Documents considered by the Committee on 17 March 2010 - European Scrutiny Committee Contents


2 Growth and Stability Pact: statistical data

(31339)

6559/10

COM(10) 53

Draft Council Regulation (EU) No … amending Regulation (EC) No. 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure

Legal baseArticle 126(14) TFEU; consultation; unanimity
Document originated15 February 2010
Deposited in Parliament25 February 2010
DepartmentHM Treasury
Basis of considerationEM of 10 March 2010
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared, further information requested

Background

2.1 The Stability and Growth Pact adopted by the Amsterdam European Council in June 1997 emphasised the obligation of Member States to avoid excessive government deficits, defined as the ratio of a planned or actual deficit to gross domestic product (GDP) at market prices in excess of a "reference value" of 3%.[5] Each year the Council of Economic and Finance Ministers (ECOFIN) issues an Opinion on the updated stability or convergence programme of each Member State.[6] These Opinions, which are not binding on Member States, are based on a recommendation from the Commission. The economic content of the programmes is assessed with reference to the Commission's current economic forecasts. If a Member State's programme is found wanting, it may be invited by ECOFIN, in a Recommendation, to make adjustments to its economic policies, though such Recommendations are likewise not binding on Member States. This whole procedure is essentially the Pact's preventative arm.

2.2 On the other hand, the Pact also endorsed a dissuasive or corrective arm involving action in cases of an excessive government deficit — the excessive deficit procedure provided for in Article 126 TFEU and the relevant Protocol. This procedure consists of Commission reports followed by a stepped series of Council Recommendations (the final two steps do not apply to non-members of the eurozone). Failure to comply with the final stage of Recommendations allows ECOFIN to require publication of additional information by the Member State concerned before issuing bonds and securities, to invite the European Investment Bank to reconsider its lending policy for the Member State concerned, to require a non-interest-bearing deposit from the Member State concerned whilst its deficit remains uncorrected, or to impose appropriate fines on the Member State concerned.

2.3 The Commission's economic forecasts and recommendations, and therefore the Council's subsequent decisions, related to the Pact depend on economic and financial statistics from the Member States. In January 2010 the Commission published a report about Greek Government deficit and debt statistics. The report was broadly factual but delivered highly critical assessments of the Greek statistical system. It identified two main problems which have had effects on debt and deficit reporting over the past few years, most notably in the context of the excessive deficit procedure:

·  statistical weaknesses and unsatisfactory technical procedures in the Greek statistical institute, the NSSG, and in the several other services that provide data and information to the NSSG, including the General Accounting Office and the Ministry of Finance; and

·  inappropriate governance — poor cooperation and lack of clear responsibilities between institutions, diffuse personal responsibilities and ambiguous empowerment of officials and absence of written instruction and documentation.

This poor practice had led to severe irregularities in the reporting of debt and deficit statistics under the excessive deficit procedure.

2.4 The Commission's overall assessment was that the current set-up of the Greek statistical system "does not guarantee the independence, integrity and accountability of the national statistical authorities" and it outlined a list of broad goals which Greece should aim to achieve:

·  clarifying and "personalising" the responsibilities of the different statistical entities involved;

·  respecting the European Statistics Code of Practice;[7] and

·  making the NSSG independent, through the revision of the current law on statistics.

However, it did not outline any explicit next steps.[8]

2.5 The generality of statistical production in the EU is governed by the Statistics Regulation, Regulation (EC) No. 223/2009, which provides guidelines on the quality of EU statistics. However production of statistics in relation to the excessive deficit procedure is governed by a narrower provision, Regulation (EC) No. 479/2009.

The document

2.6 The Commission proposes this draft Regulation to amend Regulation (EC) No. 479/2009 to give power to Eurostat to undertake a monitoring visit to a national statistical authority or finance ministry in cases where there appear to be problems with the quality of that Member State's statistical data relating to government debt or deficit figures.

