The heads of state and government of the еurozone Member States have adopted a new competitiveness pact, called “A Pact for the Euro”. The pact comes as a form of guarantee for Germany in order to increase the funds of the European Stability Mechanism (ESM). You can read more about my concerns about the legality of such a pact here. An early assessment of the Pact for the Euro is available here.
The guiding rules of the Pact for the Euro:
- It will be complementary to the existing instruments of economic governance in the EU;
- It will concentrate on actions where the competence lies with the Member States. In the chosen policy areas common objectives will be agreed upon at the Heads of State or Government level;
- Each year, concrete national commitments will be undertaken by each Head of State or Government;
- The implementation of commitments and progress towards the common policy objectives will be monitored politically by the Heads of State or Government of the Euro area and participating countries on a yearly basis.
The goals of the Pact for the Euro:
- Fostering competitiveness;
- Fostering employment;
- Contributing further to the sustainability of public finances;
- Reinforcing financial stability.
The main policy instruments:
- Monitoring and adjusting unit labour costs (ULC);
- Removing unjustified restrictions on professional services and the retail sector;
- Improving education systems and promote R&D, innovation and infrastructure;
- Removing red tape and improving the regulatory framework (e.g. bankruptcy laws, commercial code);
- Labour market reforms to promote “flexicurity”;
- Tax reforms, such as lowering taxes on labour;
- Aligning the pension system to the national demographic situation;
- Putting in place national legislation for banking resolution;
- Developing a common corporate tax base.