Re-examined proposal for a Council Regulation (EC) on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
* HT COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 24. 06. 1997 COM(97) 305 final 96/0247 (SYN) Re-examined proposal for a COUNCIL REGULATION (EC) ON THE STRENGTHENING OF THE SURVEILLANCE OF BUDGETARY POSITIONS AND THE SURVEILLANCE AND COORDINATION OF ECONOMIC POLICIES (presented by the Commission pursuant to Article 189 c (d) of the EC Treaty) EXPLANATORY MEMORANDUM The re-examined Commission proposal for a Council Regulations on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies results from the second reading made by the European Parliament on the Council common position. The re-examined proposal forms part of the stability and growth pact and builds on the original proposal adopted by the Commission on 16 October 1996 in COM(96)496 final. In 19 March 1997 in COM(97)116 final, the the Commission approved amendments proposed by the European Parliament in its first reading which had been accepted by the Commission and the agreements reached in the European Council in Dublin in December 1996. its amended proposal which inter alia, included, The re-examined proposal includes some of the amendments proposed by the European Parliament in its second reading. In particular, the Commission has accepted the amendments leading to a single reference in the recitals to the European Council Resolution and the inclusion of a specific reference to government investment expenditure in the articles of the Regulation. The Commission is presenting its re-examined proposal now with a view to final agreement on the stability and growth pact at the Amsterdam European Council in June. £ Re-examined proposal for a COUNCIL REGULATION (EC) ON THE STRENGTHENING OF THE SURVEILLANCE OF BUDGETARY POSITIONS AND THE SUR VEILLANCEAND COORDINA TION OF ECONOMIC POLICIES The Commission re-examined proposal consists of the Council common position C4- 0174/97-96/0247(SYN) with the following amendments: Recital (2) now reads: (2) Whereas, in the Resolution of the European the European Council of 17 June 1997, Council, in accordance with Article D of the Treaty, has given firm political guidelines in order to implement the Stability and Growth Pact in a strict and timely manner; \ Recital (4) now reads: Whereas adherence to the medium- (4) term objective of budgetary positions close to balance or in surplus will allow Member States to deal with normal cyclical fluctuations while keeping the government deficit within the 3 ^percent of GDP reference value; Recital (5) now reads: it is to take appropriate to (5) Whereas complement the multilateral surveillance procedure of Article 103 (3) and (4) with an early warning system, under which the Council will alert a Member Sate at an early the necessary to the need stage budgetary corrective action to in order prevent a government deficit becoming excessive; whereas all Member States have committed themselves to take the corrective budgetary action to meet the objectives of their stability and 3 they deem necessary information convergence programmes whenever they have indicating actual or expected significant divergence from the medium-term budgetary objective; Recital (10) now reads: in the Resolution of the (10) Whereas European Council of 17 June 1997, the European Council, in accordance with Article D of the Treaty, has given firm political guidelines in order to establish an exchange-rate mechanism in the third stage of EMU; whereas the currencies of non participating Member States joining the new exchange rate mechanism, hereafter referred to as ERM2, will have a central rate vis-à-vis the euro, thereby providing a reference point for judging the adequacy of their policies; whereas, so as to enable appropriate surveillance in the Council, non participating Member States not joining ERM2 will nevertheless present policies in their convergence programmes oriented to stability thus avoiding real exchange rate misalignments nominal exchange rate fluctuations; excessive and Article 3. 2. (b) now reads. the main assumptions about expected (b) economic developments and important economic variables which are relevant to the realization of the stability programme such investment government expenditure, real gross domestic product (GDP) growth, employment and inflation; as Article 5. 1. now reads: by on the Based framework assessments 1. the Commission and by the Committee set up by Article 109c of the Treaty, the Council shall, within of multilateral surveillance under Article 103, examine whether the medium-term budget objective in the stability programme provides for a safety margin to ensure the avoidance of an the economic excessive deficit, whether assumptions on which the programme is based are realistic and whether the measures being taken and/or proposed are sufficient to V achieve towards the medium-term objective. targeted adjustment path the Article 7. 2. (b) now reads: the main assumptions about expected (b) economic developments and important economic variables which are relevant to the convergence of programme such as government investment expenditure, real gross domestic product (GDP) growth, employment and inflation; realization the Article 9. 