Re-examined proposal for a Council Regulation (EC) on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
Date: 1997-06-24
Institutions: European Commission
Subjects: Economic and Monetary Union, budget deficit, budget policy, coordination of EMU policies, economic convergence

* 

HT 

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  24.06.1997 
COM(97)  305  final 

96/0247  (SYN) 

Re-examined  proposal  for a 

COUNCIL REGULATION  (EC) 

ON THE 

STRENGTHENING OF THE SURVEILLANCE OF BUDGETARY POSITIONS AND THE 
SURVEILLANCE AND COORDINATION OF ECONOMIC POLICIES 

(presented by the Commission pursuant to Article  189 c (d) 
of the EC Treaty) 

EXPLANATORY  MEMORANDUM 

The re-examined  Commission proposal for  a Council Regulations on the strengthening 
of  the  surveillance  of  budgetary positions  and  the surveillance  and  coordination  of 
economic policies  results  from  the  second  reading  made by  the  European  Parliament 
on the Council  common position.  The re-examined  proposal  forms  part  of the stability 
and growth pact and builds on the original proposal  adopted  by the Commission  on  16 
October  1996  in  COM(96)496  final.  In  19  March  1997  in  COM(97)116  final,  the 
the 
Commission  approved 
amendments  proposed  by the European  Parliament  in its first  reading  which  had  been 
accepted  by the  Commission  and  the  agreements  reached  in the  European  Council  in 
Dublin in December  1996. 

its  amended  proposal  which 

inter  alia, 

included, 

The  re-examined  proposal  includes  some  of  the  amendments  proposed  by  the 
European Parliament in its second reading. In particular,  the Commission has accepted 
the  amendments  leading  to  a  single  reference  in the  recitals  to  the  European  Council 
Resolution  and  the  inclusion  of  a  specific  reference  to  government  investment 
expenditure in the articles of the Regulation. 

The  Commission  is  presenting  its  re-examined  proposal  now  with  a  view  to  final 
agreement  on  the  stability  and  growth  pact  at  the  Amsterdam  European  Council  in 
June. 

£ 

Re-examined  proposal  for  a 

COUNCIL  REGULATION  (EC) 

ON THE 

STRENGTHENING  OF THE SURVEILLANCE  OF BUDGETARY POSITIONS AND  THE 
SUR VEILLANCEAND  COORDINA TION OF ECONOMIC POLICIES 

The  Commission  re-examined  proposal  consists  of  the  Council  common  position  C4-
0174/97-96/0247(SYN) with  the  following  amendments: 

Recital  (2)  now  reads: 

(2)  Whereas,  in  the  Resolution  of  the  European 
the  European 
Council  of  17  June  1997, 
Council,  in  accordance  with  Article  D  of  the 
Treaty,  has  given  firm  political  guidelines  in 
order  to  implement  the  Stability  and  Growth 
Pact  in  a strict  and  timely  manner; 

\ 

Recital  (4)  now  reads: 

Whereas  adherence  to  the  medium-
(4) 
term  objective  of  budgetary  positions  close  to 
balance  or  in  surplus  will  allow  Member  States 
to  deal  with  normal  cyclical  fluctuations  while 
keeping  the  government  deficit  within  the  3 
^percent  of GDP  reference  value; 

Recital  (5)  now  reads: 

it 

is 

to 

take 

appropriate 

to 
(5)  Whereas 
complement 
the  multilateral  surveillance 
procedure  of  Article  103  (3)  and  (4)  with  an 
early  warning  system,  under  which 
the 
Council  will  alert  a  Member  Sate  at  an  early 
the  necessary 
to 
the  need 
stage 
budgetary  corrective  action 
to 
in  order 
prevent  a  government  deficit  becoming 
excessive;  whereas  all  Member  States  have 
committed  themselves  to  take  the  corrective 
budgetary  action 
to 
meet  the  objectives  of  their  stability  and 
3 

they  deem  necessary 

information 

convergence  programmes  whenever  they 
have 
indicating  actual  or 
expected  significant  divergence  from  the 
medium-term  budgetary objective; 

