EUROPEAN UNION POLICIES
The following is a summary of the EU policies that are closely related to Eesti Pank's daily activities: the internal
market and the coordination of economic policy.
Internal market
The single market is EU's main economic principle, which
was introduced already in the Treaty establishing the European Economic Community
in 1958. The internal market consists of "Four Freedoms":
free movement of goods, services, people and capital. Only in the presence of
all four freedoms is it possible to divide resources efficiently and thus create
favourable conditions for economic development.
Free movement of services includes also financial services, in the case of which the
Financial Services Action Plan (FSAP) is implemented to improve the practical functioning of the internal market. The
Action Plan includes both legislative and other measures.
Economic policy coordination
The coordination of EU's economic policy is largely based on the use of "soft methods". It means
that the legal framework is marginal, and the exchange of information and experiences, discussions on the implementation of
measures in other Member States, conduct of peer reviews etc. are rather used.
The framework for economic policy coordination can be divided into two:
Those initiated in the European Commission: broad economic policy guidelines, guidelines for employment,
excessive deficit procedure;
Those initiated in the Member States' reports: stability and convergence programmes, the Cardiff process.
The central document framing EU's economic policy is the Broad Economic Policy Guidelines (BEPG).
This is a longer term strategy paper, which is reviewed thoroughly in every three months. It includes integrated
recommendations but regards every Member State separately as well.
In March 2000, the EU initiated a process in Lisbon, the aim of which was to make the Union the most
dynamic and competitive knowledge-based economy in the world by 2010. Five years later, however, the European Union was
still far from achieving the expected success and therefore, at the 2006 Spring European Council, a renewed Lisbon Strategy
or the strategy for growth and jobs was agreed on, which is implemented through National Reform Programmes (NRP) prepared
by the Member States every year.
Broad Economic Policy Guidelines need to ensure the economic policy integrity of the goals set in
the Lisbon Strategy. These guidelines also instruct Member States on how to achieve the said goals via economic policy
measures.
A very important instrument in the coordination of economic policy is the Stability and Growth Pact,
which focuses on fiscal matters. The Stability and Growth Pact covers the two following aspects.
The preventive aspect, for which the Member States prepare and launch stability and convergence
programmes that present their strategies and fiscal goals for the following three years. Stability programmes are prepared
by the euro area Member States and convergence programmes by the non euro area Member States.
The corrective aspect with the purpose of avoiding excessive budget deficit. Pursuant to the Stability
and Growth Pact, national budgets have to be balanced in the medium term and the deficit must not exceed 3% of GDP in any
year. If the permitted rate is exceeded, the Commission will start the excessive deficit procedure, which may result in
imposing a fine on the Member State.
|
