Appunti esame International and European Economic and Financial Law, prof. Saravalle

THE COUNCIL

1. is committed to a rigorous and timely implementation of all elements of the stability and growth pact in its competence; it will take the necessary decisions under Article 103 and Article 104c as quickly as is practicable (The Council has committed to implement the Stability and Growth Pact);

2. is urged to regard the deadlines for the application of the excessive deficit procedure as upper limits; in particular, the Council, acting under article 104c(7), shall recommend that excessive deficits will be corrected as quickly as possible after their emergence, no later than the year following their identification, unless there are special circumstances;

3. is invited always to impose sanctions if a participating Member State fails to take the necessary steps to bring the excessive deficit situation to an end as recommended by the Council;

4. is urged always to require a non-interest bearing deposit, whenever the Council decides to impose sanctions on a participating Member State.

accordance with Article104c(11) (The sanction consists in a non-interest bearing deposit, so the state has to pay an important amount without the need to pay interests in the long run);

5. is urged always to convert a deposit into a fine after two years of the decision to impose sanctions in accordance with Article 104c(11), unless the excessive deficit has in the view of the Council been corrected (Initially the sanction is limited as it is just a deposit but eventually it will become a fine, contemplating the state losing money).

6. is invited to always state in writing the reasons which justify a decision not to act, if at any stage of the excessive deficit or surveillance of budgetary positions procedures the Council did not act on a Commission recommendation, and, in such a case, to make public the votes cast by each Member State.

“The Council will make sure that the rules are implemented rigorously and later can exert the power to impose sanctions in the form of non-interest-bearing

deposits or, in second instance, fines in the case of breaches. Somehow it must justify itself on why it has not taken appropriate measures when they were deemed necessary. These rules are set in a certain way to ensure rigorous respect of the stability pact. Now let's view the other two instruments made available together the Stability and growth pact Resolution, these are, on the one hand the regulation 1467 and 1466. They represent the dissuasive arm, to prevent an excessive deficit, whereas the second applies when the damage has already been done and has a deterrent and sanctioning hand. These rules can be divided into two parts: 1. To strengthen the surveillance of the budgetary position and coordination of economic policies (preventive Arm) 1466. 2. Speeding up and clarifying the implementation of the excessive deficit sanctions; 1467. Council Regulation (EC) No 1466/97 of 7 July 1997, on the strengthening of the surveillance of budgetary positions and the surveillance and

coordination of economic policies (as amended by Reg (EC) No 1055/2005 and by Reg (EU) No 1175/2011) [link]

By now the states have complied with the Stability and Growth pact's rules and they have to respect the Medium-Term Objectives (MTO) by reaching a position close to reference values by taking all the necessary corrective measures. This regulation sets out the coordination and Section 2, Article 3.1 (The Stability Programme) "Each participating Member State shall submit to the Council and Commission information necessary for the purpose of multilateral surveillance at regular intervals under Article 103 of the Treaty in the form of a stability programme, which provides an essential basis for price stability and for strong sustainable growth conducive to employment creation."

STABILITY PROGRAMME (For members participating into the Third Phase)

Section 2, Article 3.2 (What can be found in the

A stability programme shall present the following information:

1. The medium-term objective for the budgetary position of close to balance or in surplus and the adjustment path towards this objective for the general government surplus/deficit and the expected path of the general government debt ratio;
2. The main assumptions about expected economic developments and important economic variables which are relevant to the realization of the stability programme such as government investment expenditure, real gross domestic product (GDP) growth, employment and inflation;
3. A description of budgetary and other economic policy measures being taken and/or proposed to achieve the objectives of the programme, and, in the case of the main

Stability programmes shall be submitted before 1 March 1999. Thereafter, updated programmes shall be submitted annually. A Member State adopting the single currency at a later stage shall submit a stability programme within six months of the Council Decision on its participation in the single currency.

The stability programme should provide for a medium-term budget objective and include an assessment of the budgetary measures and their quantitative effects on the budget. It should also analyze how changes in the main economic assumptions would affect the budgetary and debt position.

Member States are required to ensure that the economic assumptions on which the programme is based are realistic and that the proposed measures are sufficient to achieve the targeted adjustment path towards the medium-term budget objective.

Furthermore, Member States are obligated to make their stability programmes and updated programmes public. This allows the Council and the Commission to assess the budgetary and debt position of each Member State.

Section 2, Article 6 (Monitoring and early warnings)

1. As part of multilateral surveillance in accordance with Article 103 (3), the Council shall monitor the implementation of stability programmes, on the basis of information provided by participating Member States and of assessments by the Commission and the Committee set up by Article 109c, in particular with a view to identifying actual or expected significant divergence of the budgetary position from the medium-term budgetary objective, or the adjustment path towards it, as set in the programme for the government surplus/deficit.

