Strengthening budgetary
discipline in the EMU
From the Six-Pack to the Fiscal
Compact
Chairpersons Conference for Finance and Fiscal Affairs Committees
20 March 2012
Marco Buti – Director General - DG Economic and Financial Affairs

Enhanced economic governance in the EU
The 1st step: the Six-Pack
•A major reform for the 27
The 2nd step: the Two-Pack of 23 November
•Additional elements for the euro area
The latest step, the Intergovernmental Treaty
•Transposing European rules and concepts in a
national setting
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Breaking the negative feedback loop
Bank
funding

Fiscal
discipline

SOVEREIGN
DEBT
Firewalls

FINANCIAL
STABILITY

Break
the negative
feedback loop

Bank
recaps

Structural
reforms

ECONOMIC
GROWTH
Differentiated fiscal
consolidation & quality
of public finances

3

1st step: the Six-Pack as part of a comprehensive
EU response
Focus on debt
developments

More effective
preventive arm of SGP
Expenditure benchmark

Numerical benchmark in the
corrective arm of the SGP

Sound fiscal
policy
Better enforcement of
rules
-New Regulation on Sanctions
-New Directive on national
budgetary frameworks

Prevention and
correction of macro
imbalances
New surveillance
procedure and
possible sanctions

Macro-prudential
supervision

Crisis
Resolution
EFSM/EFSF/
ESM

Structural reform
strategy
Europe 2020

Balanced
growth
Regulation and
supervision of
financial systems

4

The Directive on national fiscal frameworks
Where were we?
EU budgetary framework
insufficiently entrenched in
•national frameworks

Need for strengthening
national ownership
Considerable variation in quality
of national fiscal frameworks
Well-designed fiscal
frameworks support sound fiscal
policies

Need for uniform
requirements for national
budgetary rules and
procedures

What has been agreed
Minimum requirements for national budgetary
frameworks
Country-specific numerical fiscal rules
Medium-term budgetary frameworks
Independent monitoring and analysis
Budgetary procedures
Rules for preparation of the forecasts for budgetary planning
Accounting and statistical reporting
Regulation of fiscal relationships between public authorities
across sub-sectors of general government
Transposition by end-2013

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2nd step: the Two-Pack builds on the fiscal
surveillance leg of the Six-Pack
In response to the enhanced spillovers of budgetary policies within the euro area
Further strengthening of the framework for budgetary coordination and surveillance
Additional monitoring requirements through two Regulations

Enhanced monitoring for all MS of
the euro area

Enhanced surveillance for financially
fragile MS of the euro area

•

Common provisions for assessing
draft national budgetary plans and

•Codifying common practice of EU-IMF
programmes

•

A closer monitoring of the correction
of excessive deficits in euro area
Member States (only MS in EDP)

•Possibility to recommend a euro area
Member State to ask for assistance

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The latest step: the intergovernmental
Treaty
New intensified commitments by 25 MS. The "missing part of the puzzle of the Stability and
Growth Pact". To be integrated into the EU legal framework within 5 years and with an important
role for the Commission and EU secondary legislation.
Economic Policy Coordination
•

Coordination of major economic policy reform plans in euro area MS

Reinforced Governance

3 main chapters

•

Euro Summits at least twice a year

•

President of the Euro Summit appointed by Heads of State or
Government of euro area MS

•

Participation in Euro Summits of Heads of State or Government of
non-euro area MS having ratified treaty is foreseen for certain
discussions and at least once a year

…and the FISCAL COMPACT

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The Fiscal Compact
Recalls main commitments of the SGP
oCountry-specific medium-term objectives
(MTOs)
oNumerical debt reduction benchmark under
the EDP (= Six-Pack)

Complements the SGP's toolbox
oEx ante coordination of debt issuance
plans
oEconomic partnership programmes for
Member States in EDP

Strengthens implementation of the SGP
oImplementation of MTOs at constitutional (or
equivalent) level
oAssorted with automatic correction mechanisms
(triggered in case of significant deviation… except if
exceptional circumstance) and monitoring by
independent institutions
oMore stringent lower limit for MTOs (-0.5%),
with a calendar for convergence
oBehavioural commitment to support Commission
proposals/recommendations for EDPs in the euro area

•
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The Fiscal Compact (continued)
• Enforcement

-

National level
MS to implement rules in national law through provisions of "binding force and
permanent character, preferably constitutional"
compliance monitored level by independent national institutions

o
-

Union level
COM presents report on the transposition of the agreed provisions
Matter can be brought to the Court of Justice by a MS to verify transposition
Court of Justice can impose financial sanction of up to 0.1% of GDP

o
-

• How to anchor these commitments into EU Law?
o
o

Swift implementation of key elements by legislative proposals, either currently under
discussion or new texts
Contracting Parties committed to incorporation of Treaty within 5 years
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A strengthened framework
EU 27

SixPack
In force

Reinforced preventive arm of
SGP

√

Debt-reduction benchmark

√

Proposed

Fiscal
Compact
To be
ratified

Euro area

√

Financial sanctions
Directive on national fiscal
frameworks

TwoPack

25 Contracting
Parties

√

Enhanced budgetary
monitoring

√

Enhanced surveillance for
vulnerable euro area MS

√ (for MS with financial difficulties)

National implementation of
MTOs + transposition
sanctions

√

Economic partnership
programme in the EDP

√

Ex ante coordination of debt
issuance

√
√

rQMV in EDP
Ex ante coordination of
economic reforms

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√
√

√

Thank you

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