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Document 52014DC0061
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 472/2013
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 472/2013
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 472/2013
/* COM/2014/061 final */
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 472/2013 /* COM/2014/061 final */
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 472/2013 1.
INTRODUCTION The
economic and financial crisis revealed a number of weaknesses in the EU's
economic governance and surveillance. Most surveillance shortcomings were
effectively addressed with the creation of the European Semester for economic
policy coordination and the six pieces of legislation commonly known as the
“Six Pack”. Given the higher potential that economic and budgetary policies in
a single currency area can result in substantive spill-over effects, however, there
was nonetheless a need for stronger mechanisms to be put in place. For these
purposes, Regulations (EU) No 472/2013 and (EU) No 473/2013[1]
were adopted by the legislator. Regulation (EU) No 472/2013 sets out specific
processes related to enhanced, programme and post-programme surveillance of
euro-area Member States, formalising previously ad hoc approaches and
making the link between financial assistance and the Treaty framework related
to the coordination of the economic policies of the Member States. These
so-called "Two Pack" Regulations entered into force on 30 May 2013. Regulation
(EU) No 472/2013 (hereafter "the Regulation") sets out rules for
enhanced surveillance, macroeconomic adjustment programmes and post-programme
surveillance under which the Commission and Council can exercise a degree of
surveillance appropriate to the case at hand, and which complements the other
existing multilateral surveillance processes. In so doing, they can conclude
that a Member State must take further measures to address the specific risks
emanating from that Member State for financial stability in the euro area; the said
measures would aim to rapidly re-establish a sound economic and financial
situation and, if relevant, restore the Member State's capacity to finance
itself fully on the financial markets. The
Regulation was established in order to align current practice used in
implementing financial assistance programmes in euro-area Member States with
the Treaty institutional framework and to, thus, simultaneously ensure an
improved application of said principles across Member States. The degree
of intrusiveness of monitoring and surveillance will depend on the seriousness
of the financial situation of the Member State concerned. The Regulation also
allows for the simplification of overlapping reporting obligations for specific
cases in which a Member State is under financial assistance. According
to Article 19 of the Regulation, by January 2014, and every five years
thereafter, the Commission shall submit to the European Parliament and to the
Council a report on the application of this Regulation, accompanied, where
appropriate, by a proposal to amend this Regulation. The report shall evaluate,
inter alia: (a) the effectiveness of this Regulation; (b) progress in ensuring
closer coordination of economic policies and sustained convergence of economic
performance of the Member States in accordance with the TFEU; (c) the contribution
of this Regulation to the achievement of the Union’s strategy for growth and
jobs. It
should be noted that the review of the Regulation aims to provide an overview
on its implementation since its entry into force. The content provided, as part
of this review, on economic progress made by Member States under programme is
not intended to either duplicate or subsume the regular mission reviews
conducted under these programmes. The
Regulation has only been in force for a very short time, implying severe
limitations as far as what can be evaluated, and to what depth, at this
juncture. The review of the "Six" and "Two Pack" legislation
at year-end 2014 will, in contrast, allow to conduct a more comprehensive and
in-depth assessment of the Regulation's effectiveness. 2.
APPLICATION OF REGULATION (EU) No 472/2013 2.1.
Implementation of the Regulation Article
2(5) and Article 7(12) of the Regulation mandate that the Commission publish,
for information purposes, two lists of financial
assistance instruments: (i) those instruments which are of a precautionary
nature and, separately, (ii) those instruments for which rules under the
European Stability Mechanism (ESM) do not call for a macroeconomic adjustment
programme. In October 2013 the Commission adopted the said Communication[2].
Since
the entry into force of the Regulation, no euro area Member State has yet been subject to enhanced surveillance in accordance with Article 2 and no euro-area
Member State has yet concluded a new macroeconomic adjustment programme. However,
pursuant to Article 16 of the Regulation, Member States in receipt of financial
assistance as of the date of entry into force are subject to the rules of the
Regulation. Consequently, it applies to those euro-area Member States which were
under an instrument of financial assistance on 30 May 2013. At
the time of the entry into force of the Regulation, Greece, Ireland, Portugal,
Spain, Cyprus were beneficiaries of financial assistance from one or several
other Member States, the EFSM, the ESM, the EFSF or another relevant
international financial institution such as the IMF. New decisions adjusting
the existing macro-economic adjustment programmes were adopted under this
Regulation. Four
Member States are in receipt of financial assistance linked to a macroeconomic
adjustment programme, thus triggering the application of Article 7 of the
Regulation: Greece Greece has
concluded two economic adjustment programmes. The first was detailed in by
Council Decision 2010/320/EU on 26 May 2010 and amended several times
subsequently. The second economic adjustment programme was implemented by
Council Decision 2011/734/EU of 12 July 2011 which was lastly amended by
Council Decision 2013/6/EU[3].
