Recent Legal Developments
| Published date | 01 December 2011 |
| DOI | 10.1177/1023263X1101800413 |
| Date | 01 December 2011 |
| Subject Matter | Recent Legal Developments |
588 18 MJ 4 (2011)
RECENT LEGAL DEVELOPMENTS
Reforming EU Economic Governance: e Le gislative Response to the Euro Crisis
e crisis that has swept the euro-zone in the last 12 months has i nvited numerous
responses from the EU inst itutions and national decision-makers. Some of these response s
have been to provide nancial assistance to Member States facing ca sh-ow and debt
problems through the creation of a perma nent stability mechanism for the euro-z one. is
development was given a more secure foundation through t he agreement of the German
Parliament to the expansion of the mechanism on the 29th of September 2011. Equally
important, however, are changes in the underlying governance structure for the euro-
zone. On September 28th, the Plenary of the Eu ropean Parliament na lly agreed a set of
6 measures proposed by the European Commission to strengt hen the governance of the
euro-zone.1 e agreement of the Parliament was reached aer t he tabling of some 2000
amendments by parliamenta ry members.
e proposals aim to tack le four important weak nesses in the ex isting economic
governance framework of the Union. e rst t wo concerned the existi ng Stability and
Growth Pact (SGP). Member States were obliged under the terms of the Pact’s ‘Excessive
Decit Procedure’ (EDP) to limit annual publ ic decits to 3% of GDP. A greater problem,
however, in many Member States leading up to the crisis was t he long-term accumulation
of debt (a risk that the Pact’s existing procedu res did little to monitor). is is tackled in the
new legislation by the inser tion into the EDP of an explicit debt criterion, limiting public
debt to 60% of annual GDP.
A second problem pertained to the Pact ’s credibility. In 2004, condence in the
Pact among investors was severely shaken aer two of the euro-zone’s largest Member
States, France and Germa ny, successfully lobbied in the Council to defeat Commission
recommendations to place them in an e xcessive decit position. is fai lure, and subsequent
reforms in 2005, led many investors to conclude that sa nctioning powers under the EDP
were in fact toothless.2 To meet this challenge, new legislation to strengthen the Pact’s
corrective arm int roduces a reverse qualied majority voting procedu re in the Council for
adopting recommendations on sanct ions. Rather than require Counci l approval, under this
1 See the Europe an Parliament Press Rele ase, Parliament gives g reen light to future econom ic governance
plans, 28 September 2011, www.europarl.europa.eu/en/headlines/content/20110916FCS26869/11/
html/Parl iament-gives-g reen-light-to-fut ure-economic-gover nance-plans ( last visite d 13 November
2011) .
2 For an analysi s, see F. Snyder, ‘EMU – Integration a nd Dierentiation: Metaphor for E uropean Union’,
in P. Craig and G. de Burca (eds .), e Evolution of EU Law (Oxford Univer sity Press, Oxford 2011),
p.705–709.
Recent Legal De velopments
18 MJ 4 (2011) 589
procedure, sanctioning rec ommendations will be deemed adopted unless overtu rned by the
Council by a quali ed majority vote.3
A third problem related to the national level. W hile the SGP established basic scal
rules for the Member States subject to nationa l coordination, to what extent were these rules
institutional ized in the Member States thems elves? To address this challenge, new legislation
requires the Member States to establ ish ‘national scal framework s’ incorporating the Pact’s
main decit and debt criteri a in national frameworks and establishi ng common standards
for statistical dat a and multi-annual na ncial frameworks.4 e direc tive does not, however,
stipulate the means t hrough which national scal f rameworks should be delivered (leading
to likely variations between states like Spa in and Italy who are comm itted to making
balanced budgets a constitutional requirement, and others who may simply make debt
criteria a part of polic y-making structures).5
Finally, and perhaps most importa ntly, these changes to ‘strengthen’ the Pact depend on
the capability to monitor and correct the real dangers to the euro area. Whereas the SGP
has focused on debts and decits, many economists have pointed out that the root causes
of the euro crisis related to other t hings.6 Countries such as Ireland easily met t he main
SGP criteria leading up to their economic implosion in 2009, yet carried ot her economic
risk factors, such as hig h levels of private debt and an over-inated housing sector, that
quickly turned i nto a broader economic crisis requiring deep government intervention.
To safeguard the euro area may in this sense require more than a decit procedure, but a
process whereby broader economic and budgetary i mbalances can be monitored.
e legislative package addresses this problem through the establishment of a new
‘macro-economic imbalances procedure’.7 Established on the bases of Article 121(6) and
136 TFEU, the Regulations establ ishing the procedure represent a middle position between
those resisting ex tensive EU control of national scal policy and those who demanded a
much stronger tonic, id est a central ‘economic government’ for the Union.8 In its
place,
the regulations est ablish a broad surveil lance procedure for economic imbalances,
3 See the proposed Re gulation of the Europe an Parliament and Counc il on the eective enforc ement of
budgetary su rveillanc e in the euro area, C OM (2010) 524 nal, Article3. Please note t hat references are
to the legislat ive proposals (nal propo sals were not yet publicly avai lable at the time of wr iting).
4 See the proposed D irective of the E uropean Parl iament and Cou ncil on requirement for bud getary
frameworks of t he Member States, COM (2010) 523 nal.
5 On Spain’s constitut ional amendm ent, see El Pai s, ‘Spain’s main pa rties ag ree constit utional amend ment
capping public dec it’, 26Augu st 2011,www.elpais.com/a rticulo/english/Spain /s/main/part ies/agree/
constitutiona l/amendment/cappi ng/public/decit/elpe pueng/20110826elpeng_1/ Ten (last visited
13November 2011).
6 See e.g. D. Hodson, ‘e E U Economy: e Eurozone in 2010’, 49 Journal of Co mmon Market Studies 1
(2011), p.239–250; House of Lords (EU Committ ee), 12th Report of Session 2 010–2011, ‘e Future of
Economic Governa nce in the EU’, paragrap hs 130–157.
7 See the proposed Re gulation of the Eu ropean Parlia ment and Council on t he prevention and correc tion
of macro-economic i mbalances, COM (2010) 527 nal.
8 e former broadly repres ented the position of t he European Parli ament’s far-right ‘Europ e of Freedom
and Democrac y’ group as well as t he more centrist ‘E uropean Cons ervatives a nd Reformists’; the
latter position of t he liberal ALDE group. Se e e Parliament, ‘Senior M EPs call for federal ‘econ omic
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