directorate general for internal policies · 2012. 4. 20. · directorate general for internal...

DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT D: BUDGETARY AFFAIRS

The liability of the European Union budget concerning the European Financial Stabilisation

Mechanism and the European Stability Mechanism and interference on budget control by the European

Parliament

STUDY

Abstract This study examines to what extent the current regulatory provisions establishing the functioning of the ESM respond to EU governance principles when granting financial assistance, and more specifically as regards political and democratic scrutiny, appropriate governance, sound financial management, independent external audit, accountability and transparency. Given that the ESM will assume the tasks fulfilled currently by the EFSM, and given that the EFSM is guaranteed by the Union budget, this study also examines the EFSM under the same key research study objectives.

05/04/2012 PE 453.233 EN

This document was requested by the European Parliament's Committee on Budgetary Control. It designated Iliana IVANOVA (MEP) to follow the study. AUTHORS PwC RESPONSIBLE ADMINISTRATOR Fabia JONES Policy Department D: Budgetary Affairs European Parliament B-1047 Brussels E-mail: [email protected] LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR To contact the Policy Department or to subscribe to its newsletter please write to: [email protected] Manuscript completed in April 2012. Brussels, © European Union, 2012. This document is available on the Internet at: http://www.europarl.europa.eu/studies

DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorized, provided the source is acknowledged and the publisher is given prior notice and sent a copy. IMPORTANT MESSAGE FROM THE AUTHORS This report has been prepared by PwC EU Services EESV for the European Parliament, in accordance with the instructions stipulated in the specific terms of reference to this study, dated 18 November 2011, and was performed exclusively for the European Parliament’s sole benefit and use. Given that the by-laws and rules of procedure of the ESM, aimed at defining its specific terms of operation, are or were still under confidential preparation during the period of this study, the conclusions in this report are solely based upon the existing regulatory provisions at the time of its drafting. Therefore, they may not, by any means, be transposed to the provisions that are (or will be) set out in the approved ESM by-laws and rules of procedure of the ESM, and should be considered by any party with the necessary precaution. The Report has been prepared solely based on the information provided to us or publicly available as listed in the chapter "References". Moreover, this study is limited to assessing of the design of governance and operational arrangements, without providing assurance on their operating effectiveness, which would have required audit procedures. By its very nature, this research study cannot be regarded as an exact science and the conclusions arrived at in many cases will of necessity be subjective and dependent on the exercise of individual judgement. There is, therefore, no indisputable single assessment. Although our conclusions are in our opinion reasonable and defensible, others might wish to argue for different conclusions. Our report is not intended to be the sole basis of any decisions and/or actions, also taking into account matters outside the scope of our work which may exist.

The liability of the European Union budget concerning the European Financial Stabilisation Mechanism and the European Stability Mechanism and interference on budget control by the European Parliament

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PRE-RELEASE OF FINAL REPORT 5

CONTENTS

CONTENTS ........................................................................................................................................... 5

LIST OF ABBREVIATIONS .................................................................................................................... 7

EXECUTIVE SUMMARY ........................................................................................................................ 9

ZUSAMMENFASSUNG ....................................................................................................................... 18

SYNTHESE .......................................................................................................................................... 29

INTRODUCTION ................................................................................................................................. 40

BACKGROUND........................................................................................................................................................................ 40 PURPOSE OF THE STUDY ....................................................................................................................................................... 42 APPROACH............................................................................................................................................................................. 43 CONTENT OF DOCUMENT ..................................................................................................................................................... 44

2. OVERVIEW OF EU AND INTERGOVERNMENTAL FINANCIAL ASSISTANCE PROGRAMS............ 46

2.1 FUNDING CHARACTERISTICS OF THE PROGRAMMES .................................................................................................... 47 2.2 GOVERNANCE CHARACTERISTICS OF THE PROGRAMMES............................................................................................. 50 2.3 INTERACTION BETWEEN THE EFSM AND THE ESM...................................................................................................... 51

3. EXAMINATION OF THE EFSM ........................................................................................................ 53

3.1. ROLES AND RESPONSIBILITIES AND INVOLVEMENT OF KEY STAKEHOLDERS.............................................................. 53 3.2. ADEQUACY OF BUDGETARY CONTROL MECHANISMS ON THE EFSM........................................................................ 59

3.2.1 Summary of EU institutional roles in respect of budgetary control ...............................................60 3.2.2 Financial structure and accounting treatment of loans and borrowings under the EFSM ......62 3.2.3 EFSM impact on the EU budget and on budgetary control .............................................................65

3.3 EXTERNAL AUDIT, ACCOUNTABILITY AND TRANSPARENCY ......................................................................................... 68 3.3.1 Mandate of the European Court of Auditors.............................................................................................69 3.3.2 Reporting and disclosure arrangements ...................................................................................................70

3.4 RELIABILITY OF DATA AND STATISTICS.......................................................................................................................... 71 3.4.1 Data and statistics reported by Member States, beneficiary or not from EFSM financial assistance....................................................................................................................................................................72 3.4.2 Data and statistics reported by the Commission on EFSM financial transactions ..........................76

3.5 POLITICAL AND DEMOCRATIC SCRUTINY....................................................................................................................... 77

4. EXAMINATION OF THE ESM .......................................................................................................... 81

4.1 ROLES AND RESPONSIBILITIES AND INVOLVEMENT OF KEY STAKEHOLDERS............................................................... 81 4.1.1 ESM Governance structure............................................................................................................................83 4.1.2 Findings .............................................................................................................................................................87

4.2 BUDGETARY CONTROL AND FINANCIAL MANAGEMENT .............................................................................................. 89 4.2.1 Definition of budgetary control under EU law..........................................................................................90 4.2.2 ESM Financial structure .................................................................................................................................90 4.2.3 ESM financial management .........................................................................................................................92 4.2.4 Findings .............................................................................................................................................................94

4.3 EXTERNAL AUDIT, ACCOUNTABILITY AND TRANSPARENCY ......................................................................................... 95 4.3.1 Governance of external audit within international organisations and financial institutions ......96

Policy Department D: Budgetary Affairs ____________________________________________________________________________________________


4.3.2 Mandate of the European Court of Auditors.............................................................................................97 4.3.3 Reporting and disclosure arrangements ...................................................................................................98

4.4 RELIABILITY OF DATA AND STATISTICS.......................................................................................................................... 98 4.5 POLITICAL AND DEMOCRATIC SCRUTINY.....................................................................................................................100

4.5.1 Democratic scrutiny over international institutions under EU law .................................................. 101 4.5.2 Definition of democratic scrutiny roles on the ESM.............................................................................. 101 4.5.3 Definition of European Parliament political scrutiny on the ESM..................................................... 102 4.5.4 How appropriate democratic scrutiny on international financial assistance providers can be ensured ..................................................................................................................................................................... 103 4.5.5 The way in which the European Parliament can best add value to the democratic and political scrutiny of the ESM................................................................................................................................................. 103

REFERENCES .................................................................................................................................... 105

ANNEX.............................................................................................................................................. 108

ANNEX 1: TERMS OF REFERENCE........................................................................................................................................109 ANNEX 2: INTERNATIONAL FINANCIAL SUPPORT AT A GLANCE .......................................................................................112 ANNEX 3: ACKNOWLEDGEMENTS ......................................................................................................................................116


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LIST OF ABBREVIATIONS BOP Balance of Payments assistance

CoE Council of Europe

CONT Committee on Budgetary Control

DAS Déclaration d’Assurance

DG Directorate General

EBA European Banking Authority

EC European Commission

ECA European Court of Auditors

ECB European Central Bank

ECFIN Economic and Financial Affairs (European Commission)

ECJ European Court of Justice

EFC Economic and Financial Committee

EFSF European Financial Stability Facility

EFSM European Financial Stabilisation Mechanism

EI European Institutions

EIB European Investment Bank

EP European Parliament

ESGAB European Statistical Governance Advisory Board

ESM European Stability Mechanism

ESRB European Systemic Risk Board

ESS European Statistical System

ESSC European Statistical System Committee

EU European Union

EWGFC Euro Working Group Financial Committee

GLF Greek Loan Facility

IFI International Financial Institution

IMF International Monetary Fund

MFA Macro-economic Financial Assistance

MEFP Memorandum of Economic and Financial Policies

MoU Memorandum of Understanding

MS Member States

NSI National Statistical Institute

NTMA National Treasury Management Agencies

OECD Organisation for Economic Cooperation and Development

OLAF European Anti-Fraud Office

SA Société Anonyme

SAI Supreme Audit Institutions

SSA Sovereign Supra-Nationals and Agencies

SPV Special Purpose Vehicle

TEU Consolidated Version of the Treaty on the European Union



TFCA Task Force on Coordinated Action

TFEU Consolidated version of the Treaty on the Functioning of the European Union

TSCG Treaty on Stability, Coordination and Governance

WTO World Trade Organisation


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EXECUTIVE SUMMARY Background

With a view to addressing the threats to financial stability in the European Union, the European Council adopted a package of temporary European Stabilisation Actions in May 2010. In virtue of Art. 122. of the TFEU, which foresees EU financial assistance to Member States in difficulties caused by exceptional circumstances beyond Member States’ control, these actions provided for two temporary crisis mechanisms:

The European Financial Stabilisation Mechanism (EFSM): a financial assistance program granting the right to the Commission to borrow in financial markets and to lend the proceeds to beneficiary euro area Member States under an implicit EU budget guarantee;

The European Financial Stability Facility (EFSF): a Special Purpose Vehicle aimed at providing financial assistance to beneficiary euro area Member States under the EFSF framework agreement between euro-area Member States.

While these mechanisms were widely accepted as a good line of defence in the EU crisis management framework, the Task Force on Economic Governance, the European Council, the Heads of State and Heads of Government of the European Council, agreed on the need for Member States to establish a permanent crisis mechanism to safeguard the financial stability of the euro area. On 2 February 2012, the 27 euro-area Member States endorsed the Treaty establishing the European Stability Mechanism (“ESM Treaty”) as the EU’s permanent crisis mechanism. In accordance with article 48, the ESM will assume the tasks fulfilled currently by the EFSM and the EFSF from the date the Treaty enters into force (foreseen as of July 2012). In this context and at the request of the European Parliament’s Policy Department for Budgetary Affairs, PwC has conducted a study on “The liability of the European Union budget concerning the European Financial Stabilisation Mechanism and the European Stability Mechanism and interference on budget control by the European Parliament”. Purpose

In accordance with the specific terms of reference provided in Annex 1, the purpose of this study is to examine:

the adequacy of the budgetary control mechanisms of the permanent crisis mechanism (as covered under § 2) and the extent to which due consideration has been given to the issues raised by the European Parliament, in its discharge resolution of 10 May 2011, namely:

the definition of clear responsibility and reporting arrangements and the involvement of all actors, whose liabilities are involved, in the establishment of the mechanism (as covered under § 1);

the establishment of appropriate arrangements for public external audit and accountability and full transparency for the permanent crisis mechanism (as covered under section § 3);

the definition of provisions ensuring the reliability of data and statistics (as covered under § 4);



the definition of the Parliament’s political scrutiny of any euro-bond issue, in general, and of the permanent crisis mechanism in particular (as covered under § 5).

the appropriate involvement of the European Court of Auditors with a view to ensuring a sufficiently high-quality, open and transparent external audit (as covered under § 3).

the best means to ensure appropriate democratic scrutiny of this mechanism, and the way in which the European Parliament can best add value to this process (as covered under § 5).

Approach

This study has been conducted in two phases. In the first phase, PwC examined the EFSM and ESM Treaty provisions by benchmarking them against the provisions of existing EU financial assistance programmes, with other international financial assistance providers in terms of governance, financial control, reliability of data and statistics, external audit, and democratic scrutiny, and taking into account the European Parliament requirements in its resolutions of 10 May 2011 and of 23 March 20111. The key findings of this examination were published in a mid-term draft report on the 15th February 2012. In the second phase, PwC took into account feedback and comments received on the mid-term draft report and from interviews with key stakeholders, including members of the European Parliament, the European Commission2, the European Court of Auditors, the EFSF, Eurostat, and Supreme Audit Institutions3. Our assessment as to the adequacy of EFSM and ESM provisions has been conducted against accepted practice deployed by relevant existing financial assistance providers.

1 European Parliament resolution of 23 March 2011 on the draft European Council decision amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro (00033/2010 – C7-0014/2011 – 2010/0821(NLE)). 2 DG ECFIN and DG BUDG. 3 Dutch Supreme Audit Institution.


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Key findings

The key findings listed below take into account the most likely envisaged scenario of transition for EFSM tasks towards ESM: given that there is no formal decision to transfer the borrowing and lending operations engaged under the EFSM support programme to the ESM, the most likely scenario implies that the EFSM continues in an administrative capacity once existing programmes are completed until all outstanding are repaid, without entering into new programmes. § 1. As to the definition of clear roles and responsibilities and the involvement of all actors whose liabilities are involved in the establishment of the EFSM/ ESM Roles and reporting arrangements under the EFSM are fully aligned with EU governance arrangements in place under existing financial assistance programs, such as the BoP, and the MFA in situations where urgent financial assistance is required. The comparison on alignment can only be made under these conditions of urgency, as the EFSM is constituted as an emergency financial assistance instrument, and in this case the Council is solely entitled to adopt the financial assistance decision and the European Parliament is informed of the decision. Under normal circumstances, which are not applicable to the EFSM, the MFA provides co-decision by the Council and the European Parliament on the financial assistance granted.

Although the ESM does not form part of the EU institutional framework from a legal point of view, roles and responsibilities assigned under this mechanism are aligned with several EU governance principles when granting financial assistance, and thereby respond to the following EP discharge resolution4 requirements:

the roles of the ESM respect the Union sphere of competences (Art. 18), and notably in relation to the EU monetary policy, where the ESM involves the specific Union institutions responsible for that competence area (Art. 8) notably the European Commission and the ECB ;

the ESM involves and provides access to all Member States whose currency is the euro (Art. 6 and Art. 14);

where possible and in accordance with its legal basis, the ESM involves EU institutions, to avoid the establishment of double structures (Art. 15);

ESM governance arrangements are consistent with governance prerogatives at EU level, in that:

the Commission endorses the same roles in setting and monitoring the macro-economic conditionality attached to the assistance provided;

the Court of Justice handles disputes between ESM contracting parties;

members of the Council, which is the decision authority as to financial assistance granted under the EU framework, will most probably sit in the ESM Board of Governors, which is the decision authority as to financial assistance granted under the ESM;

the ECA will be represented by a permanent seat in the ESM Internal Audit Board and will continue to perform financial and operational audits on the EU institutions involved in ESM operations;

4 European Parliament discharge resolution of 23 March 2011.



the ESM external audit function will provide assurance on its financial position in accordance with the international standards adopted at EU level.

by way of consequence, the governance framework of the ESM enables EU Institutions’ involvement at all stages (Art. 11), either directly, through the roles assigned to them by the ESM Treaty (e.g. the Commission), or by means of indirect control on their activities by the EU institutions to which they remain accountable as to their activities and use of resources (e.g. the European Parliament), as developed under § 5;

as a financial assistance instrument to euro-area Member States, that is fully embedded in the strengthened EU fiscal, budgetary and economic policy surveillance framework5 the ESM has been designed to contribute in building up EU economic governance (Art. 5);

Also, in view of the ESM legal basis and institutional form, some governance roles and responsibilities, which could not be assigned to EU institutions from a legal perspective, have been assigned to ESM internal or external governance bodies, such as:

the ESM Board of Governors, for the approval of financial conditions related to the assistance provided;

the ESM Board of Directors, for the approval of the ESM financial and risk management guidelines;

the independent external auditor, for certifying the ESM annual financial statements.

In this respect, ESM governance arrangements are aligned with governance structures set up by similar international private (EFSF) and public financial assistance providers (IMF), and have therefore been adequately provisioned from a legal and institutional perspective. Furthermore, insofar these arrangements are consistent with governance prerogatives at EU level and allow, whether directly or indirectly, EU institutional involvement at all stages, they have been adequately designed to consistently support Union economic governance.

§ 2. As to the adequacy of the budgetary control mechanisms in the EFSM/ ESM Unlike the EFSM, given its specific financial structure and legal basis, the ESM is not backed by the EU budget in case of default by a beneficiary Member State, but disposes of its capital and own reserve fund to absorb possible losses.

Thus, financial control mechanisms under the EFSM and the ESM differ as to the responsibilities assigned for their execution, as developed below.

Under the MFA, BoP and EFSM, the European Parliament, and the BUDG and CONT Committees in particular, are entitled with political control by means of the budgetary adoption and discharge procedures.

With respect to the implementation of the European budget, the borrowing and lending activities undertaken by the Commission for the purpose of MFA, BoP and EFSM financial accounts and operations are subject to (i) approval by the relevant DG’s Authorising Officer through its annual

5 ESM financial assistance macro-economic conditionality that is fully consistent with economic policy conditionality in the context of EU multilateral surveillance, in accordance with the Proposal for a regulation on strengthening of economic and budgetary surveillance 2011/385.


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Declaration of Assurance, (ii) internal control and financial management principles stemming from dedicated EU regulation, and (iii) audit by the related Internal Audit function and ECA.

Finally, the Commission and the ECA are entitled to carry out audits in EFSM financial assistance beneficiary Member States when deemed necessary, while the Commission monitors compliance of beneficiary Member States with EFSM economic policy conditionality, consistently with the provisions of the EU multilateral surveillance framework.

Under the ESM, political control can be exercised by the European Parliament indirectly on the EU institutions involved in the ESM operations and National Parliaments as described under §5.

By contrast with the EFSM:

ESM annual accounts are approved by its Board of Governors and published in an annual report made available to the national parliaments, to the supreme audit institutions of the ESM Members and to the ECA.

ESM operations are audited by its Internal Audit function, established according to international standards;

ESM internal control principles and financial management guidelines are approved by its Board of Directors;

ESM annual accounts are certified by an Independent external auditor appointed by the Board;

The Commission and the ECA are not formally entitled to carry on audits in beneficiary Member States.

While financial control mechanisms on the EFSM and the ESM present high similarity in the objectives they pursue, they essentially differ as to the responsibilities assigned for their execution, mainly due to the specific legal basis and institutional form of each mechanism. From that perspective, financial control mechanisms on each support program have been adequately defined: while the EU financial control mechanisms apply to the EFSM, the ESM has adopted financial control mechanisms that are consistent with the characteristics of control frameworks deployed by similar international private (EFSF) and public financial assistance providers (IMF). § 3. As to the establishment of appropriate arrangements for public external audit, the accountability and full transparency of the EFSM/ ESM, and to the appropriate involvement of the European Court of Auditors with a view to ensuring a sufficiently high-quality, open and transparent external audit

Like the BoP and MFA, the lending and borrowing operations undertaken for the purpose of the EFSM assistance are subject to ECA audit, by means of:

Statements of Assurance;

Compliance audits;

Performance audits;

Specific opinions requested by any EU Institution.



In this context, according to the collateral character of the EU budget under the EFSM, the ECA is granted with such a competence and provides its assistance towards the European Parliament, and the CONT Committee in particular, in the discharge process. An opinion is provided by the ECA in the context of its statement of assurance (DAS) on the reliability of EU accounts and the legality and regularity of underlying transactions. As the borrowing and lending operations entered into by the Commission for the purpose of the EFSM are integrated within the EU accounts, the ECA will be in a position to review these operations under the DAS methodology.

In parallel, the ECA is also entitled to perform specific audits in Members States that received financial assistance towards the different audit programmes.

According the ESM Treaty, ESM shall implement a three layered audit environment, in line with common practice for that type of institution:

An internal audit department, which will comply with international standards;

A Board of Auditors, which will involve external representatives from the SAIs and ECA;

External auditors, who comply with international standards.

In addition to these audit layers, the ESM Treaty provides for transparency provisions such that National Parliaments, SAIs and the ECA remain informed on its activities and financial position by means of the Annual Report.

Besides, some responsibilities related to the setting and monitoring of macro-economic conditionality have been assigned to the Commission by the ESM Treaty. As a European institution, the activities performed by the Commission according to the ESM Treaty will also be part of the scope of the ECA audits.