2. In the event that the Council identifies significant divergence of the budgetary position from the medium-term budgetary objective, or the adjustment path towards it, it shall, with a view to giving early warning in order to prevent that excessive government deficits take place (PREVENTIVE).

prevent the occurrence of an excessive deficit, address, in accordance with Article 103 (4) a recommendation to the Member State.
The third section of the regulation applies to the member states that are not participating in the Economic and Monetary Union Third Stage but, nevertheless, they are still subject to the rules, as so much that they need to submit a CONVERGENCE PROGRAM (For members not participating into the Third Phase).
Section 3, Article 7 1 - "Each non-participating Member State shall submit to the Council and the Commission information necessary for the purpose of multilateral surveillance of regular intervals under Article 103 in the form of a convergence programme, which provides an essential basis for price stability and for strong sustainable growth conducive to employment creation."
LESSON 8: COUNCIL REGULATION N°1467 and MAIN CRITICISM OF THE STABILITY AND GROWTH PACT
Discussing the Stability and growth pact we have so far analysed one of the two

Resolutions implemented in 1997 dealing with the preventing arm of the multilateral surveillance system (Set out to implement the first pillar of the Maastricht treaty) with Convergence and stability programmes. Now we can start analysing the third element of the Stability and Growth pact, regulation 1467, which sets out the provisions to apply in response of an excessive deficit procedure, which is governed by article 104.C of the Maastricht treaty.

Council Regulation (EC) No 1467/97 of 7 July 1997, on speeding up and clarifying the implementation of the excessive deficit procedure (as amended by Reg (EC) No 1056/2005 and by Reg (EU) No 1177/2011)

Article 3

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31997R1467

1. Within two weeks of the adoption by the Commission of a report issued in accordance with Article 104.C (3), the Economic and Financial Committee shall formulate an opinion.

from having excessive deficits. Now we will move forward with the reviewing of the articles in accordance with Article 104.C (4). The structure of the resolution provides, in the first part, for the

2. Taking fully into account the opinion referred to in paragraph 1, the Commission, if

definition and cases when an excessive deficit falls In the definition of exceptional or

it considers that an excessive deficit exists, shall address an opinion and a

temporary, as provided for in article 104.S followed by a number of articles stating the time

recommendation to the Council in accordance with Article 104.C (5) and (6). (The Commission

limits for the Council to deal with the excessive deficit procedure. In the regulation we cannot

will report on a case of probable excessive deficit, either by himself or by requesting the opinion

of the Economic and financial committee as provided

Article 109.C)

If the Commission will find through its report or through the opinion made by the Committee a case dealing with excessive deficit then it shall send a report and an opinion to the Council, in accordance with article 104.C) by imposing fines.

Article 1467

Finally, the Multilateral Surveillance System set out to achieve the economic and monetary union became a powerful weapon to deter and limit the freedom of member states.

Article 104.C)

The Council shall decide on the existence of an excessive deficit in accordance with Article 104.C (6), within three months of the reporting dates established in Article 4 (2) and (3) of Regulation (EC) No 3605/93. When it decides, in accordance with Article 104.C (6), that an excessive deficit exists, the Council shall at the same time make recommendations to the member state concerned.

Article 2

Exceptional and temporary cases

Article 1

Definitions

1.

nt's spending over its revenue is commonly referred to as a budget deficit. This occurs when the government spends more money than it collects in taxes and other sources of revenue. A budget deficit can lead to an increase in the government's debt, as it may need to borrow money to cover the shortfall. There are several reasons why a government may run a budget deficit. One reason is to stimulate economic growth during times of recession. By increasing government spending, the government can create jobs and boost consumer spending, which can help to stimulate the economy. Another reason is to fund important government programs and services, such as healthcare, education, and infrastructure development. However, running a budget deficit also has its drawbacks. It can lead to an increase in the government's debt, which can have long-term consequences. A high level of government debt can lead to higher interest rates, as lenders may demand higher returns to compensate for the increased risk. This can make it more expensive for the government to borrow money in the future. To address a budget deficit, governments can take several measures. They can increase taxes to generate more revenue, reduce government spending, or a combination of both. However, these measures can be politically challenging, as they may involve unpopular decisions such as cutting government programs or raising taxes. In conclusion, a budget deficit occurs when a government spends more money than it collects in revenue. While it can be used to stimulate economic growth and fund important programs, it can also lead to an increase in government debt and higher interest rates. Governments must carefully manage their budgets to ensure long-term fiscal sustainability.