# EUR-Lex - 52011PC0821 - EN

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# 52011PC0821

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area /* COM/2011/0821 final - 2011/0386 (COD) */**

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2011/0386 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

on common provisions for monitoring and
assessing draft budgetary plans and ensuring the correction of excessive
deficit of the Member States in the euro area

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 136 in combination
with Article 121(6) thereof,

Having regard to the proposal from the
European Commission,

Having regard to the opinion of the
European Central Bank,

After transmission of the draft legislative
act to the national Parliaments,

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)
The Treaty requires that Member States' regard
their economic policies as a matter of common concern and that their budgetary
policies are guided by the need for sound public finances and that their
economic policies do not risk jeopardising the proper functioning of Economic
and Monetary Union.

(2)
The Stability and Growth Pact, in particular
Regulations (EC) No 1466/97 of 7 July 1997 on the strengthening of the
surveillance of budgetary positions and the surveillance and coordination of
economic policies[1]
and Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and
clarifying the implementation of the excessive deficit procedure[2], designed to secure budgetary
discipline across the Union, sets out the framework for preventing and
correcting excessive government deficits. It has been further strengthened by
Regulation No .../2011 of the European Parliament and of the Council amending
Regulation (EC) No 1466/97 on the strengthening of the surveillance of
budgetary positions and the surveillance and coordination of economic policies
and Regulation (EU) No .../2011 amending Regulation (EC) No 1467/97 on speeding
up and clarifying the implementation of the excessive deficit procedure.
Regulation (EC) No .../2011 of the European Parliament and of the Council on the
effective enforcement of budgetary surveillance in the euro area added a system
of effective, preventive and gradual enforcement mechanisms in the form of
financial sanctions for the Member States whose currency is the euro.

(3)
The amendments to the Stability and Growth Pact
increase both the guidance, and, for the Member States whose currency is the
euro, incentives for the setting and the implementation of a prudent budgetary
policy, while avoiding excessive government deficits. These provisions have
created a more robust framework at the level of the Union for the surveillance
of national economic policies.

(4)
The Treaty allows the adoption of specific
measures in the euro area which go beyond the provisions applicable to all
Member States in order to ensure the proper functioning of
the Economic and Monetary Union.

(5)
Strong public finances are best ensured at the
planning stage and gross errors should be identified as early as possible.
Member States should benefit not just from the setting of guiding principles
and budgetary targets but also from a synchronised monitoring of their
budgetary policies.

(6)
Setting-up a common budgetary timeline for
Member States whose currency is the euro should better synchronize the key
steps in the preparation of national budgets, thus contributing to the
effectiveness of the European semester for budgetary policy coordination.
Adopting a common budgetary timeline should lead to stronger synergies by
facilitating policy coordination among Member States whose currency is the euro
and ensure that the Council and Commission recommendations are appropriately
integrated in the national process for budget adoption.

(7)
There is strong evidence showing the
effectiveness of rules-based fiscal frameworks in supporting sound and
sustainable fiscal policies. The introduction of national fiscal rules that are
consistent with the budgetary objectives set at Union level should be a crucial
element to ensure the respect of the Stability and Growth Pact provisions. In
particular, Member States should put in place structural balanced budget rules
which transpose into national legislation the main principles of the Union
fiscal framework. This transposition should be effective through binding rules
preferably of a constitutional nature so as to demonstrate the strongest
commitment of national authorities in relation to the Stability and Growth Pact.

(8)
Biased and unrealistic macroeconomic and
budgetary forecasts can considerably hamper the effectiveness of budgetary
planning and consequently impair commitment to budgetary discipline. Forecasts
from independent bodies can provide unbiased and realistic macroeconomic
forecasts.

(9)
This gradually strengthened surveillance will
further complement the existing provisions of the Stability and Growth Pact and
strengthen the surveillance of budgetary discipline in Member States whose
currency is the euro. A gradually enhanced monitoring procedure should
contribute to better budgetary outcomes to the benefit of all Member States
whose currency is the euro. As part of a gradually strengthened procedure, a
closer monitoring is particularly valuable to Member States that are subject to
an excessive deficit procedure.

