# EUR-Lex - 52013DC0166 - EN

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# 52013DC0166

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Towards a Deep and Genuine Economic and Monetary Union Ex ante coordination of plans for major economic policy reforms /* COM/2013/0166 final */**

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COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT AND THE COUNCIL

Towards a Deep and Genuine Economic and
Monetary Union
Ex ante coordination of plans for major economic policy reforms

1.
Introduction

The lessons learned from the recent
economic, financial and sovereign debt crisis have led to a major overhaul of
the EU's and Economic and Monetary Union’s (EMU) economic governance. The
surveillance of economic, budgetary and structural policies that has been
brought together into the European Semester has made EMU more robust than it
was at the onset of the crisis and better equipped for the future. Its scope
was broadened to include competitiveness and internal and external imbalances
under the new Macroeconomic Imbalances Procedure (MIP).

The new governance framework is designed to help the Union to emerge stronger from the crisis by
boosting competitiveness, productivity, growth potential, social cohesion and
economic convergence. This will help the EU internally
and also strengthen its international role as a key player in the global
economy.

The new economic surveillance architecture
in the EU, and in the Euro area in particular, provides for differentiation
between Member States depending on their economic conditions. This is reflected
in different policy instruments ranging from preventive surveillance through the
European Semester[1]
to corrective surveillance[2]
to crisis surveillance of a Member State that seeks recourse to the backstops.

To complement this governance framework, the
Commission considers it important that national plans for any major economic
policy reforms are assessed and discussed at EU-level before final decisions
are taken at the national level. This would also ensure that Member States
internalise the EU-level dimension of key reforms in their national
decision-making process. This is what is known as ex ante coordination,
which also reflects the spirit of Article 121(1) of the Treaty[3].

The
concept of ex ante coordination of plans for major economic policy reforms was
introduced by the Treaty on Stability, Coordination and Governance in the
Economic and Monetary Union (TSCG)[4]. Article 11 of the TSCG includes a commitment to
discuss ex ante and, where appropriate, coordinate all plans for major economic
policy reforms. The TSCG foresees the
incorporation of its substance into the legal framework of the European Union within
five years, at most, of the date of its entry into force. Whereas the current
EU economic surveillance framework includes a process for economic policy coordination,
it does not provide for a structured ex ante discussion and coordination of
major economic reform plans, as foreseen in Article 11 TSCG. A commitment to
discuss major reforms with potential spill-over effects has also been confirmed
in the 2012 Council Recommendation on the implementation of the broad
guidelines for the economic policies whose currency is the Euro[5].

The Commission already set out some reflections
on ex ante coordination in its Blueprint for a Deep and Genuine Economic and Monetary
Union in November 2012[6].
The European Council of 13 and 14 December 2012 requested the Presidents of the
European Council and of the Commission for work to be taken forward in the
areas of coordination of national reforms, the social dimension of EMU including
social dialogue, the feasibility and modalities of mutually agreed contractual
arrangements for competitiveness and growth, and solidarity mechanisms that can
enhance the efforts made by Member States that enter into such arrangements[7].

This Communication is a contribution to the
debate which is now underway between key stakeholders on the next steps towards
a deep and genuine EMU, in particular the European Parliament, the Member
States, and the national parliaments. It concentrates on ways of implementing
ex ante coordination of plans for major economic policy reforms under the
existing Treaties

2.
selection of reforms subject to ex ante coordination

The Commission considers that ex ante
coordination should concern only major national economic reform plans and that
it should take place at an early stage before the measures are adopted. The
reason for having ex ante coordination is to ensure that possible spillover
effects of major economic reforms in one Member State on other Member States
and/or on the Euro area and wider EU are also taken into account in the
national decision-making process. The way reforms are implemented may influence
the smooth functioning of the EMU.

In order to maximise positive spillovers
and minimise negative ones, the Commission is considering proposing that the
reforms to be coordinated should be relevant taking into account the following filters:

·
Trade and competitiveness are among the main channels through which spillovers are
transmitted. Product, services and labour market reforms as well as certain tax
reforms may affect employment and growth in the implementing Member State, and
hence the demand for products and services from other Member States. This is
because a reform may also have a positive or negative impact on the reforming
Member State's price and non-price competitiveness.

