Tuesday

16th Jul 2019

Divided EU Parliament tightens measures on economic governance

  • The European Parliament has limited the fiscal powers of national parliaments (Photo: EUobserver)

MEPs have toughened up the provisions in a package of six laws that centralise economic decision-making in the EU, delivering more powers for oversight of national fiscal policies to the European Commission.

In a four-hour, at times heated meeting of the powerful economics committee of the European Parliament, deputies waded their way through a full 2000 amendments proposed to the package of bills, dubbed the ‘six pack' by EU officials. A number of key votes passed with majorities slimmer than the house is used to.

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By the end of the meeting, the six pack had been markedly altered to give a stronger role to the commission at the expense of the Council, representing the member states, throughout new processes of oversight of budget and wider economic policy planning.

Attempts by Socialists and Greens to temper what critics are calling a rulebook for permanent austerity with more leeway for public spending on education, transport and infrastructure met only moderate success, resulting in the two groups opposing half of the new laws.

Highlighting the controversy of the moves, posters denouncing austerity were stuck to the walls throughout the building where the votes took place and at one point, the meeting was interrupted by a handful of whistling left-wing protesters opposed to the shift in powers. They were hustled away before they were able to unfurl their banner.

The new rules focus on keeping in check two elements of national government spending: the first being annual government budgets and the second, under a more open-ended process but under just as tight a leash, all economic policies - and not just for one year, but over the longer term.

With budgets and long-term economic plans now submitted to Brussels before being presented to national parliaments, the deputies voted to give the commission the role of policing a member state's budget and wider economic policies, rather than, as initially envisaged, the European Council.

Additionally, under the commission's original legislative proposals, the EU executive was to issue economic policy recommendations for member states and on the basis of these assessments, the EU Council was to decide by ‘qualified majority' what to order an individual country to do.

The whole process would take six steps before a member state could be sanctioned and only at the final stage was the EU Council faced with having to cobble together a qualified majority to block.

Now, when the commission makes a recommendation at the very earliest stage in the process, the EU Council can only reject this with a reversed qualified majority within ten days. It is likely to be very difficult to round up such a majority in this time.

Cheering the move, Liberal leader Guy Verhofstadt said: "The European Commission shall be entitled to intervene with all necessary means if the stability of the euro is at stake, to preserve our European project."

Sanctions against countries that are unable or unwilling to adhere to the commission's orders on how to adapt their fiscal policies would also now be imposed on states earlier than the legislative proposals had originally foreseen.

New fines for creative accounting

Now, countries would have to offer up a deposit of 0.1 percent of GDP as soon as the EU Council has decided that a country has strayed from the roadmap laid out for them. Previously, such a payment would have been imposed only after a member state had flouted two successive orders.

Where the commission accuses the country of "deliberate and severe non-compliance" with their orders, fines are upped to 0.3 percent of GDP.

Moreover, MEPs have come up with a whole new one-off fine - not appearing anywhere in the commission's legislative drafts - of 0.5 percent of GDP for countries that are caught fiddling the books as Greece last year admitted to having done.

Also, previously, the billions of euros that would be paid by rebel states were to be handed over to those countries without excessive deficits. Now the sums and their interest are to be given to the European Stability Mechanism - the EU's permanent bail-out fund to be established in 2013 - and, before then, the European Investment Bank.

However, deputies were keen to open up the process to public scrutiny. Any EU Council votes on imposing deposits and fines should be held in public, except in a crisis. But the production of assessments and orders coming from the EU executive will remain behind closed doors.

The parliament also wants regular ‘economic dialogues' with the president of the Eurogroup and the commission to come before MEPs and explain their policies and a say in the establishment of the metrics in a ‘scoreboard' that is being developed against which the behaviour of member states can be measured.

The Socialists did manage to introduce details requiring that commission assessments take account of public investment intended to stimulate jobs and economic growth and, in a major victory over concerns from trade unions that the process would undermine collective bargaining, the group won a vote requiring that assessment of wider economic imbalances between states would not touch this area centre-left deputies described as a "fundamental right".

But overall, both the left and the Greens were unable to balance austerity with the freedom to open other paths of investment.

"The failure ... to deliver any measures that would enable revenues to be raised through fair and effective taxation resources, means that there will be no alternative to austerity in order to balance government budgets," said the Greens following the vote. "This will hit the most vulnerable the hardest."

Stoking 'EU disillusionment'

Both the Socialists and the Greens voted against three of the laws, while the hard left United European Left (GUE) and the sole Ukip MEP on the committee voted against all six.

The right accused the left of irresponsibility for its opposition. Dutch Christian Democrat Corien Wortmann-Kool hit out at her opponents, saying that she "regret[s] that the left is not prepared to take responsibility for sustainable public finances."

The discourse from the left was just as corrosive. The laws are being "imposed from above without any democratic debate," said German Die Linke MEP Thomas Haendel, who warned that the process would boost anti-EU sentiment.

"The EU is doing everything to ignore the lessons learned during referendums on the EU Constitution, and the disillusionment caused by a European project being carried out against the wishes of the people."

The parliament normally enters negotiations with the Council after such a committee vote only if there is wide cross-party agreement. As a result of the divisions, the left of the committee room attempted to postpone the launch of talks until after a vote by the full sitting of the chamber.

The move was however defeated by the conservatives and Liberals 26-14. They argued that the ongoing eurozone crisis left little time for such niceties.

Deal reached on EU economic governance laws

After months of fraught negotiations, a deal has been reached on six new laws designed to keep eurozone member states' budgets in check and prevent a repetition of the current debt crisis. The new set-up will make it harder for deficit-sinners to avoid sanctions.

Parliament approves economic governance ‘six-pack’

After almost a year since the European Commission first proposed a package of laws radically centralising economic decision-making in the European Union, the legislative process approving the so-called ‘six-pack’ of bills has finally come to an end with the European Parliament giving its assent on Wednesday.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

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