Finally, the European institutions may, at their initiative, request the ECA to provide with specific opinions on the subject that are of interest to them.

§ 4. As to the reliability of data and statistics

Under the BoP, MFA and EFSM, the European Commission use data and statistics that are provided by Eurostat and by beneficiary countries. In order to improve the reliability of data and statistics used for the purpose of these mechanisms, several actions have been taken:

With respect to the reliability of historical data collected by Eurostat, major projects are undertaken by Eurostat in order to reinforce governance and alignment of upstream data, notably on site audits and integration of reporting platforms;

With respect to the reliability of forecast data collected by the Commission for the sustainability assessment of government debts and the elaboration of adjustment programmes, the Commission performs specific audits aimed at having comfort on the reliability of these statistics.

Since the data used for the purpose of ESM financial assistance are the same as those used under the BoP and EFSM, they benefit from the same quality improvements achieved.

With respect to the financial data and statistics reflecting ESM activities, internal control, risk management and audit modalities deployed should ensure their quality and reliability.


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§ 5. As to the definition of the European Parliament’s political scrutiny of the EFSM/ ESM and of any Euro-bond issue, how best to ensure appropriate democratic scrutiny of this mechanism, and the way in which the European Parliament can best add value to this process Like the BoP and the MFA, the EFSM Regulation and the TFEU provide the European Parliament with multiple sources of information that are of relevance for the purpose of democratic scrutiny, inter alia:

MoUs and decisions from the Council about the assistance programmes initiated;

Lending and borrowing activities undertaken by the Commission, under the EU accounts and commented in DG ECFIN’s public annual report;

Studies about the monitoring of conditionality requirements and their achievement;

ECA audits or ECA opinions, upon any EU Institution’s request).

As a non-EU institution, the ESM does not fall under the direct supervision of EU Institutions. However, democratic scrutiny will be exercised by both National and European Parliaments in the context of their respective contributions to the ESM budget and operations, in particular:

The European Parliament exercises political oversight and democratic scrutiny as regards the European Commission’s use of EU resources for the purposes of ESM activities, given the Commission’s accountability to Parliament in this respect. The Parliament maintains indirect political oversight over all EU institutions involved in ESM operations, as to their conduct of activities and use of resources for that purpose, based on their annual activity report and in accordance with EU budgetary adoption and discharge procedures. Further, the Parliament – and its CONT Committee in particular – can exercise political scrutiny by requesting an exchange of views, the formulation of parliamentary questions or adoption of parliamentary resolutions, which require information on either a voluntary or required basis.

National Parliaments of euro-area Member States scrutinize the ESM, especially given their contributions to the ESM capital. In accordance with the interparliamentary cooperation principles of TFEU Protocol n° 1, the European Parliament benefits from a degree of indirect political oversight in relation to these National Parliaments.

Thus, except to the extent that the ESM Treaty does not provide that the ESM annual report is made available to the European Parliament, sufficient democratic scrutiny mechanisms are in place to address the EP discharge resolution requirements of 23 March 2011 (Art. 17). Given that no Euro-bonds have yet been created or issued, current regulatory provisions define no political scrutiny roles for the European Parliament in this respect.



Key recommendations

As a result of our analysis and given the key findings detailed in this executive summary, we have developed a series of recommendations as regards the five key research questions that form the basis of this study. Key recommendations are summarised below separately for the EFSM and for the ESM. We recommend that the European Parliament:

EFSM ESM

§ 1. As regards the assignment of roles and responsibilities

Accept the current decision-making procedures as they are in line with decision rules applicable for other financial assistance mechanisms used in times of urgent need.

Closely monitor the development of ESM bylaws and further rules of procedures to gain assurance as to the overall effectiveness of governance structures, use of international audit standards, interaction with SAI’s6 and reporting arrangements in place.

§ 2. As regards budgetary control mechanisms

Question the Commission and DG EC-FIN in particular as regards operations related to the EFSM, making full use of available information to evaluate the capacity of beneficiary states to meet their EFSM obligations. Consider inter-alia: Commission reports on borrowing and lending activities and budget guarantees, EFSM MoUs, ECA audit reports, and DG ECFIN quarterly monitoring reports. Analyse the ECA’s audit reports relating to financial and operational audits of EFSM processes to verify alignment with budgetary and financial management procedures applicable at the EU level.

Request that EBA standards on risk management are taken into account in the implementation guidelines adopted by the ESM Board of Directors, in line with common practice for European banking, such as risk governance standards providing for ALM, liquidity risk, market risk, and operational risk functions. Make use of indirect means to assess the ESM’s financial and risk management practices, drawing on information that is available on a voluntary basis, upon request, or through existing reporting arrangements.

6 Resolution of the Contact committee of the SAIs of the EU dated 14 October 2011 on the Statement of SAIs of the euro area on the external audit of the ESM, http://eca.europa.eu/portal/pls/portal/docs/1/9406723.PDF Letter from the President of the Netherlands Court of Audit on issues to be addressed in the by-laws of the ESM with regard to Article 30 of the ESM Treaty.


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EFSM ESM

§ 3. As regards external audit and accountability

Stress the appropriateness of risk-based planning at the ECA to ensure that the timing and frequency of audit procedures and reports is aligned with the high-risk nature of financial assistance programs. In addition to the financial and performance audits that are to be conducted by the ECA according to the provisions of the TFEU, European Parliament, and the CONT Committee in particular, could, where deemed necessary, ask for specific opinions or reports from the ECA with respect to the EFSM-related operations.

Encourage the ECA to audit EU institutions involved in the ESM, placing a particular emphasis on ESM-related activities. Ensure timely scrutiny of the results of the ECA’s audit procedures, findings, and reports. Submit requests for specific opinions to the ECA in order to obtain information on financial topics related to EU institutions’ involvement in ESM operations.

§ 4. As regards the reliability of data and statistics

Follow up and support data quality improvement programs for both forecast data (the Commission) and historical data (Eurostat). Request and analyse information from the Commission – DG EC-FIN in particular – to evaluate the quality of data provided by the Member states.

Data and statistics considerations and recommendations apply equally to the ESM as to the EFSM given the use of a single set of information for all EU financial assistance programmes.

§ 5. As regards to political and democratic scrutiny

Pay particular attention to ongoing servicing requirements over the full lifecycle of EFSM loans, even after the mechanism is dissolved.

Request that the ESM Board of Governors also makes the ESM annual report accessible to the European Parliament. Alternatively, the European Parliament could address this request to National Parliaments, in the context of enhanced cooperation, or to the ECA.



ZUSAMMENFASSUNG Hintergrund

Um gegen die Gefahren vorgehen zu können, die die finanzielle Stabilität in der Europäischen Union bedrohen, hat der Europäische Rat im Mai 2010 ein Paket an befristeten europäischen Stabilisierungsmaßnahmen verabschiedet. Gemäß Artikel122 AEUV, in dem eine finanzielle Unterstützung der Mitgliedstaaten durch die EU im Falle von Schwierigkeiten vorgesehen ist, die durch außergewöhnliche Umstände verursacht werden, auf die die Mitgliedstaaten keinen Einfluss haben, kommen im Rahmen dieser Maßnahmen zwei befristete Krisenmechanismen zum Einsatz:

der Europäische Finanzstabilisierungsmechanismus (EFSM): ein finanzielles Unterstützungsprogramm, durch das der Kommission das Recht eingeräumt wird, auf Finanzmärkten Kredite aufzunehmen und die Erträge im Rahmen einer impliziten EU-Haushaltsgarantie an begünstigte Mitgliedstaaten der Eurozone zu verleihen;

die Europäische Finanzstabilisierungsfazilität (EFSF): eine Zweckgesellschaft, deren Ziel darin besteht, im Rahmen des zwischen den Mitgliedstaaten des Euroraums abgeschlossenen EFSF-Rahmenvertrags finanzielle Hilfen an begünstigte Mitgliedstaaten der Eurozone zu vergeben.

Während diese Mechanismen auf breiter Front als eine gute Verteidigungslinie im Rahmen des EU-Krisenmanagements angenommen wurden, einigten sich die Arbeitsgruppe ‚Wirtschaftspolitische Steuerung‘, der Europäische Rat und die Staats- und Regierungschefs des Europäischen Rats über die Notwendigkeit, einen dauerhaften Krisenmechanismus für die Mitgliedstaaten einzurichten, um so die finanzielle Stabilität der Eurozone zu sichern. Am 2. Februar 2012 stimmten die 27 Mitgliedstaaten der Eurozone dem Vertrag zur Errichtung des Europäischen Stabilitätsmechanismus („ESM-Vertrag“) als dem dauerhaften Krisenmechanismus der EU zu. Nach Maßgabe von Artikel 48 wird der ESM die derzeit seitens des EFSM und der EFSF wahrgenommenen Aufgaben ab dem Zeitpunkt übernehmen, an dem der Vertrag in Kraft tritt (vorgesehen für Juli 2012). In diesem Zusammenhang und im Auftrag der Fachabteilung für Haushaltsfragen des Europäischen Parlaments hat PwC eine Studie zum Thema „Die Haftung des Haushalts der Europäischen Union hinsichtlich des Europäischen Finanzstabilisierungsmechanismus und des Europäischen Stabilitätsmechanismus sowie der Einfluss des Europäischen Parlaments auf die Haushaltskontrolle“ erstellt. Zweck

Folgende Punkte sind gemäß den in Anlage 1 aufgeführten Aufgabenstellungen Gegenstand der vorliegenden Studie:

die Angemessenheit der Haushaltskontrollmechanismen des dauerhaften Krisenmechanismus (siehe Abschnitt § 2) sowie der Grad der Berücksichtigung der


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vom Europäischen Parlament in seinem Entlastungsbeschluss vom 10. Mai 2011 aufgeführten Punkte:

die Festlegung klarer Zuständigkeiten und Berichterstattungsverfahren sowie die Beteiligung aller Akteure, für die sich daraus Verpflichtungen ergeben, bei der Einrichtung des Mechanismus (siehe Abschnitt § 1);

die Schaffung der entsprechenden Modalitäten für eine öffentliche externe Rechnungskontrolle sowie Rechenschaftspflicht und vollständige Transparenz für den dauerhaften Krisenmechanismus (siehe Abschnitt § 3);

die Festlegung von Bestimmungen zur Gewährleistung der Zuverlässigkeit von Daten und Statistiken (siehe Abschnitt § 4);

die Definition der politischen Kontrolle jeder Ausgabe von Eurobonds im Allgemeinen und des ständigen Krisenmechanismus im Besonderen durch das Parlament (siehe Abschnitt § 5);

die angemessene Einbeziehung des Europäischen Rechnungshofes, um auf eine offene und transparente externe Rechnungsprüfung von ausreichender Qualität hinzuwirken (siehe Abschnitt § 3);

die bestmöglichen Maßnahmen zur Sicherstellung einer angemessenen demokratischen Kontrolle dieses Mechanismus sowie Möglichkeiten für das Europäische Parlament, bestmöglich zu diesem Prozess beizutragen (siehe Abschnitt § 5).

Methodik

Die Studie wurde in zwei Phasen ausgeführt. In der ersten Phase untersuchte PwC die Bestimmungen des EFSM- und des ESM-Vertrags, indem diese mit den Bestimmungen der bereits vorhandenen Finanzhilfeprogramme der EU als Bezugsgröße verglichen wurden, wobei auch andere internationale Finanzhilfeleister im Hinblick auf die Aspekte Steuerung, Finanzkontrolle, Zuverlässigkeit der Daten und Statistiken, externe Prüfungen und demokratische Kontrolle zum Einsatz kamen und zudem die Anforderungen des Europäischen Parlaments in Bezug auf dessen Entlastungsbeschlüsse vom 10. Mai 2011 sowie vom 23. März 2011 Berücksichtigung finden7. Die wesentlichen Ergebnisse dieser Untersuchung wurden am 15. Februar 2012 in einem Halbzeit-Berichtsentwurf veröffentlicht. In der zweiten Phase trug PwC den Rückmeldungen und den Kommentaren Rechnung, die man zu dem Halbzeit-Berichtsentwurf sowie aus Gesprächen mit wichtigen Interessengruppen, darunter auch Mitgliedern und Mitarbeitern des Europäischen Parlaments, der Europäischen Kommission8, des Europäischen Rechnungshofes, der EFSF, von Eurostat sowie der Obersten Rechnungskontrollbehörden, erhalten hatte9. Unsere Bewertung in Bezug auf die Angemessenheit der Bestimmungen des EFSM- und des ESM-Vertrags wurde unter Berücksichtigung der bewährten Vorgehensweisen vorgenommen, die bei wichtigen bestehenden Finanzhilfeleistern zum Einsatz kommen. 7 Entschließung des Europäischen Parlaments vom 23. März 2011 über den Entwurf der Entscheidung des Europäischen Rats zur Abänderung von Artikel 136 des Vertrags über die Arbeitsweise der Europäischen Union im Hinblick auf einen Stabilitätsmechanismus für Mitgliedstaaten, deren Währung der Euro ist (00033/2010 – C7-0014/2011 – 2010/0821(NLE)). 8 GD ECFIN und GD BUDG.



Wesentliche Ergebnisse

Die nachstehend aufgeführten wesentlichen Ergebnisse berücksichtigen das am ehesten angestrebte Szenario für den Übergang von EFSM-Aufgaben zum ESM: Da es keine formale Absicht gibt, die Darlehens- und Anleihetätigkeit im Rahmen des EFSM-Hilfsprogramms auf den ESM zu übertragen, bedeutet das wahrscheinlichste Szenario, dass der EFSM solange weiter besteht, nachdem bestehende Programme abgeschlossen sind, bis alle Außenstände zurückgezahlt wurden, ohne dass er neue Programme auflegt. § 1. Festlegung klarer Aufgaben und Zuständigkeiten sowie Einbeziehung aller Akteure, die bei der Errichtung des ESFM/ ESM Haftungsverpflichtungen eingehen Die Aufgaben und Berichtspflichten des EFSM werden in Situationen, in denen dringende Finanzhilfe erforderlich ist, vollständig an die geltenden EU-Aufsichtsregelungen der bestehenden Finanzhilfeprogramme, wie z. B. BoP und MFA, angepasst. Unter normalen Umständen ist das MFA das einzige Finanzhilfeprogramm, bei dem der Rat und das Europäische Parlament gemeinsam über die zu gewährende Finanzhilfe beschließen, während in Situationen, in denen dringende Finanzhilfe erforderlich ist, der Rat allein berechtigt ist, einen Beschluss über die Finanzhilfe zu fassen. Unserer Ansicht nach, da die Aufsichtsregelungen des EFSM, der als finanzielles Nothilfeinstrument eingerichtet wurde, angemessen festgelegt wurden, und insbesondere aufgrund ihrer völligen Übereinstimmung mit anderen EU-Notfinanzhilfeprogrammen. Obwohl der ESM in rechtlicher Hinsicht kein Bestandteil des institutionellen EU-Rahmens ist, lehnen sich die im Rahmen dieses Mechanismus' zugewiesenen Aufgaben und Zuständigkeiten bei der Gewährung von Finanzhilfe an verschiedene EU-Aufsichtsprinzipien an, und entsprechen damit den folgenden Anforderungen des EP-Entlastungsbeschlusses10:

die Aufgaben des ESM entsprechen dem EU-Zuständigkeitsbereich (Artikel 18), und insbesondere in Bezug auf die Geldpolitik der EU, wobei der ESM die besonderen Organe der EU einbezieht, die für diesen Zuständigkeitsbereich verantwortlich sind (Artikel 8), insbesondere die Europäische Kommission und die EZB;

der ESM bezieht alle Mitgliedstaaten ein, deren Währung der Euro ist, bzw. steht diesen offen (Artikel 6 und Artikel 14);

wo möglich und in Übereinstimmung mit seiner Rechtsgrundlage, bezieht der ESM Organe der Union ein, um doppelte Verwaltungsstrukturen zu vermeiden (Artikel 15);

die ESM-Aufsichtsregelungen stimmen mit den Aufsichtsvorrechten auf EU-Ebene überein, insofern als:

9 Niederländische Oberste Rechnungskontrollbehörde 10 Entlastungsbeschluss des Europäischen Parlaments vom 23. März 2011.


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die Kommission dieselben Aufgaben bei der Festlegung und Überwachung der makroökonomischen Bedingungen, an die die gewährte Hilfe geknüpft ist, übernimmt;

der Gerichtshof für Streitigkeiten zwischen Vertragsparteien des ESM zuständig ist;

Mitglieder des Rates, der das beschlussfassende Organ in Bezug auf die im EU-Rahmen gewährte Finanzhilfe ist, sehr wahrscheinlich im ESM-Gouverneursrat sitzen werden, welches das beschlussfassende Organ in Bezug auf die im Rahmen des ESM gewährte Finanzhilfe ist;

der Europäische Rechnungshof durch einen ständigen Sitz im internen ESM-Rechnungsprüfungsgremium vertreten sein wird und die an ESM-Transaktionen beteiligten EU-Organe weiterhin Rechnungs- und Betriebsprüfungen unterziehen wird;

die externe ESM-Rechnungsprüfungsaufgabe in Übereinstimmung mit den auf EU-Ebene beschlossenen internationalen Standards Sicherheit in Bezug auf deren finanzielle Lage bieten wird.

folglich wird durch den Aufsichtsrahmen des ESM die Einbeziehung der EU-Organe auf allen Ebenen möglich (Artikel 11), entweder direkt, durch die diesen im ESM-Vertrag zugewiesenen Aufgaben (z. B. die Kommission), oder durch indirekte Kontrolle ihrer Aktivitäten durch die EU-Organe, gegenüber denen sie für ihre Aktivitäten und die Verwendung von Ressourcen weiterhin Rechenschaft ablegen müssen (z. B. das Europäische Parlament), wie unter § 5 dargestellt;

als Finanzhilfeinstrument für die Mitgliedstaaten des Euro-Raums, das vollständig in den verstärkten Aufsichtsrahmen der Steuer-, Haushalts- und Wirtschaftspolitik der EU eingebunden ist11, wurde der ESM eingerichtet, um zum Aufbau einer EU-Wirtschaftsaufsicht beizutragen (Artikel 5);

Außerdem wurden angesichts der rechtlichen Grundlage und der institutionellen Form des ESM einige Aufsichtsaufgaben und -zuständigkeiten, die aus rechtlichen Gründen nicht EU-Organen zugewiesen werden konnten, internen oder externen ESM-Aufsichtsgremien zugewiesen, wie z. B.:

dem ESM-Gouverneursrat zur Genehmigung der finanziellen Bedingungen in Bezug auf die gewährte Hilfe;

dem ESM-Direktorium zur Genehmigung der ESM-Richtlinien für Finanzen und Risikomanagement;

dem unabhängigen externen Rechnungsprüfer zur Zertifizierung der Jahresabschlüsse des ESM.

11 Makroökonomische Bedingungen für die ESM-Finanzhilfe, die vollständig den wirtschaftspolitischen Bedingungen im Rahmen der multilateralen EU-Aufsicht entsprechen, in Übereinstimmung mit dem Vorschlag für eine Verordnung zur Stärkung der Wirtschafts- und Haushaltsaufsicht 2011/385.



In dieser Hinsicht lehnen sich die ESM-Aufsichtsregelungen an die von ähnlichen internationalen privaten (EFSF) und öffentlichen (IWF) Finanzhilfeorganisationen festgelegten Verwaltungsstrukturen an, und sind daher in rechtlicher und institutioneller Hinsicht angemessen abgesichert worden. Außerdem wurden diese Regelungen, da sie mit den Aufsichtsvorrechten auf EU-Ebene übereinstimmen und, sei es direkt oder indirekt, auf allen Ebenen die Beteiligung von EU-Organen vorsehen, angemessen darauf ausgerichtet, die Wirtschaftsaufsicht der EU konsequent zu unterstützen.

