Editor's note

The economic and financial crises since 2008, with a particular risk of instability for the euro-zone, has underlined the inherent interdependence among EU-27 economies and exposed the vulnerability of all its member states.  Fiscal discipline, in particular inside the euro area, as well as competitiveness gaps and private sector imbalances have become a matter of severe concern for the EU-27. These were the reasons behind a new plan for economic policy coordination across the block adopted this May.

Closer coordination is necessary

The new Commission’s approach is aimed at aligning the member states’ national budget and policy planning mechanisms with the “stability criteria” in the Stability and Growth Pact, SGP transferred into the new Lisbon Treaty (2009).

Such actions will be implemented through the establishment of a so-called "European Semester" for economic policy coordination. The EU 27 member states would be involved in the early coordination at the European level as they prepare their national budgets and national reform programmes. In the medium-to-long term, the Commission intends to suggest a permanent crisis resolution mechanism during 2010.

Commission's proposal

The Commission's approach to recovering from the crisis is based on three pillars:

• reinforcing the Stability and Growth Pact’s criteria;
• addressing macro-economic imbalances and divergences in competitiveness among the EU-27, and
• working towards a permanent and robust framework for crisis management.

The Commission intends to achieve a more integrated surveillance of economic policies. To do so, it has suggested under the EU-2020 strategy some initiative to synchronize the assessment of fiscal and structural policies in the EU-27. This is going to be done through the so-called European Semester in order to allow member states to benefit from early coordination at European level when they prepare their national budgets and national reform programs.

EU governance and national sovereignty

The early peer review by the Commission would fully respect the prerogatives of the member states’ national parliaments’ decisions. It would only provide information and guidance for the preparation of the national budgets in the following year. This is about informing the Commission and ensuring that national budgets are consistent with the European “economic dimension”, so that the stability of other EU member states are not at risk.

Those member states, which follow the SGP rules and implement the EU budgetary discipline can be regarded as examples for other EU partners; they can share their experience with others in the peer review, and thus contributing to safeguard the Union’s financial stability.

EU’s framework for crisis management

Recent events in the developing of the crisis have shown that:

• the financial distress can threaten the macroeconomic stability of the euro-zone and the whole EU-27 alike;
• the best part of a crisis mechanism is fiscal discipline, as well as tackling imbalances before they occur, i.e. providing the optimal predictions;
• However, if the crisis returns, corrective actions are needed to avoid the negative implications;
• In case the corrective actions are not enough, additional measures shall be implemented. Thus, building on the temporary European stabilization mechanism approved by the ECOFIN meeting on 9 May, the Commission intends in the near future to suggest the creation of a permanent crisis resolution mechanism, which will be accompanied by a detailed and demanding programme of the EU economic policy coordination.