EU push for stricter economic governance

European lawmakers will push for tougher enforcement of economic discipline in European Union member states when potentially difficult negotiations over legislation designed to avoid a repeat of the eurozone crisis get under way in Brussels today.

MEPs on Tuesday approved draft “economic governance” rules which, in key respects, would be more rigorous than those agreed by EU finance ministers last month. Two efforts by the Socialists to delay the process on Tuesday afternoon and on Wednesday morning both failed.

But MEPs’ views on some of the detailed measures were split, meaning that there could now be a prolonged and difficult tussle as negotiators representing EU countries and European parliamentarians try to hammer out a final package that both sides can approve.

In total, there are six pieces of legislation involved, the majority of which need a green light from both member states and MEPs before they can come into effect. The first negotiating session is scheduled for Wednesday.

The need to improve oversight of countries’ economic policies and budgets has been a significant issue for the EU since the financial crisis in 2008, but the push for better discipline and enforcement has become particularly urgent among eurozone countries in the wake of the Greek bail-out.

Brussels released its six proposals on economic governance in September, setting out new rules for overseeing countries’ budgeting and monetary policies and a mechanism for imposing fines on eurozone countries that persisted in running overly-lax fiscal policies.

They included provisions for potential fines equalling 0.2 per cent of a country’s gross domestic product if it was deemed to be consistently flouting Europe’s budgetary rules.

But there has already been a dispute over how “automatic” these sanctions should be. Last month, member states carved out some leeway – for example, the commission’s decision to impose a fine could be turned down by member states voting by qualified majority, and some flexibility was introduced to allow for the cost of pension reforms in national accounts. But that triggered angry criticism from the European Central Bank, which claimed the measures were insufficient.

The parliamentary package, which took hours to vote through on Tuesday, is generally tougher. It aims, for example, to make it harder for countries to wriggle out of the procedures leading up to sanctions, and includes measures designed to put peer pressure on member states to undertake structural reforms.

In addition, it bolsters the powers of the commission, in terms of information which Brussels must be given by member states and its powers when issuing warnings.

The text was approved by MEPs, voting in the economic and monetary affairs committee, and will now form the parliament’s position in three-way negotiations with member states and the European Commission, which are due to start immediately. The aim is to hammer out final legislation by the summer.