§ 2. Angemessenheit der Haushaltskontrollmechanismen im EFSM- / ESM-Vertrag Anders als der EFSM wird der ESM aufgrund seiner besonderen finanziellen Struktur und seiner gesetzlichen Grundlage im Falle eines Zahlungsverzugs eines begünstigten Mitgliedstaats nicht durch den EU-Haushalt abgesichert. Er verfügt jedoch über sein Kapital und einen eigenen Reservefonds, um mögliche Verluste auffangen zu können.

Somit weichen die finanziellen Kontrollmechanismen gemäß dem EFSM und dem ESM hinsichtlich der Verantwortungsbereiche, die für ihre Umsetzung zugewiesen worden sind, voneinander ab – so wie weiter unten ausgeführt.

Im Rahmen von MFA, BoP und EFSM sind das Europäische Parlament und besonders seine Ausschüsse für Haushalt (BUDG) und für Haushaltskontrolle (CONT) berechtigt, durch das Haushalts- und das Entlastungsverfahren politische Kontrolle auszuüben.

Im Hinblick auf die Ausführung des europäischen Haushaltsplans unterliegen die Anleihe- und Darlehenstransaktionen, die von der Kommission für die Finanzbuchhaltung und die Finanzgeschäfte von MHA, BoP und EFSM vorgenommen werden, (i) der Genehmigung des Anweisungsbefugten der zuständigen GD über deren jährliche Zuverlässigkeitserklärung, (ii) internen Kontroll- und Finanzverwaltungsprinzipien, die von spezifischen EU-Verordnungen herrühren, sowie (iii) einer Prüfung durch die entsprechende Interne Prüfungsstelle und den Europäischen Rechnungshof.

Schließlich sind die Kommission und der Europäische Rechnungshof auch dazu berechtigt, Prüfungen in Mitgliedstaaten durchzuführen, die von der Finanzhilfe des EFSM profitieren – sofern dies für notwendig erachtet wird –, während die Kommission kontrolliert, dass die begünstigten Mitgliedstaaten den wirtschaftspolitischen Auflagen des EFSM gerecht werden, die mit den Bestimmungen des multilateralen Überwachungsrahmens der EU übereinstimmen.

Beim ESM kann die politische Kontrolle indirekt durch das Europäische Parlament gegenüber EU-Organen ausgeübt werden, die am ESM-Verfahren beteiligt sind, und durch die nationalen Parlamente, wie in § 5 beschrieben. Im Vergleich zum EFSM:

Die Jahresabschlüsse des ESM werden von seinem Gouverneursrat genehmigt und in einem Jahresbericht veröffentlicht, der den nationalen Parlamenten, den obersten Rechnungskontrollbehörden der ESM-Mitglieder sowie dem Europäischen Rechnungshof zur Verfügung gestellt wird.


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Die Tätigkeiten des ESM werden anhand seiner Internen Prüfungsstelle geprüft, die gemäß den internationalen Standards eingerichtet wird.

Die internen Kontrollprinzipien sowie die Richtlinien zur Finanzverwaltung des ESM werden seitens seines Direktoriums genehmigt.

Die Jahresabschlüsse des ESM werden durch einen unabhängigen externen Prüfer zertifiziert, der vom Direktorium ernannt wird.

Die Kommission und der Rechnungshof sind formell nicht berechtigt, Prüfungen in begünstigten Mitgliedstaaten durchzuführen.

Während die finanziellen Kontrollmechanismen des EFSM und des ESM eine starke Ähnlichkeit in Bezug auf die von ihnen verfolgten Ziele aufweisen, weichen sie dennoch im Hinblick auf die für ihre Umsetzung zugewiesenen Verantwortungsbereiche wesentlich voneinander ab, was sich insbesondere auf die jeweilige Rechtsgrundlage und institutionelle Form jedes einzelnen Mechanismus zurückführen lässt. Von diesem Gesichtspunkt aus betrachtet sind die finanziellen Kontrollmechanismen jedes Finanzhilfeprogramms hinlänglich definiert worden: Während die finanziellen Kontrollmechanismen der EU auf den EFSM Anwendung finden, hat der ESM finanzielle Kontrollmechanismen übernommen, die mit den Eigenschaften von Kontrollrahmen übereinstimmen, die im Rahmen ähnlicher internationaler privater (EFSF) und öffentlicher Finanzhilfe-Dienstleister (IWF) zum Einsatz kommen. § 3. Festlegung angemessener Regelungen für die externe Rechnungsprüfung, Rechenschaftspflicht und vollständige Transparenz des EFSM/ ESM sowie entsprechende Einbeziehung des Europäischen Rechnungshofs zur Gewährleistung einer offenen und transparenten externen Rechnungsprüfung von ausreichender Qualität Die Anleihe- und Darlehenstätigkeiten im Rahmen der Hilfen aus dem EFSM unterliegt genau wie die BoP und MFA der Prüfung durch den Europäischen Rechnungshof, und zwar mittels:

Zuverlässigkeitserklärungen;

Konformitätsprüfungen;

Wirtschaftlichkeitsprüfungen;

von verschiedenen EU-Institutionen angeforderte spezifische Stellungnahmen.

In diesem Kontext und gemäß der kollateralen Natur des EU-Haushalts für den EFSM, wird dem Europäischem Rechnungshof eine solche Kompetenz gewährt und dieser bietet dem Europäischen Parlament und insbesondere dem Haushaltskontrollausschuss CONT seine Hilfe im Entlastungsverfahren an. Der Europäische Rechnungshof stellt im Hinblick auf seine Zuverlässigkeitserklärung (DAS) über die Zuverlässigkeit der EU-Rechnungsführung und die Rechtmäßigkeit und die Ordnungsgemäßheit der zugrunde liegenden Vorgänge eine



Stellungnahme zur Verfügung. Da die Anleihe- und Darlehenstätigkeiten, die von der Kommission zum Zwecke des EFSM eingegangen werden, in die Rechnungsführung der EU integriert werden, ist der Europäische Rechnungshof in der Lage, diese Tätigkeiten unter Anwendung der DAS-Methodologie zu prüfen.

Parallel dazu ist der Europäische Rechnungshof ferner berechtigt, spezifische Prüfungen in jenen Mitgliedstaaten vorzunehmen, die finanzielle Unterstützung für die unterschiedlichen Prüfungsprogramme erhalten haben.

Laut dem ESM-Vertrag wird mit dem ESM entsprechend der gängigen Praxis für Einrichtungen solcher Art eine dreigliedrige Prüfstruktur eingeführt:

eine interne Rechnungsprüfungsabteilung, die internationalen Standards entspricht;

ein Ausschuss von Rechnungsprüfern, dem externe Vertreter aus den Obersten Rechnungskontrollbehörden und dem Rechnungshof angehören;

externe Prüfer, die internationalen Standards entsprechen.

Neben den genannten Prüfstufen sind im ESM-Vertrag Bestimmungen zur Transparenz festgeschrieben, so dass die nationalen Parlamente, die Obersten Rechnungskontrollbehörden und der Rechnungshof im ESM-Jahresbericht über seine Aktivitäten und die finanzielle Lage auf dem Laufenden gehalten werden.

Darüber hinaus wurden der Kommission im Rahmen des ESM-Vertrags eine Reihe an Zuständigkeiten in Hinblick auf die Einstellung und Überwachung von makroökonomischen Konditionalitäten zugeteilt. Da es sich bei der Kommission um ein europäisches Organ handelt, werden die Aktivitäten, die von dieser im Rahmen des ESM-Vertrags vorgenommen werden, auch Teil der Prüfungen des Europäischen Rechnungshofs sein.

Schließlich können die europäischen Organe den Europäischen Rechnungshof aus eigener Initiative bitten, ihnen Stellungnahmen zu Themengebieten zukommen zu lassen, die für sie von besonderem Interesse sind.

§ 4. Zuverlässigkeit von Daten und Statistiken

Im Rahmen von BoP, MFA und EFSM nutzt die Europäische Kommission Daten und Statistiken, die ihr von Eurostat und von den Empfängerländern zur Verfügung gestellt werden. Um die Zuverlässigkeit der Daten und Statistiken, die zum Zwecke dieses Mechanismus verwendet werden, zu verbessern, wurde eine Reihe an Maßnahmen ergriffen:

im Hinblick auf die Zuverlässigkeit der historischen Daten, die von Eurostat erhoben werden, werden von Eurostat eine Reihe an umfangreichen Projekten durchgeführt, die das Qualitätsmanagement sowie die Angleichung von vorgelagerten Daten, vor allem über Standortprüfungen und die Integration von Berichterstattungsplattformen, verstärken;


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bezüglich der Zuverlässigkeit von Prognosedaten, die von der Kommission für die Nachhaltigkeitsprüfung von Staatsschulden und die Ausarbeitung von Anpassungsprogrammen erhoben werden, führt die Kommission besondere Prüfungen durch, die darauf abzielen, die Zuverlässigkeit dieser Statistiken sicherzustellen.

Da die zum Zwecke der ESM-Finanzhilfe verwendeten Daten dieselben sind wie jene, die im Rahmen des BoP und EFSM verwendet werden, profitieren sie von derselben erzielten Qualitätsoptimierung.

Im Hinblick auf die Finanzdaten und Statistiken, die die ESM-Aktivitäten widerspiegeln, sollten die umgesetzten internen Kontrollen, das bestehende Risikomanagement und die angewandten Prüfmodalitäten deren Qualität und Zuverlässigkeit sicherstellen.

§ 5. Definition der politischen Kontrolle des EFSM/ESM und einer möglichen Ausgabe von Eurobonds durch das Europäische Parlament, bestmögliche Sicherstellung einer angemessenen demokratischen Kontrolle dieses Mechanismus sowie die Möglichkeiten für das Europäische Parlament, optimal zu diesem Prozess beizutragen Wie im Falle der BoP und MFA stehen dem Europäischen Parlament gemäß EFSM-Verordnung und AEUV zahlreiche Informationsquellen zur Verfügung, die der demokratischen Kontrolle dienen, darunter:

Absichtserklärungen und Beschlüsse des Rates zu den eingeleiteten Hilfsprogrammen;

Anleihe- und Darlehenstätigkeiten von Seiten der Kommission unter der EU-Rechnungsführung, auf die im öffentlichen Jahresbericht der GD ECFIN Bezug genommen wird;

Studien zur Überwachung von Konditionalitätsanforderungen und deren Erfüllung;

Prüfungen oder Gutachten des Europäischen Rechnungshofs auf Antrag eines europäischen Organs.

Da der ESM keine Einrichtung der EU ist, fällt er nicht unter die direkte Aufsicht der europäischen Organe. Allerdings üben sowohl die nationalen als auch das Europäische Parlament hinsichtlich ihrer jeweiligen Beiträge zum ESM-Haushalt und den Tätigkeiten eine demokratische Kontrollefunktion aus. Dabei ist insbesondere Folgendes festzustellen:

Das Europäische Parlament übt eine politische Aufsicht und eine demokratische Kontrolle im Hinblick auf die Verwendung von EU-Ressourcen durch die Europäische Kommission zum Zwecke von ESM-Aktivitäten aus, die auf der Rechenschaftspflicht der Kommission gegenüber dem Parlament basiert. Das Parlament übt stets eine indirekte politische Aufsicht über alle EU-Organe, die an ESM-Tätigkeiten beteiligt sind, vor allem bezüglich deren Durchführung von Aktivitäten und deren Nutzung von Ressourcen zu diesem Zweck, basierend auf dem jährlichen Tätigkeitsbericht und



gemäß den vorgeschriebenen EU-Verfahren zur Verabschiedung des Haushalts und der Entlastung. Darüber hinaus können das Parlament und insbesondere dessen Haushaltskontrollausschuss CONT politische Kontrolle ausüben, indem sie etwa eine Diskussion ansetzen, die Formulierung von parlamentarischen Anfragen vornehmen oder Entschließungen verabschieden, die eine freiwillige oder zwingende Bereitstellung von Informationen erwirken.

Die nationalen Parlamente der EU-Mitgliedstaaten kontrollieren den ESM, vor allem im Hinblick auf deren Beitragsleistungen zum ESM-Kapital. Gemäß den Grundsätzen der interparlamentarischen Zusammenarbeit des AEUV-Protokoll Nr. 1 profitiert das Europäische Parlament von einem gewissen Maß an indirekter politischer Aufsicht durch diese nationalen Parlamente.

Außer dem Fehlen einer Bestimmung im ESM-Vertrag, dass sein Jahresbericht förmlich dem Europäischen Parlament zu übermitteln wäre, gibt es daher ausreichend demokratische Kontrollmechanismen, um die Anforderungen hinsichtlich der Entlastungsbeschlüsse des Europäischen Parlaments vom 23. März 2011 (Artikel 17) zu erfüllen. Da noch keine Eurobonds erstellt oder ausgegeben wurden, weisen die geltenden Vorschriften dem Europäischen Parlament in dieser Hinsicht keinerlei Aufgaben der politischen Überwachung zu.


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Grundlegende Empfehlungen

Als Ergebnis unserer Analyse und angesichts der wichtigsten Erkenntnisse, die in dieser Zusammenfassung im Einzelnen dargelegt wurden, haben wir eine Reihe an Empfehlungen bezüglich der fünf wichtigsten Fragen, die die Grundlage dieser Studie darstellen, ausgearbeitet. Die wichtigsten Empfehlungen werden nachstehend zusammengefasst, jeweils separat für den EFSM und den ESM. Wir geben dem Europäischen Parlament folgende Empfehlungen:

EFSM ESM

§ 1. Zuteilung von Rollen und Zuständigkeiten

Akzeptanz der aktuellen Entscheidungsverfahren, da diese den Beschlussregeln entsprechen, die bei anderen Finanzhilfemechanismen in Zeiten des dringenden Bedarfs angewandt werden.

Sorgfältige Überwachung der Entwicklung der ESM-Statuten und des weiteren Regelwerks, um die Wirksamkeit der bestehenden Steuerungsstrukturen und Berichtspflichten sicherzustellen.

§ 2. Haushaltskontrollmechanismen

Befragung der Kommission und insbesondere der GD ECFIN zu den EFSM bezogenen Transaktionen, um unter voller Ausnutzung der verfügbaren Informationen die Fähigkeiten der Empfängerstaaten zur Erfüllung ihrer EFSM Pflichten zu beurteilen. Unter anderem muss Folgendes einbezogen werden: Berichte der Kommission über Anleihe- und Darlehenstätigkeiten und Haushaltsgarantien, EFSM- Absichtserklärungen, Prüfberichte des Europäischen Rechnungshofs sowie die quartalsmäßigen GD ECFIN-Überwachungsberichte. Analyse der Prüfberichte des Europäischen Rechnungshofs über die Finanz- und Tätigkeitsprüfungen der EFSM-Verfahren, um die Ausrichtung an den auf EU-Ebene geltenden Haushalts- und Finanzmanagementverfahren zu verifizieren.

Forderung, dass EBA-Normen zum Risikomanagement in den Umsetzungsrichtlinien berücksichtigt werden, die vom ESM-Direktorium angenommen werden, im Einklang mit der allgemeinen Praxis des europäischen Bankensektors, wie beispielsweise Risikosteuerungsnormen, die Funktionen für Aktiv-/Passiv-Management, Liquiditätsrisiken, Marktrisiken und Geschäftsrisiken beinhalten. Nutzung indirekter Möglichkeiten zur Beurteilung der Finanz- und Risikomanagementpraktiken des ESM durch die Auswertung von Informationen, die auf Anfrage freiwillig oder durch bestehende Berichtspflichten zur Verfügung gestellt werden.

§ 3. Externe Rechnungsprüfung und Rechenschaftspflicht

Betonung der Angemessenheit risiko-bezogener Planung beim Europäischen Rechnungshof, um sicherzustellen, dass Zeitpunkt und Häufigkeit der Prüfungsverfahren und Berichte an den hohen Risiken der

Unterstützung des Rechnungshofs darin, beim ESM beteiligte EU-Organe zu prüfen und dabei ein besonderes Augenmerk auf ESM-bezogene Aktivitäten zu richten. Sicherstellung der rechtzeitigen Befassung der



Finanzhilfeprogramme ausgerichtet wird. Zusätzlich zu den Finanz- und Wirtschaftlichkeitsprüfungen, die vom Rechnungshof gemäß den Bestimmungen des AEUV auszuführen sind, könnten Europäisches Parlament und besonders sein CONT Ausschuss, wenn als notwendig erachtet, beim Rechnungshof Sonder- Stellungnahmen oder -Berichte hinsichtlich EFSM-bezogener Transaktionen anfordern.

Ergebnisse der Rechnungshofsverfahren, -ergebnisse und -berichte. Den Rechnungshof um Sonder-Stellungnahmen bitten, um Informationen über finanzielle Themen im Zusammenhang mit der Beteiligung von EU-Organen an ESM-Transaktionen zu erhalten.

§ 4. Zuverlässigkeit von Daten und Statistiken Weiterverfolgung und Unterstützung der Programme zur Verbesserung der Datenqualität für Prognose-Daten (Kommission) und historische Daten (Eurostat). Anforderung und Analyse von Informationen seitens der Kommission - GD ECFIN insbesondere - , um die Qualität der Daten zu bewerten, die von den Mitgliedstaaten bereitgestellt werden.

Überlegungen und Empfehlungen zu Daten und Statistiken gelten gleichermaßen für den ESM wie für den EFSM angesichts der Verwendung derselben Informationen für alle EU-Finanzhilfeprogramme.

§ 5. Politische und demokratische Kontrolle

Besondere Beachtung der fortlaufenden Abwicklungserfordernisse über die gesamte Laufzeit von EFSM Darlehen, selbst nach Einstellung des Mechanismus.

Forderung, dass der ESM Gouverneursrat den Jahresbericht auch dem Europäischen Parlament zugänglich macht. Alternativ könnte das Europäische Parlament diese Bitte im Rahmen einer verstärkten Zusammenarbeit an die nationalen Parlamente richten oder an den Europäischen Rechnungshof.


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SYNTHESE Historique

Afin de faire face aux menaces qui pèsent sur la stabilité financière de l’Union européenne, le Conseil européen a adopté un ensemble de mesures temporaires de stabilisation en mai 2010. En vertu de l’article 122 du TFUE, qui prévoit d’offrir une assistance financière de l’Union aux États membres qui connaissent des difficultés en raison de circonstances exceptionnelles échappant à leur contrôle, ces mesures prévoyaient deux mécanismes de crise temporaires:

le mécanisme européen de stabilisation financière (MESF): un programme d’assistance financière autorisant la Commission à emprunter sur les marchés financiers et à prêter le bénéfice engendré à des États membres bénéficiaires de la zone euro dans le cadre d’une garantie budgétaire communautaire implicite;

le Fonds européen de stabilité financière (FESF): une structure ad hoc visant à offrir une assistance financière à des États membres bénéficiaires de la zone euro en vertu de l’accord-cadre régissant le FESF conclu entre les États membres de la zone euro.

Tandis que ces mécanismes étaient reconnus par tous comme constituant une ligne de défense efficace dans le cadre de la gestion des crises dans l’UE, le groupe de travail sur la gouvernance économique, le Conseil européen et les chefs d’État ou de gouvernement du Conseil européen ont admis la nécessité pour les États membres d’établir un mécanisme permanent de gestion de crise pour préserver la stabilité financière de la zone euro. Le 2 février 2012, les 27 États membres de la zone euro ont adopté le traité instituant le mécanisme européen de stabilité («traité MES») en guise de mécanisme permanent de gestion de crise de l’UE. Conformément à l’article 48, le MES remplira les fonctions assurées actuellement par le MESF et la FESF dès l’entrée en vigueur du traité (prévue pour juillet 2012). Dans ce contexte, et à la demande du département thématique «Affaires budgétaires» du Parlement européen, PwC a réalisé une étude portant sur «La responsabilité du budget de l’Union européenne vis-à-vis du mécanisme européen de stabilisation financière et du mécanisme européen de stabilité et leur incidence sur le contrôle budgétaire exercé par le Parlement européen».