(10)
As demonstrated by the sovereign debt crisis,
and in particular by the need to put in place common financial backstops,
Member States whose currency is the euro share enhanced spillovers from their
budgetary policy. Each of the Member States whose currency is the euro should
consult the Commission and other Member States whose currency is the euro before
the adoption of any major fiscal policy reform plans with potential spillover
effects, so as to give the possibility for an assessment of possible impact for
the euro area as a whole. They should consider their budgetary plans to be of
common concern and submit them to the Commission for monitoring purposes in
advance of the plans becoming binding. The Commission should be in a position,
if necessary, to adopt an opinion on the draft budgetary plan, that the Member
State and in particular budgetary authorities should be invited to take into
account in the process of the budget law adoption. Such an opinion should ensure that Union's policy guidance in the budgetary area is
appropriately integrated in the national budgetary preparations. In particular,
this opinion should include an assessment of whether or
not the budgetary plans appropriately address the recommendations issued in the
context of the European semester in the budgetary area. The Commission should
stand ready to present this opinion to the Parliament of the Member State
concerned at its request. The extent to which this opinion has been taken into
account should be part of the assessment, if and when the conditions are met,
leading to the decision to place the concerned Member State in excessive
deficit procedure, where no follow-up to the early guidance from the Commission
should be considered as an aggravating factor. Also, based
on an overall assessment of the plans by the Commission, the Eurogroup should
discuss the budgetary situation and prospects for the euro area.

(11)
Member States whose currency is the euro and
which are subject to an excessive deficit procedure should be monitored more
closely to secure a full and timely correction of the excessive deficit. A
closer monitoring should ensure early correction of any deviations from the Council
recommendations to correct the excessive deficit. Such monitoring should complement
the provisions set out in Regulation (EC) No 1467/97. The modalities of this
closer monitoring should be graduated depending on the stage of the procedure the Member State is subject to, as provided for in Article 126
of the Treaty.

(12)
The closer monitoring for Member States subject
to an excessive deficit procedure should allow the identification of risks in
the compliance of a Member State's deadline to correct the excessive deficit. In
the event of such risks being identified, the Commission should issue a
recommendation to the Member State for measures to be taken within a given
timeframe that should be presented to the Parliament of the Member State
concerned at its request. This assessment should allow
rapid correction of any developments putting at risk the correction of the
excessive deficit within the established deadline. Assessment
of compliance with this Commission recommendation should be part of the
continuous assessment made by the Commission of effective action to correct an
excessive deficit. When deciding whether effective action to correct the
excessive deficit has been taken, the Council should also base its decision on
whether or not the Member State complied with the Commission recommendation.

(13)
In order to enhance the dialogue between the
Union institutions, in particular the European Parliament, the Council and the
Commission, and to ensure greater transparency and accountability, the competent
committee of the European Parliament may offer the opportunity to the Member
State concerned by a Commission recommendation to participate in an exchange of
views,

HAVE ADOPTED THIS REGULATION:

Chapter I

General
provisions

Article 1
Subject matter and scope

1.           This Regulation sets out
provisions for enhanced monitoring of budgetary policies in the euro area by:

(a)
complementing the European semester as defined
in Article 2a of Regulation (EC) 1466/97 with a common budgetary timeline;

(b)
complementing the multilateral surveillance
system of budgetary policies as established by Regulation (EC) No 1466/97 with
additional monitoring requirements in order to ensure that Union policy
recommendations in the budgetary area are appropriately integrated in the
national budgetary preparations;

(c)
complementing the procedure for correction of a
Member State's excessive deficit as established by Article 126 of the Treaty
and Regulation (EC) No 1467/97 by a closer monitoring of budgetary policies of
Member States subject to an excessive deficit procedure in order to secure a
timely durable correction of excessive deficits.

