Abstract
This chapter discusses the evolving arrangements for decision-making concerning the economic and monetary union (EMU). It begins by recalling some of the main reasons behind the complexity and sensitivity of these arrangements. The first section reviews the structures and mechanisms which have been created on the basis of the differential participation between the Member States, in particular between the euro area countries and the others. The second section sets out to explain the mix of methods which are involved in the two main pillars of economic governance: the control of fiscal and macroeconomic imbalances, and the coordination of policies to promote employment, competitiveness and innovation. The third section looks at the operation of the ‘European Semester’, which brings these different processes together in an annual cycle. The chapter concludes by identifying some of the main issues which are seen as still needing to be addressed.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The main decision-making body is the Governing Council of the ECB, composed of the six-member Executive Board and the Governors of the central banks of the euro area countries. Since 1 January 2015, a rotation of voting rights operates in the Governing Council. The five countries ranked highest in terms of the size of their economies and banking sectors—Germany, France, Italy, Spain and the Netherlands—share four voting rights. The others share 11 voting rights. The Governors take turns using the rights on a monthly rotation.
- 2.
Whereas the treaty states that the President of the European Council cannot hold a national mandate at the same time, the Protocol which formalised the Eurogroup is silent on this point. Jeroen Dijsselbloem, who was elected in January 2013, continued to serve as Dutch Minister of Finance. The French President and the German Chancellor, among others, have called for this to become a full-time position as of July 2015.
- 3.
Together with a full-time Eurogroup president, this has been seen by, for example, the British Bankers’ Association as a possible threat to the interests of non-eurozone countries. ‘The Eurogroup has a small secretariat in the Commission which has never been well enough staffed to enable it to be an agenda setting force. A full-time president with adequate staff will be able and willing to drive a proactive agenda in the Eurogroup—including close participation in the discussion of legislative files together with the Council Presidency’. British Bankers’ Association, ‘Eurozone Caucusing. A challenge to the European single financial market? The impact of the changes in eurozone governance on financial services legislation.’ June 2014. p. 7.
- 4.
The ESM has taken over from the temporary European Financial Stability Facility (EFSF) which was set up in 2010 and which will cease to exist once all loans are repaid and outstanding reimbursements paid. The EFSF has provided funds guaranteed by the euro area countries. The European Financial Stability Mechanism (EFSM), also created in 2010, allows the Commission to borrow on behalf of a country in difficulties, using an implicit EU budget guarantee.
- 5.
Article 136 TFEU: ‘The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality’.
- 6.
See European Parliament, ‘Report on the enquiry on the role and operations of the Troika (ECB, Commission and IMF) with regard to the euro area programme countries’ [2013/2277(INI)] Committee on Economic and Monetary Affairs, Rapporteur : Othmar Karas, Liem Hoang Ngoc. 28 February 2014.
- 7.
Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability. OJ L 140 of 27 May 2013.
- 8.
The Commission may first subject to ‘enhanced surveillance’ a country facing serious difficulties which are likely to have negative spill-over effects. This specific modality, as compared to budgetary surveillance, or enhanced surveillance to correct macroeconomic imbalances, had not been applied as of early 2015. It means that the country must adopt measures to address the sources of difficulties under the supervision of the relevant EU bodies. In addition to the Commission and the ECB (‘and, where appropriate, the IMF’), this means the relevant European Supervisory Authorities (ESA)—the European Banking Authority (EBA); the European Insurance and Occupational Pensions Authority (EIOPA); the European Securities and Markets Authority (ESMA)—and the European Systemic Risk Board (ESRB). These bodies were established in 2010 as part of the EU’s efforts to strengthen supervision of the financial system in response to the crisis.
- 9.
The Czech Republic subsequently signed the TSCG, but ratification was still pending in March 2015.
- 10.
TSCG, Article 3(2). A country which is considered by others not to have complied with these requirements may be taken before the Court of Justice which may deliver a legally binding judgement. Failure to comply with that judgement may result in a fine of up to 0.1 % of GDP.
- 11.
COSAC Rules of Procedure 5(2). COSAC was created in 1989 when national parliaments woke up to the challenges posed to their role by the reality of qualified majority voting in the Council following the Single European Act, as well as responding to concerns about the lack of clear limits to EU action in the context of ‘completing the internal market’.
- 12.
Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies. OJ L 306 of 23 November 2011.
