Sixpack (European Union law)


The EU economic governance, Sixpack describes a set of European legislative measures to reform the Stability and Growth Pact and introduces greater macroeconomic surveillance, in response to the European debt crisis of 2009. These measures were bundled into a "six pack" of regulations, tabled in September 2010 as two versions respectively by the European Commission and a European Council task force. In March 2011, the ECOFIN council reached a preliminary agreement for the content of the Sixpack with the Commission, and negotiations for endorsement by the European Parliament then started. Ultimately it entered into force 13 December 2011, after one year of preceding negotiations. The six regulations aim at strengthening the procedures to reduce public deficits and address macroeconomic imbalances.

Overview

All 27 EU member states are committed by the paragraphs in the EU Treaty, referred to as the Stability and Growth Pact, to implement a fiscal policy aiming for the country to stay within the limits on government deficit and debt ; and in case of having a debt level above 60% it should each year have a declining trend. Each year all EU member states are obliged to submit a SGP compliance report for the scrutiny and evaluation of the European Commission and the Council of Ministers, that will present the country's expected fiscal development for the current and subsequent three years. These reports are called "stability programmes" for eurozone Member States and "convergence programmes" for non-eurozone Member States, but despite having different titles they are identical in their content. After the reform of the SGP in 2005, these programmes have also included the Medium-Term budgetary Objectives, being individually calculated for each Member State as the medium-term sustainable average-limit for the country's structural deficit, the Member State is also obliged to outline the measures it intends to implement to attain its MTO. If the EU Member State do not comply with both the deficit limit and the debt limit, a so-called "Excessive Deficit Procedure" is initiated along with a deadline to comply, which outlines an "adjustment path towards reaching the MTO".
Four of the six instruments in the Sixpack are used to conduct further reforms of the "Stability and Growth Pact", focusing on improving compliance. These reforms do not change any of the conditions already imposed by the SGP, but aim to enforce greater budgetary discipline among the Member States of the euro area by stipulating that sanctions come into force earlier and more consistently. For example, when a country against which an excessive deficit procedure was opened fails to take necessary measures to eliminate its deficit, an interest-bearing deposit equalling 0.2% of GDP is due. With continued non-compliance the deposit is converted into a fine. In addition, automatic sanctions are triggered based on a different voting mechanism in the Council of the European Union. At the same time the national accounts statistics and forecast practices of Member States are adjusted to comply with EU standards. If it is determined that a country has reported false data, an additional fine may be imposed.
The remaining two pieces of legislation in the Sixpack relate to the Macroeconomic Imbalance Procedure, an early warning system and correction mechanism for excessive macroeconomic imbalances.

Specific EU regulations and guidelines

Specifically, the EU sixpack relates to the following regulations and guidelines:
;Fiscal policy
;Macroeconomic imbalances

Further proposals for the Eurozone

Development of the Eurozone fiscal union can be described as the fourth stage of the EMU, proposed to be implemented for the Eurozone in the near future. The argument presented was, that Member States sharing the same currency will also need more integration of fiscal policies and tighter budgetary surveillance, to prevent and combat the occurrence of financial instability caused by macroeconomic imbalances inside the monetary union.

Two-pack

A step towards increased fiscal discipline of member States of the European Union was taken on 23 November 2011, when the European Commission proposed the two Regulations, which introduced additional coordination and surveillance of budgetary processes for all eurozone members. The additional regulations complement the SGP's requirement for surveillance, by enhancing the frequency of scrutiny of Member States' policymaking, but do not place additional requirements on the policy itself. The frequency of monitoring will depend on the economic health of the member state. As of the entry into force of the regulations, all eurozone member states are obliged to respect "Regulation 1", while "Regulation 2" – demanding even more in depth and frequent monitoring – will only be triggered if the state receive macroeconomic financial assistance or has an ongoing Excessive Imbalance Procedure :
The two above regulations apply towards all eurozone member states, and together form a stronger budgetary governance with a more tight system of monitoring and surveillance by the European Commission. According to in the Treaty on the Functioning of the European Union, the enactment and entry into force of the regulations required the Council's adoption in agreement with the European Parliament, subject to a qualified majority of the 17 eurozone member states. The ECOFIN council reached a final agreement with the Parliament's Permanent Representatives Committee on 20 February 2013. The parliament then adopted the two-pack on 12 March, with the first regulation passed by 526 voting for towards 86 against and 66 abstentions, and with the second regulation passed by 528 voting for towards 81 against and 71 abstentions. Subsequently the two-pack was finally adopted by the Council of the European Union on 13 May, with publication of the legal acts in the Official Journal of the European Union on 27 May, and the official legal entry into force on 30 May 2013. Most provisions will apply from the date of entry into force. In regards of the increased reporting frequency for member states with an open EDP, and the requirement to set up independent national bodies monitoring compliance with the fiscal rules, these article provisions will however only apply starting from 31 October 2013.
The provisions of the Two-pack Member States are required to transpose the SGP fiscal rules into national legislation, 2) Member States in EDP are required to prepare "economic partnership programmes", 3) Member States are required to submit their debt issuance plans for an ex-ante coordination with other Member States''. The new legal structure introduced by the Two-pack, was in March 2013 expected to be used for the first time, when the 2014 fiscal budget draft laws shall be submitted to the European Commission for prior review and comments by 15 October 2013.

