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
Date: 2011-11-23
Institutions: European Commission
Subjects: EU control, Euro Group (euro area), budget deficit, coordination of EMU policies, economic recession, economic stabilisation, financial aid, public debt

EUROPEAN COMMISSION 

Brussels, 23.11.2011 
COM(2011) 819 final 

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 

EN 

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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) 

(2) 

(3) 

(4) 

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. 

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. 

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.  

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 

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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. 

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.  

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.  

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, 

(5) 

(6) 

(7) 

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 

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2. 

3. 

1. 

2. 

3. 

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. 

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. 

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 

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. 

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.  

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

(a) 

(b) 

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; 

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.  

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4. 

5. 

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. 

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) 

(b) 

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

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 

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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. 

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

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.  

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. 

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. 

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.  

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.  

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  

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. 

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: 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

1. 

2. 

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(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. 

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Article 11 
Post-programme surveillance 

1. 

2. 

3. 

4. 

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.  

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. 

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.  

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. 

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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 
The President 

For the Council 
The President 

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