Wednesday 8 October 2008

EU: Excessive government deficits IIb

We look at some legal materials and descriptions of the proposal of the European Convention in the draft Constitution concerning the avoidance of excessive government deficits and the related procedures.

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Texts compared

Here are the material differences between Article III-76 of the draft Constitution and the existing Article 104 of the Treaty establishing the European Community (TEC):

In paragraph 5, the Commission addresses an opinion (“first warning”) directly to the member state concerned (instead of to the Council).

In paragraph 6, the Council acts on a proposal from the Commission (instead of a recommendation). Consequently, the Council would have to act unanimously to amend the proposal, which would have given it “backbone”. The text added “overall assessment” and incorporated the text of the current paragraph 7, thus dealing with both the existence of an excessive deficit and the recommendations issued as a consequence. The second subparagraph defined the qualified majority, excluding the “sinner”.

In the new paragraph 7, the Council was to make its later decisions concerning a “persistent sinner” on a recommendation from the Commission, in other words preserving the Council’s opportunities to deviate from the Commission’s view.

The current paragraph 10 on inadmissibility of actions was removed to become paragraph 12; consequently the current paragraph 11 was renumbered 10 and paragraph 12 became paragraph 11.

Decision-making on Commission recommendations had been set out in the draft Constitution (above), so the current paragraph 14 became paragraph 13.

The date for the first detailed rules and definitions (1 January 1994) was dropped. The European Parliament was still only to be consulted concerning implementing rules (subparagraph 3).

Thus, there was no paragraph 14 in the draft Constitution.

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Convention Working Group

For a look at the background, you can read the Final report of Working Group VI on Economic Governance, CONV 357/02 (21 October 2002. Here are some relevant remarks (page 5):

“The Working Group is of the opinion that budgetary and financial coordination of the Member States with the objective of monetary stability as a basis for sound economic growth is of utmost common concern.

Therefore, as far as the Treaty provisions on excessive deficit procedures (Article 104) are concerned, a majority of the Group wish to see these amended in order to allow the Commission to issue first warnings on excessive deficits directly to the Member State concerned. Some members consider that, in the subsequent phases, the Council should take decisions by QMV on the basis of a Commission proposal, always excluding from voting the Member State concerned.”

The Working Group Report is available at:

http://register.consilium.eu.int/pdf/en/02/cv00/00357en2.pdf

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de Poncins

Étienne de Poncins presented the proposed text of Article III-76 of the draft Constitution in ‘Vers une Constitution européenne’ (Éditions 10/18, 2003), with a lengthy and illuminating comment on page 300:

« Commentaire : cet article III-76 sur la procédure des déficits excessifs est essentiel. Il peut conduire à l’instauration des sanctions à l’égard de l’État membre qui ne se conformerait pas à une décision l’enjoignant de réduire son déficit public. Pour la mise en œuvre de cet article, tous les États membres prennent part à la décision, qu’ils soient ou non membres de la zone euro, à l’exception des décisions prises sous les paragraphes 9 et 10 (mise en demeure et éventuelles sanctions financières) pour lesquels, en vertu de l’article III-91, seuls les États membres de la zone euro prennent part au vote, en présence des autres.

Les ministres de la zone euro ont demandé que cette liste soit étendue aux paragraphes 6, 7, 8 et 11 afin que les États membres de la zone euro puissent se prononcer seuls sur ensemble de la procédure. Ils n’ont pas eu gain de cause. Une disposition particulière leur a été proposée en échange avec l’insertion d’un nouvel article III-88 propre à la zone euro. Le débat devrait reprendre lors de la Conference intergouvernementale afin notamment de clarifier l’articulation entre le nouvel article III-88 et les dispositions générales de cet article III-76.

À noter également que, conformément aux conclusions du groupe de travail sur la gouvernance économique et à l’orientation prise par la Convention, les pouvoirs de la Commission sont renforcés au paragraphe 6. À l’heure actuelle, le Conseil se prononce sur la base d’une recommandation de la Commission (qu’il peut modifier à la majorité qualifiée) pour constater un déficit excessif. La Convention propose qu’il statue à l’avenir sur la base d’une proposition de la Commission. Elle ne pourrait donc être modifiée qu’à l’unanimité des États membres. Pour la mise en œuvre d’éventuelles sanctions, le Conseil continuera à se prononcer sur base d’une recommandation. »

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Sweden

The government of Sweden presented the main proposals on economic governance in the draft Constitution in ‘Europeiska konventet om EU:s framtid’ (Utrikesdepartementet, Departementsserien (Ds) 2003:58, 2003). The relevant passage is on page 55:

“Konventets förslag

Inom den ekonomiska politiken föreslås att kommissionen bl.a. skall få möjlighet att utfärda varningar till medlemsstater som inte bedöms följa de allmänna riktlinjer som rådet enats om rörande varje medlemsstats offentliga finanser. Konventet föreslår också att den berörda medlemsstatens röst inte skall räknas vid beslut om att utfärda en rekommendation när en medlemsstat inte efterlever de allmänna riktlinjerna eller vid beslut huruvida en medlemsstat har ett alltför stort underskott i de offentliga finanserna.”


