Amendment Justification

Recital 2:

At the end of recital 2, the text in bold was added: ‘The report was endorsed by the European Council in its conclusions of 23 March 2005, which stated that the report updates and complements the Stability and Growth Pact, of which it is now an integral part’. This change was introduced in order to clarify the status of the 20 March 2005 report, as an integral part of the Stability and Growth Pact, on a par with the Amsterdam Resolution of the European Council on the Stability and Growth Pact.

Recital 2A:

The European Parliament proposed a new recital 2A, reading as follows: ‘The implementation of the fiscal framework, the surveillance and coordination of economic policies and their credibility rely on the quality, reliability and timeliness of fiscal statistics. The quality of statistics at national and Community level must be ensured in order to guarantee the independence, integrity and accountability of both national statistical offices and Eurostat’. This amendment was not accepted for the following reason: The issue of the quality, reliability and timeliness of fiscal statistics does not fall within the remit of Regulation (EC) No 1466/97. Regulation (EC) No 3605/93 contains the relevant definitions and timetable for the purpose of the excessive deficit procedure. Regulation (EC) No 3605/93 is currently in the process of being amended specifically to address quality aspects and strengthen monitoring in the context of the excessive deficit procedure.

Recital 2B:

The European Parliament proposed a new recital 2B, reading as follows: ‘The Commission should compare the figures submitted to it by the Member States with the reports of the national central banks to the ECB’. This amendment was not accepted for the following reason: In practice, a comparison of such data is already happening through the representation of national central banks and the European Central Bank in the Economic and Financial Committee, which plays a key role in the multilateral fiscal surveillance process.

Recital 3:

Recital 3 was redrafted. This recital was amended to place more emphasis on Member States ‘renewed commitment to observe the rules of the Stability and Growth Pact and to emphasise Member States’ responsibilities under the Stability and Growth Pact.

Recital 5:

Recital 5 is a re-drafted and completed version of recital 6 — Commission proposal. The revised recital 5 presents more clearly the principle of country-specific medium-term budgetary objectives and the underlying economic rationale, while also clarifying that the medium-term budgetary objective for each Member State is based on the underlying requirement to remain close to balance or in surplus.

Recital 6:

Recital 6 is a redrafted and completed version of recital 5 — Commission proposal. The revised recital 6 more clearly states the economic rationale for reaching and adhering to the medium-term budgetary objective.

Article 2A:

Article 2A has been redrafted by the Council. The Euorpean Parliament's suggested drafting was as follows: ‘Medium-term objectives of budgetary positions close to balance or in surplus shall be set for every Member State in the framework of the procedure referred to in Article 99(2) of the Treaty. These medium-term budgetary objectives shall be reviewed at least annually and whenever major structural and budgetary reforms are undertaken and, where appropriate, revised. Each Member State could establish an economic council of wise people who would advise on the main macroeconomic projections. These country-specific medium-term budgetary objectives shall be set at a level which allows Member States to deal with normal cyclical fluctuations while keeping the government deficit below the 3 % of GDP reference value, ensure rapid progress towards fiscal sustainability and, taking this into account, allow room for budgetary manoeuvre, in particular for public investment.’ As Article 2A is ‘definitional’, the procedural element (in the framework of the procedure referred to in Article 99(2) of the Treaty) has been moved to Articles 3 and 5. The revised Article 2A specifies that medium-term budgetary objectives may vary from country to country, but that they are confined to a defined range (applicable to euro area and ERM2 Member States), from — 1 % of GDP to balance or surplus. The revised Article 2A states that the medium-term budgetary objective is defined in cyclically-adjusted terms, and net of one-off and other temporary measures. Finally, the revised Article 2A clarifies the procedure for revising the medium-term budgetary objective (when a major structural reform is implemented and in any case every four years). This establishes the medium-term objectives as structural parameters that reflect structural characteristics of Member States (notably potential growth, current debt stock, implicit liabilities) and their relatively slow evolution: hence the four-year cycle for their revision. The proposal to establish a council of ‘wise people’ is fully compatible with the 20 March 2005 Council report, which calls upon Member States to enhance the role of independent budgetary institutions at the national level, but its optional nature is more suitable for a political declaration than a Regulation.

Article 3(2)(a):

According to the revised article, the stability programme shall also present the medium-term budgetary objective. This amendment clarifies the procedure for setting the medium-term budgetary objective. Member States will present their medium-term objective, set according to the principles of Article 2A, in their stability programmes. The Council will then examine whether the medium-term budgetary objective has been set at the appropriate level and it may ask a Member State to adjust its stability programme if it reaches the conclusion that the medium-term objective is not set at the appropriate level (see Article 5).