2.           This Regulation shall
apply to Member States whose currency is the euro.

Article 2
Definitions

1.           For the purposes of this
Regulation, the following definitions shall apply:

(1)
"independent fiscal council" means a
body endowed with functional autonomy vis-à-vis the fiscal authorities of the
Member State in charge of monitoring the implementation of national fiscal
rules;

(2)
"independent macroeconomic forecasts"
means the macroeconomic and/or budgetary forecasts produced by an independent
body or a body endowed with functional autonomy vis-à-vis the fiscal
authorities of the Member State;

(3)
"medium-term budgetary framework" has
the meaning set out in point e of Article 2 of the Council Directive [.../...];

(4)
"stability programme" has the meaning set
out in Article 3 of Regulation (EC) 1466/97;

(5)
"government" and "deficit"
have the meaning' set out in Article 2 of the Protocol (No 12) on the excessive
deficit procedure annexed to the Treaty on European Union and the Treaty on the
Functioning of the European Union.

2.           The definition of general
government and of sub-sectors of general government set out in point 2.70 of
Annex A to Regulation (EC) No 2223/96 shall also apply.

Chapter II

Common Budgetary Provisions

Article 3
Common Budgetary Timeline

1.           Member States shall make
public annually their medium-term fiscal plans in accordance with their medium-term
budgetary framework based on independent macroeconomic forecast together with
their Stability Programmes, no later than 15 April.

2.           Draft budget laws for the
general government shall be made public annually no later than 15 October
together with the independent macroeconomic forecasts on which they are based.

3.           Budget laws for the
general government shall be adopted and made public annually no later than 31
December.

Article 4
Rules on the budgetary balance and independent national fiscal council

1.           Member States shall have
in place numerical fiscal rules on the budget balance that implement in the
national budgetary processes their medium-term budgetary objective as defined
in Article 2a of Regulation (EC) No 1466/97. Such rules shall cover the general
government as a whole and be of binding, preferably constitutional, nature.

2.           Member States shall have
in place an independent fiscal council for monitoring the implementation of
national fiscal rules as referred to in paragraph 1.

Chapter III

Monitoring and assessment of Member
States draft budgetary plans

Article 5
Monitoring requirements

1.           Member States shall submit
annually to the Commission and the Eurogroup a draft budgetary plan for the
forthcoming year no later than 15 October.

2.           The draft budgetary plan
shall be made public at the same time.

3.           The draft budgetary plan
shall contain the following information for the forthcoming year:

(a)
the targeted budget balance for the general
government as a percentage of Gross Domestic Product (GDP), broken down by sub-sector
of general government;

(b)
the projections at unchanged policies for expenditure
and revenue as a percentage of GDP for the general government and their main
components.;

(c)
the targeted expenditure and revenue as a
percentage of GDP for the general government and their main components, taking
into account the conditions and criteria to establish the growth path of
government expenditure net of discretionary revenue measures under Article 5(1)
of Regulation (EC) No 1466/97;

(d)
a detailed description and a well-documented quantification
of the measures to be included in the budget for the year to come in order to
bridge the gap between the targets referred to in point (c) and the projections
at unchanged policies provided in accordance with point (b). The description
may be less detailed for measures with a budgetary impact estimated to be lower
than 0.1% of GDP. Particular attention shall be paid to major fiscal policy reform plans with potential spillover effects
for other Member States whose currency is the euro.

(e)
the main assumptions about expected economic
developments and important economic variables which are relevant to the
achievement of the budgetary targets. These assumptions shall be based on
independent macroeconomic growth forecast;

(f)
where applicable, additional indications on how
the current recommendations addressed to the Member State concerned in
accordance with Article 121 of the Treaty in the budgetary area will be met.

4.           Where the budgetary
targets reported in the draft budgetary plan in accordance with points (a) and
(c) of paragraph 3 or the projections at unchanged policies differ from those
in the most recent stability programme, the differences shall be duly
explained.

5.           Where the Commission identifies
particularly serious non-compliance with the budgetary policy obligations laid
down in the Stability and Growth Pact, it shall, within two weeks from the
submission of the draft budgetary plan, request a revised draft budgetary plan
from the Member State concerned. This request shall be made public.

