures. The regulation provides that the duration of post-programme surveillance may be extended by the Council on a proposal from the Commission “in the case of persistent risks to the financial or fiscal sustainability of the Member State concerned. Post-programme surveillance is a normal feature of IMF assistance programmes, and this regulation provides for a similar arrangement for the EU.
The other proposed regulation concerns ‘the monitoring and assessment of draft budgetary plans and on ensuring the correction of excessive deficits’ in euro area Member States. It will apply to all countries in the euro area, with special provisions including in relation to reporting requirements being made for those which are subject to an excessive deficit procedure. This draft regulation specifies that all euro area Member States, not in a macroeconomic adjustment programme, will be required to submit to the Commission and the Eurogroup and make public a draft budgetary plan no later than 15 October each year. The draft budgetary plan will be assessed by the Commission, which shall adopt an opinion on it by the end of November. The draft regulation also provides that the Commission may request a revised draft budgetary plan in exceptional circumstances where it identifies particularly serious non-compliance with the budgetary obligations laid down in the Stability and Growth Pact.
This Government is firmly committed to reducing the deficit to below 3% by 2015 and to achieve a structural balance thereafter in line with the stability treaty. These regulations make no changes to these rules.