Ireland The
Irish economic adjustment programme was implemented by Council Decision
2011/77/EU in February 2011. The updates to the macro-economic adjustment
programme have been adopted under Article 7(5) of the Regulation as of 9 July
2013 via Council Implementing Decision 2013/373/EU[4]. Portugal The
Portuguese economic adjustment programme was implemented by Council Decision
2011/344/EU on 20 May 2011. The updates to the macro-economic adjustment
programme have been adopted under Article 7(5) of the Regulation as of 9 July
2013 via Council Implementing Decision 2013/375/EU[5]. Cyprus The
Cypriot economic adjustment programme was implemented by Council Decision
2013/236/EU of 23 April 2013, shortly before the entry into force of the
Regulation. For the sake of clarity and legal certainty, the macro-economic
adjustment programme has since been endorsed under Article 7(2) of the
Regulation via Council Decision 2013/463/EU of 13 September 2013[6].
Spain has
been subject to financial assistance for the recapitalisation of financial
institutions. This
means that
the Regulation's macroeconomic adjustment programme provisions do not apply to Spain. Spain will,
however,
be subject to post-programme surveillance in accordance with Article 14 of the
Regulation as soon as the current financial assistance programme ends. 2.2.
Effectiveness of the Regulation The main
objective of the Regulation is to strengthen monitoring and surveillance for
Member States threatened with, or experiencing, serious difficulties regarding
their financial stability. It aims to establish
transparent, efficient,
streamlined,
and
predictable
surveillance processes
for the Member States under enhanced surveillance, macroeconomic adjustment
programme and post-programme surveillance. The
Regulation has been in force since 30 May 2013. Such a short timeframe makes it
particularly difficult to assess the effectiveness of the Regulation, as it
provides limited evidence on which to base this evaluation. In
particular, many provisions of the Regulation are relevant for the period in
which programmes are developed and negotiated. In the existing programmes,
these periods took place before the Regulation entered into force. The
effectiveness of the Regulation in accordance with Article 19 cannot therefore
be evaluated as regards these earlier phases. In
addition, it is not possible to assess the effectiveness of the Regulation with
regard to enhanced surveillance, as no euro area Member State has yet been
placed under enhanced surveillance. For these same reasons, the effectiveness
of the Regulation cannot yet be assessed as regards the application of
post-programme surveillance. During
this time, effectiveness can be evaluated only as regards existing
macroeconomic adjustment programmes. These are intended to rapidly
re-establish a sound and sustainable economic and financial situation and
restore the Member State's capacity to finance itself fully on the financial
markets. Thus
far,
the existing
macroeconomic adjustment programmes have achieved the objectives of the
Regulation. However,
ongoing implementation of the Greek, Portuguese and Cypriot programmes will provide
important parameters and evidence on how to assess effectiveness for the next
review exercise. Similarly, Ireland and Spain's
forthcoming exit from their financial assistance programmes will provide new
evidence to conduct a more thorough assessment of the effectiveness of post
programme surveillance at a later stage. The
close monitoring of all euro-area Members States will serve to immediately
address any potential fragility that may emerge and to avoid contagion in the
EMU or the Union more broadly. 2.3. Progress in ensuring closer
coordination of economic policies and sustained convergence of economic
performance of the Member States in accordance with the TFEU Regulation
(EU)
No 473/2013 and the "Six
Pack" legislation will be assessed in 2014 by a review exercise. It is
expected
that this
review
will take a more comprehensive look at the progress made in respect
of coordination and convergence. Regulation
(EU)
No 472/2013
establishes a framework for the strengthening of economic and budgetary
surveillance for Member States in the euro area experiencing or threatened with
serious difficulties. Among other aspects, it provides for a closer
coordination for those Member States under macroeconomic adjustment programmes
and establishes the general framework for post-programme surveillance. In
addition, the Regulation provides for a reinforced economic surveillance with a
view to ensuring consistency in economic policies – in particular between the
Union multilateral surveillance framework as established by the TFEU and the
possible policy conditions attached to financial assistance – and to avoiding
duplication of reporting obligations. To that effect the Regulation contains
consistency clauses with the Stability and Growth Pact, with Regulation (EU)
No 1176/2011[7]
and with some provisions of Regulation (EU) No 473/2013[8].