Eurobonds

On 23 November 2011, the European Commission also presented a Green paper for the possible introduction of Eurobonds, that outlined different options and levels for common issuance and common guarantees. After having concluded a public consultation on the subject in January 2012, the Commission asked for the political opinion of the European Economic and Social Committee. This opinion was submitted to the Commission on 11 July 2012, with a recommendation for the Commission to continue the political work to develop a proposal. The committee revealed that it favoured the option where eurobonds should carry full common payment guarantees, but only substitute a part of the current national bonds. It was fully agreed, that the impact of introducing eurobonds would be an effective tool to ensure low interest rates across all eurozone countries. The committee however also called for additional impact studies, to map if the 3 different levels for introduction of eurobonds, potentially also could introduce some negative consequences, in the form of an increased risk that each of the eurozone countries might exploit the gained "security delivered by common eurobonds", just to lower their exercised degree of "fiscal responsibility" at the national level.
Introduction of Eurobonds is expected first to require a Treaty change and/or other political agreements first to be implemented. Despite of a relative long roadmap for a possible introduction of eurobonds, it is believed an agreement for this proposal could have an immediate impact on market expectations, resulting in the immediate decline of funding costs through lower government bond yields, for those Member States currently facing funding pressures.
The European Commission presented on 28 November 2012 a "Blueprint", on how it see the path on the short + medium + long term towards building a deep and genuine EMU. In this report, the introduction of eurobonds were described as the last final step on the path to create a genuine fiscal union, and something only to be introduced in the long term. The report suggested for the medium term, that it was more appropriate as a first step, to introduce a common issuance by eurozone Member States of the so-called eurobills, which are defined as being short-term instruments to finance government debt with a maturity of up to one or two years. This first eurobills step would still require a treaty change along with an increased call for implementing an even tighter fiscal policy integration. Introduction of eurobills would however, not require a full fiscal policy integration straight from the start, because of the fact that it would only cover introduction of common short term debt, which only represents a minor fraction of the governments overall debt pile, and thus the risk of excersiced "moral hazard" in the individual member states would also be limited.
The "Blueprint" on the next steps towards a deeper Economic and Monetary Union, is to be considered as the first draft version of a joint report from the "Four presidents", that will be further discussed by the European Council on 13–14 December 2012.

Convergence and Competitiveness Instrument (CCI)

The European Commission also recently proposed the establishment of a Convergence and Competitiveness Instrument within the EU budget. The proposal is to create a special EU budget account with earmarked money, for supporting the timely implementation of needed structural reforms, where the implementation funding would be paid by the CCI fund conditional on strict adherence to a prior signed "contractual arrangement" for the agreed structural reform, with the two contracting parties being the Member State and the Commission. If the Member State implements the identified and needed structural reforms to ensure convergence/competitiveness, then the CCI budget will so to speak pay the Member State an economic reward of behaving in a sound and responsible way. The proposal is expected to be further debated, soon after the Council have concluded an agreement for the next 7-year EU budget.
An additional/related suggestion also currently being debated, is to create the CCI outside the EU budget and only let it apply for eurozone member states, with a budget instead to be covered by income from the collection of the Financial Transaction Tax. In October 2012, the FTT was formally agreed to be implemented and enter into force 1 January 2014 in 11 out of 17 eurozone member states. Currently no formal decision was however reached, if the collected income should be kept as direct national income, or perhaps instead be transferred to a supranational eurozone budget.

Banking Union

The proposal to create a Banking Union, covers both the creation of a Single Supervisory Mechanism, and after its adoption also a Single Resolution Mechanism to deal with banks in difficulties. This new independent organisation, is supposed to be in charge of the restructuring and resolution of banks within the EU Member States participating in the Banking Union. The European Commission presented the proposal 12 September 2012 and at the EU summit in October, it was agreed to formally request that a final proposal for the SSM framework be agreed between the Council and Parliament before the end of the year, with the aim for the SSM to be founded in 2013 and fully established to cover all banks starting from 1 January 2014.
On 29 November 2012, the Economic and Monetary affairs Committee of the European Parliament voted on and approved the initial framework proposal and a mutually approved final proposal agreement between the Council and Parliament is now the next step. Remaining issues for the ECOFIN council to consider at their next meeting on 4 December 2012, is to decide on: "the role of the national supervisors, the governance of the ECB and the voting rights within EBA". At the council meeting there was not sufficient time to agree on any final decision, so the council will be called for a second meeting within 8 days, with the aim of concluding the work ahead of the EU summit on 13–14 December. Any change of the EU legislation about EBA require : A qualified majority at the Council in conjunction with the Parliament's approval. While any change of the EU legislation about ECB's function/role require : "Unanimity for adoption by the Council, after consulting the European Parliament and the ECB".