Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a governance framework for the budgetary instrument for convergence and competitiveness for the euro area
Date: 2019-07-24
Institutions: European Commission, Secretariat-General
Subjects: competitiveness, coordination of EMU policies, economic convergence, economic reform, euro area, investment policy, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.7.2019  COM(2019) 354 final 2019/0161 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a governance framework for the budgetary instrument for convergence and competitiveness for the euro area    
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

When  the  global  crisis  hit  the  Union  and  the  euro  area  a  decade  ago,  the  Union  was  soon 
faced with a rapid worsening of its economic and social situation. A financial crisis quickly 
became an economic and sovereign debt crisis in the euro area. In response, action has been 
taken  to  preserve  the  stability  and  integrity  of  the  euro  area.  These  steps  have  since  been 
complemented  and  strengthened  by  various  initiatives  to  address  the  vulnerabilities  in  the 
architecture  of  the  single  currency  area  in  the  longer  term.  While  significant  improvements 
have been made, in line with recommendations made in the Five Presidents’ Report of June 
2015 and in the Reflection Paper on the Deepening of the Economic and Monetary Union of 
31 May 2017, some important gaps  remain.  One of the lessons of the crisis  is that Member 
States  whose  currency  is  the  euro  should  further  enhance  the  resilience  of  their  economies, 
through  targeted  structural  reforms  and  investment,  so  as  to  foster  convergence  and 
competitiveness of the euro area as a whole.  

Against that background, at the Euro Summit of 14 December 2018 (held in inclusive format 
at  27),  the  Union  Leaders  mandated  the  Eurogroup  to  work  on  a  number  of  issues  to 
contribute  to  the  Economic  and  Monetary  Union,  and  notably  on  the  design,  modalities  of 
implementation  and  timing  of  a  budgetary  instrument  for  convergence  and  competitiveness 
for  the  euro  area  and  of  the  Member  States  participating  in  the  exchange  rate  mechanism 
(ERM II) on a voluntary basis. The instrument will be part of the Union budget and adopted 
on the basis of the relevant Commission legislative proposal to be amended if necessary. The 
Euro  Summit  also  indicated  that  the  instrument  should  be  subject  to  criteria  and  strategic 
guidance  from  the  euro-area  Member  States.  Taking  stock  four  years  after  the  Five 
Presidents’  Report,  the  Commission  Communication  ‘Deepening  Europe’s  Economic  and 
Monetary Union’ of 12 June 20191 outlined a way forward for the deepening of the Economic 
and  Monetary  Union.  It  notably  stressed  that  a  budgetary  instrument  for  convergence  and 
competitiveness would contribute to the resilience of the Economic and Monetary Union by 
supporting coherent packages of reforms and investment aimed at addressing competitiveness 
and  convergence  challenges  of 
the  euro-area  Member  States.  The  Commission 
Communication also indicated that it stood ready to propose a new Regulation on the basis of 
Article  136  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  on  the 
governance framework of such  an instrument,  while fully  respecting the  prerogatives of the 
Commission  as  regards  budget  and  programme  implementation.  On  14  June  2019,  the 
Eurogroup  agreed  a  Term  Sheet  on  the  key  features  of  the  future  budgetary  instrument  for 
convergence and competitiveness for the euro-area Member States and for the Member States 
participating in the ERM II on a voluntary basis.2 The Leaders, at the Euro Summit of 21 June 
2019,  welcomed  the  agreement  and  stressed  the  need  to  work  on  all  pending  issues  with  a 
view to ensuring the autonomy of decision by the euro-area Member States.3  

To  that  end,  the  proposed  Regulation  establishes  a  governance  framework  for  a  new 
budgetary instrument for convergence and competitiveness for the euro area. The instrument 

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https://ec.europa.eu/info/sites/info/files/economy-finance/emu_communication_en.pdf  
https://www.consilium.europa.eu/en/press/press-releases/2019/06/14/term-sheet-on-the-budgetary-
instrument-for-convergence-and-competitiveness/  
https://www.consilium.europa.eu/en/press/press-releases/2019/06/21/statement-of-the-euro-summit-21-
june-2019/  

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will be included in the Reform Support Programme4. The governance framework will provide 
economic policy guidance for reforms and investment to be supported by the new budgetary 
instrument in line with the overall economic policy coordination framework of the Union.  