Objet

Conformément au cahier des charges spécifique joint à l’annexe 1, cette étude a pour objet d’examiner:

l’adéquation des mécanismes de contrôle budgétaire prévus par le mécanisme permanent de gestion de crise (voir le point 2) et la mesure dans laquelle il a été dûment tenu compte des questions soulevées par le Parlement européen dans sa résolution de décharge du 10 mai 2011, à savoir:

la définition claire des responsabilités et des dispositions en matière d’établissement des rapports et la nécessité d’associer à l’élaboration du mécanisme tous les acteurs dont la responsabilité sera engagée (voir le point 1);

la mise au point de dispositions appropriées régissant les audits externes publics ainsi que la définition des responsabilités et la transparence totale dans le mécanisme permanent de gestion de crise (voir le point 3);

l’adoption de dispositions garantissant la fiabilité des données et des statistiques (voir le point 4);

la définition du contrôle politique par le Parlement de toute émission d’euro-obligations, en général, et du mécanisme permanent de gestion de crise, en particulier (voir le point 5).

la participation appropriée de la Cour des comptes européenne de façon à garantir un contrôle externe de qualité, ouvert et transparent (voir le point 3);

la meilleure façon d’assurer le contrôle démocratique de ce mécanisme et la meilleure façon, pour le Parlement européen, d’apporter une valeur ajoutée à ce processus (voir le point 5).

Démarche suivie

La présente étude a été menée en deux phases. Dans la première phase, PwC a examiné les dispositions du traité MESF et MES en les comparant aux dispositions des programmes européens d’assistance financière existants, à celles appliquées par d’autres fournisseurs d’assistance financière au niveau international en termes de gouvernance, de contrôle financier, de fiabilité des données et de statistiques, d’audit externe et de contrôle démocratique, et en prenant en considération les exigences du Parlement européen contenues dans sa résolution de décharge du 10 mai 2011 et du 23 mars 201112. Les principaux résultats de cette analyse ont été publiés dans un projet de rapport à mi-parcours le 15 février 2012. Dans la deuxième phase, PwC a tenu compte du retour et des commentaires reçus concernant le projet de rapport à mi-parcours et des entretiens réalisés avec les principales parties prenantes, et notamment avec des députés au Parlement

12 Résolution du Parlement européen du 23 mars 2011 sur le projet de décision du Conseil européen modifiant l'article 136 du traité sur le fonctionnement de l'Union européenne en ce qui concerne un mécanisme de stabilité pour les États membres dont la monnaie est l'euro (00033/2010 – C7-0014/2011 – 2010/0821(NLE)).


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européen, avec la Commission européenne13, la Cour des comptes européenne, la FESF, Eurostat et les institutions supérieures de contrôle14. Notre étude en ce qui concerne l’adéquation des dispositions du MESF et du MES a été réalisée en prenant pour référence la pratique acceptée utilisée par les fournisseurs d’assistance technique existants.

Constatations principales

Les constatations principales mentionnées ci-dessous tiennent compte des scénarios envisagés les plus probables en ce qui concerne le transfert des fonctions du MESF vers le MES: étant donné qu’il n’existe pas d’intention formelle de transférer les opérations d’emprunt et de prêt engagées dans le cadre du programme d’aide du MESF vers le MES, le scénario le plus probable suppose que le MESF soit maintenu dans le cadre d’une capacité administrative une fois l’ensemble des programmes existants terminés, jusqu’à ce que l’ensemble des impayés soient remboursés, sans s’engager dans de nouveaux programmes. § 1. En ce qui concerne la définition de rôles et de responsabilités clairs et l’association à l’élaboration du MESF/MES de tous les acteurs dont la responsabilité sera engagée Les fonctions et les dispositions en matière d’établissement des rapports visées par le MESF cadrent pleinement avec les modalités de gouvernance de l’UE en place dans le cadre des programmes d’assistance financière existants, comme le mécanisme de soutien à la balance des paiements et les instruments d’aide macrofinancière dans les situations où une assistance financière urgente s’impose. Dans des circonstances normales, les instruments d’aide macrofinancière sont le seul programme d’assistance financière prévoyant la codécision du Conseil et du Parlement européen en ce qui concerne l’assistance financière octroyée, tandis que dans les situations où une assistance financière urgente s’impose, le Conseil est le seul à pouvoir adopter la décision d’assistance financière. Selon nous, les modalités de gouvernance du MESF, en tant qu’instrument d’assistance financière d’urgence, ont été établies de façon appropriée, et notamment en se conciliant parfaitement avec d’autres programmes communautaires d’assistance financière d’urgence.

Même si le MES ne fait pas partie du cadre institutionnel de l’UE d’un point de vue juridique, les rôles et responsabilités attribués dans le cadre de ce mécanisme cadrent avec plusieurs principes de gouvernance communautaire lors de l’octroi d’une assistance financière et répondent dès lors aux exigences suivantes prévues par le PE dans sa résolution de décharge15:

les fonctions du MES respectent la sphère de compétences de l’Union (article 18), et notamment en ce qui concerne la politique monétaire de l’UE, où le MES implique les institutions de l’Union responsables de ce domaine de compétence (article 8), notamment la Commission européenne et la BCE;

13 DG ECFIN et DG BUDG. 14 Institution supérieure de contrôle néerlandaise. 15 Résolution de décharge du Parlement européen du 23 mars 2011.



tous les États membres dont la monnaie est l’euro contribuent au MES et y ont accès (articles 6 et 14);

lorsque c’est possible, et conformément à son fondement juridique, le MES fait appel aux institutions de l’UE afin d’éviter la mise en place de doubles structures (article 15);

les modalités de gouvernance du MES sont conformes aux prérogatives à l’échelle de l’UE en la matière, puisque:

la Commission assume les mêmes fonctions en définissant et en contrôlant la conditionnalité macro-économique liée à l’assistance offerte;

la Cour de justice traite les litiges entre les parties contractantes du MES;

les membres du Conseil, qui est l’organe qui décide de l’assistance financière accordée dans le cadre de l’UE, vont très probablement siéger au conseil des gouverneurs du MES, qui est l’organe qui décide de l’assistance financière accordée dans le cadre du MES;

la Cour des comptes européenne sera représentée par un siège permanent au Conseil d’audit interne du MES et va continuer à effectuer des audits financiers et opérationnels auprès des institutions de l’UE impliquées dans les opérations du MES;

la fonction d’audit externe du MES va permettre de garantir sa situation financière conformément aux normes internationales adoptées au niveau de l’UE.

par conséquent, le cadre de gouvernance du MES permet aux institutions de l’UE de participer à tous les stades (article 11), que ce soit directement, dans le cadre des fonctions qui leur sont attribuées par le traité MES (par ex., la Commission), ou au moyen d’un contrôle indirect de leurs activités par les institutions de l’UE dont elles continuent à relever en ce qui concerne leurs activités et l’utilisation de leurs ressources (par ex., le Parlement européen), comme expliqué au point 5;

en tant qu’instrument d’assistance financière pour les États membres de la zone euro, s’inscrivant pleinement dans le cadre de surveillance renforcée des politiques fiscales, budgétaires et économiques de l’UE16, le MES vise à contribuer au renforcement de la gouvernance économique de l’UE (article 5);

De même, compte tenu du fondement juridique du MES et de sa forme institutionnelle, certaines fonctions et responsabilités en matière de gouvernance, qui ne pouvaient être attribuées à des institutions de l’UE d’un point de vue juridique, ont été attribuées à des organes de gouvernance interne et externe du MES, comme:

le conseil des gouverneurs du MES, pour l’approbation des conditions financières liées à l’assistance offerte;

16 Une conditionnalité macroéconomique liée à l’assistance financière du MES qui cadre pleinement avec la conditionnalité de la politique économique dans le cadre de la surveillance multilatérale de l’UE, conformément à la proposition de règlement relatif au renforcement de la surveillance économique et budgétaire 2011/385.


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le conseil d’administration du MES, pour l’approbation des lignes directrices en matière de gestion financière et des risques du MES;

le commissaire aux comptes externe indépendant, pour la certification des états financiers annuels du MES.

À cet égard, les modalités de gouvernance du MES cadrent avec les structures de gouvernance établies par les fournisseurs d’assistance financière internationaux similaires privés (FESF) et publics (FMI), et sont donc suffisamment provisionnées d’un point de vue juridique et institutionnel. De plus, dans la mesure où ces modalités cadrent avec les prérogatives au niveau de l’UE en matière de gouvernance et permettent, directement ou indirectement, une participation institutionnelle de l’UE à tous les stades, elles permettent bel et bien de faciliter systématiquement la gouvernance économique de l’Union.

§ 2. En ce qui concerne l’adéquation des mécanismes de contrôle budgétaire dans le MESF/MES Contrairement au MESF, compte tenu de sa structure financière et de son fondement juridique particuliers, le MES ne peut s’appuyer sur le budget de l’UE en cas de défaut par l’État membre bénéficiaire, mais il dispose de son capital et de son propre fonds de réserve pour absorber les pertes éventuelles.

Par conséquent, les mécanismes de contrôle financier prévus par le MESF et le MES diffèrent quant aux responsabilités attribuées pour leur exécution, comme nous allons le voir ci-dessous.

Dans le cadre des instruments d’aide macrofinancière, du mécanisme de soutien à la balance des paiements et du MESF, le Parlement européen, et notamment les commissions BUDG et CONT, bénéficie d’un contrôle politique dans le cadre des procédures d’adoption budgétaire et de décharge.

S’agissant de l’exécution du budget européen, les activités d’emprunt et de prêt réalisées par la Commission pour les besoins des comptes et opérations financières des instruments d’aide macrofinancière, du mécanisme de soutien à la balance des paiements et du MESF sont soumises: (i) à l’approbation de l’ordonnateur de la DG concernée dans le cadre de sa déclaration annuelle d’assurance, (ii) aux principes de contrôle interne et de gestion financière émanant de la réglementation communautaire visée et (iii) à un contrôle par la fonction d’audit interne connexe et la Cour des comptes européenne.

Enfin, la Commission et la Cour des comptes européenne sont habilitées à effectuer des audits dans les États membres bénéficiaires d’une assistance financière au titre du MESF lorsqu’elles le jugent nécessaire, tandis que la Commission contrôle le respect par les États membres bénéficiaires des conditions de politique économique du MESF, conformément aux dispositions du cadre de surveillance multilatérale de l’UE.

Dans le cadre du MES, le contrôle politique peut être exercé par le Parlement européen indirectement sur les institutions de l’UE concernées par les opérations du MES et par les parlements nationaux, comme indiqué au point 5. Contrairement au MESF:



les comptes annuels du MES sont approuvés par son conseil des gouverneurs et publiés dans un rapport annuel mis à la disposition des parlements nationaux, des institutions supérieures de contrôle des membres du MES et de la Cour des comptes européenne;

les opérations du MES sont vérifiées par sa fonction d’audit interne, mise en place conformément aux normes internationales;

les principes de contrôle interne et de gestion financière du MES sont approuvés par son conseil d’administration;

les comptes annuels du MES sont certifiés par un commissaire aux comptes externe indépendant, désigné par le conseil des gouverneurs;

la Commission et la Cour des comptes européenne ne sont pas formellement habilitées à effectuer des audits dans les États membres bénéficiaires.

Tandis que les mécanismes de contrôle financier du MESF et du MES présentent une grande similarité dans les objectifs poursuivis, ils diffèrent essentiellement quant aux responsabilités attribuées pour leur exécution, en raison, surtout, du fondement juridique et de la forme institutionnelle propres à chaque mécanisme. De ce point de vue, les mécanismes de contrôle financier de chaque programme d’aide ont été définis de manière appropriée: tandis que les mécanismes de contrôle financier de l’UE s’appliquent au MESF, le MES a adopté des mécanismes de contrôle financier qui sont cohérents avec les caractéristiques des cadres de contrôle mis en place par des fournisseurs d’assistance financière internationaux similaires privés (FESF) et publics (FMI). § 3. En ce qui concerne la mise en place de mécanismes appropriés pour le contrôle public externe, les responsabilités et la transparence pleine et entière du MESF/MES, ainsi que la participation appropriée de la Cour des comptes européenne de façon à garantir un contrôle externe de qualité, ouvert et transparent Tout comme le mécanisme de soutien à la balance des paiements et les instruments d’aide macrofinancière, les opérations d’emprunt et de prêt entreprises pour l’assistance au titre du MESF font l’objet d’un contrôle par la Cour des comptes européenne via:

des déclarations d’assurance;

des audits de conformité;

des audits de performance;

des avis spécifiques rendus à la demande de toute institution de l’UE.

Dans ce contexte, compte tenu de la nature secondaire du budget de l’UE dans le cadre du MESF, la Cour des comptes européenne bénéficie de cette compétence et offre son aide au Parlement européen, et notamment à la commission CONT, dans le processus de décharge.


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Un avis est rendu par la Cour des comptes européenne dans le cadre de sa déclaration d’assurance (DAS) sur la fiabilité des comptes de l’UE et la légalité de même que la régularité des transactions sous-jacentes. Étant donné que les opérations d’emprunt et de prêt entreprises par la Commission au titre du MESF sont intégrées dans les comptes de l’UE, la Cour des comptes européenne est en mesure de revoir ces opérations dans le cadre de la méthode de la DAS.

Parallèlement à cela, la Cour des comptes européenne est également habilitée à effectuer des contrôles spécifiques dans les États membres ayant bénéficié d’une assistance financière dans le cadre des différents programmes d’audit.

Le traité MES prévoit que le MES applique un environnement de contrôle à trois niveaux, conformément aux pratiques habituelles de ce type d’institution:

un service d’audit interne respectant les normes internationales;

un conseil d’audit incluant des représentants externes issus des ISC et de la Cour des comptes européenne;

des auditeurs externes respectant les normes internationales.

Outre ces trois niveaux de contrôle, le traité MES contient des dispositions en matière de transparence en vertu desquelles les parlements nationaux, les ISC et la Cour des comptes européenne sont informés, par le rapport annuel, des activités et de la situation financière du MES.

Certaines responsabilités liées à la définition et au contrôle de la conditionnalité macroéconomique ont en outre été attribuées à la Commission par le traité MES. En tant qu’institution européenne, les activités réalisées par la Commission conformément au traité MES sont également visées par les audits de la Cour des comptes européenne.

Enfin, les institutions européennes peuvent, de leur initiative, demander à la Cour des comptes de rendre des avis sur des questions qui les intéressent.

§ 4. En ce qui concerne la fiabilité des données et des statistiques

Dans le cadre du mécanisme de soutien à la balance des paiements, des instruments d’aide macrofinancière et du MESF, la Commission européenne utilise des données et des statistiques fournies par Eurostat et les pays bénéficiaires. Afin d’améliorer la fiabilité des données et des statistiques utilisées dans le cadre de ces mécanismes, plusieurs mesures ont été prises:

en ce qui concerne la fiabilité des données historiques recueillies par Eurostat, cette institution réalise des projets importants en vue de renforcer la gouvernance et l’alignement des données en amont, notamment par des audits sur site et l’intégration des plateformes de notification des informations;



en ce qui concerne la fiabilité des données prévisionnelles recueillies par la Commission dans le cadre de l’évaluation de la soutenabilité des dettes gouvernementales et de l’élaboration des programmes d’ajustement, la Commission effectue des contrôles spécifiques visant à assurer la fiabilité de ces statistiques.

Étant donné que les données utilisées dans le cadre de l’assistance financière du MES sont les mêmes que celles utilisées dans le cadre du mécanisme de soutien à la balance des paiements et du MESF, elles bénéficient des mêmes améliorations de la qualité réalisées.

En ce qui concerne les données et les statistiques financières illustrant les activités du MES, les modalités de contrôle interne, de gestion des risques et de contrôle appliquées devraient assurer leur qualité et leur fiabilité.

§ 5. En ce qui concerne la définition du contrôle politique par le Parlement du MESF/MES et de toute émission d’euro-obligations, la meilleure façon d’assurer le contrôle démocratique de ce mécanisme et la meilleure façon, pour le Parlement européen, d’apporter une valeur ajoutée à ce processus Tout comme le mécanisme de soutien à la balance des paiements et les instruments d’aide macrofinancière, le règlement MESF et le TFUE fournissent au Parlement européen de nombreuses sources d’informations utiles pour le contrôle démocratique, parmi lesquelles:

les protocoles d’accord et les décisions du Conseil concernant les programmes d’assistance initiés;

les activités de prêt et d’emprunt de la Commission dans le cadre des comptes de l’Union et commentées dans le rapport annuel public de la DG ECFIN;

les études relatives au contrôle des conditions imposées et de leur réalisation;

les audits et avis de la Cour des comptes européenne (à la demande de toute institution européenne).

N’étant pas une institution de l’Union, le MES n’est pas soumis à la surveillance directe des institutions de l’UE. Un contrôle démocratique sera cependant exercé par les parlements nationaux et le Parlement européen, dans le cadre de leurs contributions respectives au budget et aux opérations du MES, et plus particulièrement:

le Parlement européen exerce une surveillance politique et un contrôle démocratique sur l’utilisation faite par la Commission européenne des ressources de l’UE dans le cadre des activités du MES, compte tenu de son obligation de rendre des comptes au Parlement dans ce domaine. Le Parlement exerce une surveillance politique indirecte sur l’ensemble des institutions de l’UE impliquées dans les opérations du MES, en ce qui concerne la conduite de leurs activités et l’utilisation des ressources à cette fin, sur la base de leur rapport d’activité annuel et conformément aux procédures


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communautaires d’adoption du budget et de décharge budgétaire. En outre, le Parlement, et sa commission CONT en particulier, peut exercer une surveillance politique en demandant un échange de vues, la formulation de questions parlementaires ou l’adoption de résolutions parlementaires, qui exigent des informations fournies volontairement ou de façon obligatoire;

les parlements nationaux des États membres de la zone euro contrôlent le MES, compte tenu notamment de leurs contributions au capital du MES. Conformément aux principes de coopération interparlementaire du protocole n° 1 du TFUE, le Parlement européen exerce un certain contrôle politique indirect sur ces parlements nationaux.

Par conséquent, sauf dans la mesure où le traité MES ne prévoit pas que le rapport annuel du MES soit mis à la disposition du Parlement européen, les mécanismes de contrôle démocratique en place sont suffisants pour répondre aux exigences soulevées par le PE dans sa résolution de décharge du 23 mars 2011 (article 17). Étant donné qu’aucune euro-obligation n’a encore été créée ou émise, les dispositions réglementaires actuelles ne définissent aucun rôle de contrôle politique pour le Parlement européen à cet égard.



Recommandations principales

Compte tenu de notre analyse et des principales constatations présentées dans la présente synthèse, nous avons formulé une série de recommandations en ce qui concerne les cinq questions de recherche principales qui sont à la base de cette étude. Nos principales recommandations sont résumées ci-dessous séparément pour le MESF et le MES. Nous recommandons au Parlement européen:

MESF MES

§ 1. En ce qui concerne l’attribution de rôles et de responsabilités

Accepter les actuelles procédures décisionnelles étant donné qu’elles cadrent avec les règles de décision applicables à d’autres mécanismes d’assistance financière utilisés en période de besoin urgent.

Surveiller de près l’évolution des règlements et des nouvelles règles de procédure du MES afin de garantir l’efficacité globale des structures de gouvernance et des dispositions en matière d’établissement des rapports en place.

§ 2. En ce qui concerne les mécanismes de contrôle budgétaire Interroger la Commission, et plus particulièrement la DG ECFIN, au sujet des opérations liées au MESF, en utilisant pleinement les informations disponibles pour évaluer la capacité des États bénéficiaires à répondre à leurs obligations au titre du MESF. Examiner, entre autres: les rapports de la Commission sur les activités d’emprunt et de prêt et les garanties budgétaires, les protocoles d’accord du MESF, les rapports d’audit de la Cour des comptes européenne, et les rapports de surveillance trimestriels de la DG ECFIN. Analyser les rapports d’audit de la Cour des comptes européenne liés aux contrôles financiers et opérationnels des processus du MESF afin de vérifier qu’ils cadrent avec les procédures de gestion budgétaire et financière applicables au niveau de l’UE.

