EU member states, particularly eurozone countries like Malta, will soon have more rigid economic governance rules after an agreement was reached between member states and the European Parliament over six pieces of legislation.
After months of negotiations, Commission President Jose Manuel Barroso on Tuesday announced the agreement which now has to be given the formal green light to enter into force.
The new rules have been framed as the cornerstone of the EU’s plans to prevent another financial crisis and create a stronger, closer union. The ‘six-pack’, as the new legislation is known in Brussels, also gives new authority to the EU executive to increase oversight of national authorities’ economic policies, make suggestions for reforms, and punish profligate states.
The new legislation allows – for the first time – financial sanctions to be imposed on those member states which repeatedly ignore the Commission’s recommendations to rein in their deficits and level of public debt.
Malta was in favour of this legislation as it assures a stronger eurozone.
Since the start of July, Poland – at the helm of the rotating EU presidency – has been very active in this area, playing its role of mediator between the Council and Parliament, which were initially divided.
Germany and France fought against conceding too much authority to the EU to oversee national economic policies while MEPs took this opportunity to assert their influence in one of the first major tests of new powers granted by the Lisbon Treaty.
Welcoming the agreement, Nationalist MEP David Casa – who acted as a rapporteur on this legislation for the Employment and Social Affairs Committee – said that a strong economic governance package is a crucial tool to prevent future crises, boost competitiveness and ensure responsible and sustainable budgetary policies in the eurozone.
“The package that has just been agreed between the European Council and the European Parliament is a real breakthrough, following long and difficult negotiations,” he said.
However, not everyone is celebrating the deal. European Central Bank President Jean-Claude Trichet said at a meeting of EU finance ministers over the weekend in Poland – where the member states reached the agreement on the package of six legislative acts – that the EU should continue improving governance, while Dutch Finance Minister Jan Kees de Jager said the package of six proposals should be seen only as a first step.
The package needs to be officially approved by the Ecofin Council (EU finance ministers) on October 4.
Goals of ‘six-pack
The package has four broad goals:
Toughening the rules of the Stability and Growth Pact (SGP) which was designed to limit budget deficits and government debts by a much stronger surveillance already in an early stage and making it easier to initiate the procedure. The rules will also give a greater importance to debt (and not only deficit) reduction and sustainable growth;
Introducing new controls on macro-economic imbalances across the EU, such as housing bubbles and growing divergences in competitiveness between member states;
Setting standards to ensure the correct and independent compilation of statistics as this data is crucial to sound budgetary policy-making and monitoring of budgets;
Beefing up the transparency of the decision-making processes and the accountability of decision makers.