As  part  of  the  Reform  Support  Programme,  the  budgetary  instrument  for  convergence  and 
competitiveness aims to promote cohesion within the Union by providing euro-area Member 
States with financial support for reforms and investment, as set out in coherent packages. The 
proposed Regulation intends to organise the governance aspect of that budgetary instrument 
and must be read in conjunction with the Reform Support Programme.  

In  this  context,  the  Council,  with  only  the  euro-area  Member  States  having  a  voting  right, 
would be entrusted with tasks in respect of: (i) the overall strategy and oversight as regards 
reforms and investment in the euro area; and (ii) country-specific guidance in relation to the 
objectives  of  reforms  and  investment  to  be  supported  by  the  budgetary  instrument.  In 
particular,  the  proposed  Regulation  provides  for  the  Council  (after  discussions  in  the 
Eurogroup) to annually set strategic orientations on reforms and investment priorities for the 
euro area as a whole, as part of the Recommendation on the economic policy of the euro area 
(hereinafter  euro-area  recommendation).  When  setting  out  the  strategic  orientations,  the 
Council  may  seek  the  views  of  the  Euro  Summit.  The  Council  would  thereafter  adopt  a 
Recommendation with country-specific guidance addressed to all euro-area Member States on 
the objectives of the reforms and investment to be supported under the budgetary instrument. 
Under  the  budgetary  instrument  for  convergence  and  competitiveness,  euro-area  Member 
States can decide to submit proposals for reform and investment packages; both the strategic 
orientations and the country-specific guidance will have to be taken into account by the euro-
area Member States when submitting coherent packages of reforms and investment under the 
budgetary instrument. With regard to Member States whose currency is not the euro, which 
participate  in  ERM  II,  and  which  are  willing  to  participate  in  the  budgetary  instrument  for 
convergence  and  competitiveness  on  a  voluntary  basis,  appropriate  arrangements  should  be 
developed in a manner consistent with the framework provided for in this Regulation. 

The  proposed  governance  framework  for  the  budgetary  instrument  for  convergence  and 
competitiveness  for  the  euro  area  responds  to  the  need  to  reinforce  the  coordination  of  the 
economic  policies  of  the  euro  area  and  to  the  need  to  foster  reforms  and  investment  that 
address the challenges of the euro area as a whole and contribute to its economic and social 
convergence.  

Consistency with existing policy provisions in the policy area 

for 

framework 

The  governance 
for  convergence  and 
the  budgetary 
competitiveness  will  be  consistent  with  the  well-established  European  Semester  process  of 
surveillance and coordination of economic policies of the Union. The implementation of the 
governance framework set out in this Regulation will also be aligned with the timeline of the 
European Semester. 

instrument 

The  annual  strategic  orientations  will  be  adopted  by  the  Council  as  an  integral  part  of  the 
euro-area  recommendation,  which  is  endorsed  by  the  European  Council  before  adoption  by 
the Council. As an input to the strategic orientations, the Commission will inform the Council 
about how the strategic orientations have been followed during the preceding  years, thereby 
strengthening the consistency of the policy guidance. 

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COM(2018)391; 
support-programme-regulation_en.pdf 

https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-reform-

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The  country-specific  guidance  for  euro-area  Member  States  will  take  into  account  the 
strategic orientations and will be fully consistent with the country-specific recommendations 
that  are  adopted,  in  parallel,  under  the  European  Semester  further  to  discussions,  where 
appropriate,  within  the  relevant  Treaty-based  committees.  In  particular,  the  country-specific 
guidance will indicate for which particular reform and investment objectives among the ones 
identified in the country specific recommendations each euro-area Member State may want to 
submit coherent reform and investment package proposals under the budgetary instrument for 
convergence  and  competitiveness.  Country-specific  guidance  for  the  Member  States 
concerned will therefore not add to the country-specific recommendations but will rather set 
out priorities among them in terms of support under the budgetary instrument. For reasons of 
efficiency,  this  country-specific  guidance  addressed  to  all  euro-area  Member  States  will  be 
adopted as a single Recommendation. Where relevant, guidance provided under the proposed 
Regulation will duly take into account any macroeconomic adjustment programme to which a 
Member State would be subject at the time.  

