OPINION OF THE EUROPEAN CENTRAL BANK on strengthened economic
governance of the euro area (Two pack).
On 21 December
2011, the ECB received a request from the Council of the European
Union for an opinion on :
- a proposal for a regulation of
the European Parliament and of the Council on common provisions for
monitoring and assessing draft budgetary plans and ensuring the
correction of excessive deficit of the Member States in the euro
area;
- a proposal for
a regulation of the European Parliament and of the Council on
the strengthening of economic and budgetary surveillance of Member
States experiencing or threatened with serious difficulties with
respect to their financial stability in the euro area.
The ECB welcomes
the proposed regulations and recommends some amendments
aimed at: (a) further strengthening the budgetary discipline of the
euro area Member States; and; (b) further enhancing the
surveillance of the euro area Member States experiencing or
threatened with serious difficulties with respect to their
financial stability, irrespective of whether they receive financial
assistance or may need to receive such assistance.
The ECB sees the
proposed regulations as compatible with and complementary to the
new Treaty on Stability, Coordination and Governance in the
Economic and Monetary Union ( ‘TSCG’) as agreed at
the European Council meeting of 30 January 2012. Finally, a
condition for progressing with the above mentioned quantum leap is
that Member States timely and vigorously implement their
obligations under the TSCG, and the proposed regulations when
adopted.
Proposed
regulation on strengthening surveillance procedures: overall,
the proposed regulation is welcome, as it gives an explicit basis
to the practice of stronger monitoring of Member States
experiencing financial market tensions or receiving financial
assistance. The involvement of the ECB and European Supervisory
Authorities is also welcome. Nevertheless, the ECB has several
observations:
- The ECB welcomes
the fact that even if a Member State is not receiving any kind of
financial support, the Commission may decide to subject it to
enhanced surveillance if it is experiencing severe financial
difficulties. In addition, providing examples of what could
constitute a serious difficulty would facilitate the understanding
of the proposed regulation, contrary to developing an exhaustive
definition, which would not be prudent.
- As the sources of
difficulties of the Member States under enhanced surveillance might
easily encompass or generate systemic risks, action in this field
could benefit from the involvement of the European Systemic Risk
Board (ESRB). It would therefore be useful to inform the ESRB,
where relevant, about the results of the enhanced
surveillance.
- Another crucial
feature of the proposed regulation is that the Council may
recommend that a Member State under enhanced surveillance seeks
financial assistance and prepares a macroeconomic adjustment
programme if it is found that more measures are needed and the
Member State’s financial situation has significant adverse
effects on financial stability in the euro area as a whole. This is
an important provision as it strongly encourages a Member State to
ask for financial assistance and to avoid unnecessary delays where
this could have detrimental consequences for financial stability in
the euro area as a whole. This provision could be reinforced by
obliging the Council (‘the Council shall’) to make a
recommendation of this kind.
- Member States
should be encouraged not to avoid a more ambitious adjustment
programme by applying for precautionary assistance instead of
direct financial assistance.
- The ECB notes that
obligations of the euro area Member States wishing to obtain
financial assistance should entail more than just information
sharing. Indeed such Member States should discuss the possibilities
available under existing Union or euro area financial instruments
and the facilities of international financial institutions and
lenders. The proposed strengthened surveillance procedure could be
further reinforced in several ways.
- The continuous
monitoring by the Commission of the eligibility criteria laid down
in Union and intergovernmental financial assistance instruments
should also apply to Member States that have been granted access to
financial assistance on a precautionary basis, even if this
assistance is not linked to the adoption of new policy measures. In
any case, if a Member State judges it necessary to request
precautionary financial assistance, a closer monitoring seems
justified.
- The ECB recommends
keeping open the possibility of assessing the sustainability of
government debt also with regard to Member States under a
precautionary programme.
- It is important to
also empower the Council to initiate and pursue the enhanced
surveillance procedures by requesting the Commission to initiate
enhanced surveillance, request additional information on the
situation of financial institutions, perform additional stress
tests or request additional action.
- The proposed
regulation requires a Member State subject to an adjustment
programme experiencing insufficient administrative capacity or
significant problems in the implementation of the programme to seek
technical assistance from the Commission.
- In addition, the
setting up of a permanent resident advisor in the Member State
concerned, who would advise the authorities of this Member State on
the implementation of the adjustment programme and coordinate with
the Union institutions and Member States involved in the technical
assistance would be useful.