The Government's view

2.7 The Economic Secretary to the Treasury (Ian Pearson) says that the Government supports the objectives of this proposal, as it seeks to prevent a recurrence of the situation that came to light in Greece in the autumn of 2009. He reminds us that:

·  the Greek national statistical authorities were discovered to have produced data of inadequate quality;

·  according to the Eurostat report,[9] some statistical data had been deliberately misreported to reduce the size of the national deficit; and

·  the Greek published deficit figure was subsequently revised from 6% to 12.7%.

2.8 The Minister comments further that:

·  the Government has always supported the Stability and Growth Pact as a framework for ensuring sound public finances across the EU;

·  however, for the pact to remain a credible monitoring and enforcement mechanism, it is vital that statistical data provided by Member States is of high quality and that Member States' debt and deficit figures are reliable;

·  whilst the general EU statistical regime is sound and, so far, there have only been problems with national data on deficits in one Member State (Greece), the Government believes that an EU level monitoring system has the potential to prevent and identify future cases of manipulation of statistical data on debts and deficits;

·  EU level assessments of statistical data quality already exist in the form of peer review of the European Statistics Code of Practice established under the Statistics Regulation 223/2009;

·  however, this proposal gives Eurostat increased powers to monitor national statistical authorities' data and processes;

·  the Government supports the proposal that Eurostat should be able to make a monitoring visit to a Member State's national statistics authority "where significant risks or problems with the quality of the data have been clearly identified", as this would deter manipulation of statistical data and bring to light any future incidences of inadequate data underpinning government debt and deficit figures;

·  the Government believes that the proposals are broadly in line with subsidiarity;

·  the powers proposed for Eurostat will, however, require further definition, as the current draft does not make clear under which circumstances Eurostat should and should not make a monitoring visit to a Member State — it does not define what these "significant risks or problems" could be, nor does it set out how Eurostat would identify these risks; and

·   the Government believes that new legislation in this area must be proportionate to the scale of the problem.

2.9 The Minister then tells us that the Government's approach to the negotiations will be guided by five aims:

·  the text should confirm the need for national statistical authorities to operate independently;

·  Eurostat should create a report setting out the justification for a potential monitoring visit to any Member State;

·  there should be an agreed, clear set of criteria by which the quality of a Member State's statistical data could be assessed — this would provide an initial test to determine whether a Eurostat audit or investigation was necessary;

·  the proposed Regulation should contain clear examples of cases where monitoring visits to a Member State should be made; and

·  Eurostat should conduct their investigations based on published audited reports and other records held within the national statistical authority or finance ministry, where available, rather than direct access to other bodies.

2.10 On the financial implications of the proposal the Minister tells us that:

·  the Commission proposes that, in order to implement the measure, twenty new members of staff would be required;

·  whilst this does not have significant financial implications for the UK, the Government intends to query the number of full-time staff proposed to monitor Member States' national statistics, as it seems rather high; and

·  on the principle of budget neutrality, the Government will propose that the Commission should assign staff to this work from other areas of the Commission, rather than creating new posts.

Conclusion

2.11 While the purpose of this draft Regulation seems unexceptionable, we note that, although the Government supports the thrust of the proposal, it has a number of issues to deal with during negotiations, related both to subsidiarity and proportionality and to staff for Eurostat's new power. Before considering this proposal further we should like to hear about negotiating progress on these issues, and we ask for as prompt a response as possible, given the eight-week timeframe for national parliaments under the Subsidiarity Protocol. Meanwhile the document remains under scrutiny.


5   This obligation does not apply to Member States, including the UK, whilst they remain outside the eurozone, but they are required to endeavour to avoid excessive deficits. Back

6   The 16 Member States (Austria, Belgium, Cyprus, Germany, Greece, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain) that have adopted the euro have Stability Programmes, whereas the other 11 Member States (including the UK) produce Convergence Programmes. Back

7   (26595) 9461/05: see HC 34-ii (2005-06), chapter 5 (13 July 2005), HC 34-viii (2005-06), chapter 18 (2 November 2005) and HC 34-xiv (2005-06), chapter 20 (11 January 2006). Back

8   (31253) 5175/10 + ADDs 1-6: see HC 5-x (2009-10), chapter 10 (9 February 2010). Back

9   IbidBack


 
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