·
Another channel through which spillovers are transmitted,
are the financial markets. Some reforms may produce spillovers through
financial markets when reforms increase the Member State's ability to
withstand external shocks and limit the risk of contagion of risk premiums in
case of concerns with regard to debt sustainability.

·
Finally, there are also political economy
considerations. While it is in each Member State's interest to foster reforms
that improve competitiveness, successful implementation has to take into
account possible domestic opposition to reform. Coordinated reforms across
Member States can help communicate the broader welfare effects of structural
reform. For example, Member States can learn from each other's policies.
Benchmarking, mutual learning and the exchange of best practices – based on
individual examples or a horizontal overview of implemented reforms – can be
helpful as demonstrated already in the work of many Council Committees.

Questions for
consultation:

·
Do you agree that the formal ex ante
coordination of major policy reforms at EU level should be limited to key
reforms?

·
Do you agree that such key reforms include competitiveness, employment, the functioning of product and services
markets and network industries, tax systems, as well as financial stability and
fiscal sustainability? Should any of these fields be excluded? Should any other
fields be included?

·
Are the filters identified above the correct
ones or should any others be considered?

3.
A framework for the ex ante coordination of plans for
major economic policy reforms
3.1.
Which Member States should be involved?

While there are potential spillovers
between all EU Member States, such effects are magnified in the Euro area due
to the stronger interdependence of Euro area Member States. For this reason the
Commission is considering proposing that a binding framework to engage in the
ex ante coordination of major economic reform plans should apply to all euro
area Member States. At the same time, ways should be found to involving
other Member States. This would also reflect the spirit of Article 121(1) of
the TFEU that concerns all EU Member States.

While the Commission considers that Member States subject to a macroeconomic
adjustment programme will be exempt from the reporting
requirements and discussions in the context of ex ante coordination as they are
already subject to strict reporting requirements and monitoring in the context
of the programme[8], it is considering providing for their participation on a voluntary
basis.

Questions for consultation:

·
Do you agree that all Euro area Member States
should be obliged to coordinate major economic policy reforms ex ante at EU
level?

·
If not, why not? If not, which Member States
should be covered?

·
Do you agree that ways should be found to
include non Euro area Member States?

·
Do you agree that Member States participating in
a macroeconomic adjustment programme should be exempted? Should they have the
possibility to participate on a voluntary basis?

3.2.
Process

The Commission is considering the following
process of ex ante coordination:

·
It will form an integral part of the European
Semester.

·
Participating Member States will submit to the
Commission information about their major economic reform plans.

·
Since Member States have different national
decision-making practices for the adoption of reform proposals, the exact timing
of transmission of this information is likely to vary across Member States. However,
it should always be provided in a timely manner for assessment and discussion
at euro area or EU level. Outside urgency situations, Member States should make
use of existing tools, such as the National Reform Programmes, to submit
the aforementioned information.

·
Where the urgency of the economic situation
requires immediate action, a particular urgency provision could be considered.
For example, rapid endorsement could be given by the Commission for a certain
limited period during which the normal process could take place.

·
While Member States would be expected to submit
information on their major economic reform plans on their own initiative, in
the framework of the European Semester, the Commission
or the Council could request or invite them to do so where necessary, for
example when new policy measures are being prepared after a new government takes
office. When reporting on a major economic policy
reform plan, Member States should provide the Commission with a detailed
qualitative description of the reform, including an identification of the main
economic target(s) pursued, a time frame and an estimate of the expected gains
from the reform, and its budgetary impact.

·
The Commission would make an assessment of the
plans received and adopt an opinion within a reasonably
short period of receiving the information from a Member State. Sufficient time will
be needed to allow a proper assessment of the plans while, at the same time, the
national decision-making process should be taken into account. It is
important to ensure that that the assessment and the subsequent EU-level
discussions can be appropriately integrated in the national decision-making
process, involving the national parliament or relevant stakeholders such as
social partners. The process should fully respect national decision-making
powers, with the decision on the reform plan remaining with the Member State
itself.

