the commission has long argued in favour of deepening and broadening euro area economic surveillance
the importance of this issue was recognised by the european parliament in its report on the two thousand and nine annual statement from the euro area and public finances
the commission intends to make full use of the new treaty instruments to achieve stronger policy coordination and governance
a forthcoming communication will outline new proposals in order to frame the development of a comprehensive framework for crisis prevention and correction in the euro area through recourse to the new article one hundred and thirty-six of the treaty on the functioning of the european union
the communication may include proposals to reinforce the preventive and corrective arms of the stability and growth pact proposals for more effective and broader surveillance of intra-euro area macro-economic imbalances and explore the options for the creation of a crisis resolution mechanism for euro area countries
regarding fiscal policy a reinforced emphasis on fiscal sustainability is warranted because of the impact of the crisis on debt and growth potential as well as the demographic factors kicking in
the incentives for compliance with the preventive and corrective dimensions of the stability and growth pact need to be made stronger
the commitment to consolidation needs to become stronger in good times
underlying vulnerabilities of public finances should be taken properly into account when designing the optimal consolidation part
new focus should be given to debt dynamics and sustainability and quality of public finances including national fiscal roots
there is also a need to address cases where the rules are continuously broken penalties could be made more deterrent and incentives strengthened
competitiveness developments and macro-economic imbalances on top of fiscal imbalances are a matter of concern for all eu member states
however surveillance of macro-economic imbalances and competitiveness diversions are particularly warranted for eu member states that linked to the euro because of the higher degree of economic and financial spillovers across euro area member states less market discipline the absence of exchange rate risks and more challenging adjustment with potentially high cost for the euro area as a whole
competitiveness divergences are a cause of serious concern for the functioning of the european monetary union
during the decade preceding the crisis divergence has been underpinned by a worrying build-up of a range of domestic economic imbalances in some member states including high debt and housing bubbles in some current account deficit countries as well as entrenched weakness in domestic demand in some surplus countries
diverging wage and cost trends the accumulation of a sustainable external debt position and the protracted mythical allocation of resources raised the stake for adjustment and increased vulnerability of public finances
at the same time countries heavily relying on trade surpluses have fallen victim to the sharp contraction in world trade in the early stages of the global crisis
therefore complementing fiscal surveillance the commission intends coming forward with proposals for the broadening of economic surveillance in the euro area addressing macro-economic imbalances and competitive developments
the aim is to set up a framework for early detection prevention and effective correction of intra-euro area imbalances
the third main element in the commission's proposal will explore the options for setting up a crisis resolution mechanism
the ad hoc mechanism for possible financial assistance for greece serves the immediate need
however it is necessary to set up a permanent crisis resolution mechanism with strong built-in disincentives for activation
establishing clear credible and consistent rules and procedures for the provision of exceptional and conditional support for a euro area country in serious distress will bolster the fundaments of the emu
the proposals for enhanced economic surveillance and coordination in the euro area are an important complement to the eu's comprehensive twenty twenty strategy for growth and jobs
the commission will ensure the efficient articulation between the two frameworks