Article 3(2):

A point (e) is added, on the basis of which stability programmes shall provide the following information: ‘if applicable, the reasons for a deviation from the required adjustment path towards the medium term budgetary objective’. In line with the underlying objective of strengthening the preventive arm of the Stability Pact, the monitoring of Member States' efforts to achieve their medium-term budgetary objective is reinforced.

Article 4(1):

In Article 4(1), the European Parliament has proposed the following amendment: ‘Stability programmes shall be submitted before 1 March 1999. Thereafter, updated programmes shall be submitted annually for a period of two years. A Member State adopting the single currency at a later stage shall submit a stability programme within six months of the Council Decision on its participation in the single currency.’ This amendment was not accepted for the following reason: An efficient and effective implementation of the process of multilateral fiscal surveillance requires that stability programmes be submitted and assessed on an annual basis.

Article 5(1):

In Article 5(1), three elements are added to the original Commission proposal. First, it is clarified that in order to assess whether Member States pursue a sufficient budgetary adjustment in order to reach their medium-term objective, an adjustment effort of 0,5 % of GDP will serve as a benchmark. Second, it is clarified that deviations from the medium-term budgetary objective or from the adjustment path towards the objective on the basis of the implementation of structural reforms are conditional on the preservation of an appropriate safety margin with respect to the deficit reference value and that the budgetary position is expected to return to the medium-term budgetary objective within the programme period. Furthermore, the amendment clarifies that under the same conditions, multi-pillar pension reforms introducing a fully-funded second pillar outside the control of the government sector but diverting social contributions from it, are eligible reforms that allow deviations from the medium-term budgetary objective or the adjustment path towards this objective.

Article 5(1):

In Article 5(1)(1), the European Parliament has proposed the following amendment: ‘Based on assessments by the Commission and the Committee set up by Article 114 of the Treaty, the Council shall, within the framework of multilateral surveillance under Article 99, examine whether the adjustment path in the programme is sufficiently ambitious, whether the economic assumptions on which the programme is based are realistic and whether the measures being taken and/or proposed are sufficient to achieve the targeted adjustment path towards the medium-term budgetary objective. For this purpose the Commission shall undertake financial auditing missions in the countries.’ This amendment was not accepted for the following reason: Proposed amendments to Regulation (EC) No 3605/93 as regards the quality of statistical data in the context of the excessive deficit procedure address this issue and will define the objectives and content of dialogue visits and methodological visits by the European Commission (Eurostat) to the Member States.

Article 5(2):

In Article 5(2), the European Parliament has proposed the following amendment: ‘The Council shall carry out the examination of the stability programme referred to in paragraph 1 within at most three months of the submission of the programme. The Council, on a recommendation from the Commission and after consulting the Committee set up by Article 109c, shall deliver an opinion on the programme. Where the Council, in accordance with Article 103, considers that the objectives and contents of a programme should be strengthened, in particular regarding the improvement on the adjustment path toward the medium-term budgetary objective pursued in economic good times, the Council shall, in its opinion, invite the Member State concerned to adjust its programme.’ This amendment was not accepted for the following reason: The amendment proposed by the European Parliament could be understood to imply that a Council request to strengthen the adjustment path is conditional on the prevalence of economic good times. This is clearly not the case. The process of revision of budgetary objectives foreseen by this Article entails that Member States may be asked to strengthen notably the medium-term objective itself or the adjustment path to it whenever this is possible given the prevailing circumstances, and not only in economic good times. Thus, consolidation when feasible is the overarching policy objective, and consolidation in economic good times is subjugated to this more general requirement.

Article 6(1):

In Article 6(1), the European Parliament has proposed the following amendment: ‘As part of multilateral surveillance in accordance with Article 99(3), the Council shall monitor the implementation of stability programmes, on the basis of information provided by participating Member States and of assessments by the Commission and the Committee set up by Article 109c, in particular with a view to identifying actual or expected significant divergence of the budgetary position from the medium-term budgetary objective, or the adjustment path towards it, as set in the programme for the government surplus/deficit, and of the expected path of the general government debt ratio.’ Similar amendments proposed for Articles 6(2) and 6(3) are rejected for the same reasons. This amendment was not accepted for the following reason: The Council report on ‘Improving the implementation of the Stability and Growth Pact’ states in part 3.5 that there should be increased focus on debt and sustainability. The Council concluded that the debt surveillance framework should be strengthened and that no change to the existing Regulations is required to that effect.

Article 7(2)(a):

According to the revised article, the convergence programme shall also present the medium-term budgetary objective. See Article 3(2)(a) above

Article 7(2):

A point (e) is added, on the basis of which convergence programmes shall provide the following information: ‘if applicable, the reasons for a deviation from the required adjustment path towards the medium term budgetary objective’. See Article 3(2) above.

Article 9(1):