By Nick Mann | 14 June 2012
The European Parliament yesterday voted in favour of rules to strengthen budgetary surveillance and monitoring in the eurozone.
These will give the European Commission power to scrutinise countries’ draft budgets more closely and recommend changes to spending and debt reduction plans. It will be able to look particularly carefully at countries in ‘serious difficulties’ and require them to seek bailout funds.
But the MEPs introduced some amendments to the ‘two-pack’ rules, first drawn up by the commission in November, to gear the legislation more towards growth. The parliament also inserted democratic controls on the power to vet countries’ budgets and intervene in their spending plans.
In particular, it wants the commission’s extra powers to be renewed every three years and for both the European Parliament and Council to be able to revoke them.
It also said the commission’s planned country-by-country budget assessments would need to be more comprehensive to ensure cuts were not being made at the cost of killing off investments with growth potential.
The commission should also ensure countries being asked to make cuts did not do so in a way that harmed investments in education and health care, and should also be aware of the potential effect a country’s difficulties might have on its neighbours.
MEPs also proposed the introduction of a European Debt Redemption Fund to provide a more immediate way of reducing eurozone countries’ debts as well as cutting individual countries’ debt refinancing burden.
The fund would group together debt from all countries that exceeded 60% of their gross domestic product – currently around €2.3 trillion. Countries would then have 25 years to repay the debt, reducing the average interest rate paid.
Elisa Ferreira, one of two MEPs responsible for steering the legislation through the European Parliament, said the ‘two pack’ needed to address growth and the cost of debt refinancing as well as fiscal discipline.
‘Fiscal discipline cannot be the Alpha and Omega of our strategy. We need to rebalance our short-term objectives to also address growth and the vicious spiral of high debt-financing interest rates,’ she said.
Under the Parliament’s proposals, the commission would also be required to present a roadmap for introducing eurobonds which one month of the new rules coming into power. It would also have to outline plans for a ‘growth instrument’ worth €100bn over ten years to make infrastructure investments.
Following yesterday’s vote, the Parliament will now enter into talks with member states to reach a deal on the legislation.
