Considerations on COM(2018)387 - Establishment of a European Investment Stabilisation Function - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2018)387 - Establishment of a European Investment Stabilisation Function. |
|---|---|
| document | COM(2018)387  |
| date | May 31, 2018 |
(2) Strenghtening economic cohesion amongst Member States whose currency is the euro would contribute to the stability of the monetary union and to the harmonious development of the Union as a whole.
(3) Member States should conduct their economic policies and should coordinate them in such a way as to attain the objective of strengthening economic, social, and territorial cohesion.
(4) The unprecedented financial crisis and economic downturn that hit the world and the euro area has shown that in the euro area available instruments such as the single monetary policy, automatic fiscal stabilisers and discretionary fiscal policy measures at national level are insufficient to absorb large asymmetric shocks.
(5) In order to facilitate macroeconomic adjustment and cushion large asymmetric shocks in the current institutional set-up, Member States whose currency is the euro and other Member States that participate in the exchange rate mechanism (ERM II) have to rely more heavily on remaining instruments of economic policy, such as automatic fiscal stabilisers and other discretionary fiscal measures, making the adjustment more difficult overall. The sequence of the crisis in euro area also suggests strong reliance on the single monetary policy to provide for macro-economic stabilisation in severe macro-economic circumstances.
(6) The financial crisis has resulted in a pro-cyclical pattern for fiscal policies, which has been detrimental to the quality of public finances and in particular for public investment. In turn, that shortcoming has contributed to widespread differences in macroeconomic performance between Member States, imperilling cohesion.
(7) Additional instruments are therefore necessary to avoid in the future that large asymmetric shocks result into deeper and broader situations of stress and weaken cohesion.
(8) In particular, in order to support Member States whose currency is the euro to respond better to rapidly changing economic circumstances and stabilise their economy by preserving public investment in the event of large asymmetric shocks, a European Investment Stabilisation Function (EISF) should be established.
(9) EISF should not only benefit Member States whose currency is the euro but also other Member States that participate in the exchange rate mechanism (ERM II).
(10) EISF should be a Union instrument which complements national fiscal policies. It should be recalled that Member States should pursue sound fiscal policies and build up fiscal buffers in favourable economic times.
(11) At Union level, the European Semester of economic policy coordination is the framework to identify national reform priorities and monitor their implementation. Member States develop their own national multiannual investment strategies in support of those reform priorities. Those strategies should be presented alongside the yearly National Reform Programmes as a way to outline and coordinate priority investment projects to be supported by national and/or Union funding. They should also serve to use Union funding in a coherent manner and to maximise the added value of the financial support to be received notably from the programmes supported by the Union under the European Regional Development Fund, the Cohesion fund, the European Social Fund, the European Maritime and Fisheries Fund and the European Agricultural Fund for Rural Development,, the EISF and InvestEU, where relevant.
(12) The European Stability Mechanism (ESM) or its legal successor could provide further support in addition to support under EISF.
(13) EISF support should be given in case one or several Member States whose currency is the euro or other Member States that participate in the exchange rate mechanism (ERM II) are confronted with a large asymmetric shock. Changes in unemployment rates are highly correlated with business cycle fluctuations in such Member States. Strong increases in national unemployment rates above their long-term averages are a clear indicator of a large shock in a specific Member State. Asymmetric shocks affect one or several Member States significantly more strongly than the average of Member States.
(14) The activation of EISF support should therefore be determined by a double activation trigger based on both the level of national unemployment rate compared to its past average and the change in unemployment compared to a certain threshold.
(15) Strict eligibility criteria based on compliance with decisions and recommendations under the Union's fiscal and economic surveillance framework over a period of two years before the request for EISF support should be fulfilled by the Member State requesting EISF support in order not to diminish the incentive for that Member State to pursue prudent budgetary policies.