• 

Consistency with other Union policies 

The proposed Regulation will provide the governance framework organising economic policy 
guidance  for  the  reform  and  investment  packages  to  be  submitted  under  the  budgetary 
instrument  for  convergence  and  competitiveness  for  the  euro  area.  It  will  also  be  consistent 
with  and  will  provide  for  complementarity  and  synergies  with  the  proposed  Union 
programmes  relevant  for  investment  such  as  EU  cohesion  policy  funds,  the  Connecting 
Europe Facility and InvestEU.  

The  proposed  Regulation  builds  upon  the  ideas  presented  in  the  Reflection  Paper  on  the 
Deepening  of  the  Economic  and  Monetary  Union  of  31  May  2017,5  and  is  in  line  with  the 
Commission Communication on Deepening Europe’s Economic and Monetary Union: Taking 
stock  four  years  after  the  Five  Presidents’  Report  of  12  June  2019,  which  outlined  a  way 
forward for the deepening of the Economic and Monetary Union. The budgetary instrument is 
planned to be part of the Union’s budget and its size will be determined in the context of the 
negotiations on the Multiannual Financial Framework 2021-2027. The proposed Regulation is 
also coherent with the objectives of that Multiannual Financial Framework.  

The proposed Regulation will not impinge on the prerogatives of the Commission as regards 
budget and programme implementation. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The proposal is based on Article 136(1)(b) in combination with 121(6) of the Treaty on the 
Functioning of the European Union. 

Article 136(1)(b) TFEU provides that, in order to ensure the proper functioning of Economic 
and Monetary Union, the Council may, in accordance with the relevant procedures referred to 
in Articles 121 and 126 TFEU, adopt measures specific to those euro-area Member States to 
set  out  economic  policy  guidelines  for  them,  while  ensuring  that  such  guidelines  are 
compatible with those adopted for the whole of the Union and are kept under surveillance.  

Article 121(6) TFEU provides that the European Parliament and Council may adopt detailed 
rules for the multilateral surveillance procedure set out in that provision, acting in accordance 
with the ordinary legislative procedure.  

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https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf  

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In line with Article 136(1)(b) TFEU, the proposed Regulation aims to set out economic policy 
guidelines  of  the  euro-area  Member  States  by  laying  down  provisions  for  a  governance 
framework  for  the  future  budgetary  instrument  for  convergence  and  competitiveness  within 
the Reform Support Programme, the beneficiaries of which are euro-area Member States. The 
procedure  referred  to  in  Article  121(6)  TFEU  constitutes  the  relevant  procedure  for  the 
adoption of the proposed Regulation, given the subject matter of the proposal.  

• 

Subsidiarity (for non-exclusive competence)  

The proposed Regulation respects the principle of subsidiarity, as it only takes actions whose 
objectives cannot be sufficiently achieved by the Member States alone (‘national insufficiency 
test’),  and  where  the  Union  intervention  can  better  achieve  those  objectives  compared  to 
actions of Member States alone (‘comparative efficiency test’).  

In that respect, policy guidance, such as strategic orientations for the euro area as a whole and 
setting  targeted  individual  objectives  for  reforms  and  investment,  which  can  also  foster  the 
overall convergence and competitiveness of the euro area, are indeed actions that can better be 
formulated and implemented at the Union level than at Member State level. The Commission 
is best placed to take the initiative and the Council to decide on such matters in line with their 
economic policy coordination role enshrined in the Treaties.  

Furthermore,  enhancing  the  role  of  the  members  of  the  Council  representing  the  euro-area 
Member States as regards  the framework for  governance of the future budgetary instrument 
for convergence and competitiveness will also increase the collective euro-area ownership of 
the relevant measures of economic policy coordination adopted under the present Regulation. 
This reflects well the Treaty principle that coordination of economic policies is a ‘matter of 
common concern’. 

The strategic orientations and country-specific guidance to be adopted under this proposal are 
limited  to  providing  guidance  to  the  euro-area  Member  States,  while  the  choice  of  actual 
reforms and investment remains with the Member State concerned. As a result, the proposed 
Regulation  does  not  prejudice  the  right  of  each  Member  State  to  decide  what  action  is 
necessary  or  opportune  to  be  undertaken  at  national,  regional  or  local  level;  the  proposed 
Regulation respects the principle that the implementation of reforms and investment remains a 
national competence and the Member States are responsible for it at the appropriate level of 
government.  