Paragraphs 2 to 4 shall apply in case of
revised draft budgetary plan.

6.           The Commission shall
specify the content of the draft budgetary plan referred to in paragraph 1.

Article 6

Assessment
of the draft budgetary plan

1.           The Commission shall, if
necessary, adopt an opinion on the draft budgetary plan by 30 November.

2.           The Commission opinion
shall be made public and, at the request of the Parliament of the Member State
concerned, shall be presented by the Commission to the Parliament concerned.

3.           The Commission shall make
an overall assessment of the budgetary situation and prospects in the euro area
as a whole. The assessment shall be made public.

4.           The Eurogroup shall
discuss opinions of the Commission on the national budgetary plans and the
budgetary situation and prospects in the euro area as a whole on the basis of the
overall assessment made by the Commission in accordance with paragraph 3. The
assessment shall be made public.

Chapter IV

Ensuring the correction of excessive
deficit

Article 7
Closer monitoring for Member States in excessive deficit procedure

1.           When the Council decides
in accordance with Article 126(6) of the Treaty that an excessive deficit
exists in a Member State, the Member State concerned shall be subject to
paragraphs 2 to 5 of this Article, until the abrogation of its excessive
deficit procedure.

2.           The Member State subject
to closer monitoring shall without delay carry out a comprehensive
assessment of in-year budgetary execution for the general government and its
sub-sectors. The financial risks associated to government-owned entities and
government contracts shall also be covered by the assessment to the extent that
they may contribute to the existence of an excessive deficit. The result of
this assessment shall be included in the report submitted in accordance with
Article 3(4a) or 5(1a) of Regulation (EC) No 1467/97 on action taken to correct
the excessive deficit.

3.           Member State shall report
regularly to the Commission and to the Economic and Financial Committee or any
sub-committee it will designate for that purpose, for the general government
and its sub-sectors, the in-year budgetary execution, the budgetary impact of
discretionary measures taken on both the expenditure and the revenue side,
targets for the government expenditure and revenues, as well as information on
the measures adopted and the nature of those envisaged to achieve the targets.
The report shall be made public.

The Commission shall specify the content of the
report referred to in this paragraph.

4.           If the Member State
concerned is subject of a Council recommendation under Article 126(7) of the
Treaty, the report in accordance with paragraph 3 of this Article shall be
submitted for the first time 6 months after the initial report provided for in Article
3(4a) of Regulation (EC) No 1467/97, and thereafter on a 6-month basis.

5.           If the Member State
concerned is subject of a Council notice under Article 126(9) of the Treaty,
the report in accordance with paragraph 3 of this Article shall also contain
information on the actions being taken in response to the specific Council recommendations.
It shall be submitted for the first time 3 months after the initial report provided
for in Article 5(1a) of Regulation (EC) No 1467/97, and thereafter on a
quarterly basis.

6.           On request and within the
deadline set by the Commission, the Member State subject to closer monitoring
shall:

(a)
carry out and report on a comprehensive independent
audit of the accounts of the general government conducted in coordination with
national supreme audit institutions, aiming at assessing the reliability, completeness
and accuracy of these public accounts for the purposes of the excessive
defiocit procedure. In this context, the Commission (Eurostat) shall assess the
quality of data reported by the Member State concerned in accordance with Regulation
(EC) No 679/2010[3];

(b)
provide additional information for the purposes
of monitoring the progress towards the correction of the excessive deficit.

Article 8
Member States at risk of non-compliance with their obligation under their excessive
deficit procedure

1.           When assessing whether
compliance with the deadline to correct the excessive deficit, as established
by the current Council recommendation under Article 126(7) of the Treaty or
Council notice under Article 126(9) of the Treaty, is at risk, the Commission
shall also base its assessment on the reports submitted by the Member States in
accordance with Article 7(3) of this Regulation.

2.           In case of risks of
non-compliance with the deadline to correct the excessive deficit, the
Commission shall address a recommendation to the Member State concerned for
adoption of further measures within a timeframe consistent with the deadline
for the correction of its excessive deficit referred to in paragraph 1. The
recommendation by the Commission shall be made public, and, at the request of
the Parliament of the Member State concerned, shall be presented by the
Commission to the Parliament concerned.

3.           Within the timeframe set
by the Commission recommendation referred to in paragraph 2, the Member State
concerned shall report to the Commission on measures adopted in response to
this recommendation together with the reports provided for in Article 7(3). The
report shall include the budgetary impact of all discretionary measures taken,
targets for the government expenditure and revenues, information on the
measures adopted and the nature of those envisaged to achieve the targets, as
well as information on the other actions being taken in response to the
Commission recommendation. The report shall be made public.

4.           The competent committee of
the European Parliament may offer the opportunity to the Member State concerned
by a recommendation in accordance with paragraph 2 to participate in an
exchange of views in accordance with Article 2a of Regulation (EC) No 1467/97.

5.           On the basis of the report
referred to in paragraph 3, the Commission shall assess whether the Member
State has complied with the recommendation made in accordance with paragraph 2.

Article 9
Impact on the excessive deficit procedure

1.           The extent to which the
opinion referred to in Article 6(1) has been taken into account by the Member
State concerned shall be taken into account by:

(a)
the Commission when conducting a report under
Article 126(3) of the Treaty and when recommending the imposition of a
non-interest bearing deposit in accordance with Article 5 of Regulation (EC) No
XXX/2011;

(b)
the Council when deciding whether an excessive
deficit exists in accordance with Article 126(6) of the Treaty.

2.           The closer monitoring
established by Articles 7 and 8 of this Regulation shall be an integral part of
the regular monitoring, as provided for in Article 10(1) of Regulation (EC) No
1467/97, of the implementation of action taken by the Member State concerned in
response to recommendations made under Article 126(7) of the Treaty or notices
given under Article 126(9) of the Treaty to correct the excessive deficit.

3.           When considering whether
effective action has been taken in response to the recommendations made in
accordance with Article 126(7) of the Treaty or to the notices in accordance
with 126(9) of the Treaty, the Commission shall take into account the
assessment referred to in Article 8(5) in this Regulation and recommend, as
appropriate, to the Council possible decisions under Article 126(8) or Article
126(11) of the Treaty.

Article 10
Consistency with Regulation No XXX 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

Member States subject to a macro-economic
adjustment programme in accordance with Article 6 of Regulation No XXX shall
not be subject to Article 5 and 7 of this Regulation.

Chapter V

Final provisions

Article 11
Review

1.           By [same date as in
Article 13 of sanctions Regulation] and every five years thereafter, the
Commission shall publish a report on the application of this Regulation.

That report shall evaluate, inter alia:

(a)
the effectiveness of this Regulation;

(b)
the progress in ensuring closer coordination of
economic policies and sustained convergence of economic performances of the
Member States in accordance with the Treaty.

2.           Where appropriate, the
report referred to in paragraph 1 shall be accompanied by a proposal for
amendments to this Regulation.

3.           The report shall be
forwarded to the European Parliament and to the Council.

Article 12
Transitional provisions

1.           This Regulation shall
apply to the Member States that are already subject to an excessive deficit
procedure at the time of the entry into force of this Regulation.

2.           By derogation from
paragraph 1, Article 7(2) shall not apply to Member States for which the
Council has already decided that effective action has been taken in accordance
with Article 4(2) and Article 6(1) of Regulation (EC) No 1467/97.

3.           Member States shall comply
with Article 4 at the latest by [6 months after adoption of this Regulation].

Article 13
Entry into force

This Regulation shall enter into force on
the twentieth day following that of its publication in the Official Journal
of the European Union.

This
Regulation shall be binding in its entirety and directly applicable in the Member
States in accordance with the Treaties.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ L 209, 2.8.1997, p. 1.

[2]               OJ L 209, 2.8.1997, p. 6.

[3]               OJ L 198, 30.7.2010, p. 1.