Exiger que les normes de l’ABE en matière de gestion des risques soient prises en considération dans les principes de mise en œuvre adoptés par le conseil d’administration du MES, conformément à la pratique habituelle du secteur bancaire européen, comme les normes de gouvernance des risques dans la GAP, le risque de liquidité, le risque de marché et les fonctions de risque opérationnel. Utiliser des moyens indirects d’évaluer les pratiques du MES en matière de gestion financière et des risques, sur la base des informations mises à disposition de façon spontanée, sur demande ou dans le cadre des dispositions existantes en matière d’établissement des rapports.

§ 3. En ce qui concerne le contrôle public externe et les responsabilités

Insister sur la pertinence de la planification des risques par la Cour des comptes européenne en s'assurant que le calendrier et la fréquence des procédures d'audit et des rapports soient alignés avec la nature à haut risque

Encourager la Cour des comptes européenne à contrôler les institutions de l'UE impliquées dans le MES, en mettant un accent particulier sur les activités directement liées au MES. Assurer un contrôle opportun des


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des programmes d'aide financière. En plus des audits financiers et de performance qui doivent être menés par la Cour des comptes européenne, conformément aux dispositions du TFUE, le Parlement européen, et la commission CONT en particulier, pourrait, s'il le juge nécessaire, demander des avis spécifiques ou des rapports de la Cour des comptes européenne en respectant les opérations du MESF.

résultats des procédures d'audit, des conclusions et des rapports de la Cour des comptes. Soumettre à la Cour des comptes européenne des demandes d'avis spécifiques pour obtenir des informations sur des sujets financiers liés à la participation des institutions de l'UE dans les opérations du MES.

§ 4. En ce qui concerne la fiabilité des données et des statistiques Suivre et soutenir les programmes d'amélioration de la qualité des données pour les données prévisionnelles (Commission) et les données historiques (Eurostat). Demander et analyser les informations de la Commission - DG ECFIN en particulier - pour évaluer la qualité des données fournies par les États membres.

Les données et les statistiques prises en considération et les recommandations s'appliquent de la même manière au MES qu'au MESF étant donné l'utilisation d'un ensemble unique d'informations pour tous les programmes d'aide financière de l'UE.

§ 5. En ce qui concerne l'examen politique et démocratique

Porter une attention particulière à la poursuite des exigences durant la vie complète de leurs prêts MESF, même après que le mécanisme soit dissous.

Demande que le Conseil des gouverneurs du MES rende le rapport annuel du MES accessible au Parlement européen. Alternativement, le Parlement européen pourrait adresser cette demande aux parlements nationaux, dans le cadre d'une coopération renforcée, ou à la Cour des comptes européenne.



INTRODUCTION

BACKGROUND Amid severe tensions in euro-area sovereign debt markets and faced with severe threats to financial stability in the European Union, the European Council adopted a package of temporary European Stabilisation Actions in May 2010 with a view to safeguard financial stability. Two actions were established in virtue of Art. 122. of the TFEU, which foresees EU financial assistance to Member States in difficulties caused by exceptional circumstances beyond Member States’ control:

The European Financial Stabilisation Mechanism (EFSM) was established in virtue of the Council Regulation (EU) no 407/2010. It grants the right to the Commission to borrow up to a total of € 60 billion in financial markets on behalf of the Union and to lend the proceeds to a beneficiary euro area Member State, under an implicit EU budget guarantee;

The European Financial Stability Facility (EFSF), was established as a Special Purpose Vehicle aimed at providing financial assistance to euro area Member States experiencing severe difficulties in order to safeguard financial stability in Europe. The EFSF is funded by euro area Member States in proportion to their share in the paid-up capital of the European Central Bank; it has a lending capacity of € 440 billion, which is backed by guarantee commitments from the euro area Member States for a total of €780 billion. The EFSF was established with a three-year tenure that expires in June 2013.

These mechanisms were widely accepted as a good line of defence17 in the EU crisis management framework, however, the Task Force on Economic Governance, the European Council, the Heads of State and Heads of Government of the European Council, agreed on the need for Member States to establish a permanent crisis mechanism to safeguard the financial stability of the euro area. A change to the Treaty on the Functioning of the European Union was required to allow for the creation of the ESM by EU Member States.

On 23-24 March 2011, the European Parliament approved the required change to Art. 136 of the TFEU for the creation of the ESM in plenary session, but expressed several concerns as regards the general features of the future ESM in its resolution of 23 March 2011, most notably that:

“the intention to establish the permanent stability mechanism outside the EU institutional framework poses a risk to the integrity of the Treaty-based system; considers that the Commission must be a member of the board of this mechanism, and not simply an observer; considers, moreover, that in this context the Commission should be entitled to take the appropriate initiatives in order to achieve, with the consent of the Member States concerned, the objectives of the European stability mechanism; underlines that Member States must at any rate respect Union law and the prerogatives of the institutions laid down therein”;

“the establishment and functioning of the permanent stability mechanism must fully respect the core principles of democratic decision-making such as transparency, parliamentary scrutiny and democratic accountability; emphasises that the European stability mechanism should closely involve the Union institutions and bodies responsible for monetary issues – the European

17 Strengthening Economic Governance in the EU, Report of the Task Force to the European Council, Brussels, 21 October 2010.


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Commission, the European Central Bank (ECB) and the European Investment Bank; underlines that the mechanism must not give rise to a new model of European governance which falls short of the level of democratic standards achieved in the Union”.

Further, in its May 2011 discharge resolution the Parliament invited the Council and Member States, when devising a permanent crisis mechanism to:

Establish appropriate arrangements for public external audit and accountability and full transparency for the permanent crisis mechanism;

Ensure the reliability of data and statistics;

Ensure clear responsibility and reporting arrangements and include all actors whose liabilities will be involved in the ESM in the establishment of the mechanism;

Define Parliament’s political scrutiny of any euro-bond issue, in general, and of the permanent crisis mechanism in particular.

On 11 July 2011, finance ministers of the 17 Euro-area countries first endorsed the Treaty Establishing the European Stability Mechanism (ESM), with the European Council accepting that policy conditionality established under an enhanced surveillance or a macroeconomic adjustment programme should be consistent with the EU surveillance framework and guarantee the respect of EU procedures. The final Treaty was signed by euro-area Member States on 2 February 2012 with a stated purpose to:

“Provide stability support under strict conditionality, appropriate to the financial instrument chosen, to the benefit of ESM members which are experiencing, or threatened by, severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole and its Member States.”

The ESM will be fully backed by capital contributions from its members and takes the form of an intergovernmental financial institution outside the European Union institutional and legislative framework, except where specifically otherwise stipulated by the Treaty. Initial contributions of € 80 billion will be contributed as paid-in shares, with a total of € 700 billion authorised capital that may be called in times of crisis. In addition, the ESM is empowered to borrow funds on the financial markets.

Emerging in parallel with the ESM, complementary developments of November and December 2011 must also be noted in:



The Commission’s Proposal for a Regulation on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area, which provides for enhanced surveillance of budgetary positions of Member States18 experiencing severe difficulties and might request financial assistance from ESM, as well as the interactions with ESM provisions on budgetary surveillance of these countries, notably as regards consistency between ESM and TFEU provisions as regards economic policy conditionality;

The signing of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) by Euro-area members, that took place on the 2nd of March 2013. Commonly referred to as the “fiscal compact”, this Treaty aims to ensure lasting, sound and robust management of public finances and thus addresses one of the main sources of financial instability. The TSCG and the ESM Treaty may be seen as complementary in fostering fiscal responsibility and solidarity within the economic and monetary union. Formal links are created between the two in that financial assistance issued under the ESM will become conditional on the ratification of the TSCG and transposition of the balanced budget rule into national legislation.

PURPOSE OF THE STUDY In accordance with the specific terms of reference provided in Annex 1, the purpose of this study is to examine:

the adequacy of the budgetary control mechanisms in the permanent crisis mechanism (as covered under § 2) and to what extent due consideration has been given to the issues raised by the European Parliament, in its discharge resolution of 10 May 2011, namely:

the definition of clear responsibility and reporting arrangements and the involvement of all actors, whose liabilities are involved, in the establishment of the mechanism (as covered under § 1);

the establishment of appropriate arrangements for public external audit and accountability and full transparency for the permanent crisis mechanism (as covered under section § 3);

the definition of provisions ensuring the reliability of data and statistics (as covered under § 4);

the definition of the Parliament’s political scrutiny of any euro-bond issue, in general, and of the permanent crisis mechanism in particular (as covered under § 5).

18 Proposal for a Regulation on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area, Brussels, 23 November 2011, COM(2011) 819 final, 2011/385 (COD).


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the appropriate involvement of the European Court of Auditors with a view to ensuring a sufficiently high-quality, open and transparent external audit (as covered under § 3).

how best to ensure appropriate democratic scrutiny of this mechanism, and the way in which the European Parliament can best add value to this process (as covered under § 5).

Given that the ESM will assume the tasks fulfilled currently by the EFSM, while it has not yet been decided what will happen to the EFSM once the ESM enters into force, this study also examines the EFSM under the above research study objectives, while considering several scenarios of transition, as elaborated under section 2.3.

APPROACH The study was designed to respond to the key questions raised defined in the terms of reference by combining primary and secondary research sources in an integrated analysis that considered the EFSM and ESM both in the EU’s legal and institutional framework and in the broader international environment. PwC examined the EFSM Regulation and ESM Treaty provisions on governance, budgetary control, external audit and democratic scrutiny by benchmarking them with the provisions of existing EU financial assistance programs and with other international financial assistance providers:

The EFSM Regulation was analysed to establish the basis of the EFSM itself. This analysis was aimed at identifying the roles and responsibilities assigned to the EU institutions, the budget impact and budgetary control resulting from the EFSM assistance programmes, as well as the audit, reliability of data and democratic scrutiny exercised on the mechanism;

The ESM Treaty was analysed to establish the basis of the ESM itself. Further this analysis highlighted the roles and responsibilities assigned to various actors in the ESM, including those related to the control, governance and oversight requirements defined in the EP discharge resolution of 10 May 2011;

The European Union’s overarching legal and institutional framework and its applicability to the EFSM and ESM was considered with reference to the Consolidated Treaties on the European Union (TEU) and on the Functioning of the European Union (TFEU). Additional details on institutional relationships within the EU were found in inter-institutional agreements. This in-depth understanding of current EU law was necessary to provide a basis of assessing the extent to which the EFSM and ESM governance framework Financial Institutions (IFIs) that lie outside of the EU’s institutional framework but meet EU standards and principles on financial management, control, and oversight. A review of other EU financial assistance programs, including the Balance of Payments, MFA and EFSF, were reviewed provided benchmarks comparing the EFSM and ESM’s governance and control provisions against other EU actions;

Our comparative institutional analysis was expanded into the international environment to include and share some commonalities with the ESM as an IFI itself (e.g. the IMF).



The final document, submitted on 15 March 2012, takes into account the review comments received on the mid-term draft report, and incorporates findings from interviews conducted with key stakeholders, notably members of the European Parliament, of the European Commission, of the European Court of Auditors, of the EFSF, of Eurostat, and of Supreme Audit Institutions. Every effort was made to remain abreast of rapidly unfolding developments in the area of European economic policy, specifically with respect to European stabilization actions, over the course of our research. The focus of our research has remained squarely on existing public information available up to 7 March 2012; no attempt has been made to incorporate information that is under confidential development (e.g. DG ECFIN internal procedures and internal control systems, ESM by-laws).

CONTENT OF DOCUMENT In order to facilitate the examination of the European financial assistance programmes, the second chapter of this study describes the governance structure and funding characteristics of the BoP, the MFA, the EFSM, the EFSF and the ESM. These programmes are relevant in the context of this study, either because they are designed in accordance with these principles under the EU legal framework (e.g. the EFSM or the BoP financial assistance programs), or because they present a similar institutional form or legal framework (e.g. EFSF) as compared to the ESM. This analysis allows clarifying what common practice is in place as regards governance and financial management within existing financial assistance structures in accordance with their respective legal framework and the institutional form. Further to this analysis, chapter three and four of this study examines the EFSM mechanism and the ESM Treaty. More precisely:

The first sub-chapters on roles/responsibilities and involvement of actors examines to what extent:

Roles and responsibilities have been defined and assigned to the involved actors;

all actors whose liabilities are involved in the EFSM/ESM have been involved in its establishment;

the European Parliament and the CONT Committee in particular are part of the decision process.

The second sub-chapter on budgetary control evaluates the adequacy of financial management processes defined by the current European or ESM Treaty provisions. This analysis takes account of best practices in place at institutions presenting a similar legal basis and institutional form;


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The third sub-chapter on external audit, accountability and transparency, examines to what extent:

the EFSM Regulation and the ESM Treaty provisions ensure appropriate arrangements for public external audit and accountability and full transparency;

the EFSM Regulation and the ESM Treaty provisions consider involvement of European Court of Auditors with a view to ensuring a sufficiently high-quality, open and transparent external audit.

The fourth sub-chapter on reliability of data identifies the European and ESM Treaty arrangements that ensure reliability of data and statistics around the mechanisms ;

The fifth sub-chapter on democratic scrutiny examines to what extent:

the European Parliament’s political scrutiny of the EFSM and ESM has been defined;

the current ESM Treaty provisions ensure appropriate democratic scrutiny of the ESM, and the way in which the European Parliament can best add value to this process.



2. OVERVIEW OF EU AND INTERGOVERNMENTAL FINANCIAL ASSISTANCE PROGRAMS

KEY FINDINGS

Given that there is no formal decision to transfer the borrowing and lending operations engaged under the EFSM support programme to the ESM, the most likely scenario implies that the EFSM continues in an administrative capacity once existing programmes are completed until all outstanding are repaid, without entering into new programmes.

The EFSM, the BoP and the MFA are all backed by the EU budget, albeit indirectly in case of the MFA, which is backed by a Guarantee Fund provisioned by the EU budget.

The EFSM’s governance structure is aligned with that of other EU financial assistance programmes, such as the BoP and the MFA, in conditions where urgent financial assistance is required.

According to the TFEU, the Financial Regulation and the different Council Regulations implementing the EU financial assistance programs, all EU Institutions play a role in these programs, being decisions made with respect to their activation, their capacity ceiling, their granting, the monitoring pre- and post-program implementation, reporting and management of the borrowing/ lending operations.

According to the ESM Treaty and the by-laws and rules of procedures of the EFSF, these two programs are very similar to each other.

Under the ESM and the EFSF, the European Commission and the ECB are the sole EU Institutions that are entitled to undertake certain responsibilities in the management of the assistance and monitoring of the programs.

For all financial assistance programs under EU or intergovernmental supervision, the assistance granted to the beneficiary countries constitutes only one component of the total package of financial assistance granted in conjunction with other international organisations, such as the IMF, World Bank and EIB.

KEY RECOMMENDATIONS

With the most likely scenario consisting in the continuation of the EFSM for its servicing purposes only, we recommend the European Parliament to continue paying particular attention to its political and democratic scrutiny until the full redemption of borrowed money for the purpose of EFSM assistance. Recommendations regarding political and democratic scrutiny are elaborated under Chapter 3.2 and 3.5.

It could be argued that, the European Parliament, as budgetary authority, should have a co-decision power with the Council in granting financial assistance under the EFSM and BoP,


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similarly to the TFEU provisions regarding the mobilisation of MFA under normal circumstances. This would require an amendment of the TFEU. Given that the reason for not applying the co-decision process lies with emergency conditions of the financial assistance required, it is recommended either not to change relevant TFEU provisions, or to request the application of a co-decision allowing rapid decision-making justified by urgency conditions.

According to the TFEU19, the Commission is entitled to enter into borrowing/ lending operations for the purpose of financial assistance programmes in the context of three different types of assistance:

The Balance-of-Payments (BoP) assistance, provided to Member States that have not yet adopted the euro;

The Macro-Financial Assistance (MFA), under which financial aid programmes are provided to assist non-Member States that are Candidate, Potential Candidate and Neighbourhood countries of the EU;

The recent European Financial Stabilisation Mechanism (EFSM), which provides financial support to Euro Area Member states.

Euro-area Member States have also put in place two additional financial assistance mechanisms for the purpose of granting euro-area Member States with funding sources:

The European Financial Stabilisation Facility, and

The European Stability Mechanism (to be implemented in July 2012).

2.1 FUNDING CHARACTERISTICS OF THE PROGRAMMES

Legal basis

The BoP assistance facility, as established by Council Regulation (EC) N° 332/2002, takes the form of medium-term loans provided by the Union.

The MFA facility, as established under the TFEU, takes the form of grants and/or loans provided by the Union.

The EFSM facility, as established by the Council Regulation (EU) N°407/2010, takes the form of loans or credit lines provided by the Union.

The EFSF, an SA incorporated in Luxemburg created in 2010 by Euro-area Member States following a decision made by the ECOFIN Council, (i) provides loans and intervenes in the debt primary and secondary market to help Member States facing financial difficulties and (ii) finance recapitalisation of financial institutions through loans to governments.

The ESM, an intergovernmental organisation established in 2011 by Euro-area Member States following a decision made by the Council, (i) provides loans and other

19 Art. 143 of the TFEU for the BoP, art. 212 of the TFEU for the MFA, art.122 (2) of the TFEU for the EFSM.



debt instruments and intervenes in the debt primary and secondary markets to help Euro-area Member States in financial difficulties and (ii) provides financing for the recapitalisation of financial institutions through loans to governments.

Scope of application

Under the BoP, potential beneficiaries are Member States outside the euro area that are faced with serious balance-of-payment difficulties.

Under the MFA, potential beneficiaries are Candidate, Potential Candidate and Neighbourhood countries with short-term balance-of-payment problems, in need of public finance stabilisation and structural reforms.

Under the EFSM, potential beneficiaries are Member States in difficulties caused by exceptional circumstances beyond the Member State’s control.

Under the EFSF, potential beneficiaries are Euro-area Member States in financial difficulties.

Under the ESM, potential beneficiaries are Euro-area Member States in financial distress.

Lending & control conditions

Under the BoP granting facility, the beneficiary Member State is required to fulfil economic policy conditions, sign-off on a MoU and be subject to the monitoring of adjustment measures throughout the loan period.

Under the MFA granting facility, a beneficiary third country is required to fulfil adjustment and reform conditions aimed at restoring its economy and improving resilience to macroeconomic shocks.

Under the EFSM granting facility, beneficiary Member States is required to fulfil economic policy conditions, sign-off on a MoU and be subject to adjustment measures monitoring during the granting of the loan.

Under the EFSF, the beneficiary Member State is required fulfil economic policy conditions, sign-off on a MoU and be subject to the monitoring of adjustment measures throughout the financial assistance period.

Under the ESM, the beneficiary Member State is required to fulfil economic policy conditions, sign-off on a MoU and be subject to the monitoring of adjustment measures throughout the financial assistance period.

Duration

BoP financial assistance is of exceptional character and is mobilised on a case-by-case basis. The BoP programme has been mobilised on a number of occasions since its inception and at least three Member States currently benefit from BoP assistance.


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MFA financial assistance is of exceptional and temporary basis and is mobilised on a case-by-case basis. The MFA programme has been used several times since 1990; 2010 was one of the most active years with respect to operations granted under the MFA program.

EFSM financial assistance is of exceptional character and is mobilised on a case-by-case basis. The EFSM has been established as a temporary mechanism. The Commission will assess regularly if exceptional occurrences that justified its adoption are not longer at issue.

The EFSF has been created as a temporary institution. According to the EFSF Articles of Association, after 30th of June 2013, the EFSF will not enter into any new lending programmes. It will only continue with the servicing of the outstanding debt and be liquidated after repayment of the outstanding debt.

ESM has been established as a permanent financial assistance mechanism.

Lending limit, funding model and loss coverage

The BoP’s initial ceiling was set at € 12 billion and has been increased twice, first in 2008 (€ 25 billion) and second in 2009 to reach the current ceiling of € 50 billion. Loans granted under the BoP assistance are funded by European Union borrowing operations. It therefore enables the beneficiary Member State to qualify for interest rates applied to the high investment grade attached to the European Union. The mechanism is financed from capital markets and guaranteed by the EU budget.

