CELEX: 51997PC0305
Language: en
Date: 1997-06-24
Title: 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

COMMISSION OF THE EUROPEAN COMMUNITIES
*   HT
                                           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)
 ---pagebreak---  ---pagebreak---                          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
Commission approved its amended proposal which included, inter alia, the
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.
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.
                                               £
 ---pagebreak---                                  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
                      Council of 17 June 1997, the European
                      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:
                     (4)       Whereas adherence to the medium-
                     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:
                         (5)   Whereas      it   is appropriate     to
                         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
                         stage to the need to take the necessary
                         budgetary corrective action in order to
                         prevent a government deficit becoming
                         excessive; whereas all Member States have
                         committed themselves to take the corrective
                         budgetary action they deem necessary to
                         meet the objectives of their stability and
                                               3
 ---pagebreak---                         convergence programmes whenever they
                        have information indicating actual or
                        expected significant divergence from the
                        medium-term budgetary objective;
Recital (10) now reads:
                        (10) Whereas in the Resolution of the
                        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 and excessive nominal
                        exchange rate fluctuations;
Article 3.2.(b) now reads.
                        (b) the main assumptions about expected
                        economic developments and important
                        economic variables which are relevant to
                        the realization of the stability programme
                        such       as     government       investment
                        expenditure, real gross domestic product
                        (GDP) growth, employment and inflation;
Article 5.1. now reads:
                         1.    Based     on    assessments    by    the
                         Commission 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 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 proposed are sufficient to
                                                 V
 ---pagebreak---                         achieve the targeted adjustment          path
                        towards the medium-term objective.
Article 7.2. (b) now reads:
                        (b) the main assumptions about expected
                        economic developments and important
                        economic variables which are relevant to
                        the realization of the convergence
                        programme such as government investment
                        expenditure, real gross domestic product
                        (GDP) growth, employment and inflation;
Article 9.1 now reads:
                         1.     Based on assessments by 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
                         proposed are sufficient to achieve the
                         targeted adjustment path towards the
                         medium-term objective and to achieve
                         sustained convergence;
                                               s
 ---pagebreak---        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)            Introducing in this Regulation, which deals with the
                                    early-warning part of the Pact, reference to the
                                    procedures of Article 104c is not appropriate.
Amendment 7                         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                        The amendment seems to imply that, if the
                                     convergence      programme is being           properly
                                     implemented, emergency measures could put it off
                                     track. If the pressures on the currency are
                                     unwarranted they should be temporary and
                                     successfully combated through temporary measures
                                     (e.g. increase in domestic interest rates).
 ---pagebreak---                                                                       ANNEX
       AMENDMENTS NOT ACCEPTED BY THE COMMISSION
(Amendment 4 )
  Recital (10)
            (10)       whereas in the Resolution of the
            European Council of 17 June 1997. the                 accepted
            European Council, in accordance with Article D
            of the Treaty, has givenfirmpolitical 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, 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 present policies in their
            convergence programmes oriented to stability
            thus avoiding real exchange rate misalignments
            and excessive nominal exchange rate
            fluctuations;
   (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
 ---pagebreak---    (Amendment 7)
    Article 7(2)(a)
             (a)      the medium-term objective for the
             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
             objective for the general government
             surplus/deficit; the expected path for the
             general government debt ratio; the medium-
             term monetary policy objectives; the
             relationship of those objectives to price and
             exchange rate stability;
       (Amendment 9)
         Article 9(1)
                 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 the framework 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
                 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 objective and to
                 achieve sustained convergence;
         (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 and thus ensure the smooth
                     functioning of exchange markets.
 ---pagebreak---                                                                   ISSN 0254-1475
                                                            COM(97) 305 final
                                              DOCUMENTS
EN                                                                       01   IO
                                    Catalogue number : CB-C097-292-EN-C
                                                             ISBN 92-78-21465-5
Office for Official Publications of the European Communities
L-2985 Luxembourg