MEPs call for greater ‘democracy’ in pact

Date: 21/11/1996

By Tim Jones

THE European Parliament is wielding its limited muscle to the full to try to inject political flexibility into the proposed pact to ensure budgetary discipline in a single currency bloc.

MEPs will vote at their Brussels plenary session next Thursday (28 November) on a report from Greek Conservative Efthymios Christodoulou which includes a series of amendments to the European Commission's proposed 'stability pact'.

The fact remains, however, that the Parliament simply does not have the power to overturn finance ministers' decisions. Instead, MEPs want to draw attention to what they consider to be a democratic deficit in EMU decision-making.

“There are five areas of economic and monetary policy which are entirely outside the democratic decision-making process,” said Dutch Socialist MEP Alman Metten.

These are in defining the Union's annual economic guidelines, the procedures for the 'multilateral surveillance' of EU economies and dealing with 'excessive' budget deficits, making corrective recommendations to member states and imposing sanctions for non-compliance.

“We are just informed of the results,” said Metten. “And if we cannot do anything, what about the national parliaments? Their ministers will simply say that decisions like the imposition of sanctions are taken by a majority and it is out of their hands.

The ministers will be taking decisions without any democratic representation. That is really incredible.”

Christodoulou's amended report was approved by the Parliament's monetary sub-committee this week, despite opposition from the Conservative European People's Party (EPP) to changes to the text inserted by Socialist members.

Those changes are aimed at blunting some of the pact's teeth and allowing more room for a political interpretation of the Maastricht Treaty's 'convergence criteria' in drawing up a short-list of EMU entrants.

However, the Socialists are keen to win as big a majority as is possible for the report and are holding constant meetings with the EPP to try to reach a compromise.

The most significant amendment would weaken the Commission's already watered-down definition of the kind of economic downturn needed to justify exempting a member state from the rules of the pact.

Under normal circumstances, the regulations would require all members of the pact to keep their budget deficits below 3&percent; of gross domestic product and close to balance during boom years. Failure to do so would trigger an automatic process which could lead to the imposition of cash sanctions.

Bonn is insisting that the only “exceptional” and “temporary” circumstances which would allow a member state to be absolved from these penalties should be a deep recession, measured as 2&percent; negative annual growth over four consecutive quarters.

The Commission itself could not agree to this. Attempts by Economics Commissioner Yves-Thibault de Silguy to win over a majority of his colleagues to a 1.5&percent; recession definition failed.

In its final text, the Commission agreed that exemption from the rules could be allowed when a deterioration in government finances resulted from “a severe economic downturn, in parti-cular in the case of a significant negative annual real growth”.

Metten drafted an amendment which defined this downswing as the “bottom of an economic downturn not re-occurring within six years”.

However, committee members found this definition too difficult to understand. Metten is considering simply amending the text to allow exemption in the case of “a severe economic downturn”.

As MEPs debated these issues, the EU's powerful monetary committee was meeting less than a kilometre away to argue over the final points standing in the way of an agreement at the 13-14 December summit in Dublin on the terms of the stability pact.