The MFA does not contain a specific ceiling amount. Loans granted under the MFA assistance are funded by European Union borrowing operations guaranteed by the EU budget. It therefore enables the beneficiary Member State to qualify for interest rates applied to the high investment grade attached to the European Union. The mechanism is financed from capital markets with the guarantee of the budget. In case of default from a beneficiary third country, the Commission will draw on the reserves deposited within the Guarantee Fund for External Actions20.

The current ceiling of EFSM is € 60 billion, with such a ceiling being directly linked to the margin available under the own resources ceiling for payment appropriation. The mechanism is financed from capital markets with the guarantee of the EU budget.

The EFSF has a lending capacity of € 440 billion. EFSF issues are backed by guarantee commitment of € 780 billion from the 17 Euro-area Member States, in accordance with their share in the paid-up capital of the ECB.

The ESM will have a lending capacity of € 500 billion. ESM issues will be backed by subscribed capital of € 700 billion from the 17 Euro-area Member States, of which € 80 billion will be in the form of paid-in capital and € 620 billion of committed callable capital and a reserve fund.

20 Explanation with respect to a default scenario under the EFSM is provided under Chapter 3.2.



Interaction with other programmes

BoP assistance programmes granted to beneficiary Member States are usually provided in conjunction with IMF and/or other multi-lateral lenders such as the EIB, EBRD, World Bank or bilateral assistance from other Member States.

MFA assistance programmes granted to beneficiary non Member States are provided in conjunction with IMF adjustment programmes.

EFSM assistance programmes granted to beneficiary Member States are provided in conjunction with IMF and EFSM financial assistance programmes.

ESM assistance will be granted to beneficiary Member States are provided in conjunction with IMF financial assistance programmes.

A detailed presentation of the characteristics of the different financial assistance programmes is provided in Appendix 2.

2.2 GOVERNANCE CHARACTERISTICS OF THE PROGRAMMES Under the three EU financial assistance programmes – BoP, MFA and EFSM – the procedures and the EU Institutions involved in the process of financial assistance request are very similar: the potential beneficiary Member State or third country, once having informed the Council for the request to receive financial assistance, will agree with DG ECFIN, who will consult the EFC on the policy conditions and the implementation of adjustment measures to be attached to the facility. The major difference between the MFA, on the one hand, and the EFSM/BoP, on the other hand, relies in the financial assistance decision-making process:

Under the MFA, Art. 212, §2 of the TFEU provides with co-decision by the Council and the European Parliament, for the adoption of, inter alia, financial assistance towards third countries. Notwithstanding, in situations where urgent financial assistance is required, the Council is allowed to take that decision on its own, on a proposal from the Commission (Art.213 of the TFEU).

This Art.213 and its related process are aimed at providing the EU with a faster decision making process where urgent assistance is requested by a third country, therefore falling outside the normal legislative procedure.

With respect to the BoP and the EFSM, a similar rationale has been followed: as these mechanisms are aimed to provide financial assistance to Member States facing severe difficulties requiring emergency lending, the TFEU provides that solely the Council takes the decision of granting the assistance, on a proposal from the Commission (Art.122, §2 of the TFEU). It is however provided that, where such a decision is taken, the President of the Council informs the European Parliament of the decision.

As a result of positive loan decision taken with the Council, the potential beneficiary Member State will sign off on a MoU prior to the implementation of the loan agreement. During the loan period, DG ECFIN will perform the review of the implementation of agreed adjustment measures and policy conditions by conducting on-site missions.


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For all EU assistance programmes, in accordance with the Financial Regulation and financial assistance programmes Regulations, DG ECFIN is required to perform:

On-site inspections within the beneficiary Member State or third country before disbursement of the funds in the form of operational assessments (OAs). The purpose of these OAs is to obtain reasonable assurances on the functioning of administrative procedures and financial circuits of the recipient country;

On-site inspections within the beneficiary Member State or third country after disbursement of first instalments or funds. The purpose of the on-site inspection is to obtain assurance that the economic policy of the beneficiary Member State complies with (i) its adjustment programme and (ii) the general economic policy conditions set out in the MoU signed by the beneficiary Member State.

Under the EFSF and the ESM, the procedures for granting assistance are also very similar: the potential beneficiary Member State, once having informed the Eurogroup and Board of Governors/Directors for the request to receive financial assistance, will agree with DG ECFIN, who will consult the EFC on the policy conditions and the implementation of adjustment measures attached to the facility granting. As a result of a positive loan decision taken with the Board of Governors/Directors, the potential beneficiary Member State will sign off a MoU prior to the implementation of the loan agreement. During the loan period, DG ECFIN will perform the review of the implementation of agreed adjustment measures and policy conditions by conducting on-site missions.

2.3 INTERACTION BETWEEN THE EFSM AND THE ESM While the transitional arrangements to be taken at entering into force of the ESM are still under consideration, the following scenarios may be envisaged with respect to the decommissioning of the EFSM:

Scenario 1: Continuation of the EFSM for servicing purposes only (highest probability)

The Commission considers that the exceptional occurrences21 that justified the adoption of the EFSM Regulation cease and decides on the termination of the EFSM. The EFSM continues in its current capacity and issues in order to complete existing programmes without entering into new programmes. Once existing programmes are completed, the EFSM continues in an administrative capacity until all outstanding are repaid.

In that scenario, the guarantee of the EU budget will continue to be applicable until the full redemption of borrowed money for the purpose of the financial assistance granted to the Member States.

This is, according to our analysis, the most probable scenario given the absence of transitional arrangements specifying the transfer to EFSM engagements under ESM.

21 As defined under art. 122 of the TFEU



This would also be the most suitable scenario, in the withdrawal of the EU budgetary guarantee after unwinding of the mechanism.

Scenario 2: Continuation of the EFSM in its full capacity along with the entry into force of the ESM (low probability)

The Commission considers that the exceptional occurrences that justified the adoption of the EFSM Regulation continue.

New assistance programmes under the EFSM could therefore be granted, provided that the outstanding has not reached the available margin under the own resources ceiling for payment appropriations (currently fixed at € 60 billions).

In such a scenario, the EFSM would be used in parallel with the ESM, once this latter enters into force. The guarantee of the EU budget would continue to be applicable until the full redemption of borrowed money for the purpose of the financial assistance granted to the Member States.

Given that the ESM will take over the tasks currently executed by the EFSM, this scenario is unlikely to take place.

Scenario 3: Buy back of the EFSM by the ESM (lowest probability)

In such a case, a redemption agreement should be reached between the ESM and the EU so that the ESM buys back the issued loans and available credit lines granted under the EFSM.

This scenario is the most unlikely, given complexity of operations and legal constraints.


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3. EXAMINATION OF THE EFSM

3.1. ROLES AND RESPONSIBILITIES AND INVOLVEMENT OF KEY STAKEHOLDERS

KEY FINDINGS

Under the EFSM Regulation, roles and reporting arrangements within the EU Institutions, namely the Commission and Council, have been clearly defined. These arrangements are very similar to the ones that are applicable to governance structures of similar lending and borrowing operations under the EU framework, namely the BoP and MFA22.

The on-site inspections and monitoring responsibilities assigned to the Commission, under the multilateral surveillance as defined within the TFEU and the different Regulations with respect to excessive deficit procedure, strengthening of the surveillance of budgetary position, Proposal for a regulation on enhanced surveillance, are endorsed within the DG ECFIN, therefore ensuring EU expertise is provided throughout the process.

In accordance with the EU legal basis and form of the EFSM, the EU Institutions are accountable as regards the borrowing and lending operations of the EFSM. This is because the EU budget serves as collateral for borrowing operations initiated by the Commission on behalf of the beneficiary country. The Commission is therefore accountable towards the Council and the Parliament for the implementation of the budget, its conduct of operations and its resources involved in the administration of the EFSM.

Under the procedure for the granting of financial assistance under the EFSM, the European Parliament is provided by the Commission with the MoUs that are agreed with beneficiary Member States, therefore enabling the European Parliament, via its Committees, to assess the need for an exchange of view with beneficiary Member States on progress made in the implementation of the adjustment programme, according to the Proposal for a Regulation 2011/385.

According to the TFEU, the ECA will provide the Council and the European Parliament, in particular the CONT committee, with its findings on the borrowing and lending operations undertaken by the Commission in, inter alia, the context of the EFSM as a result of the DAS and the performance audit performed with respect to sound financial management. These opinions will provide the necessary elements to support the European Parliament in granting its discharge on the EU budget.

Under the TFEU and the different Council Regulations related to financial assistance programmes, the European Parliament is to be provided with relevant information with respect to MoUs, reports from the Commission on borrowing and lending activities as a result of the financial assistance, post-lending monitoring quarterly reports, DAS and performance audit reports, that are of particular relevance in the context of the responsibilities assigned to the CONT committee

22 Except with respect to the major difference related to the co-decision process under the MFA, as described under Chapter 2.2 Governance characteristics of the programmes.



Under the European Financial Stability Mechanism, which is in its governance and procedures very close and comparable to the BoP and MFA mechanisms23, it is the European Institutions that are responsible for the granting decision, the elaboration and signed-off of the MoU, the monitoring of the compliance with MoU conditions, the undertaking of borrowing and lending operations and reporting, as described below

EU Council: it is up to the European Council, acting by a qualified majority, to decide to grant assistance to the beneficiary Member State.

More concretely, the potential beneficiary Member State will send the request for financial assistance to the EWG FC. Once informed, it will base its decision on information collected by the European Commission’s DG ECFIN, which will provide the EWG FC with:

Detailed procedures for financial assistance, i.e. type of instruments (loan or credit line), the amount and maturity (in case of a loan) or availability period (in case of a credit line), the number of payments, the pricing formula detailing the applicable interest rates;

General economic policy conditions;

The economic and financial adjustment programme of the Member State.

In a further step, the Council, acting by a qualified majority, may decide to review the initial general economic policy conditions, as well as the adjustment program set by the Member State to reach economic policy conditions.

European Commission: under the EFSM Regulation, the European Commission is entitled with the following responsibilities:

On-site preliminary missions:

It is the Commission that conduct preliminary discussions with the potential beneficiary MS about the assessment of its financial needs and the review of its draft economic and financial adjustment programme. For that purpose, DG ECFIN will organise an assessment mission within the requesting Member State in order to look at the economic and financial sector conditions of the country. These conditions are three-fold: (i) contemplated fiscal reform, (ii) financial sector rescue plan and (iii) budgetary plans, as prepared by DG ECFIN country desks for Portugal and Ireland EFSM assistance.

During the mission, DG ECFIN, together with the ECB and IMF, will also discuss the adjustment programme arguments with the requesting Member State government representatives.

Preparatory work for Council decision:

Once on-site preliminary missions have been performed by DG ECFIN, the Council will decide to grant the financial assistance on the basis of a proposal prepared by DG ECFIN.

23 Except with respect to the major difference related to the co-decision process under the MFA, as described under Chapter 2.3 Governance characteristics of the programmes.


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This proposal includes:

Detailed procedures for financial assistance, i.e. type of instruments (loan or credit line), the amount and maturity (in case of a loan) or availability period (in case of a credit line), the number of payments, the pricing formula detailing the applicable interest rates;

General economic policy conditions;

The economic and financial adjustment programme of the Member State developed to meet the economic policy conditions.

For the purpose of the general economic policy and adjustment programme, DG ECFIN will agree with the beneficiary Member State on the following:

The Memorandum of Understanding on Specific Economic Conditionality (MoU), that details the terms and conditions attached to quarterly disbursements of financial assistance from the EFSM to the beneficiary Member State and the reporting requirements between this later and the Commission/ ECB/ IMF. The detailed list of data to be provided to the EC by the Department of finance, NTMA, and Central Bank is made publicly available24

The Memorandum of Economic and Financial Policies (MEFP), that outlines the policies to be taken, with the support of the EU and IMF. Specifically, it details:

Financial sector policies (e.g. restructuring, deleveraging, recapitalisation, strengthening the banking framework, etc;

Fiscal policies (e.g. fiscal consolidation, product and labour market reforms, etc.) ;

Budgetary plans.

The MEFP also describes program financing and monitoring activities.

The Technical Memorandum of Understanding (TMU), that sets out the understandings regarding the definitions of the indicators subject to performance criteria and indicative targets under the arrangements supported by the Extended Fund Facility (EFF). It also describes the methods to be used in assessing the programme performance and the information requirements to ensure adequate monitoring of the targets.

Once agreed, these MoUs are shared by DG ECFIN with the European Parliament and the Council.

Borrowing/lending operations

Once approved within the Council, DG ECFIN will initiate and enter into the borrowing and lending operations.

DG ECFIN will contact financial institutions to agree on the financial conditions of the loan to be granted to the European Union and issue the loan on the financial markets. In parallel, DG ECFIN will enter into a back-to-back lending operation with the beneficiary Member State whereby the amount of the loan or credit lines will be disbursed according to instalments or funds drawn down.

24 http://ec.europa.eu/economy_finance/eu_borrower/ireland/index_en.htm



The disbursements are subject to quarterly reviews of conditionality for the duration of the programme. The release of instalments/drawing dawn of funds is based on:

Observance of quantitative performance criteria,

Respect for EU Council Decisions and Recommendations in the context of the excessive deficit procedure, and

A positive evaluation of progress made with respect to policy criteria in the Memorandum of Economic and Financial Policies (MEFP) and the most recent Memorandum of Understanding on specific economic policy conditionality (MoU), which details and further specifies the criteria that will be assessed and the reporting requirements in respect of these criteria.

The Commission is required, under Council decision, to provide the EU Parliament and the Council with information, on a yearly basis, regarding the use of lending instruments. In that perspective, the Commission provides information on borrowing and lending activities undertaken for the purpose of the BoP, MFA and will communicate, as from 2012, on the EFSM.

Post-lending monitoring

In addition to the monitoring performed for the purpose of instalments/drawing down of funds under the financial assistance programme, DG ECFIN is made responsible for monitoring the adequacy of the economic policy of the beneficiary Member State in line with the adjustment programme and with the general economic policy conditions attached to the assistance.

Progresses in the implementation of the programme’s policies are monitored through quarterly reports and programme review, continuous performance criteria, indicative targets and structural benchmarks.

The disbursements are also subject to quarterly reviews of ‘conditionality’ for the duration of the programme.

Risk management for the purpose of borrowing and lending activities

The lending and borrowing transactions, as well as related treasury management, are carried out by the EU according to the respective Council Decisions, if applicable, and internal guidelines. Written procedure manuals covering specific areas such as borrowings, loans and treasury management have been developed and are used by the relevant operating units within DG ECFIN. Lending operations are financed by "back-to-back" borrowings in € currency, which thus do not generate open interest rate or currency positions for the EU. As a result of the borrowing and lending activities under the EFSM, the procedures listed below are performed according to the risk entailed:

Market risk: in the context of the EFSM financial assistance, the EU does not give loans in other currencies than €. The EU does therefore not suffer market risk in this context.

Interest rate risk: Due to the nature of its borrowing and lending activities, the EU has significant interest-bearing assets and liabilities. Borrowings issued at variable rates expose the EU to interest rate risk. However, the interest rate risks that arise from


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borrowing are offset by equivalent loans in terms and conditions with the beneficiary (back-to-back).

Credit risk: Credit risk incurred by lenders to the EU, is managed through the EU budget: the Own Resources legislation in force during 2010 fixed the ceiling for the GNI resource at 1,23 % of Member States GNI and during 2010 1,12 % was actually used to cover payment appropriations. This means that at 31 December 2010 there existed an available margin of 0,11 % to cover this guarantee. In any case, the exposure of the European Union to credit risk is mitigated by the possibility to call on the EU budget in case a debtor would be unable to reimburse the amounts due in full. To this end the EU is entitled, according to Art.12, 3° of the Council Regulation (EC, EURATOM) N° 1150/2000, to call upon all the Member States to honour its obligations towards its lenders25.

The credit risk exposure and related budgetary impact of the EU in the event of default by an EFSM beneficiary Member State, are assessed to be limited, notably because: (i) amounts granted are limited and in several disbursements, spread over time, after ensuring compliance with related conditions.

With respect to the choice of counterparts for the purpose of treasury operations, guidelines must be applied. Inter alia, DG ECFIN’s operating units will be able to enter into deals only with eligible banks having sufficient counterparty limits.

Liquidity risk: The liquidity risk that arises from borrowing is generally offset by equivalent loans in terms and conditions (back-to-back operations). For EFSM, the Council Regulation (EU) N° 407/2010 provides for a procedure allowing sufficient time to mobilise funds through the EU budget.

ECA: According to the EFSM Regulation, the ECA is entitled to carry out in the given beneficiary Member State any financial controls or audits that it considers necessary in relation to the management of the assistance.

For that purpose, the ECA can conduct, according to its methodology:

Financial audits that are aimed at providing assurance on the reliability of accounts and the legality and regularity of transactions.

Compliance audits that consist in the assessment of revenues and expenditures with rules and regulations that applies to it.

Performance audits that relate to the assessment of sound financial management.

In accordance with Art. 287 of TFEU and the ECA’s right to examine the EU accounts, the ECA will be in a position to provide an opinion on the EFSM based on an:

Analysis of the Annual Activity Report and declaration of DG ECFIN under the DAS methodology (please refer to chapter 3.4 for further details) and

25 According to information provided in the Communication from the Commission to the European Parliament, the Council and the Court of Auditors, Annual Accounts of the European Union – Financial Year 2010.



Assessment of sound financial management of, for instance, borrowing operations entered into by DG ECFIN for the purpose of the EFSM assistance.

It is also important to remind that, in accordance to Art. 287, §4, indent 2, any Institutions of the Union, for instance the CONT committee or more generally the European Parliament, may ask the ECA to address a specific question or deliver an opinion on a specific question.

While the ECA has not yet performed such specific audits the ECA is expected to perform specific audits on the BoP assistance in 2012, according to its audit plan26.

EP: Although the European Parliament is not involved in the decision process of granting financial assistance under the EFSM, the Parliament intervenes in the monitoring of fiscal imbalances and of compliance with macro-economic adjustment programmes, as well as on EU budgetary establishment and discharge processes, consistently with TFEU provisions and EP roles under existing financial assistance programs.

CONT: Like the EU Parliament, the Committee on Budgetary Control is not assigned specific roles or responsibilities within the EFSM Regulation. Notwithstanding, the Proposal for a regulation 2011/385 as regards strengthened economic and budgetary surveillance over - inter alia EFSM beneficiary Member States, provides for governance roles to the EU Institutions responsible under the EFSM Regulation and to other EU Institutions, amongst other the European Parliament. These roles are described under “4.1.1. ESM Governance structure”. Besides, the European Parliament and the CONT Committee in particular, according to their responsibilities in the adoption and discharge of the Union budget, are given the opportunity to raise specific questions and decide on operations linked to the EFSM mechanism. This is further described under chapter 3.2.3.

26 ECA Work Programme 2012 as announced on the 29th of February 2012.


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3.2. ADEQUACY OF BUDGETARY CONTROL MECHANISMS ON THE EFSM

KEY FINDINGS

Borrowing and lending activities undertaken by the Commission for the purpose of, inter alia, EFSM operations are part of the EU budget, which is subject to adoption by the European Parliament, in particular the BUDG Committee.

Lending operations are financed by "back-to-back" borrowings in € currency, which thus do not generate open interest rate or currency positions for the EU.

In accordance with EU institutional procedures, they are subject to (i) formal approval by the relevant DG’s Authorising Officer through its annual Declaration of Assurance on the DG’s operations and financial accounts, (ii) internal control and financial management principles stemming from dedicated EU regulation, and (iii) audit from their Internal Audit function and the ECA.

Regarding the activities performed within the DG ECFIN which manages the EFSM, as applicable to any other DG, they must be undertaken in accordance with internal control systems that are aimed at ensuring legality and regularity of underlying transactions and the use of resources. DG ECFIN activities are also subject to internal audit reviews.

In case of a debtor’s default under the EFSM, the Commission may draw on its cash resources to service the debt provisionally, in accordance with Art. 12 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000.