Recital (10) now reads: 

in  the  Resolution  of  the 
(10)  Whereas 
European  Council  of  17  June  1997,  the 
European  Council, 
in  accordance  with 
Article  D  of  the  Treaty,  has  given  firm 
political  guidelines  in  order  to  establish  an 
exchange-rate  mechanism  in the third  stage 
of  EMU;  whereas  the  currencies  of  non 
participating  Member  States  joining  the 
new  exchange  rate  mechanism,  hereafter 
referred  to  as  ERM2,  will  have  a  central 
rate  vis-à-vis  the  euro,  thereby  providing  a 
reference  point  for judging  the  adequacy  of 
their  policies;  whereas,  so  as  to  enable 
appropriate surveillance  in the Council, non 
participating  Member  States  not  joining 
ERM2  will  nevertheless  present  policies  in 
their  convergence  programmes  oriented  to 
stability  thus  avoiding  real  exchange  rate 
misalignments 
nominal 
exchange rate fluctuations; 

excessive 

and 

Article 3.2.(b) now reads. 

the  main  assumptions  about  expected 
(b) 
economic  developments  and 
important 
economic  variables  which  are  relevant  to 
the  realization  of  the  stability  programme 
such 
investment 
government 
expenditure,  real  gross  domestic  product 
(GDP) growth, employment and  inflation; 

as 

Article 5.1. now reads: 

by 

on 

the 

Based 

framework 

assessments 

1. 
the 
Commission  and  by the Committee  set  up by 
Article  109c  of  the  Treaty,  the  Council  shall, 
within 
of  multilateral 
surveillance  under  Article  103,  examine 
whether  the  medium-term  budget  objective 
in  the  stability  programme  provides  for  a 
safety  margin  to  ensure  the  avoidance  of  an 
the  economic 
excessive  deficit,  whether 
assumptions  on  which  the  programme  is 
based  are realistic  and whether  the  measures 
being taken  and/or  proposed  are sufficient  to 

V 

achieve 
towards the medium-term  objective. 

targeted  adjustment  path 

the 

Article 7.2. (b) now reads: 

the  main  assumptions  about  expected 
(b) 
economic  developments  and 
important 
economic  variables  which  are  relevant  to 
the 
convergence 
of 
programme  such  as  government  investment 
expenditure,  real  gross  domestic  product 
(GDP) growth, employment and  inflation; 

realization 

the 

Article 9.1 now reads: 

on 

by 

Based 

assessments 

1. 
the 
Commission  and  by  the  Committee  set  up 
by Article  109(c)  of the Treaty,  the  Council 
shall,  within  the  framework  of  multilateral 
surveillance  under  Article  103,  examine 
whether  the  medium-term  budget  objective 
provides  for  a  safety  margin  to  ensure  the 
avoidance  of  an  excessive  deficit,  whether 
the  economic  assumptions  on  which  the 
programme 
is  based  are  realistic  and 
whether  the  measures  being  taken  and/or 
the 
proposed  are  sufficient 
targeted  adjustment  path 
the 
medium-term  objective  and 
to  achieve 
sustained  convergence; 

to  achieve 
towards 

s 

Amendments  proposed  by the  European  Parliament  in second  reading 

and not accepted  by the Commission 

The Commission did not accept amendments 4 (second  part), 6 (first  part), 7, 9 (first  part) 
and  10, which are presented  in an annex. 

The reasons why the Commission did not accept these amendments are the following : 

Amendments  not accepted 

Justification 

Amendment 4 (second  part) 

The proposed  phrase is of a subjective nature. 

Amendment  6 (first  part) 

Amendment 7 

Introducing  in  this  Regulation,  which  deals  with  the 
early-warning  part  of  the  Pact,  reference  to  the 
procedures of Article  104c is not appropriate. 

It  is not  clear  what  is meant  by a government  deficit 
in  conformity  with  the provisions  of  the  Treaty;-  in 
addition,  the inclusion  of the word possibly  was  not 
accepted  because  both  participating  and  non-
participating  Member  States  have  agreed  that  the 
medium-term  target  for  the  deficit  must  be  close  to 
balance or surplus. 