(16) Member States whose currency is the euro which benefit from financial assistance by the ESM, the European Financial Stabilisation Mechanism (EFSM) or the International Monetary Fund (IMF) and which are under a macro-economic adjustment programme within the meaning of Article 7(2) of Regulation (EU) No 472/2013 of the European Parliament and of the Council 12 should not benefit from EISF support since their financing needs including for maintaining public investment are addressed via the financial assistance granted.
(17) Member States with a derogation which benefit from balance of payments support within the meaning of point (a) of Article 3(2) of Council Regulation (EC) No 332/2002 13 should not benefit from EISF support since their financing needs including for maintaining public investment are addressed via the medium-term financial assistance facility granted.
(18) EISF support should take the form of loans to the Member States concerned. That instrument would provide them with financing to continue executing public investment.
(19) In addition to loans, interest rate subsidies should be granted to the Member States concerned to cover the interest costs incurred on such loans, as a specific type of financial assistance under Article 220 of the Financial Regulation. Such an interest rate subsidy would provide additional support in parallel to the loan for Member States undergoing an asymmetric shock and facing tight financing conditions on the financial markets.
(20) With a view to swiftly provide EISF support, the competence for granting the loans when the eligibility and activation criteria are fulfilled and deciding on granting interest rate subsidies should be entrusted to the Commission.
(21) Member States should invest the support received under EISF in eligible public investment and also maintain the level of public investment in general compared to the average level of public investment over the five last years in order to ensure that the objective pursued by this Regulation is achieved. In that respect, there is the expectation that Member States should give priority to maintaining eligible investment in programmes supported by the Union under the European Regional Development Fund, the Cohesion fund, the European Social Fund, the European Maritime and Fisheries Fund and the European Agricultural Fund for Rural Development..
(22) To that effect, the Commission should examine whether the Member State concerned has respected those conditions. In case of non-compliance the Member State concerned should repay part or the entire loan given and should not be entitled to receiving an interest rate subsidy.
(23) The maximum level of eligible public investment that could be supported by EISF loan for a Member State should be automatically set on the basis of a formula which captures the ratio of public eligible investment to gross domestic product (GDP) in the Union over a period of five years before the Member State concerned requests a loan and its GDP over the same period. The maximum level of eligible public investment should also be scaled by means of scaling factor (α) towards the fixed ceiling in the Union budget. That factor is determined such that with hindsight of the recent crisis, all the EISF support could have been provided to the Member States concerned, had the mechanism been in place.
(24) The amount of EISF loan should also be automatically determined on the basis of a formula which firstly takes into account the maximum level of eligible public investment that can be supported under EISF and secondly the severity of the large asymmetric shock. The support determined on the basis of that formula should also be scaled in function of the severity of the shock by means of a factor (β). That factor is determined such that for a shock that increases unemployment by more than 2.5 percentage points, the maximum support is made available to the Member State concerned. An EISF loan could be increased up to the maximum level of eligible public investment in case the asymmetric shock is particularly severe as reflected by other indicators of the Member State's position in the economic cycle (e.g. confidence surveys) and a deeper analysis of the macroeconomic situation (as conducted in particular in the context of the macroeconomic forecast and the European Semester). With a view to ensure that as many Member States as possible could qualify for support under EISF, the loan to a Member State should not exceed 30 percent of the remaining available means under the ceiling set for calibrating the loans under EISF to the available means in the Union budget.
(25) The amount of EISF interest rate subsidies should be determined as a percentage of the interest rate costs incurred by the Member State on the loan granted under the EISF.
(26) A Stabilisation Support Fund should be established to finance the interest rate subsidy. The Stabilisation Support Fund should be endowed with national contributions from Member States whose currency is the euro and other Member States that participate in the exchange rate mechanism (ERM II).