As part of the Commission borrowing and lending activities, EFSM operations are accounted within the EU consolidated financial statements, and therefore subject to political control by means of the budgetary adoption (BUDG Committee) and discharge (CONT) procedures: (i) the Statement of revenue and expenditure of the Commission, which includes EFSM financial information, is subject to the approval of the European Parliament, (ii) budget implementation, including expenses related to EFSM, is subject to CONT Committee approval, (iii) the ECA’s Statement of assurance and performance audit encompasses EFSM operations.

The Commission and the ECA are entitled to carry out audits in EFSM financial assistance beneficiary Member States when deemed necessary, while the Commission monitors compliance of beneficiary Member States with EFSM economic policy conditionality, consistently with the provisions of the EU multilateral surveillance framework.

KEY RECOMMENDATIONS

As regards external audit and accountability, the European parliament could:

Question the Commission and DG EC-FIN in particular as regards operations related to the EFSM, making full use of available information to evaluate the capacity of beneficiary states to meet their EFSM obligations. Consider inter-alia: Commission reports on borrowing and



lending activities and budget guarantees, EFSM MoUs, ECA audit reports, and DG ECFIN quarterly monitoring reports.

Analyse the ECA’s audit reports relating to financial and operational audits of EFSM processes to verify alignment with budgetary and financial management procedures applicable at the EU level.

3.2.1 Summary of EU institutional roles in respect of budgetary control

3.2.1.1 Establishment of the EU budget

The budgetary procedure itself involves the preparation and adoption of the budget, establishing the annual amount and the distribution of EU expenditure as well as the revenue necessary to cover it. In accordance with Art. 314 of the TFEU, the European Parliament and the Council, acting in accordance with a special legislative procedure, establish the Union's annual budget, based on a proposal containing the draft budget submitted by the Commission to the European Parliament and to the Council not later than 1 September of the year preceding that in which the budget is to be implemented. In the context of the EU budget adoption, the European Parliament approves the statement of revenue and expenditure of the Commission on the basis of information that, inter alia, relate to the EFSM:

those revenues arising from exercise of rights in connection with a guarantee under the EFSM;

the structure of the guarantee provided by the EU under the EFSM;

Annual Activity Report and declaration of DG ECFIN.

The Commission remains responsible towards the Council and the European Parliament of the establishment of the EU budget. Nevertheless, the EU budget adoption process enables the European Parliament to raise any question it may have with respect to the EFSM-related activities. Besides, the European Parliament could disagree with additional expenses encountered within DG ECFIN as a result of the administrative costs faced for the servicing of the EFSM and therefore refuse any increase of such expenses.

3.2.1.2 Implementation of the budget In accordance with Art. 317 of the TFEU, the Commission must implement the budget in cooperation with the Member States, in accordance with the provisions of the regulations made pursuant to Article 322, on its own responsibility and within the limits of the appropriations, having regard to the principles of sound financial management. The Council regulation n° 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (Art 3) provides that the EU budget must be established and implemented in compliance with the principles of unity, accuracy, annuality, equilibrium, unit of


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account, universality, specification, and sound financial management, which requires that budget appropriations are used in accordance with the principles of economy, efficiency and effectiveness.

3.2.1.3 Budgetary control and discharge

Budgetary control27 involves exercising control over the implementation of the budget, to guarantee the legality, accuracy and financial soundness of budget operations and financial control systems, as well as the sound financial management of the European budget. Budgetary control is exercised at several levels:

At the level of each Member State, for exercising control on specific budgetary items for which Member States have kept their powers, e.g. on traditional own resources;

At the level of each EU Institution:

by authorising officers, which are internal staff to whom the institution has delegated financial management and control including, amongst others the validation of expenditure, authorisation of payments, establishment of internal management and control procedures and ex post verification thereof, controlling the management of financial operations, evaluating and reporting on the efficiency and effectiveness of the internal control system to the institutions’ internal auditor, in accordance with Art 60 of the Council regulation n° 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities. Findings from their evaluation exercises are reported to the internal audit function of the respective institution by which they are appointed;

by the Internal Audit function established by each institution in accordance with Art. 85-87 of the Council regulation n° 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities, and mainly responsible for verifying the proper operation of budgetary implementation, systems and procedures, and in particular for assessing the suitability and effectiveness of internal management systems, the suitability and effectiveness of internal management systems, the performance of departments in implementing policies, programmes and actions, the efficiency and effectiveness of the internal control and audit systems applicable to every budgetary implementation operation. The internal auditor reports to the institution on his/her findings and recommendations and the institution must ensure that action is taken on recommendations resulting from audits. Every year, the institution forwards a report to the discharge authority summarising the number and type of internal audits carried out, the recommendations made and the action taken on those recommendations;

By the external independent auditor: external control is carried out by the European Court of Auditors which submits each year to the budgetary authority detailed reports in accordance with Article 287 of the TFEU:

the statement of assurance as to the reliability of accounts and the legality and regularity of the underlying transactions. “Financial audits” carried out by the Court aim at obtaining assurance as to the reliability of accounts. “Compliance audits”

27 Budgetary control, Jean-Jacques GAY/Helmut WERNER, 10/2010.



performed by the Court aim at obtaining assurance as to the legality and regularity of underlying transactions;

the annual report relating to implementation of the general budget, including the budgets of all institutions and satellite bodies, whereby the Court examines whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. “Performance audits” carried out by the Court aim at obtaining assurance as to the sound financial management of the EU budget, requiring that appropriations are used in accordance with the principles of economy, efficiency and effectiveness;

special reports on specific issues;

specific annual reports relative to EU agencies and bodies.

By the political authority: In accordance with Art. 319 of the TFEU, the European Parliament, acting on a recommendation from the Council, gives a discharge to the Commission in respect of the implementation of the budget, based on the examination of the following documents communicated on a yearly basis by the Commission and the European Court of Auditors to the European Parliament, in accordance with Art. 318 of the TFEU:

the accounts of the preceding financial year relating to the implementation of the budget;

the financial statement of the assets and liabilities of the Union;

the evaluation report on the Union's finances based on the results achieved;

the annual report by the Court of Auditors together with the replies of the institutions under audit to the observations of the Court of Auditors;

the Court of Auditors statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions;

any relevant special reports by the Court of Auditors.

3.2.2 Financial structure and accounting treatment of loans and borrowings under the EFSM

3.2.2.1 Financial structure of the EFSM In accordance with Art. 2 of the Regulation No 407/2010 of 11 May 2010 establishing the EFSM, the financial assistance provided under the EFSM takes the form of a loan or of a credit line granted to the Member State concerned. To this end, the Commission is empowered on behalf of the European Union to contract borrowings on the capital markets or with financial institutions. The ECOFIN Council conclusions of 9 May 201028 restrict the facility to EUR 60 billion but the legal limit is provided in Article 2.2 of the Regulation No 407/2010 of 11 May 2010 establishing the EFSM, which restricts the outstanding amount of loans or credit lines to the margin available under the own resources ceiling.

28 Council of the European Union, 9596/10 (Presse 108), Press release, Extraordinary Council meeting Economic and Financial Affairs, Brussels, 9/10 May 2010.


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In alignment with the Commission internal procedures for borrowing and lending operations, loans granted under the EFSM have a back-to-back character, whereby the effective interest for the loan equals the effective interest rate for the related borrowing(s), notwithstanding that the costs incurred by the Union in concluding and carrying out each operation are charged to the beneficiary Member State, as provisioned by Art. 7 of the Council Regulation (EU) No 407/2010 of 11 May 2010 establishing the EFSM. As of 15 March 2012, EFSM funding and loan disbursements are presented below:

Amount (€ billions)

Maturity (years)

Raising date

Loan beneficiary Disbursement date

5.0 5 05-Jan-11 Ireland 12-Jan-11 3.4 7 17-Mar-11 Ireland 24-Mar-11

4.75 10 24-May-11€ 3 bn for Ireland€ 1.75 bn for Portugal 31-May-11

4.75 5 25-May-11 Portugal 01-Jun-11 5.0 10 14-Sep-11 Portugal 21-Sep-11

4.0 15 22-Sep-11€ 2 bn for Ireland€ 2 bn for Portugal 29-Sep-11

1.1 7 29-Sep-11€ 0.5 bn for Ireland€ 0.6 bn for Portugal 06-Oct-11

3.0 30 09-Jan-12€ 1.5 bn for Ireland€ 1.5 bn for Portugal 16-Jan-12

3.0 20 27-Feb-12 Ireland 05-Mar-12 Source: http://ec.europa.eu/economy_finance/eu_borrower/efsm/index_en.htm Borrowing operations carried out by the Commission to grant loans under the EFSM, BoP and MFA support programs are “bundled” borrowing operations, with a view to obtain best market terms in favour of the loan beneficiaries, at spread levels that are typical for first class Sovereign Supra-nationals and Agencies (SSA) sector borrowers. These operations are performed in accordance with the principles of the Commission internal borrowing procedures, as audited by the Court of Auditors in the context of performance audits. As opposed to the MFA, under which defaulting loans guaranteed by the EU budget are covered by the Guarantee Fund for external actions, the loans granted under the EFSM (and under the BoP support program) are guaranteed by the EU budget, but not covered by any fund in case of a debtor’s default. In case of default of the beneficiary Member State, the Commission will have to draw on the sums credited to the own resources accounts . In case these cash resources are not available, the Commission may draw in excess of the total of these assets from Member States. 3.2.2.2 Accounting treatment of EFSM lending and borrowing operations

Lending and borrowing operations carried out by the Commission under the EFSM support programme are accounted for in accordance with the accounting principles applicable to financial instruments, and more precisely to loans and receivables, as defined by the significant accounting policies applicable to the consolidated accounts of the European Union, which are:

kept in accordance with Council Regulation on the Financial Regulation applicable to the general budget of the European Union and the Commission Regulation laying down detailed rules for the implementation of this Financial Regulation, and

prepared in accordance with article 133 of the Financial Regulation, on the basis of accrual-based accounting rules that are derived from International Public Sector Accounting Standards (IPSAS) or by default, International Financial Reporting Standards (IFRS).



3.2.2.3 Lending operations29

In accordance with these principles, loans granted by the Commission are defined as non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the EU provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in non-current assets, except for maturities within 12 months of the balance sheet date. The classification of the financial instruments, including loans and receivables, is determined at initial recognition and re-evaluated at each balance sheet date. Initial recognition and measurement Loans granted on borrowed funds are measured at their nominal amount, which is considered to be the fair value of the loan, essentially because the EU lending operation itself represents the market, in that it can only borrow funds for the purpose of lending at the same rate (e.g. BOP) or a reduced rate compared to the commercial market (e.g. EFSM in 2011). Subsequent measurement Loans and receivables are carried at amortised cost using the effective interest method. In the case of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and borrowings since these loans have the characteristics of ‘back-to-back operations’ and the differences between the loan and the borrowing conditions and amounts are not material. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the economic outturn account. Impairment If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the economic outturn account. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the economic outturn account.

29 As explained in the Annual Accounts of the European Union – Financial Year 2010.


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3.2.2.4 Borrowing operations30 Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates. They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the economic outturn account over the period of the borrowings using the effective interest method. They are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. 3.2.3 EFSM impact on the EU budget and on budgetary control

3.2.3.1 Impact on EU budget

Given that there is no formal intention to transfer the borrowing and lending operations engaged under the EFSM support programme to the ESM, these operations will most probably remain under the current legal basis of the EFSM until their complete servicing, and related budgetary control procedures will remain applicable until the end of that period. Similarly to the BoP and MFA support programme, financial assistance granted under the EFSM consists of loans raised on the capital markets or from financial institutions by the European Commission, which are guaranteed by the EU budget in case of default of a beneficiary Member State. This structure implies a direct impact on the EU budget in case of default by an EFSM beneficiary Member State. Lending operations are financed by "back-to-back" borrowings in € currency, which thus do not generate open interest rate or currency positions. Consequently, loans granted under this programme are not disclosed as budgetary expenditure, but under a p.m. (pro memoria) line in the budget under article 802, item 01 04 01 03, which constitutes the structure for the guarantee provided by the European Union enabling the Commission to service the debt should debtors default, in compliance with Art. 4 and Art. 46 of the Financial Regulation31 and implementing rules applicable to the general budget of the European Communities. A specific annex to this part of the statement gives a summary of borrowing-and-lending operations guaranteed by the general budget, including debt management, in respect of capital and interest, in compliance with Art. 30 of that regulation. This is consistent with the scheme of borrowing and lending operations carried out under the BoP financial assistance programme. Both parts of these borrowing-and-lending operations under the EFSM are carried out on identical terms, and only affect the budget if the guarantee is activated in case of default.

30 As explained in the Annual Accounts of the European Union – Financial Year 2010. 31 Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities.



In order to honour its obligations and to protect the EU budget, several provisions have been taken according to the EFSM Regulation and Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000:

According to Art. 8, 2° of the EFSM Regulation, the terms defining that repayment of the loan by the beneficiary MS should occur 14 days before due date is one measure taken by ECFIN that allows for DG BUDG to identify (in)solvency of the country and take the necessary measures to honour the Commission's obligations towards its own creditors in due time;

In compliance with the provisions set out for the budgetary guarantee scheme of borrowing and lending operations carried out under the balance of payments financial assistance program, in case of a debtor’s default under the EFSM, the Commission may draw on its cash resources to service the debt provisionally, in accordance with Art. 12 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000. The accounting treatment would be as follows: the p.m. line providing for this guarantee structure (article 802, item 01 04 01 03) would disclose the amounts for which the Commission has drawn from its own resources.

According to the EFSM Regulation, the TFEU and the Council Decisions adopted in order to implement the financial assistance programmes, the European Parliament, and the Parliament BUDG Committee in particular, are provided with specific responsibilities. The European Parliament, within the context of the EU budget adoption, approve the statement of revenue and expenditure of the Commission on the basis of information that, inter alia, relate to the EFSM:

Those revenues arising from exercise of rights in connection with a guarantee under the EFSM;

The structure of the guarantee provided by the EU under the EFSM;


Finally, in the broader context of the “six-pack” regulations, and notably Art. 12 of Council Regulation No 1177/2011 of 8 November 2011 on the excessive deficit procedure32, regarding fines imposed by the Council to EU Member States in virtue of Art. 126 of the TFEU, the regulation provides that such fines “shall constitute other revenue, as referred to in Article 311 TFEU, and shall be assigned to the European Financial Stability Facility. When the participating Member States create another stability mechanism to provide financial assistance in order to safeguard the stability of the euro area as a whole, the amount of those fines shall be assigned to that mechanism.” Therefore, such fines are not part of the Eu own resources, from which the EU budget is financed.

3.2.3.2 Impact on budgetary control Budgetary control over EFSM borrowing and lending operations will aim at guaranteeing the legality, accuracy and financial soundness of budget operations and financial control systems, as well as the sound financial management of these operations. According to the EFSM Regulation, the TFEU and the Council Decisions adopted in order to implement the financial assistance programmes, the European Parliament, and the Parliament CONT Committee in particular, are provided with specific responsibilities.

32 Council regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure


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The European Parliament, within the context of the EU budget discharge procedure,

approve the statement of revenue and expenditure of the Commission on the basis of information that, inter alia, relate to the EFSM:

Within the Consolidated financial statements: the amount of loans granted under the

EFSM and borrowing operations entered into under the EFSM, per memory EU guaranteed for lending operations under the EFSM;

Within the consolidated reports on the implementation of the budget: revenue generated by borrowing and lending operations entered into under the EFSM;

The ECA’s Statement of assurance and performance audit that may include information on the EFSM operations.

In the framework of the discharge granted by the European Parliament to the Commission on the respect of the implementation of the budget (in accordance with Art. 319 of the TFEU), the Parliament may ask to hear the Commission to provide evidence with regard to, inter alia, the operation of financial control systems and may request the Commission to provide it with any necessary information.

In the context of (i) its responsibilities within the control of the implementation of the budget

of the Union and of the European Development Fund, and the decisions on discharge to be taken by Parliament, including the internal discharge procedure and all other measures accompanying or implementing such decisions and (ii) in consideration of ECA reports, the CONT Committee is to play a major role in reviewing the EFSM by :

Considering information provided under the review of the implementation of the budget, i.e. :

Art. 802 European guarantee for EU loans raised for financial assistance under the European Financial Stabilisation Mechanism, under Chapter 8 0, title 8 of Revenue, within Section 3 – Commission;

Art. 01 04 01 03 European guarantee for EU loans raised for financial assistance under the European Financial Stabilisation Mechanism, under Chapter 01 04, title 01 of Expenditure, within Section 3 – Commission.

Considering any ECA consideration as a result of the DAS report or any specific opinion or report performed by the ECA on this area.

In that perspective, the European Parliament, and the BUDG and CONT Committees in particular:

Could, within the context of the consolidated financial statements, ask the Commission questions about the amount of loans granted under the EFSM and borrowing operations entered into under the EFSM;

Could, within the context of the consolidated reports on the implementation of the budget, ask the Commission questions about revenue generated by borrowing and lending operations entered into under the EFSM;



Could, within the context of the consolidated reports on the implementation of the budget, ask the Commission to provide evidence with regard to, inter alia, the operation of financial control systems and may request the Commission to provide it with any necessary information.

Could, regarding the ECA’s Statement of assurance and performance audit that may include information on the EFSM operations, ask ECA questions about its findings and recommendations;

Recommend the Commission, in the context of the discharge procedure, to take specific actions with respect to the borrowing and lending activities under the EFSM mechanism;

3.3 EXTERNAL AUDIT, ACCOUNTABILITY AND TRANSPARENCY

KEY FINDINGS

According to the European Treaties, the ECA is entrusted with the external audit of Union budget. In that perspective, according to the collateral character of the EU budget under the EFSM, the ECA is granted with such a competence and provides its assistance towards the European Parliament, and the CONT Committee in particular, in the discharge process. An opinion is provided by the ECA in the context of its statement of assurance (DAS) on the reliability of EU accounts and the legality and regularity of underlying transactions. As the borrowing and lending operations entered into by the Commission for the purpose of the EFSM are integrated within the EU accounts, the ECA will be in a position to review these operations under the DAS methodology.

The Commission may be required by the ECA to provide it with any information it deems necessary with respect to the borrowing and lending operations.

KEY RECOMMENDATIONS

As regards external audit and accountability, the European Parliament could:

Stress the appropriateness of risk-based planning at the ECA to ensure that the timing and frequency of audit procedures and reports is aligned with the high-risk nature of financial assistance programs.

In addition to the financial and performance audits that are to be conducted by the ECA according to the provisions of the TFEU, European Parliament, and the CONT Committee in particular, could, where deemed necessary, ask for specific opinions or reports from the ECA with respect to the EFSM-related operations.


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3.3.1 Mandate of the European Court of Auditors According to Art. 8 of the EFSM Regulation, the ECA has the right to carry out in the beneficiary Member State any financial controls or audits that it considers necessary in relation to the management assistance. In case such an audit or control would be performed, the ECA would publish a special report Under this article, the ECA can conduct several type of audits, according to its procedures, ie (i) financial audits, (ii) compliance audits and (iii) performance audits. Notwithstanding, the ECA is also entitled by Art. 287 of the TFEU to provide the Council and the European Parliament, and the CONT in particular, with relevant information about EFSM as a result of, inter alia, the Statement of Assurance (DAS) and performance audits33. Under the DAS methodology, the ECA will give its formal opinion on the reliability of the EU accounts and on the legality and regularity of the underlying transactions.

Reliability of the EU accounts: under this audit, ECA gives with its opinion about the completeness and accuracy of final consolidated accounts, accuracy of reported cash flows and financial results for the particular year and appropriateness of registration of assets and liabilities.

In the framework of the audit of the accounts, the below information will be taken into account for the purpose of the EFSM financial assistance review:

Under the Consolidated financial statements:

Information with respect to EFSM financial assistance granted to beneficiary Member States to be found under sub-chapter 2.4.2. Loans granted from borrowed funds, together with financial assistance granted under the BoP and MFA;

Information with respect to borrowing operations entered into by the European Union under the EFSM will mainly be found under sub-chapter 2.14. Long-term financial liabilities, as well as those under the BoP and MFA.