Euro-area Member States, subject to the Regulation, have been exempted from
some obligations to avoid precisely this duplication of reporting obligations. The
Regulation does not contain transitory provisions for the Member States that
exit a programme and respective financial assistance (e.g. Ireland) during the annual cycles of macroeconomic surveillance. With the aim of smoothing
the full re-integration of those Member States in the mechanisms of economic
coordination, the Commission will promptly apply the standard surveillance
tools to the Member States that have successfully implemented economic
adjustment programmes. 3.
ASSESSMENT OF PROGRESS WITH REGARD TO ECONOMIC CONDITIONS Given
that Regulation (EU) No 472/2013 has only recently
entered into force, it is too early to assess the impact of its implementation
on economic conditions. All Member
States to which the content of the Regulation applies have carried out
structural reforms in order to address the sources of vulnerability and
financial instability. Ireland´s and Cyprus's problems were mainly rooted in
the banking sector. Accordingly, Ireland reorganised the sector, recapitalised viable
banks and wound down nonviable banks, and is doing rigorous stress testing to
properly value asset portfolios. Restructuring and resolution of banks has also
been done in Cyprus, as well as quick and upfront deleveraging. Furthermore,
both countries have and continue to conduct labour and product market reforms.
The former includes the implementation of the Action Plan for Jobs and a reform
of the education and training programmes in Ireland, and a suspension of the
wage indexation in the private sector until 2014 in Cyprus. The latter refers
among others to privatisation programmes in various energy and transport
sectors and an enforcement of competition law (Ireland). Besides, both
countries undertook and are still undertaking reforms in order to consolidate
public finances and reduce financial pressure. Greece has implemented
impressive fiscal consolidation and carried out deep labour and product market
reforms, like easing formalities to start new business and the complexity of
licensing procedures, as well as reforms in the pension, health care and
taxation systems, to foster adjustment, competitiveness and growth. High public
debt, structural rigidities and burdensome institutional arrangements remain of
concern. Finally,
Portugal experienced structural rigidities and high public debt levels. To
address these sources of instability, several reform packages were implemented.
For instance, unemployment benefit rates were reduced, privatisation programmes
were carried out, competition in retail trade was increased and barriers to
entry in professional services were reduced. Besides, the VAT base was
broadened and a number of deductions in income tax were eliminated. A detailed
and thorough assessment of the situation of programme countries can be found in
the results of the review missions, published in 'European economy' and
available on the website of the European Commission at the following address:
http://ec.europa.eu/economy_finance/assistance_eu_ms/index_en.htm.
4.
CONCLUSION This
Communication describes some of the essential aspects of the "Two Pack",
Regulation (EU)
No 472/2013.
Ambitious fiscal consolidation combined with far reaching structural reforms
and financial repair, supported by external financial assistance – most
commonly via macro-economic adjustment programmes – have helped contain financial
market turmoil and stabilize markets subsequently. Against
this background, the Commission is of the opinion that Regulation (EU)
No 472/2013
has so far proven an adequate framework for a strengthened monitoring and
surveillance of the euro-area Member States experiencing or threatened with
serious difficulties with respect to their financial stability. The
provisions entrusted in the "Two Pack" and the procedural norms
enacted therein seem to allow for a more coordinated treatment across the
euro-area Member States. However, as explained in this Communication, the short
timeframe during which this Regulation has been in force provides limited
evidence on which to base this evaluation. Enhanced surveillance, for example,
remains to be tested, but the Regulation establishes a framework which should enable
closer monitoring of euro-area Member States either threatened with, or
experiencing, financial difficulties. Post-programme surveillance also remains
to be tested. A
systematic and thorough assessment, building on the experience acquired, will
take place at the occasion of the next review of this Regulation, which will be
carried out in parallel with the review of the Regulation (EU) No 473/2013 and
the "Six Pack" legislation. [1] OJ L 140, 27.5.2013. [2] OJ C 300,
16.10.2013. [3] OJ L 48, 21.2.2013. [4] OJ L 191, 12.7.2013. [5] OJ L 192, 13.7.2013. [6] OJ L 250, 20.9.2013. [7] Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances (OJ L 306, 23.11.2011,
p. 25). 8 However, Articles 1
to 5 and 13 to 18 of Regulation (EU) No 473/2013 shall not apply.