• 

Proportionality 

The  proposal  complies  with  the  proportionality  principle  in  that  it  is  a  suitable  measure  for 
achieving the objective of setting up a governance framework for the budgetary instrument for 
convergence and competitiveness for the euro area. The proposal does not go beyond what is 
necessary to achieve that governance framework, in so far as no less restrictive means could 
be employed to set out economic policy guidelines in respect of the priorities and objectives 
of  Member  States’  reforms  and  investment.  The  strategic  orientations  and  country-specific 
guidance  to  be  issued  under  the  proposed  governance  framework  are  acts  without  binding 
force and limit themselves to determining discrete characteristics of reforms and investment, 
which euro-area Member States can, in turn, at their individual discretion, decide to submit as 
a  package  under  the  budgetary  instrument  for  convergence  and  competitiveness.  The 
proposed  Regulation,  furthermore,  only  establishes  the  general  content,  consistency  and 
timing  of  such  strategic  orientations  and  country-specific  guidance.  Considering  these 
elements of the proposal, the proposed Regulation is a proportionate means for achieving its 
aim, since it employs only measures that are commensurate with its objectives.  

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• 

Choice of the instrument 

The proposed Union governance framework cannot be achieved by means of directives, or by 
voluntary instruments. Therefore, the use of a regulation is appropriate here. 

3. 

RESULTS OF STAKEHOLDER CONSULTATIONS 

The proposal takes into account the views expressed by the European Parliament and by the 
Euro Summit.  

The  European  Parliament  in  its  own  initiative  report  set  out  its  views  on  a  roadmap  for  a 
budgetary  capacity  for  the  Eurozone  (Böge/Berès  report  -  2015/2344(INI),  report  of  16 
February 2017).  

The December 2018 Euro Summit mandated the Eurogroup to work on the design, modalities 
of implementation and timing of a budgetary instrument for convergence and competitiveness 
for  the  euro  area  ‘on  the  basis  of  the  relevant  Commission  proposal  to  be  amended  if 
necessary’, which was commonly understood as the Reform Support Programme put forward 
by the Commission in May 2018. In particular, the December 2018 Euro Summit’s statement 
called  for  the  budgetary  instrument  for  convergence  and  competitiveness  to  be  subject  to 
criteria and strategic guidance from the euro-area Member States.  

The Eurogroup of 14 June 2019 agreed a Term Sheet setting out the general features of the 
future  budgetary  instrument  for  convergence  and  competitiveness  for  the  euro  area,  and 
calling for the arrangements for the governance framework for the euro-area Member States 
to be codified in an ‘additional act’. Furthermore, the Euro Summit of 21 June 2019 noted that 
the ‘autonomy of decision’ of the euro-area Member States must be secured in the governance 
framework for that instrument.  

In  this  regard,  only  a  separate  Regulation  under  Article  136  TFEU  could  guarantee  the 
autonomy of the governance framework, as set out under the Treaty. Firstly, only a separate 
Regulation under Article 136 TFEU can establish measures of economic governance, which 
specify the strategic orientations and the objectives  for reforms  and investment  of euro-area 
Member  States,  relevant  under  the  future  budgetary  instrument  for  convergence  and 
competitiveness.  Secondly,  only  a  Regulation  under  Article  136  TFEU  can  provide  for 
mechanisms  for  the  euro-area  Member  States  to  exercise  decision-making  in  the  field  of 
economic policy coordination.  

In addition to ensuring the ‘autonomy of decision’ stipulated by the Euro Summit, a proposal 
under  Article  136  TFEU  would  codify  the  euro-area  dimension  of  the  governance  of  the 
instrument in a way compatible with the prerogatives of the Commission in respect of budget 
and programme implementation (as regards the future budgetary instrument for convergence 
an competitiveness). 

 

Regulatory fitness and simplification 

The proposal is not linked to the regulatory fitness and simplification exercise and does not 
have  any  costs  of  compliance  for  small  and  medium-sized  enterprises  or  any  other 
stakeholders.  

