Extract from Press release regarding European Commission proposal for a common euro-zone bond market and tighter budgetary controls for members:
The proposed Regulation strengthening surveillance of budgetary policies in euro area Member States would require these countries to present their draft budgets at the same time each year and give the Commission the right to assess and, if necessary, issue an opinion on them. The Commission could request that these drafts be revised, should it consider them to be seriously non-compliant with the policy obligations laid down in the Stability and Growth Pact. All of this would be done publicly to ensure full transparency. The Regulation also proposes closer monitoring and reporting requirements for euro area countries in Excessive Deficit Procedure, to apply on an ongoing basis throughout the budgetary cycle. And euro area Member States would be required to have in place independent fiscal councils and to base their budgets on independent forecasts.
The proposed Regulation strengthening economic and fiscal surveillance of euro area countries facing or threatened with serious financial instability would ensure that the surveillance of these Member States under a financial assistance programme, or facing a serious threat of financial instability, is robust, follows clear procedures and is embedded in EU law. The Commission would be able to decide whether a Member State experiencing severe difficulties with regard to its financial stability should be subject to enhanced surveillance. The Council would be able to issue a recommendation to such Member States to request financial assistance.
The Green Paper on Stability Bonds analyses the potential benefits and challenges of three approaches to the joint issuance of debt in the euro area. The paper sets out the likely effects of each of these approaches on Member States’ funding costs, European financial integration, financial market stability and the global attractiveness of EU financial markets. It also considers the risks of moral hazard posed by each approach, as well as its implications in terms of Treaty change. Stability Bonds are seen by some as a potentially highly effective long-term response to the sovereign debt crisis, while others are concerned that they would remove the market incentive for fiscal discipline and encourage moral hazard. The Commission makes clear that any move towards introducing Stability Bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline. The extent of this strengthening needs to be commensurate with the ambition of the approach chosen.
via EUROPA – Press Releases – New action for growth, governance and stability.