- 13.
http://www.europarl.europa.eu/relnatparl/en/conferences/european-parliamentary-week.html. It has been noted that concepts of time seem to be somewhat relative in the framework of European economic governance: the European ‘Semester’ now lasts 12 months, while a European Parliamentary ‘Week’ consists of 2 days.
- 14.
The other criteria are with an inflation rate not more than 1.5 % points above the rate of the three best-performing Member States, long-term interest rates not more than 2 % points above the rate of the three best-performing Member States, and exchange rate stability. These ‘convergence criteria’ are not based in universally-recognised theory. ‘The setting-up of an EMU is a unique experience and therefore the conditions for success are not very well known. The theory of EMU is not sufficiently developed to help out. So the EU has distilled from various segments of economic thinking and of policy experience a set of rules about sound macro policies that should be imposed upon participating countries in order to safeguard the conditions for a well-functioning EMU.’ (Molle 2001: 382).
- 15.
‘Improving the implementation of the Stability and Growth Pact . Council Report to the European Council’, 20 March 2005. Annex II to European Council Presidency Conclusions, 22–23 March 2005.
- 16.
These should not be confused with Economic Partnership Agreements (EPAs), which are ‘development-focused’ trade agreements negotiated between the African, Caribbean and African countries/regions and the EU.
- 17.
Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 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. OJ L 140 of 27 May 2013.
- 18.
These include public debt and deficit, real effective exchange rate, export market share, current account balance, net international investment position, private sector credit flow and debt, house price index and unemployment rate.
- 19.
The other categories, and their inhabitants as of February 2015, are: Level 2—‘Imbalances, which require monitoring and policy action’ (BE, NL, RO, FI, SE, UK); Level 3—‘Imbalances, which require monitoring and decisive policy action’ (HU, DE); Level 4—‘Imbalances, which require specific monitoring and decisive policy action’ (IE, ES, SI).
- 20.
Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States. OJ L 260 of 23 November 2011.
- 21.
Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 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. OJ L 140 of 27 May 2013.
- 22.
European Commission, White Paper, ‘Growth, Competitiveness and Employment. The challenges and ways forward into the 21st century.’ COM(93)700, 5 December 1993.
- 23.
Resolution of the European Council on Growth and Employment. Amsterdam, 16 June 1997 (OJ 97/C 236/02).
- 24.
The seven initiatives are: Digital agenda for Europe, Innovation Union, Youth on the move, Resource efficient Europe, An industrial policy for the globalisation era, Agenda for new skills and jobs, European platform against poverty. For a concise assessment of the state of play in these initiatives, see the Commission’s Europe 2020 Stocktaking of 5 March 2014 at http://ec.europa.eu/europe2020/documents/documents-and-reports/index_en.htm.
- 25.
This comparison refers to the 23 countries for which CSRs adopted in 2013 (excluding Cyprus, Greece, Ireland and Portugal, which were all then under economic adjustment programmes, and Croatia which only joined the EU on 1 July 2013.
- 26.
Herman Van Rompuy, President of the European Council, in close collaboration with: José Manuel Barroso, President of the European Commission; Jean-Claude Juncker, President of the Eurogroup; Mario Draghi, President of the European Central Bank. Towards a Genuine Economic and Monetary Union, 5 December 2012.
References
Derooses S, Griesse J (2014) Implementing economic reforms—are EU Member States responding to European Semester recommendations? European Commission, ECFIN Economic brief, issue 37, Oct
Draghi M (2015) Opinion piece for project syndicate, 2 Jan. https://www.ecb.europa.eu/press/inter/date/2015/html/sp150102.en.html
Hodson D (2010) Economic and monetary union: an experiment in new modes of EU policy-making. In: Wallace H, Pollack MA, Young AR (eds) Policy-making in the European Union, 6th edn. Oxford University Press, Oxford, pp 157–180
Hradiský M (2014) Implementation of country specific recommendations, European Parliament, DG internal policies, Economic Governance Support Unit (EGOV), 6 Oct
Molle W (2001) The economics of European integration. Theory, practice, policy, 4th edn. Ashgate, Aldershot
Pelkmans J (1997) European integration, methods and economic analysis. Longman/Open University of the Netherlands, Harlow/Heerlen
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2016 European Institute of Public Administration
About this chapter
Cite this chapter
Best, E. (2016). Economic Governance. In: Understanding EU Decision-Making. Springer, Cham. https://doi.org/10.1007/978-3-319-22374-2_7
Download citation
DOI: https://doi.org/10.1007/978-3-319-22374-2_7
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-22373-5
Online ISBN: 978-3-319-22374-2
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)