In other words, the Swedish government mentioned the proposal to allow the Commission to issue warnings and the exclusion of the member state concerned from votes on recommendations or assessments of excessive deficits.

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Sweden

Ahead of the intergovernmental conference (IGC 2003─2004), the government of Sweden described the proposed economic policy provisions, in ‘Europeiska konventet om EU:s framtid’ (Regeringens skrivelse 2003/04:13, den 2 oktober 2003), on pages 48:

”Kompetensfördelningen mellan institutionerna

Konventet föreslår inte några genomgripande förändringar i regelverket eller kompetensfördelningen på det ekonomisk-politiska området. En viss förskjutning föreslås i riktning mot mer inflytande för kommissionen och Europaparlamentet. Flera av dessa förslag syftar till att säkerställa genomförandet av medlemsstaternas åtaganden.

Kommissionen skall till exempel få möjlighet att utfärda ”de första varningarna” till medlemsstater som inte bedöms efterleva de allmänna riktlinjerna för den ekonomiska politiken och till medlemsstater som bedöms kunna få ett alltför stort underskott i de offentliga finanserna. För närvarande har rådet denna befogenhet. Enligt konventets förslag skall kommissionen få möjlighet att lägga ett förslag när det gäller beslut huruvida ett land har ett alltför stort underskott och även ett förslag till rekommendation om åtgärd för landet i fråga. Det innebär en stärkt roll för kommissionen eftersom det krävs enhällighet i rådet för att ändra i kommissionens förslag. Konventet föreslår också att den berörda medlemsstatens röst inte skall räknas vid beslut om att utfärda en rekommendation när en medlemsstat inte efterlever de allmänna riktlinjerna eller vid beslut huruvida en medlemsstat har ett alltför stort underskott i de offentliga finanserna.”

According to the government of Sweden, the proposed amendments were not sweeping, but it noted some movement towards added influence for the Commission and the European Parliament. The Commission would be allowed to issue “first warnings” to member states with excessive government deficits, and the Commission would propose the assessment and the measures, meaning that the Council would have to act unanimously to counter the proposals. The member state in question would be excluded from voting.

On pages 49─50 the Swedish government stated the importance of functioning economic policy coordination in order to manage the cross-border effects of member states’ economic policies and for the sake of monetary union. The government gave its approval to the existing basic legal framework and the competences, but some strengthening could be in order to ensure member states’ compliance. Still, economic policy was primarily a matter for national competence:

”En väl fungerande ekonomisk-politisk samordning är viktig för att unionen skall kunna hantera gränsöverskridande effekter av medlemsstaternas ekonomiska politik och för att valutaunionen skall fungera väl. Det nuvarande ramverket och kompetensfördelningen för den ekonomisk-politiska samordningen är i grunden bra. Instrumenten för genomförande och uppföljning kan dock behöva stärkas, bl.a. för att befästa medlemsstaternas åtaganden. Det är därför positivt att konventet lägger förslag som går i denna riktning. En viktig princip är att den ekonomiska politiken är nationell och faller inom medlemsstaternas befogenhet även om viss samordning är av gemensamt intresse.”

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United Kingdom

Between the European Convention and the intergovernmental conference, the UK government presented its view ─ most British ─ in ‘A Constitutional Treaty for the EU; The British Approach to the European Union Intergovernmental Conference 2003’ (Cm5934, September 2003), under Economic Governance on pages 34─35:

“74. Many of the issues discussed in the European Convention and raised in the draft Constitutional Treaty could have significant consequences for the future performance of EU economies. The draft Constitutional Treaty proposed by the Convention has proposed changes to the EU’s existing system of economic governance and other aspects of the EU fiscal framework; the institutional balance between the Union and Member States in economic policy coordination; and the role of the Eurogroup, the informal grouping of euro area finance ministers. The Government will oppose any such proposals which might lead to unnecessary rigidities or undermine the central role of Member States in determining their economic policies. It will work to ensure outcomes that will bolster stability, promote flexibility and enhance the ability of European countries to raise productivity and employment levels.

75. The draft Treaty does not alter the terms of the UK’s Economic and Monetary Union protocol (allowing the UK to decide whether or not to join the euro). This will need formally to be re-adopted on the conclusion of the IGC.”

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In the following instalment we look at excessive government deficits in the Constitutional Treaty.


Ralf Grahn

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