Amendment 9 (first  part) 

Same justification  as  for  Amendment  6,  but  for  the 
convergence programmes. 

Amendment  10 

if 

to 

that, 

programme 

imply 
is 

the 
The  amendment  seems 
convergence 
properly 
implemented,  emergency  measures  could  put  it  off 
the  currency  are 
track. 
unwarranted 
and 
successfully  combated  through  temporary  measures 
(e.g. increase in domestic interest rates). 

the  pressures  on 

should  be 

temporary 

being 

they 

If 

ANNEX 

accepted 

AMENDMENTS NOT ACCEPTED BY THE  COMMISSION 

(Amendment 4  ) 
Recital (10) 

joining 

(10) 
whereas  in  the  Resolution  of  the 
the 
European  Council  of  17  June  1997. 
European Council, in accordance with Article D 
of the Treaty, has given firm political  guidelines 
to  establish  an  exchange-rate 
in  order 
mechanism in the third stage of EMU;  whereas 
the  currencies  of  non  participating  Member 
States 
the  new  exchange  rate 
mechanism, hereafter referred to as ERM2, will 
have a central  rate vis-à-vis the euro, there by 
providing  a  reference  point  for  judging  the 
adequacy  of  their  policies;  whereas  this 
mechanism  will  also  assist  them  to  resist 
unwarranted pressures in the foreign-exchange 
markets;  whereas, so as to enable appropriate 
surveillance  in  the  Council,  non  participating 
Member  States  not  joining  ERM2  will 
nevertheless 
their 
convergence  programmes  oriented  to  stability 
thus avoiding real exchange rate misalignments 
and 
rate 
fluctuations; 

excessive  nominal 

exchange 

policies 

present 

in 

(Amendment 6) 
Article 5(1) 

1.  Based  on assessments by the Commission 
under  the  procedure  provided  for  in  Article 
104(cW3^ and (5) and by the Committee set up 
by Article 109c of the Treaty, the Council shall, 
within the framework of multilateral surveillance 
under  Article  103,  examine  whether  the 
medium-term  budget  objective  in the  stability 
programme  provide  for  a  safety  margin  to 

accepted 

3 

(Amendment  7) 
Article  7(2)(a) 

the  medium-term  objective  for  the 
(a) 
budgetary position  for  a government  deficit  to 
be  in  conformity  with  the  provisions  of  the 
Treaty  and  possibly  be  close to  balance  or  in 
surplus  and  the  adjustment  path  towards  this 
the  general  government 
objective 
for 
surplus/deficit; 
the 
the  expected  path  for 
general  government  debt  ratio;  the  medium-
the 
policy 
term  monetary 
relationship  of  those  objectives  to  price  and 
exchange rate  stability; 

objectives; 

(Amendment 9) 
Article 9(1) 

the 

framework 

1.  Based  on  assessments  by the  Commission 
under  the  procedure  provided  for  in  Article 
104(cy3) and (5) and by the Committee set  up 
by Article  109c of the Treaty, the Council  shall, 
within 
of  multilateral 
surveillance  under  Article  103,  examine 
v/hether  the  medium-term  budget  objective 
provide  for  a  safety  margin  to  ensure  the  I  accepted 
avoidance  of an excessive deficit,  whether  the 
the 
economic 
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 objective and  to 
achieve sustained  convergence; 

assumptions 

on  which 

(Amendment  10) 
Article  10(1) second  subparagraph 

In  addition,  the  Council  shall  monitor  the 
economic policies of non participating Member 
States in the light  of convergence  programme 
objectives  with  a  view  to  ensure  that  their 
policies  are  geared  to  stability  and  thus  to 
avoid  real  excliange  rate  misalignments  and 
excessive  nominal  exchange  rate fluctuations» 
and to take account of the emergency  measures 
needed to resist unwarranted  pressures  so as to 
stabilise 
smooth 
thus  ensure 
functioning  of exchange markets. 

and 

the 

ISSN 0254-1475 

COM(97) 305 final 

DOCUMENTS 

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