 

Fundamental rights 

The proposal  will have  no direct  effect  on the  respect  and protection of Union fundamental 
rights,  since  the  Regulation  merely  establishes  a  framework  for  economic  governance.  The 
strategic  orientations  and  Council  measures  (recommendations)  adopted  under  the  proposed 

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Regulation have no binding force and are addressed to Member States.  

4. 

BUDGETARY IMPLICATIONS 

This proposal will have no budgetary implications for the Union. 

5. 

• 

OTHER ELEMENTS 

Detailed explanation of the specific provisions of the proposal 

The proposed Regulation establishes a governance framework of the budgetary instrument for 
convergence and competitiveness for the euro area. In that context, the general subject matter 
and  scope  of  the  proposed  Regulation  is  the  framework  for  governance  of  the  budgetary 
instrument  for  convergence  and  competitiveness  for  euro-area  Member  States  within  the 
Reform Support Programme. Its scope of application therefore extends to euro-area Member 
States (Article 1).  

The proposed Regulation envisages two distinct kinds of measure that may be adopted by the 
Council,  as  made  clear  in  its  objectives  (Article  3).  For  the  euro  area  as  whole,  after 
discussion within the Eurogroup, the Council may adopt strategic orientations on reforms and 
investment  priorities for the euro area;  and,  for the individual euro-area  Member States, the 
Council  may  formulate  country-specific  guidance  setting  out  the  objectives  for  reforms  and 
investment  relevant  under  the  budgetary  instrument  for  convergence  and  competitiveness, 
which  the  Member  States  concerned  may  want  to  submit  to  the  Commission  under  the 
budgetary  instrument  for  convergence  and  competitiveness.  The  country-specific  guidance 
will  be  consistent  with  the  strategic  orientations  for  the  euro  area  and  with  the  country-
specific recommendations that are adopted under the European Semester of economic policy 
coordination  further  to  discussions,  where  appropriate,  within  the  relevant  Treaty-based 
committees. 

The  proposal  makes  provision  for  the  strategic  orientations  of  the  reform  and  investment 
priorities  of  the  euro  area  to  be  integrated  into  the  euro-area  recommendation  (Article  4). 
Discussion in the Eurogroup will be required before strategic orientations are adopted by the 
Council as an integral part of the euro-area recommendation, acting by qualified majority on 
the basis of a recommendation from the Commission. The Euro Summit would also endorse 
the approach on an  annual  basis. The proposed  Regulation  also  requires the Commission  to 
inform the Council how previous annual strategic orientations have been followed, which will 
allow  the  Council  to  reflect  progress  in  implementation  of  the  policies  in  the  strategic 
orientations of the following year.  

The framework for governance is also reflected in more specific terms in the provision for a 
Council Recommendation (Article 5), which gives country-specific guidance to all euro-area 
Member States. The country-specific guidance should be consistent with the guidance in the 
country-specific recommendations for the Member State concerned, or it should duly take into 
account  any  Council  decision  approving  a  macroeconomic  adjustment  programme.  The 
Council Recommendation with country-specific guidance will be adopted, acting by qualified 
majority, on the basis of a recommendation from the Commission. The strategic orientations 
(Article 4) as well as the country-specific guidance could be taken up by Member States under 
the budgetary instrument for convergence and competitiveness. Both will serve as a basis for 
Member States for their possible proposals of coherent reform and investment packages under 
the budgetary instrument for convergence and competitiveness. Ultimately, it is the choice of 

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the  Member  State  to  participate  and  present  eligible  reform  and  investment  packages  to  be 
supported under the budgetary instrument. 

The budgetary instrument  may  set  a minimum  national  co-financing  rate as a percentage of 
the  total  cost  of  the  reforms  and  investment.  In  this  context,  Article  6  provides  that,  on  the 
basis of an assessment by the Commission, the Council will establish which Member States 
are  considered  to  be  experiencing  a  severe  economic  downturn,  for  the  purposes  of  a 
modulation  of  the  national  co-financing  rate  within  the  future  budgetary  instrument  for 
convergence  and  competitiveness.  This  provision  is  without  prejudice  to  the  application  of 
Article  2(2)  of  Council  Regulation  (EC)  1467/97  as  modified  by  Council  Regulation  (EC) 
1056/2004 and Council Regulation (EU) 1177/20146. 

