The Commission has issued a communication on reform of economic governance in the eurozone, called “Reinforcing economic policy coordination”. EUobserver reports that the proposals have drawn an immediate rebuke from Sweden.
Here’s a list of major proposals:
Improving the functioning of existing mechanisms under the Stability and Growth Pact
• Increase effectiveness of Stability and Convergence Programmes assessments through better ex-ante coordination, including competitiveness developments and underlying structural challenges. This will be done by a scoreboard with details on developments in current accounts, net foreign asset positions, productivity, unit labour costs, employment, and real effective exchange rates, as well as public debt and private sector credit and asset prices.
• National fiscal frameworks to better reflect the priorities of EU budgetary surveillance. This would include formulation of more timely country-specific recommendations, a system of early peer-review of national budgets, a horizontal assessment of the eurozone fiscal stance
Addressing high public debt and safeguarding long-term fiscal sustainability
• Give new prominence to the debt criterion of the Treaty. Conditionality would typically involve an appropriate mix of fiscal consolidation and the strengthening of fiscal governance including tax policies; financial sector stabilisation to the extent that financial sector distress is at the root of the public finances problems; and broader policy interventions to restore macroeconomic stability and external viability.
• Take better account of the interplay between debt and deficit
Better incentives and sanctions to comply with the rules of the Stability and Growth Pact
• Interest-bearing deposits in case of inadequate fiscal policies
• More rigorous and conditional use of EU expenditure to ensure better compliance with the rules of the Stability and Growth Pact
• Recurrent breaches of the Pact to be subjected to more speedy treatment and more rigorous use of the Cohesion Fund Regulation