COMMUNICATION FROM THE COMMISSION TO THE COUNCIL Opinion of the Commission on a draft Council decision on the composition and the statutes of the Economic Policy Committee

In accordance with Article 209 of the Treaty, the Council shall, after receiving an opinion of the Commission, determine the rules governing the Economic Policy Committee. On 16 March 2000 the Council consulted the Commission on a draft Council decision on the composition and the statutes of the Economic Policy Committee (Council documents 6220/00; 6380/00 ADD1, 2000/0802(CNS)).

Overall, the Commission does not agree with the draft statutes and composition of the Economic Policy Committee and recommends that the Council does not adopt them.

1. Introduction and background

1.1. The Economic Policy Committee (EPC) was established by Council Decision No 74/122 of 18 February 1974. The rules for the co-ordination of economic policies were laid down on the same date in Council Decision No 74/120 on the attainment of a high degree of convergence of the economic policies of the Member States. The EPC assumed tasks which until that date were assigned to three separate committees (short-term, budgetary, medium-term policies). The task assigned to it was to contribute to the co-ordination of short and medium-term economic policies of the Member States. The EPC has included four members per country who in general have come from government departments (e.g. general economic policies, budgetary policies, structural policies) and from the central bank.

1.2. With the establishment of the European Monetary System (EMS) in 1979 economic and monetary policy co-ordination centred around the EMS. The Monetary Committee (MC, established by the EEC Treaty itself but until then with its role mainly confined to monetary policy) became more and more involved in the co-ordination not only of monetary, but also of economic policies and the EPC's role diminished considerably in the practical work. In 1990, when the concept of multilateral surveillance was introduced in Community law through Council Decision No 90/141 on the attainment of progressive convergence during stage one of EMU (which repealed the decision No 74/120) the preparation of the Council work on surveillance was attributed to the MC which for that purposes included, as experts, members of the EPC.

1.3. The progressive prominence given to the MC to the detriment of the EPC was fully confirmed in the Maastricht Treaty; Article 114 assigns to the MC (Economic and Financial Committee (EFC) since 1.1.99) some clear tasks including contributing to the preparation of the work of the Council while no specific role in the domain of co-ordination of economic policies is attributed to the EPC, to which a single small reference is made in Article 272 which deals with the EU budget.

2. The epc and the efc; the role of the commission

2.1. The EPC draft statutes do not take into consideration these developments. The draft statutes have the same legal format as the EFC statutes and they assign to the EPC roles which are not explicitly attributed to him in the Treaty or in secondary legislation. Indeed the only reference the Treaty makes to the EPC is in paragraph 9 of Article 272 which states that "The Commission shall, after consulting the Economic Policy Committee, declare what this maximum rate (of increase of non-obligatory expenditure) is as it results from: ...". In matters as important as the co-ordination of economic policies it would have been preferable if the EPC draft statutes had been initiated by a proposal from the Commission; this would have secured the respect of the spirit of Article 99(5) of the Treaty which explicitly foresees that the decisions of the Council on the procedures of multilateral surveillance must be initiated by a proposal from the Commission, in a process in which the European Parliament is fully involved. Having proceeded in this way would, at least, have given to the process the necessary transparency and coherence. The Commission, however, does not consider that the conditions for the presentation of such a proposal have yet been satisfied (see 3.3 below).

2.2. In several articles of the draft statutes, the institutional balance does not seem to be taken properly into consideration. This is particularly the case in relation to the tasks of the Committee, namely paragraphs (2) and (3) of Article 1 of the draft statutes. It must be recalled that, in the terms of Title VII of the Treaty (Economic and Monetary Policy), the policy decisions of the Council are based upon a recommendation or proposal from the Commission on which the EFC must give an opinion. Clear examples are the Broad Economic Policy Guidelines and their implementation (Article 99(2) and (3)), the excessive deficit procedure (Article 104) and the decisions for adoption of the single currency (Articles 121 and 122). However, according to the draft statutes one of the tasks of the EPC appears to be, in self-selected domains, the formulation of policy recommendations for the Council not based on recommendations/proposals from the Commission. While the EFC statutes fully respect the Commission's right of initiative, as clearly stated in the Treaty, the same does not seem to happen as regards the draft EPC statutes.

2.3. In the same vein, the Commission considers that the last sentence of Article 8(1) "The Secretary and his/her staff shall act upon the instructions of the Committee when carrying out their responsibilities to the Committee" should be deleted. This is because the Secretary and staff of the secretariat will be Commission officials, and the Staff Regulations prohibit Commission officials from taking instructions from outside bodies. This sentence is moreover superfluous as the first sentence states that the Committee shall be assisted by a secretariat under the direction of a Secretary.

3. Conclusion

3.1. The Commission considers, however, that the tasks identified in Article 1 of the draft statutes cover issues which are relevant for the smooth functioning of EMU and the achievement of the Community's overall economic goals stated in the Treaty. Moreover, the scope of the Broad Economic Policy Guidelines (BEPGs) has become wider as a result of various European Council conclusions regarding economic policy co-ordination, the latest being the conclusions of the Santa Maria da Feira European Council. These conclusions reiterate the need to enhance the co-ordinating role of the BEPGs. They also state that the BEPGs are designed to maintain growth and stability-oriented policies, increase the growth potential of the Union, improve the quality and sustainability of public finances and move forward with far-reaching and comprehensive reforms of product, capital and labour market reforms, thereby contributing to meet the goals set up at the Lisbon special European Council.

As a consequence, the scope of multilateral surveillance has been widened accordingly. However, the Commission considers that the EFC, in its current format, is not in a position to address all these issues in an adequate way. The European Parliament expressed similar views in 1998 in its opinion on the draft statutes of the EFC [1].

[1] Resolution PE 226.977 of 18.5.98.

3.2. The issue remains, therefore, on how to allocate adequately the tasks and responsibilities of such a wide multilateral surveillance exercise. The current arrangements, in which a division of labour between the EFC and EPC has been informally established, were able to provide an adequate response to the needs of multilateral surveillance; multilateral surveillance would thus not be put in jeopardy if those arrangements were to be maintained. The issue must, however, be reassessed in due course.

3.3. Clearly, a unified piece of secondary legislation for multilateral surveillance procedures foreseen in Treaty Article 99 would help in clarifying the issue. However, such secondary legislation, foreseen in paragraph 5 of Article 99 has not yet been established. This is only natural because the third stage of EMU started only just over one year ago, and it is wise to wait until significant experience has been gained with the existing procedures. A unified secondary legislation would provide, inter alia, a clear and transparent organisation of the co-ordination of economic policies; most likely, such legislation should include a role for an EPC. The report on co-ordination of economic policies endorsed by the European Council in Helsinki provides an idea of what could be secondary legislation on these matters.

3.4. Secondary legislation on multilateral surveillance, based on Article 99(5), would have to be initiated by a Commission proposal and the European Parliament would be involved through the procedure referred to in Article 252. The Commission intends, in a not distant future and once further experience has been gained, e.g., with a complete "Lisbon cycle", to make to the Council a proposal for the detailed rules for multilateral surveillance in the terms of paragraph 5 of Article 99. Until such a secondary legislation is set-up, the Commission considers that it is not appropriate to change the rules currently governing the EPC.

On the basis of the arguments developed above, the Commission is not in a position to give a favourable opinion to the Council on the EPC draft statutes, in particular if they are not amended in line with the points referred to in this opinion.