The  proposed  Regulation  reaffirms  the  voting  rule  in  Article  136(2)  TFEU  in  relation  to 
strategic  orientations  and  Council  recommendations:  only  members  of  the  Council 
representing euro-area Member States will be entitled to vote (Article 7). 

In  order  to  enhance  the  dialogue  between  the  Union  institutions,  in  particular  between  the 
European  Parliament,  the  Council  and  the  Commission,  and  to  ensure  greater  transparency 
and accountability, the proposed Regulation sets out the parameters of an economic dialogue 
involving  the  European  Parliament,  Council  and  the  Eurogroup  (Article  8).  Under  that 
framework,  the  competent  committee  of  the  European  Parliament  may  host  an  economic 
dialogue  and  invite  the  President  of  the  Council  and  the  Eurogroup  to  discuss  measures 
adopted under the Regulation.  

In order to review the effectiveness of the proposed Regulation, the  Commission is required 
every four years starting in 2023 to publish and transmit a report to the European Parliament 
and Council (Article 9). 

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https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31997R1467&from=EN;  
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32005R1056&from=EN 
https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:306:0033:0040:EN:PDF 

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2019/0161 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on a governance framework for the budgetary instrument for convergence and 
competitiveness for 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(1)(b) in combination with Article 121(6), 

Having regard to the proposal from the European Commission, 
After transmission of the draft legislative act to the national parliaments7, 
Having regard to the opinion of the European Central Bank8, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The  coordination  of  the  economic  policies  of  the  Member  States  is  a  matter  of 
common concern. The Member States whose currency is the euro have a particular 
interest in and a responsibility to conduct economic policies that promote the proper 
functioning  of  the  Economic  and  Monetary  Union  and  to  avoid  policies  that 
jeopardise it in the context of broad guidelines formulated by the Council.  

implementation  and 

timing  of  a  budgetary 

In  order  to  ensure  the  proper  functioning  of  the  Economic  and  Monetary  Union, 
Member  States  whose  currency  is  the  euro  should  take  measures  to  enhance  the 
resilience of their economies through targeted structural reforms and investment. The 
Euro  Summit  of  December  2018  mandated  the  Eurogroup  to  work  on  the  design, 
modalities  of 
instrument  for 
competitiveness  and  convergence  for  the  euro  area.  To  ensure  that  Member  States 
carry  out  structural  reforms  and  investment  in  a  consistent,  coherent  and  well-
coordinated  manner,  it  is  necessary  to  establish  a  governance  framework  to  enable 
the Council to provide strategic orientations on reform and investment priorities to be 
undertaken  within  the  euro  area  by  the  Member  States.  Such  a  framework  would 
enhance convergence and competitiveness of the euro area. The Council should also 
provide  country-specific  guidance  on  individual  reforms  and  investment  objectives 
of  the  Member  States  whose  currency  is  the  euro,  which  can  be  supported  by  the 
budgetary instrument for convergence and competitiveness. Since such a framework 
is  specific  to  the  Member  States  whose  currency  is  the  euro,  only  members  of  the 
Council  representing  those  Member  States  should  take  part  in  votes  under  this 
Regulation.  

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OJ C , , p.  
OJ C ; ; p.  

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

At  the  Union  level,  the  European  Semester  of  economic  policy  coordination  is  the 
framework  for  the  identification  of  national  reform  priorities  of  the  Member  States 
and  for  the  monitoring  of  the  implementation  of  those  priorities.  This  Regulation 
addresses  the  need  to  establish  coherence  between  the  reform  and  investment 
priorities for the euro area as a whole and the reform and investment objectives of the 
individual Member States whose currency is the euro, and to ensure their consistency 
with the European Semester. 

On  an  annual  basis,  the  Council  should  set  out  strategic  orientations  on  the  reform 
and  investment  priorities  for  the  euro  area,  as  part  of  the  recommendation  on  the 
economic policy of the euro area. The strategic orientations should be adopted by the 
Council  acting  by  qualified  majority  on  a  recommendation  from  the  Commission, 
and  after  the  Eurogroup  has  discussed  the  reforms  and  investment  priorities  that  it 
considers  relevant  and  appropriate  for  inclusion  therein.  The  annual  Euro  Summit 
will play its role. 

