It is well known that the sovereign debt crisis has opened the door for further economic and fiscal policy integration – the EU is moving fast towards the economic government. Last September, the European Commission presented, the expected, legislative proposals, on the so-called Economic Governance in the EU and EMU. The Commission proposed broader and enhanced surveillance of fiscal policies as well as macroeconomic policies and structural reforms. Member States will be monitored not just for excessive deficits and debts, but also for imbalances and falling competitiveness. It is now clear that member states economic and fiscal policies will be further co-ordinated at EU level.

The Commission proposals would give Brussels unprecedented power to intervene in domestic politics. National governments would no longer be responsible for a great range of domestic economic policies.

The Commission called upon the Council and European Parliament “to work towards a speedy adoption of these proposals.” The European Council also called “for a "fast track" approach” and stressed that “The objective is for the Council and the European Parliament to reach agreement by summer 2011 on the Commission's legislative proposals.” Taking into account that the majority of the proposals would be decided by the ordinary legislative procedure and QMV, they are, therefore, aiming a first reading agreement. Only the proposal for a Council Directive on requirements for budgetary frameworks of the Member States and the proposal amending the Regulation on speeding up and clarifying the implementation of the excessive deficit procedure (corrective part of SGP) will be decided through the consultation procedure. The UK could veto these proposals, as unanimity is required at the Council.

Although the UK would not be subject to sanctions, the Commission proposals on economic coordination and surveillance would also apply to the UK, which is unacceptable.

On 15 March, the Council reached a general approach on this package of measures, the so-called “six-pack”. George Osborne has said “The UK negotiated a UK opt-out on the articles in the fiscal frameworks directive pertaining to fiscal rules…” nevertheless, the UK would be subject to the macroeconomic surveillance framework. The Commission has proposed a “new element of the economic surveillance process” the so-called Excessive Imbalance Procedure (EIP), which entails a regular assessment of risks of imbalances, including an alert mechanism.

The UK will not be subject to sanctions, but it will be subject to the Council policy recommendations and might be placed in Excessive Imbalance procedure, moreover it would be subject to burdensome reporting requirements and surveillance missions from the Commission.

On 19 April, the European Parliament’s Committee on Economic Affairs voted on the Commission’s proposals on economic governance. In general terms the Committee endorsed the proposals but the Committee’s members voted for the Commission to have a stronger role and for stricter rules to be adopted.

Aiming at reducing discretion in enforcement, the Commission proposed to introduce the so-called ‘reverse voting’ mechanism for imposing the new sanctions in connection with the successive steps of the EDP. Hence, the Commission at each step of the EDP, would make a proposal for a relevant sanction which would be considered adopted, unless the Council rejects it by qualified majority. Thus, the sanctions can only be stopped, if the Council votes against them by qualified majority. Under the Commission proposal sanctions would be imposed almost automatically as a qualified majority of member states would be required to block their imposition. Such proposal would transfer further powers from member states to the European Commission but have no legal basis, as the Treaty presently just foresees that the Council takes its decisions on the basis of the Commission recommendations, under the qualified majority rule but not the so called reverse majority rule.

According to the Council Legal Service the introduction of the reverse majority voting rule is solely possible in the case of the draft regulation on enforcement measures to correct excessive macroeconomic imbalances in the euro area.

The majority of the member states could not accept such proposal, which, therefore, was not included in the general approach. However, the ECON’s members have voted for more automatic fines to be introduced. According to Eurobusiness John Schranz, Parliament spokesman, said that "The general idea is that sanctions are more automatically applied at an earlier stage and that voting rules are changed to apply to a wider range of sanctionable circumstances," The Committee has voted to transfer even more powers to the European Commission.

The Committee also called for the Commission to introduce common euro bonds, guarantee by the EU budget.

The Hungarian EU Presidency has started negotiations with the European Parliament. The European Parliament and the Council of Ministers will work towards reaching a first reading agreement by June. It remains to be seen what will come out of the negotiations between the member states and the Council with the European Parliament. It has been reported that there is a left-right split between the European Parliament’s political groups, which might weaken the European Parliement’s negotiation position with the Council. Obviously, the behind close doors meetings would be fully used at the expense of a proper debate and analysis of the legislative proposals. Please read here what the above-mentioned proposals entail.