1 now reads: on by Based assessments 1. the Commission and by the Committee set up by Article 109(c) of the Treaty, the Council shall, within the framework of multilateral surveillance under Article 103, examine whether the medium-term budget objective provides for a safety margin to ensure the avoidance of an excessive deficit, whether the economic assumptions on which the programme is based are realistic and whether the measures being taken and/or the proposed are sufficient targeted adjustment path the medium-term objective and to achieve sustained convergence; to achieve towards s Amendments proposed by the European Parliament in second reading and not accepted by the Commission The Commission did not accept amendments 4 (second part), 6 (first part), 7, 9 (first part) and 10, which are presented in an annex. The reasons why the Commission did not accept these amendments are the following : Amendments not accepted Justification Amendment 4 (second part) The proposed phrase is of a subjective nature. Amendment 6 (first part) Amendment 7 Introducing in this Regulation, which deals with the early-warning part of the Pact, reference to the procedures of Article 104c is not appropriate. It is not clear what is meant by a government deficit in conformity with the provisions of the Treaty;- in addition, the inclusion of the word possibly was not accepted because both participating and non- participating Member States have agreed that the medium-term target for the deficit must be close to balance or surplus. Amendment 9 (first part) Same justification as for Amendment 6, but for the convergence programmes. Amendment 10 if to that, programme imply is the The amendment seems convergence properly implemented, emergency measures could put it off the currency are track. unwarranted and successfully combated through temporary measures (e. g. increase in domestic interest rates). the pressures on should be temporary being they If ANNEX accepted AMENDMENTS NOT ACCEPTED BY THE COMMISSION (Amendment 4 ) Recital (10) joining (10) whereas in the Resolution of the the European Council of 17 June 1997. European Council, in accordance with Article D of the Treaty, has given firm political guidelines to establish an exchange-rate in order mechanism in the third stage of EMU; whereas the currencies of non participating Member States the new exchange rate mechanism, hereafter referred to as ERM2, will have a central rate vis-à-vis the euro, there by providing a reference point for judging the adequacy of their policies; whereas this mechanism will also assist them to resist unwarranted pressures in the foreign-exchange markets; whereas, so as to enable appropriate surveillance in the Council, non participating Member States not joining ERM2 will nevertheless their convergence programmes oriented to stability thus avoiding real exchange rate misalignments and rate fluctuations; excessive nominal exchange policies present in (Amendment 6) Article 5(1) 1. Based on assessments by the Commission under the procedure provided for in Article 104(cW3^ and (5) and by the Committee set up by Article 109c of the Treaty, the Council shall, within the framework of multilateral surveillance under Article 103, examine whether the medium-term budget objective in the stability programme provide for a safety margin to accepted 3 (Amendment 7) Article 7(2)(a) the medium-term objective for the (a) budgetary position for a government deficit to be in conformity with the provisions of the Treaty and possibly be close to balance or in surplus and the adjustment path towards this the general government objective for surplus/deficit; the the expected path for general government debt ratio; the medium- the policy term monetary relationship of those objectives to price and exchange rate stability; objectives; (Amendment 9) Article 9(1) the framework 1. Based on assessments by the Commission under the procedure provided for in Article 104(cy3) and (5) and by the Committee set up by Article 109c of the Treaty, the Council shall, within of multilateral surveillance under Article 103, examine v/hether the medium-term budget objective provide for a safety margin to ensure the I accepted avoidance of an excessive deficit, whether the the economic programme is based are realistic and whether the measures being taken and/or proposed are sufficient to achieve the targeted adjustment path towards the medium-term objective and to achieve sustained convergence; assumptions on which (Amendment 10) Article 10(1) second subparagraph In addition, the Council shall monitor the economic policies of non participating Member States in the light of convergence programme objectives with a view to ensure that their policies are geared to stability and thus to avoid real excliange rate misalignments and excessive nominal exchange rate fluctuations» and to take account of the emergency measures needed to resist unwarranted pressures so as to stabilise smooth thus ensure functioning of exchange markets. and the ISSN 0254-1475 COM(97) 305 final DOCUMENTS EN 01 IO Catalogue number : CB-C097-292-EN-C ISBN 92-78-21465-5 Office for Official Publications of the European Communities L-2985 Luxembourg