To  ensure  that  strategic  orientations  reflect  the  evolving  experience  of  the 
implementation  of  the  budgetary  instrument  for  convergence  and  competitiveness, 
the Commission should, alongside its recommendation on the strategic orientations, 
as  part  of  its  recommendation  on  the  economic  policy  of  the  euro  area,  inform  the 
Council  of  how  the  strategic  orientations  have  been  followed  during  the  preceding 
years. 

The  Member  States  whose  currency  is  the  euro  can  decide  to  submit  proposals  for 
reform and investment packages under the budgetary instrument for convergence and 
competitiveness.  To  that  end,  the  Council  will  adopt  a  Recommendation  providing 
country-specific  guidance  on  the  objectives  of  reforms  and  investment  that  can  be 
supported  under  the  budgetary  instrument  for  convergence  and  competitiveness  in 
Member States whose currency is the euro. This Council Recommendation should be 
consistent with the strategic orientations adopted under this Regulation, and with the 
country-specific recommendations that  are adopted, in  parallel,  under the European 
Semester of economic policy coordination further to discussions, where appropriate, 
within  the  relevant  Treaty-based  committees.  The  Council  Recommendation  shall 
also duly take into account any macroeconomic adjustment programme approved in 
accordance  with  the  relevant  provisions  of  Regulation  (EU)  No  472/2013  of  the 
European Parliament and of the Council9.  

The Council Recommendation providing country-specific guidance on the objectives 
of reforms and investment in Member States whose currency is the euro, adopted by 
qualified majority, should be based on a Commission recommendation. This process 
should be without prejudice to the voluntary nature of participation of Member States 
whose  currency  is  the  euro  in  the  budgetary  instrument  for  convergence  and 
competitiveness, and without prejudice to the Commission’s prerogatives as regards 
its implementation.  

Within the governance framework set out in this Regulation, the Council should set 
out  the  strategic  orientations  for  the  euro  area  as  a  whole  and  provide  country-
specific  guidance  on  the  objectives  of  reform  and  investment  packages  of  the 
individual Member States whose currency is the euro. The Commission implements 

9 
Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the 
strengthening  of  economic  and  budgetary  surveillance  of  Member  States  in  the  euro  area  experiencing  or 
threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013, p. 1). 

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(9) 

(10) 

(11) 

(12) 

the  Union’s  budget  under  Article  317  TFEU,  which  includes  the  management  of 
spending programmes. The Commission responsibilities with regard to the budgetary 
instrument  for  convergence  and  competitiveness  [within  the  Reform  Support 
Programme] under Regulation (EU) XXXX/XX should not be affected.  

On the basis of an assessment by the Commission, the Council, shall establish which 
Member  States  are  experiencing  a  severe  economic  downturn  for  the  purpose  of  a 
modulation  of  national  co-financing  rates  provided  for  in  Regulation  (EU) 
XXXX/XX  [Reform  Support  Programme  Regulation],  and  without  prejudice  to  the 
application of Article 2(2) of Council Regulation (EC) 1467/97 as amended.  

In  order  to  enhance  the  dialogue  between  the  Union  institutions,  in  particular 
between  the  European  Parliament,  the  Council  and  the  Commission,  and  to  ensure 
greater  transparency  and  accountability  in  that  economic  dialogue,  the  competent 
committee  of  the  European  Parliament  can  invite  the  President  of  the  Council,  the 
Commission and, where appropriate, the President of the Eurogroup to appear before 
the committee to discuss the measures taken pursuant to this Regulation. 

The  Commission  should  report  to  the  European  Parliament  and  the  Council,  at 
regular intervals, on the effectiveness of this Regulation.  

Since  the  objective  of  this  Regulation  to  contribute  to  the  proper  functioning  of 
Europe’s  Economic  and  Monetary  Union  and 
the  convergence  and 
competitiveness within the euro area by setting out a governance framework for the 
budgetary  instrument  for  convergence  and  competitiveness  cannot  be  sufficiently 
achieved by the Member States and can therefore, by reason of the scale of action, be 
better  achieved  at  Union  level,  the  Union  may  adopt  measures,  in  accordance  with 
the principle of subsidiarity set out in Article 5 of the Treaty on the European Union. 
In  accordance  with  the  principle  of  proportionality,  as  set  out  in  that  article,  this 
Regulation does not go beyond what is necessary in order to achieve that objective, 

to 

HAVE ADOPTED THIS REGULATION: 

CHAPTER I 
General provisions 

Article 1 
Subject matter and scope 

1. 

