Building EU firewall
Agreement in Brussels this Wednesday on the final part of an EU economic governance package, approved by member states in 2011, is an important landmark in the EU’s response to the euro crisis and in building a robust supervisory architecture to prevent a similar crisis in future. The agreement, on what has been called the “two-pack”, between representatives of the European Parliament, the European Commission, and member states in the form of the Irish Presidency, is no mean accomplishment for the latter in its role as manager of member states’ agendas.
The two-pack aims to further strengthen euro zone budget discipline – it builds on the December 2011 “six-pack”, a set of economic governance regulations for all EU states, which enacted swifter financial sanctions for those breaking deficit and debt limits and which was mirrored in the Stability Treaty put to and agreed in a referendum in Ireland.
The new regulations, will allow the commission to adjudicate on the budget plans of all euro-zone states, not just those facing acute financial problems. Euro states will have to submit their draft budgets for review by both parliament and commission each October – Ireland may bring forward its own budget day – with the commission then entitled to ask for those it deems inadequate to be redrawn.
The deal emerged from the process known as “conciliation” between the three bodies and now goes before parliament’s March plenary for final approval. That is expected to be largely a formality, although Dublin Socialist MEP Paul Murphy promises to vote against what he sees as the continuing erosion of national sovereignty, “a further attack on the basic democratic rights of governments to decide their budgetary policy . . . part of the process of imposing a framework of authoritarian neo-liberalism across Europe”.
Negotiators for the parliament, who were also seeking an agreement on mutualising member-state debt, agreed to back the plans after the commission agreed on an expert group to analyse the pros and cons of a Redemption Fund – to part mutualise government debt over 60 per cent of GDP and help pay it down over 20 years via cheaper euro zone funding – and of short-term eurobills .
MEPs have also inserted language requiring more account to be taken of the need for growth-enhancing measures in commission assessments of national budgets.
The two-pack is welcome and necessary, an acknowledgment that only European-level solutions, and hence European-level decision-making, are capable of setting the continent on the road to recovery. The central role of the parliament in this process is an important element in ensuring that this process remains rooted in democratic legitimacy.