(27) Both the determination of the amount of the national contributions to the Stabilisation Support Fund and their transfer should be governed by an intergovernmental agreement to be concluded between Member States whose currency is the euro and other Member States that participate in the exchange rate mechanism (ERM II). That agreement should provide that the national contributions for all the Member States are calculated based on the share of the national central banks of those Member States whose currency is the euro in the monetary income of the Eurosystem. For Member States which participate in ERM II a specific key should be foreseen to determine the national contributions. The Commission should assist the Member States for the calculation of those contributions. To that end, the European Central Bank (ECB) should communicate to the Commission the amount of monetary income the national central banks of the Eurosystem are entitled to.
(28) After that intergovernmental agreement has entered into force, payment of the interest rate subsidy to the Member State concerned should be conditional upon the Member State transferring its yearly contribution to the Stabilisation Support Fund. Payment of interest rate subsidies should be conditional upon the availability of sufficient means in the Stabilisation Support Fund. Payment of interest rate subsidies from the Stabilisation Support Fund would be postponed in case the interest rate subsidy to a specific Member State would exceed 30 percent of the available means in the Stabilisation Support Fund at the moment when such payment is due.
(29) The Commission should be in charge for managing the assets of the Stabilisation Support Fund in a safe and prudent manner.
(30) In order to increase the impact of public investment and potential EISF support the quality of Member States' public investment systems and practices should be ensured and where appropriate strengthened. An assessment by the Commission should be carried out regularly and take the form of a report and if warranted contain recommendations to improve the quality of public investment systems and practices in Member States. A Member State could request technical assistance from Commission. The latter could undertake technical missions.
(31) In order to determine the rules for the involvement of the ESM or its legal successor in providing financial assistance in parallel to the Commission in support of public investment, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of the exchange of relevant information as regards the EISF loan, the impact of the ESM's involvement for calculating the amount of EISF support, and the granting of an interest rate subsidy by the Stabilisation Support Fund to the Member State for costs incurred on ESM financial assistance. The Commission should also be empowered to adopt delegated acts determining the percentage in the formula for calculating the interest rate subsidy, the detailed rules for the administration of the Stabilisation Support Fund and the general principles and criteria for its investment strategy. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016 14 . In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
(32) Pursuant to paragraph 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016, there is a need to evaluate this Regulation in order in particular to assess its effectiveness, its contribution to the conduct of economic policies in Member States and the Union's strategy for jobs and growth, and to determine possible further developments that are needed in order to create an insurance mechanism serving the purpose of macro-economic stabilisation. This will be done on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, can include measurable indicators, as a basis for evaluating the effects of the Regulation on the ground.
(33) EISF should be considered as a first step in the development over time of a fully-fledged insurance mechanism to cater for macro-economic stabilisation. Currently, EISF would be based on loans and granting of interest rate subsidies. In parallel, it is not excluded that the ESM or its legal successor would be involved in the future by providing financial assistance to Member States whose currency is the euro facing adverse economic conditions in support of public investment. Moreover, a voluntary insurance mechanism with a borrowing capacity based on voluntary contributions by Member States could be set up in the future to provide for a powerful instrument for the purpose of macro-economic stabilisation against asymmetric shocks.
(34) In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council , Council Regulation (Euratom, EC) No 2185/96 and Council Regulation (EU) 2017/1939, the financial interests of the Union are to be protected through proportionate measures, including the prevention, detection, correction and investigation of irregularities and fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions. In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96 the European Anti-Fraud Office (OLAF) may carry out investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Council Regulation (EU) 2017/1939, the European Public Prosecutor's Office may investigate and prosecute fraud and other illegal activities affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council. In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, to grant the necessary rights and access to the Commission, OLAF, the EPPO and the European Court of Auditors (ECA).
(35) Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union apply to this Regulation. These rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States, as the respect for the rule of law is an essential precondition for sound financial management and effective EU funding.
(36) Since the objective of this Regulation, namely setting up a European Investment Stabilisation Function to absorb large asymmetric shocks which risk imperilling economic and social cohesion cannot be sufficiently achieved by Member States due to the architecture of the EMU with a centralised monetary policy but national fiscal policies, but can rather, by reason of the scale of action required be better achieved at the Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives,