The EU has res­ponded to the economic crisis through a variety of legislative initiatives, first targeting financial sectors that have clearly been at fault. This is exemplified through legislation regulating credit rating agencies and the latest versions of the Capital Requirements Directives obliging banks to hold enough capital to reflect the true risks they are taking. The Supervisory Package is another instrumental initiative that enables oversight of the entire the financial sector and the early detection of micro and also macro prudential risks.

While these regulations and directives have enabled an effective response to most of the evident reasons for which the crisis occurred, it became evident that fiscal governance and the convergence of rules relating to public funds was crucial if the euro project were to survive. Mismanagement of public finances has led to a number of member states requesting aid through bailouts in order to be able to meet their financial obligations. In the euro area, such state of affairs has had an adverse effect on other member states because they are holding the same currency.

Greece, Ireland and, now, Portugal have been in choppy waters but the question is where does it end and how long will stronger member states have the ability, not to mention the political will, to bail out their less fortunate counterparts. In the long term, the critical issue is ensuring this situation is prevented from happening again.

Most regrettably, it is often only in times of crisis that we are pushed to take the much-needed action for which political divergences would have encouraged the perpetuation of a status quo that has proved detrimental, in this case, to the economic health of the EU.

The legislative tool that has been used so far to monitor and regulate public finances is the Stability and Growth Pact. The truth is that the pact has been known to be inefficient and ineffective, characterised by mechanisms that would be triggered only after the problem has already occurred and dependent on the will of member states in Council where political considerations and diplomatic ties could bear heavily on the decisions taken.

It is for the reasons above that the Commission, last year, presented a package of six dossiers that aimed to close these important gaps in European economic governance, primarily through the strengthening of the Stability and Growth Pact. This is the first time the European Parliament has had co-decision powers on economic governance, giving MEPs the opportunity to have an influential role in the decision-making process.

The EP committees that contributed to the dossiers were those dealing with economic and employment matters. I was responsible for establishing the position of the Employment Committee on these dossiers, which has now been voted upon and some of the clauses therein inserted in the version of the reports as adopted by the Economic Committee last week.

The EP is calling for a stronger package, one that hinges on semi-automaticity of mechanisms including sanctions that circumvent or limit the inevitable diplomatic haggling occurring in Council. The process is far from over however. The Council and the EP will have to work together to come to a compromise on the package before it can enter into force. This process is likely to be a challenging one with big concessions having to be made by both sides.

The author is a Nationalist member of the European Parliament.

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