The Debate on Economic Governance Intensifies in the EU

The Van Rompuy task force on economic governance has produced its report that will be discussed during the European Council meeting on 28 October. According to Mr. Van Rompuy this will be the biggest reform of the Economic and Monetary Union since the euro was created.

The most important provision is about creating a mechanism for macro-economic surveillance. The mechanism will serve as an early warning system for detecting substantial macroeconomic imbalances, including strong divergences in competitiveness. The mechanism will operate for eurozone member states.

The second reform concerns the corrective arm of the Stability and Growth Pact. The debt criterion will carry much more weight when deciding on the excessive deficit procedure. According to Euractiv the task force has also endorsed plans for an interest-bearing fine on countries with high debts. The task force has also endorsed the European Semester for the coordination of budget planning.

The new proposals may need the revision of the Treaties. Le Figaro reports that France and Germany have agreed on such a revision in 2013 (hat tip: OpenEurope).

In summary, the report of the task force will generally repeat the proposals of the Commission on European economic governance. The big question, however, remains – will these proposals suffice to reverse current macroeconomic imbalances in the eurozone and the EU in general. Economists remain sceptical, and if we do not manage those imbalances, all other political measures will have only incremental value.

One response to “The Debate on Economic Governance Intensifies in the EU

  1. in light of the article ….what prediction would you make of any announcement to be made by Merkel and Scarkozy on tuesday?> funadalmental change supporting europe economic governance or Germany going alone! …leaving markets in turmoil!

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