·
The Commission assessment would include whether
the proposed reform would be likely to meet its declared purpose and contribute
to improving the competitiveness and adjustment capacity of that Member State. The
Commission could suggest modifications in order to ensure that the proposed
reforms meet their purpose. Given the potential social impact of some economic
reforms, the social dimension[9]
of the reform would be duly taken into account. The assessment would pay
specific attention to the impact of the reform on the functioning of the euro
area and possible spill-over effects on other Member States. The Commission's opinion
would also consider any accompanying flanking measures in order to
minimise the potential adverse social consequences of those reforms and other possible
negative short-term effects.

·
The Commission's assessment and opinion would be
presented to the Council and the Eurogroup. Relevant
Council formations could be involved in the process of discussing the plans. The
Council could suggest modifications to the national reform plan in cases where
modifications could be justified by the expected effects on other Member States
and the functioning of the EMU. The Commission opinions
and the outcomes of the discussions in the Council and the Eurogroup should
thereafter be taken into account in the policy advice issued to a Member State in
the context of the European Semester.

·
Where relevant the Commission would highlight
(elements of) reforms that it considers relevant for other Member States. Benchmarking
and mutual learning would also be taking place by the work of the Council and
its Committees in reviewing national policies in individual policy areas.

Questions for consultation:

·
Do you agree that outside of the annual
timetable for National Reform Programmes Member States should be able to inform
the Commission ex ante of intended major national economic policy reforms?

·
Do you agree that the Commission should be able to
request information and to propose changes to proposed measures which could
affect the interests of other Member States or the Euro area and EU as a whole?

3.3.
Ensuring democratic legitimacy

A framework for ex ante coordination of the
most important national reforms can encourage the
implementation and improve the design of reforms, guarantee the
efficiency-enhancing nature of the reform and ensure that spill-overs on other
countries are considered in the national process.

The democratic legitimacy
and accountability of the process must start with the national democratic
institutions. The new process to be introduced respects national
decision-making powers, with the decision on the reform plan remaining with the
Member State itself. The process described in Section 3.2 above is one way of
meeting this requirement. Ex ante coordination
at the EU level should be organised to facilitate the reform process in the
Member States and add value through better design of reforms. At EU level a
process of economic dialogue could be envisaged, for example through
invitations from the relevant committee of the European Parliament to the
Commission, the President of the Council or the President of the Eurogroup to
discuss the Commission opinion on a Member State's reform plans as well as the conclusions
of the discussions in the Council. The relevant committee of the European
Parliament could also invite Member States to participate in an exchange of
views on planned, major economic policy reforms.

Questions for consultation:

·
How can the national decision-making process be
accommodated in the ex ante coordination?

·
Do you agree that there should be a dialogue
process at EU level involving the European Parliament, the Council and the
Commission?

4.
Next steps

Following this consultation and other
discussions with the European Parliament and the Council, the Commission will make
a formal legislative proposal, in the framework of existing Treaties, in the
course of 2013.

[1]               Implemented through the Europe 2020 Strategy and the
preventive arms of the Stability and Growth Pact and the Macroeconomic
Imbalances Procedure

[2]               under the corrective arms of the Stability and Growth
Pact and the Macroeconomic Imbalances Procedure

[3]               "Member States shall regard their economic policies
as a matter of common concern".

[4]               http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf.
The Treaty was signed by all EU Member States except for the Czech Republic and
the United Kingdom. It came into force on 1 January 2013. By 20 March 2013 it
had been ratified by all euro area Member States except for Belgium,
Luxembourg, Malta and The Netherlands. Denmark and Romania have also ratified the Treaty and declared their intent
to be bound by its fiscal and economic provisions (Titles III and IV) including
Article 11. For the other non-euro area signatories these provisions will apply
once they ratify the Treaty and when the decision abrogating their derogation
or exemption takes effect or when they provide a similar declaration.

[5]               OJ C 219, 24.7.2012, p. 95.

[6]               http://ec.europa.eu/commission_2010-2014/president/news/archives/2012/11/pdf/blueprint_en.pdf

[7]               http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/134353.pdf, par 12.

[8]               Member States subject to a macroeconomic adjustment
programme are already subject to strict reporting requirements and monitoring
in the context of the programme - Proposal
for a Regulation of the European Parliament and of 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 -      
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0819:FIN:EN:PDF

[9]               The Commission will make
proposals for further strengthening the social dimension of the European
Semester, without creating new procedures.