This Regulation lays down provisions for the governance framework relevant for the 
budgetary instrument  for convergence  and competitiveness  for the euro  area within 
the Reform Support Programme under Regulation (EU) XXX/XX10.  

2. 

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

10 

O.J.C , , p. 

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For the purposes of this Regulation, the following definitions apply:  

Article 2 
Definitions 

(a) 

(b) 

‘country-specific  recommendations’  means  the  Council  recommendations 
addressed to each Member State in accordance with Article 121(2) and Article 
148(4)  TFEU  in  the  context  of  the  European  Semester  of  economic  policy 
coordination; 

‘euro-area  recommendation’  means  the  Council  recommendation  on  the 
economic policy of the euro area in accordance with Article 136 in conjunction 
with Article 121(2) TFEU. 

Article 3 
Objectives 

This Regulation shall contribute to the convergence and competitiveness of the economies of 
the Member States whose currency is the euro by defining a governance framework relevant 
for the budgetary instrument for convergence and competitiveness, which sets out: 

(a) 

(b) 

the  strategic  orientations  on  the  reform  and  investment  priorities  of  the  euro 
area as a whole; 

country-specific guidance on the objectives of reforms and investment relevant 
for  the  budgetary  instrument  for  convergence  and  competitiveness  consistent 
with the country-specific recommendations. 

1. 

2. 

1. 

Article 4 
Strategic orientations for the euro area 

On a recommendation from the Commission and after discussion in the Eurogroup, 
the  Council  shall  establish,  as  part  of  the  euro-area  recommendation  and  on  an 
annual basis, the strategic orientations for the reform and investment priorities of the 
euro area.  

In  parallel  to  its  recommendation  referred  to  in  paragraph  1,  the  Commission  shall 
inform  the  Council  on  how  the  strategic  orientations  of  the  preceding  years  have 
been followed by the Member States.  

Article 5 
Country-specific guidance  

The  Council  shall,  on  a  recommendation  from 
the  Commission,  adopt  a 
recommendation  addressed  to  all  Member  States  whose  currency  is  the  euro 
providing,  on  an  annual  basis,  country-specific  guidance  on  the  reform  and 
investment objectives for the purposes of the reform and investment packages, which 

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Member  States  may  subsequently  submit  under  Regulation  (EU)  XXXX/XX 
[Reform Support Programme Regulation].  

2. 

The recommendation referred to in paragraph 1 shall be consistent with the strategic 
orientations referred to  in  Article 4 and with  the country-specific recommendations 
for the Member State concerned. In the recommendation referred to in paragraph 1, 
the Council shall duly take into account any macroeconomic adjustment programme 
approved in accordance with Article 7(2) of Regulation (EU) No 472/2013. 

Article 6 
Severe economic downturn 

Where relevant, based on an assessment by the Commission, the recommendation referred to 
in paragraph 1 of Article 5 shall establish whether a Member State is  experiencing a severe 
economic downturn, for the purposes of a modulation of national co-financing rates provided 
for in Regulation (EU) XXXX/XX [Reform Support Programme Regulation].  

This Article shall be without prejudice to the application of Article 2(2) of Council Regulation 
(EC) 1467/97. 

Article 7 
Voting in Council  

1. 

2. 

As regards the measures referred to in this Regulation, only members of the Council 
representing Member States whose currency is the euro shall vote. 

A qualified majority of the members of the Council referred to in paragraph 1 shall 
be defined in accordance with point (a) of Article 238(3) TFEU. 

Article 8 
Economic dialogue 

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, the competent committee of the European Parliament may invite the President 
of  the  Council,  the  Commission  and,  where  appropriate,  the  President  of  the  Eurogroup  to 
appear before the committee to discuss the measures taken pursuant to this Regulation. 

Article 9 
Review 

1. 

By 31 December 2023 and every four years thereafter, the Commission shall publish 
a  report  on  the  application  of  this  Regulation.  That  report  shall  assess  the 
effectiveness of this Regulation. 

2. 

The Commission shall send the report to the European Parliament and to the Council. 

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Article 10 
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 
The President 

For the Council 
The President 

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