Coordinating EU Economic Policy

The Maastricht Treaty requires EU member states to regard their economic policies "as a matter of common concern" and to coordinate them within the Council of Ministers.

First the Commission recommends a set of guidelines for the member states' economic policies which are the basis for a draft to be adopted by the Finance Ministers Council. This draft shapes the conclusions of the European Council which, in turn, form the basis of the recommendations to be adopted by the Council. This is called "multilateral surveillance."

Aided by reports from the Commission, the Finance Ministers' Council monitors developments in each member state and checks that its policies are consistent with the guidelines endorsed by its government. If they are not, or if they risk jeopardising "the proper function of economic and monetary union", then the Council can single out the member state for a communication recommending the policies to be followed. This may be enough to produce the required adjustments to policy, but the Council can exert further pressure by publicising the recommendation if the Commission proposes it.

In order to qualify for membership of European Monetary Union, the Treaty requires member states to aim for certain targets for their budget deficits, public debt, inflation, interest rates and exchange rates. Since inflation, interest and exchange rates are crucially influenced by the size of budget deficits, special surveillance procedures are applied by the Council and the Commission. These are not unlike those outlined above for macro-economic policies, including making recommendations public, except that the European Council has no direct role.

Under the "excessive deficit" procedure, the focus is on a country's total outstanding public debt as a percentage of its gross domestic product (GDP) and on its budget deficit as a percentage of GDP. The targets laid down in a protocol to the Treaty are 60% of GDP for outstanding debt and 3% for the annual budget deficit.

Source: EU