# EUR-Lex - 52011PC0819 - EN

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# 52011PC0819

**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 /* COM/2011/0819 final - 2011/385 (COD) */**

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2011/385 (COD)

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

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 unprecedented global crisis that has hit the
world over the last three years has seriously damaged economic growth and
financial stability and provoked a strong deterioration in the government
deficit and debt position of the Member States, leading a number of them to
seek financial assistance outside the framework of the Union.

(2)
The full consistency between the Union
multilateral surveillance framework established by the Treaty and the possible
policy conditions attached to this financial assistance should be enshrined in
Union law. The economic and
financial integration of the Member States whose currency is the euro calls for
a reinforced surveillance to prevent a contagion from a Member State
experiencing difficulties with respect to its financial stability to the rest
of the euro area.

(3)
The intensity of the economic and fiscal
surveillance should be commensurate to the severity of the financial
difficulties encountered and should take due account of the nature of the
financial assistance received, which may range from a mere precautionary
support based on eligibility conditions up to a full macro-economic adjustment
programme involving strict policy conditionality.

(4)
A Member State whose currency is the euro should
be subject to enhanced surveillance when it is experiencing - or at risk of
experiencing - severe financial disturbance, with a view to ensuring its swift
return to a normal situation and to protecting the other euro area Member
States against possible negative spill over effects. This enhanced surveillance
should include a wider access to the information needed for a close monitoring
of the economic, fiscal and financial situation and a regular reporting to the
Economic and Financial Committee (EFC) or to any sub-committee the latter may
designate for that purpose. The same modalities of surveillance should apply to
Member States requesting precautionary assistance from the European Financial
Stability Facility (EFSF), the European Stability Mechanism (ESM) the
International Monetary Fund (IMF) or another international financial
institution.

(5)
The surveillance of the economic and fiscal
situation should be strongly reinforced for Member States under macro-economic
adjustment programme. Because of the comprehensive nature of the latter, the
other processes of economic and fiscal surveillance should be suspended for the
duration of the macro-economic adjustment programme, with a view to avoiding a duplication
of reporting obligations.

(6)
Rules should be provided 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.

(7)
A decision regarding the non-compliance of a
Member State with its adjustment programme would also entail a suspension of
payments or commitments of Union funds as provided by Article 21(6) of
Regulation (EU) No XXX laying down common provisions on the European Regional
Development Fund, the European Social Fund, the Cohesion Fund, the European
Agricultural Fund for Rural Development and the European Maritime and Fisheries
Fund covered by the common strategic framework and laying down general
provisions on the European Regional Development Fund, the European Social Fund
and the Cohesion Fund and repealing Regulation (EC) No 1083/2006,

HAVE
ADOPTED THIS REGULATION:

Article 1
Subject matter and scope

1.           This Regulation sets out
provisions for strengthening the economic and budgetary surveillance of Member
States experiencing or threatened with serious difficulties with respect to
their financial stability and/or that receive or may receive financial
assistance from one or several other States, the European Financial Stability
Facility (EFSF), the European Financial Stability Mechanism (EFSM), the
European Stability Mechanism (ESM) or other International Financial
Institutions (IFI), such as the International Monetary Fund (IMF).

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

Article 2
Member States under enhanced surveillance

1.           The Commission may decide
to make a Member State experiencing severe difficulties with regard to its
financial stability subject to enhanced surveillance. The Member State
concerned shall be given the possibility to express its views beforehand. The
Commission shall decide every six months whether to prolong the enhanced
surveillance.

2.           The Commission shall
decide to make a Member State receiving a financial assistance on a
precautionary basis from one or several other States, the EFSF, the ESM or any
other International Financial Institution, such as the IMF, subject to enhanced
surveillance. The Commission shall establish a list of the precautionary
financial assistance instruments concerned and keep it updated to take into
account possible changes in the financial support policy of the EFSF, ESM or of
any other relevant International Financial Institution.

3.           Paragraph 2 shall not
apply to a Member State receiving a financial assistance on a precautionary
basis in the form of a credit line which is not conditioned to the adoption of new
policy measures by the concerned Member State, as long as the credit line is
not drawn.

Article 3
Enhanced surveillance

1.           A Member State under
enhanced surveillance shall, in consultation and cooperation with the
Commission, acting in liaison with the European Central Bank (ECB), adopt
measures aimed at addressing the sources or potential sources of difficulties.

2.           The closer monitoring of
the fiscal situation laid down in Article 7, paragraphs 2, 3 and 6, of
Regulation (EU) No XXX of the European Parliament and of the Council shall
apply to a Member State under enhanced surveillance, irrespective of the
existence of an excessive deficit. The report in accordance with paragraph 3 of
this Article shall be submitted on a quarterly basis.

3.           On a request from the
Commission, the Member State under enhanced surveillance shall:

(a)
communicate to the Commission,the ECB and the
European Banking Authority (EBA) at the requested frequency disaggregated
information on the financial situation of the financial institutions which are
under the surveillance of its national supervisors;

(b)
carry out, under the supervision of the European
Banking Authority, stress test exercises or sensitivity analyses as necessary
to assess the resilience of the banking sector to various macroeconomic and
financial shocks, as specified by the Commission and the ECB, and share the
detailed results with them;

(c)
be subject to regular assessments of its
supervisory capacities over the banking sector in the framework of specific
peer review carried out by the EBA;

(d)
communicate any information needed for the
monitoring of macro-imbalances established by Regulation No XXX of the European
Parliament and of the Council on the prevention and correction of macroeconomic
imbalances.

4.           The Commission shall
conduct, in liaison with the ECB, regular review missions in the Member State
under surveillance to verify the progresses made in the implementation of the
measures mentioned in paragraph 1, 2 and 3. It shall communicate every quarter
its findings to the Economic and Financial Committee (EFC) - or to any
subcommittee the latter may designate for that purpose - and assess notably
whether further measures are needed. These review missions shall replace the
onsite monitoring foreseen in Article 10a(2) of Regulation (EC) No 1467/97.

5.           Where it is concluded - on
the basis of the assessment foreseen in paragraph 4 - that further measures are
needed and the financial situation of the Member State concerned has
significant adverse effects on the financial stability of the euro area, the
Council, acting by qualified majority on a proposal from the Commission, may recommend
to the Member State concerned to seek financial assistance and to prepare a
macro-economic adjustment programme. The Council may decide to make this
recommendation public.

6.           Where a recommendation
under paragraph 5 is made public:

(a)
the relevant Committee of the European Parliament
may invite representatives of the Member State concerned to participate to an
exchange of views;

(b)
representatives of the Commission may be invited
by the parliament of the Member State concerned to participate to an exchange
of views.

Article 4
Information on envisaged financial assistance requests

A Member State wishing to obtain financial
assistance from one or several other States, the EFSF, the ESM, the
International Monetary Fund (IMF) or another institution outside of the Union
framework shall immediately inform the Council, the Commission and the ECB of
its intention. The EFC, or any subcommittee the latter may designate for that
purpose, shall hold a discussion on this envisaged request, after having
received an assessment from the Commission.

Article 5
Assessment of the sustainability of the government debt

Where financial assistance is sought from
the EFSF or the ESM, the Commission shall prepare – in liaison with the ECB and
wherever possible, the IMF - an analysis of the sustainability of the
government debt of the Member State concerned, including the Member State's
ability to repay the envisaged financial assistance, and forward it to the EFC or
to any subcommittee the latter may designate for that purpose.

Article 6
Macro-economic adjustment programme

1.           A Member State receiving
financial assistance from one or several other States, the IMF, the EFSF or the
ESM shall prepare in agreement with the Commission - acting in liaison with the
ECB - a draft adjustment programme aimed at re-establishing a sound and
sustainable economic and financial situation and restoring its capacity to
finance itself fully on the financial markets. The draft adjustment programme
shall take due account of the current recommendations addressed to the Member
State concerned under Articles 121, 126 and/or 148 of the Treaty- and its actions
to comply with them - while aiming at broadening, strengthening and deepening
the required policy measures.

2.           The Council, acting by
qualified majority on a proposal from the Commission, shall approve the
adjustment programme.

3.           The Commission, in liaison
with the ECB, shall monitor the progress made in the implementation of the
adjustment programme and inform every three months the EFC or any subcommittee
the latter may designate for that purpose. The Member State concerned shall
give the Commission its full cooperation. It shall in particular provide to the
Commission all the information that the latter deems necessary for the
monitoring of the programme. Article 3(3) shall apply.

4.           The Commission - in
liaison with the ECB - shall examine with the Member State concerned the
changes that may be needed to its adjustment programme. The Council, acting by
a qualified majority on a proposal from the Commission, shall decide on any
change to be made to the adjustment programme.

5.           If the monitoring referred
to in paragraph 3 highlights significant deviations from the macro-economic
adjustment programme, the Council, acting by qualified majority on a proposal
from the Commission, may decide that the Member State concerned does not comply
with the policy requirements contained in the adjustment programme.

6.           A Member State subject to
an adjustment programme experiencing insufficient administrative capacity or
significant problems in the implementation of its adjustment programme shall
seek technical assistance from the Commission.

7.           The relevant Committee of
the European Parliament may invite representatives of the Member State
concerned to participate to an exchange of views on the progress made in the
implementation of the adjustment programme.

8.           Representatives of the
Commission may be invited by the Parliament of the Member State concerned to
participate to an exchange of views on the progress made in the implementation
of the adjustment programme.

Article 7
Consistency with the excessive deficit procedure

1.           The adjustment programme
and the changes thereto provided for by Article 6 of this Regulation shall be
deemed to replace the submission of stability programmes provided for by
Article 4 of Council Regulation (EC) No 1466/97.

2.           If the Member State
concerned is the subject of a recommendation under Article 126(7) of the Treaty
or a notice under Article 126(9) of the Treaty for the correction of an
excessive deficit:

(a)
The adjustment programme provided for by Article
6 of this Regulation shall also be deemed to replace as appropriate the reports
provided for by Article 3(4a) and Article 5(1a) of Council Regulation (EC) No 1467/97;

(b)
The annual budgetary targets in the adjustment
programme provided for by Article 6(3) of this Regulation shall be deemed to
replace as appropriate the annual budgetary targets foreseen in accordance with
Article 3(4) and Article 5(1) of Regulation (EC) No 1467/97 in the mentioned
recommendation and notice. If the Member State concerned is subject to notice
under Article 126(9) of the Treaty, the adjustment programme foreseen by
Article 6(3) of this Regulation shall also be deemed to replace the indications
on measures conducive to those targets foreseen in the notice in accordance
with Article 5(1) of Regulation (EC) No 1467/97.

(c)
The monitoring provided for by Article 6(3) of
this Regulation shall be deemed to replace the monitoring provided for by
Article 10(1) and Article 10a of Council Regulation (EC) No 1467/97 and the
monitoring underlying any decision provided for by Article 4(2) and 6(2) of Regulation
(EC) No 1467/97.

Article 8
Consistency with the excessive imbalances procedure

The implementation of Regulation (EU) No XXX
on the prevention and correction of macroeconomic imbalances shall be suspended
for the Member States subject to a macro-economic adjustment programme approved
by the Council in accordance with Article 6(2) of this Regulation. This
suspension shall be applicable for the duration of the macro-economic
adjustment programme.

Article 9
Consistency with the European Semester for economic policy coordination

The monitoring provided for by Article 6(3)
of this Regulation shall be deemed to replace the monitoring and assessment of
the European Semester for economic policy coordination provided for by Article
2a of Regulation (EC) No 1466/97 on the strengthening of the surveillance of
budgetary positions and coordination of economic policies.

Article 10
Consistency with Regulation (EU) No XXX 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 implementation of Regulation (EU) No XXX
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 shall be suspended for the Member States subject to a macro-economic
adjustment programme approved by the Council in accordance with Article 6(2) of
this Regulation. This suspension shall be applicable for the duration of the
macro-economic adjustment programme.

Article 11
Post-programme surveillance

1.           A Member State shall be
under post-programme surveillance as long as a minimum of 75% of the financial
assistance received from one or several other Member State(s), the EFSM, the
EFSF or the ESM has not been repaid. The Council, acting on a qualified
majority on a proposal from the Commission, may extend the duration of the post
programme surveillance.

2.           Article 3(3) shall apply.
On a request from the Commission, the Member State shall also provide the
information mentioned in Article 7(3) of Regulation (EU) No XXX 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.

3.           The Commission shall
conduct, in liaison with the ECB, regular review missions in the Member State
under post programme surveillance to assess its economic, fiscal and financial
situation. It shall communicate every semester its findings to the EFC or to
any subcommittee the latter may designate for that purpose and assess notably
whether corrective measures are needed.

4.           The Council, acting by
qualified majority on a proposal from the Commission, may recommend to the
Member State under post programme surveillance to adopt corrective measures.

Article 12
Voting within the Council

For the measures referred to in Articles
2(1), 3, 6(2), 6(4) and 11(4), only members of the Council representing Member
States whose currency is the euro shall vote and the Council shall act without
taking into account the vote of the member of the Council representing the
Member State concerned.

A qualified majority of the members of the
Council referred to in the first paragraph shall be calculated in accordance
with Article 238(3)(b) of the Treaty.

Article 13
Types of assistance and loans excluded from the application of Articles 5 and 6

The provisions of Article 5 and 6 do not
apply to financial assistance granted on a precautionary basis and to loans
made for recapitalising financial institutions.

Article 14
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