The European Parliament is working on economic governance and budgetary surveillance

Work began this week and could threaten the democratic legitimacy of fiscal policy.

Towards the very end of 2011 the Commission presented two further pieces of legislation to complement the economic governance “six pack”, notably by increasing Commission powers to oversee Eurozone countries’ budgetary policies and tightening such surveillance one notch further for countries receiving bailout funds. Parliament shares decision-making power with the Council for both legislative texts.

This discussion comes as the working group tasked with preparing a first draft of an international agreement to strengthen economic governance in the EU starts work. Elmar Brok (EPP, DE), Roberto Gualtieri (S&D, IT) and Guy Verhofstadt (ALDE, BE), are members of the working group.

Normal legislation, not ad hoc treaties

Jean-Paul Gauzès (EPP, FR), rapporteur for the text on surveillance of “bailout countries” said the two proposals offered an opportunity to impose stronger economic governance without working outside the normal EU arrangements (the “Community method”). “Much of what is proposed in the international treaty can be done through the ’six pack’ and these two texts. We should integrate as much of the international treaty elements as possible into these two new texts”, he said.

This view, echoed by others, builds on the opinion already voiced by the three “drafting working group” MEPs that much in the planned international agreement can in fact be accomplished through normal EU legislation.

Danger of losing democratic legitimacy

Many MEPs also highlighted the danger of entrusting broad surveillance powers to the Commission without also addressing its accountability. “We need to always keep sight of democratic legitimacy when drafting these texts”, Elisa Ferreira (S&D, PT), the second rapporteur said.

Sven Giegold (Greens, DE), argued that if surveillance was to be increased, then the transparency with which the new powers were exercised also needed to be strengthened. “The legislation is useful in that it gives legality to an ongoing situation. However, I still have an issue with giving added surveillance powers to an institution which has already failed in this task”, he added.

Surveillance to promote growth, not just for austerity

The other weakness highlighted by various MEPs was that the proposed legislation was too closely focused on austerity, and not sufficiently on growth.

Ms Ferreira warned that “This proposed legislation and the international treaty risk reducing the focus of the six pack to one only based on imposing austerity”, adding that “it is important to make sure that the detailed monitoring now proposed will not hamper a country’s long term goals”.

Ramon Tremosa i Balcells (ALDE, ES) proposed that together with extra surveillance, cost benefit analyses should be carried out by the Commission to evaluate the usefulness of infrastructural investments, so as to ensure that spending went to projects with potential.

Various other MEPs aired the idea of cutting EU structural funds to excessive deficit countries, but without reaching a verdict on whether this might do more harm than good.

Next steps

The two draft reports amending the Commission proposals will be officially presented by the Economic and Monetary Affairs Committee draftspersons on 28 February.

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