Under the consolidated reports on the implementation of the budget:

Information with respect to lending and borrowing budget revenue implementation;

Information with respect to expenditure by policy area.

Legality and regularity of underlying transactions: under this review, ECA provides with its opinion about the conformity of spending with contractual and legislative conditions and correctness and accuracy of their calculation.

In the context of the review of the legality and regularity of underlying transactions, the below information will be taken into account for the purpose of the EFSM financial assistance review:

33 As part of the ECA audit programme announced on the 29th of February 2012.



Supervisory and control system applied in the collection and disbursement of European funds for the purpose of the EFSM;

Transactions relating to expenditure for the purpose of the EFSM, down to the level of the final beneficiary;

Annual Activity Report and the declaration of the Commission’s DG ECFIN;

Evidences from previous audits, any report resulting from parliamentary inquiry or results of investigations conducted by European Anti-Fraud Office (OLAF).

Art. 287, 2° of TFEU requires the ECA to examine whether the financial management of the European Community has been sound and whether the activities have been performed in an economic, effective and efficient manner. For that purpose, the ECA conducts performance audits. Finally, in accordance with Art. 287, 4°, indent two of the TFEU, Institutions of the Union may request the Court of Auditors to deliver specific opinions or submit observations in the form of special reports. Moreover, according to its Rules of Procedure, the Court of Auditors may also carry out such opinions on its own initiative. It is therefore conceivable that the European Parliament, and the CONT Committee in particular, could, as a result of the information received from the Commission (EFSM MoU), the ECA (under the DAS), the beneficiary Member States (under the Proposal for a regulation 2011/385), ask for such special report. 3.3.2 Reporting and disclosure arrangements According to Art. 287, 4° of the TFEU, the ECA draw up an annual report after the close of each financial year, which is sent to EU Institution, including the European Parliament, and published in the OJ. In accordance with Art. 287, 4°, §4, the ECA assists the European Parliament, and the Council, in exercising their powers of control over implementation of the budget. Such an assistance is achieved by communication by the ECA to the European Parliament, and in particular the CONT Committee, of its statement of assurance (DAS) and exchange of views against the CONT Committee and the European Parliament, where appropriate. Finally, in accordance with the ECA’s internal Rules of Procedures, at the end of each audit, the ECA prepares a written opinion or report, as appropriate, setting out its findings. Such a report or opinion is communicated to the EU Institutions and is made public.


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3.4 RELIABILITY OF DATA AND STATISTICS

KEY FINDINGS

Under the EFSM, BoP and MFA, the European Commission use data and statistics that are provided byt Eurostat and beneficiary countries.

Quality and reliability of Member States financial data reported cannot be implemented by Eurostat alone. Despite the rollout of reinforced governance mechanisms, reliability of data and statistics reported by Member States relies on a joint effort and on the support from all ESS partners.

The responsibility of data collection and of verifying that they comply with legal provisions, lies with the national statistical institute.

In order to improve the reliability of data and statistics used for the purpose of these mechanisms, several actions have been taken:

(i) With respect to the reliability of historical data collected by Eurostat, major projects are undertaken by Eurostat in order to reinforce governance and alignment of upstream data, notably on site audits and integration of reporting platforms;

(ii) With respect to the reliability of forecast data collected by the Commission for the sustainability assessment of government debts and the elaboration of adjustment programmes, the Commission performs specific audits aimed at having comfort on the reliability of these statistics.

Data used by DG ECFIN for the aim of the EFSM are (i) the one they received from beneficiary Member State’s financial authorities (Ministry of Finance, National Central Bank, Supreme Court of Audits) and (ii) data communicated by Eurostat.

KEY RECOMMENDATIONS

With respect to the reliability of the data and statistics used under the MFA, BoP and EFSM, we recommend the European Parliament to :

Follow up and support data quality improvement programs for both forecast data (the Commission) and historical data (Eurostat).

Request and analyse information from the Commission – DG EC-FIN in particular – to evaluate the quality of data provided by the Member states.



3.4.1 Data and statistics reported by Member States, beneficiary or not from EFSM financial

assistance

In the broader context of enhanced economic, budgetary and fiscal surveillance of EU Member States, whether or not beneficiary of financial assistance from the EU or any other international financial institution, the tasks entrusted to the Commission as regards the monitoring of economic policy coordination, budgetary discipline and compliance with any adjustment program, require sound, high quality data and statistical analysis reported by Member States to allow for informed decision-making. Statistical information results from the statistical production processes operating across the entire European Statistical System (ESS)34, in accordance with the European System of Accounts (currently ESA 95). The overall quality of statistical information at European level is highly dependent on the appropriateness of the entire production process used to generate these statistics, including Eurostat. The responsibility of data collection and of verifying that they comply with legal provisions, lies with the national statistical institute (NSI) and other national authorities of each Member State, as recognised by Eurostat in its List of National statistical institutes and other national authorities published on its website35, such as National Treasury Management Agencies, Departments of Finance and Central Banks, which also provide financial information to the Commission in the context of the EFSM, EFSF and ESM financial assistance programs (see section 3.1 on roles and responsibilities governing the EFSM). The role of Eurostat is to provide the statistical methodological basis on which statistics are compiled, to consolidate the data for production of statistics at European level, and to assess the quality of actual data reported by Member States in accordance with the methods, standards and procedures defined by Eurostat (Art. 4 of the Commission Decision of 21 April 1997 on the role of Eurostat36, Art. 6 and Art. 12 of the Regulation of 11 March 2009 on European statistics37). In recent years, several measures have been taken to improve the governance of the ESS, and thereby the reliability of data reported by Member States, in particular with:

The adoption of a European Statistics Code of Practice in 2005, as a “self regulatory instrument containing standards for the independence of the national and Community statistical authorities provides a further guarantee for the good functioning of the European Statistical System and the production of high quality and reliable statistics”38;

34 The European Statistical System (ESS) is defined by the partnership between the Community statistical authority, which is the Commission (Eurostat), and the national statistical institutes (NSIs) and other national authorities responsible in each Member State for the development, production and dissemination of European statistics, in accordance with Art. 4 of the Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 2009 on European statistics. 35http://epp.eurostat.ec.europa.eu/portal/page/portal/pgp_ess/0_DOCS/estat/list_national_statistical_institutes.pdf. 36 Commission Decision of 21 April 1997 on the role of Eurostat as regards the production of Community statistics (97/281/EC). 37 Regulation (EC) No 223/2009 of the European Parliament and of the Council of 11 March 2009 on European statistics and repealing Regulation (EC, Euratom) No 1101/2008 of the European Parliament and of the Council on the transmission of data subject to statistical confidentiality to the Statistical Office of the European Communities, Council Regulation (EC) No 322/97 on Community Statistics, and Council Decision 89/382/EEC, Euratom establishing a Committee on the Statistical Programmes of the European Communities, (OJ) L 87/164, 31 March 2009. 38 Recommendation of the Commission on the independence, integrity and accountability of the national and Community statistical authorities, Brussels, 25/5/2005, COM(2005) 217 final.


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The establishment of the European Statistical Governance Advisory Board (ESGAB)39 in 2008 to provide an independent overview of the European Statistical System as regards the implementation of the European Statistics Code of Practice, by assessing and reporting on compliance by Eurostat and the ESS as a whole with the Code of Practice;

The establishment of a legal framework for the development, production and dissemination of European statistics in 2009 in accordance with the Regulation of 11 March 2009 on European statistics, including:

the establishment of the European Statistical System Committee (ESSC) to provide professional guidance to the ESS for developing, producing and disseminating European statistics in line with regulatory principles (Art. 7);

the establishment of reinforced coordination between authorities that contribute to the development, production and dissemination of European statistics (Art. 8-10);

the decision that the Community should make financial contributions to the NSIs and other national authorities in order to cover fully the incremental costs they may incur in the execution of the temporary direct statistical actions decided by the Commission (Art. 14).

The Communication from the Commission to the European Parliament and the Council on the production method of EU statistics of 10 August 200940, calls for a reform of the production method of European statistics, by:

replacing, at the level of the Member States, the “stovepipe model” by and integrated model through the integration of data sets and by combining data from different sources as integrated parts of comprehensive production systems for clusters of statistics, based on a common (technical) infrastructure taking the form of a network of databases among Member States;

establishing, at European level, a new European systems method to statistics, presenting horizontal integration, across statistical domains at the level of NSIs and Eurostat, and vertical integration, by developing synergies within the ESS, through collaborative networks with joint structures, tools and processes between national statistical authorities and Eurostat, with a view to avoid duplication of work and reduce the unnecessary burden on respondents;

enhanced communication and the use of common reporting tools among ESS members, towards harmonized application of standards for the production of statistics.

However, recent developments, such as the inaccuracy of Greek government deficit and debt statistics reported, have however demonstrated that the system for fiscal statistics did not sufficiently mitigate the risk of substandard quality data being notified to Eurostat. To address this issue, the Council granted extended powers to Eurostat in its Regulation of 26 July 201041, notably by:

39 Decision No 235/2008/EC of the European Parliament and the Council of 11 March 2008 establishing the European Statistical Governance Advisory Board, (OJ) L 73/17, 15/03/2008. 40 Communication from the Commission to the European Parliament and the Council on the production method of EU statistics: a vision for the next decade, Brussels, 10/8/2009, COM(2009) 404 final. 41 Regulation (EU) No 679/2010 of 26 July 2010 amending Regulation (EC) No 479/2009 as regards the quality of statistical data in the context of the excessive deficit procedure, (OJ) L 198/1, 30/7/2010.



elaborating on the purpose of dialogue visits and triggers of methodological visits carried out by Eurostat in EU Member States (Art. 11);

establishing the obligation for Member States to provide the assistance of national accounting experts at the request of Eurostat, that are necessary to carry out their duties (Art. 12).

With a view to further reinforce the upstream of public data and statistics in the context of the recent financial crisis and strengthened surveillance over Member States’ economic, fiscal and budgetary positions, in its Communication of 15 April 2011 towards robust quality management for European Statistics42, the Commission sets out a strategy that would give the European Union a quality management framework for statistics related to enhanced economic policy coordination, which includes mechanisms to ensure the high quality of statistical indicators. The implementation of this framework pursues tow lines of action: (i) further strengthening the governance of the European Statistical System, and (ii) developing a preventive approach to verifying government finance statistics. Strengthening the governance of the European Statistical System will rely on:

reinforcing the implementation of the European Statistics Code of Practice, notably through:

reinforcing and generalizing independence of NSI’s;

clarifying principles to be implemented by ESS members and principles to be implemented by Member State governments;

committing each Member State to confidence of data, whereby each Member State would define its own quality assurance and improvement programme, reflecting progress in implementing the Code and identifying priority actions needed to ensure proper implementation of the minimum standards;

the conduct, by each Member State, on a regular basis, of a self assessment of the implementation of the Code, covering the entire National Statistical System, whereby identified weaknesses should be remedied without undue delay;

the development by the Commission of its own programme to assess implementation of the Code of Practice by National Statistical Authorities.

reinforcing the role of the ESGAB as supervisory authority of Eurostat;

the alignment of the roles and responsibilities of Eurostat within the European Commission, as defined by the Commission Decision 97/281/EC43, with the independent role of Eurostat in the current institutional framework.

Developing a preventive approach to verifying government finance statistics relies on:

the benefits from reinforced governance of the European Statistical System, entailing a clear mission statement, proper management supervision and segregation of duties, an internal audit capacity or similar entity and an appropriate risk management process, including IT aspects.

42 Communication from the Commission to the European Parliament and the Council, Towards robust quality management for European Statistics, Brussels, 15/4/2011, COM(2011) 211 final. 43 Commission Decision 97/281/EC of 21 April 1997 on the role of Eurostat as regards the production of Community statistics (OJ) L 112, 29/4/1997.


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specific measures, such as:

the development by Eurostat of a specific quality management system by introducing improved quality assurance systems within the ESS and close monitoring by Eurostat through systematic risk analysis and regular dialogue visits, which would be extended to public entities supplying upstream public finance data to the NSIs. Also, methodological visits to the Member States concerned will be made at the earliest possible moment.

In this context, Eurostat will rollout a structured preventive system applicable to all Member States aiming at better identifying, assessing and monitoring significant risks or problems in a proactive manner with a view to taking corrective action at the earliest possible point. To achieve this, Eurostat will introduce a new approach focusing on:

The appropriateness of upstream public finance data to comply with the requirements of ESA-based accounts;

Exhaustiveness coverage of the general government, with special attention to state and local sub-sectors and supervised entities;

Timeliness and consistency in time, including quarterly data, of public finance data;

The effectiveness, reliability, integrity and transparency of the process of data flows between public entities and the statistical authorities in charge of the final compilation of EDP data covering an analysis of arrangements regarding the responsibility of national officials and staff involved in these workflows, the verification of accounting data by Member States at all levels of general government, as well as robust and effective supervisory and control systems at national level. For instance, a set of quality management standards tailored to the specificities of the EDP compilation process could be agreed, implemented by NSIs and certified by the Commission;

The completeness and accuracy of the registry of entities controlled by units of the general government;

Implementation of the European Statistics Code of Practice in the context of the process of EDP compilation.

A more rigorous enforcement policy will supplement this new approach and infringement procedures will be systematically initiated in the event that a Member State has clearly falsified fiscal data or provided misleading information.

To monitor and control a more harmonised system, Eurostat will create a group of officials from NSIs dedicated to implementing the responsibilities of national authorities and officials as regards compliance of reported data, and to the harmonised improvements of the quality management framework concerning government finance statistics, particularly the development of a common early warning system to identify, assess and monitor risks.



3.4.2 Data and statistics reported by the Commission on EFSM financial transactions

Reliability of data and statistics reported by the Commission as regards EFSM financial transactions is essentially ensured by the actors exercising financial control or audits on these transactions, such as authorising officers within the institution and the European Court of Auditors respectively. For further details in this respect, we refer to section 3.2 on budgetary control and section 3.3 on external audit of the EFSM.

Regarding the information collected by the Commission in the context of (i) the preparatory work undertaken to assess the financial needs to be granted to a Member State and (ii) the monitoring of conditionality compliance under the EFSM assistance, DG ECFIN country desk for Portugal and Ireland rely on data and statistics provided by National Treasury Management Agencies, Departments of Finance and Central Bank. The responsibility of data collection and of verifying that they comply with legal provisions, lies with these national authorities of each Member State.


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3.5 POLITICAL AND DEMOCRATIC SCRUTINY

KEY FINDINGS

European Parliament is not entitled with decision entitlement with respect to the granting of financial assistance under the EFSM, as well as the BoP.

Notwithstanding, the European Parliament, and in particular BUDG and CONT Committee, are (i) part of the decision process with respect to the EFSM in the framework of the several EU procedure, i.e. decision on the budget, discharge of the budget, (ii) communicated with useful information with respect to EFSM programmes by the Commission, i.e. MoU, quarterly economic adjustment programmes reports, and (iii) entitled with exchange of views request with beneficiary Member States according to the Proposal for Regulation 2011/385.

EFSM Regulation and Council Decision implementing EU financial assistance mechanisms provides with the communication by DG ECFIN to the European Parliament (and the Council) of the following documents:

- MoU signed under the EFSM

- DG ECFIN review reports on adjustment programme of the beneficiary Member State

- DG ECFIN annual report

- European Commission reports on borrowing and lending activities of the EU

- Commission bi-yearly report on the guarantees covered by the general budget

- ECA audits or ECA opinions, upon any EU institution’s request

Besides, in accordance with Art. 122, 2° of the TFEU, the President of the Council informs the European Parliament of its decision with respect to the granting of financial assistance to a Member State under the EFSM and BoP.

The EU Parliament, and the Parliament CONT Committee, will therefore be in a position to exercise their parliamentary duties in the context of the information provided in accordance with the TFEU and EFSM Regulation.



KEY RECOMMENDATIONS

As regards political and democratic scrutiny, the European Parliament could:

Pay particular attention to ongoing servicing requirements over the full lifecycle of EFSM loans, even after the mechanism is dissolved;

Request the ECA for specific opinion on any budgetary topic that relates to the EFSM activities;

Request for exchange of view towards the CONT Committee or during a plenary session.

Under the macro-financial assistance44 (MFA) program, the Parliament is consulted in the process for granting the assistance, as follows:

When the Union grants macro-financial assistance to third countries other than developing countries, the European Parliament and the Council adopt the related implementation measures, in accordance with the ordinary legislative procedure (Art. 212 of the TFEU). However, in accordance with Art. 213 of the TFEU, when the situation in a third country requires urgent financial assistance from the Union, the Council adopts the necessary decisions on a proposal from the Commission;

Under the EFSM, the European Parliament is not involved in the decision of granting financial assistance, but informed of the decision taken by the Council, in accordance with Art. 122 of the TFEU. Similarly with the provisions set out under the BoP and MFA programmes, in accordance with Art. 3.5 of the Council Regulation (EU) No 407/2010 of 11 May 2010 establishing the EFSM, the Memorandum of Understanding setting out economic policy conditionality attached to the assistance must be communicated by the Commission to the European Parliament and the Council. The absence of provisions for European Parliament intervention in the decision of granting financial assistance under the EFSM and the BoP, while co-decision is provisioned for the MFA under normal financial assistance circumstances, can partly be explained by the necessity to expedite a financial assistance decision when a Member State is seriously threatened with severe difficulties. The necessity to expedite the decisions of granting financial assistance to EU or non EU countries has been stressed under both the BoP and MFA support programs: in accordance with Proposal for a Regulation laying down general provisions for Macro-Financial Assistance to third countries45, the co-decision procedure by the European Parliament and of the Council in granting macro-financial assistance reduces the efficiency and effectiveness of the assistance by causing unnecessary delays between requests for macro-financial assistance and their actual implementation. Therefore, the European Parliament, in its resolution on the implementation of macro-financial assistance to third

44 In accordance with Art. 212 of the TFEU, the Union may grant financial assistance to third countries other than developing countries, taking the form of loans or grants or an appropriate combination of both and generally complements financing provided in the context of an IMF-supported adjustment and reform program. These loans are guaranteed by the Guarantee Fund for external actions, which is provisioned from the general EU budget and has to be maintained at a certain percentage of the outstanding amount of the loans and loan guarantees covered by the Fund. (source: http://ec.europa.eu/economy_finance/financial_operations/market/guarantee_fund/index_en.htm) 45 Proposal for a Regulation laying down general provisions for Macro-Financial Assistance to third countries SEC(2011) 865 final, Brussels, 4.7.2011, COM(2011) 396 final, 2011/0176 (COD).


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countries of 3 June 2003, called for a framework regulation for macro-financial assistance in order to expedite the decision-making process and provide this financial instrument with a formal and transparent basis, as described in the Proposal for a Regulation laying down general provisions for Macro-Financial Assistance to third countries. As regards the BoP mechanism, in the European Parliament legislative resolution of 20 November 2008 on the proposal for a Council regulation amending Regulation (EC) No 332/200246, Recital 2 states that (2) in the event of exceptional situations that could require a quick Community response to major changes in the financial environment, the European Parliament, the Member States within the Council, and the Commission should act speedily in order to ensure that market confidence is not undermined.

According to the TFEU provisions applicable to the MFA, BoP and EFSM and the regulations that implement the BoP and the EFSM, the European Parliament is provided with weaker political control on the decision to grant the financial assistance when emergency circumstances requires Member States or third countries to request for it. Notwithstanding, the absence of control in the decision to grant the financial assistance does not impact the political control and the democratic scrutiny that may be exercised by the European Parliament, and the CONT Committee in particular:

specific responsibilities with respect to borrowing and lending operations entered into by the Commission for the purpose of EFSM assistance, therefore enabling the European Parliament, and the Parliament CONT Committee in particular, to exercise their parliamentary duties on the EFSM:

The European Parliament, within the context of the EU budget adoption, approve the

statement of revenue and expenditure of the Commission on the basis of information that, inter alia, relate to the EFSM:

those revenues arising from exercise of rights in connection with a guarantee under the EFSM;

the structure of the guarantee provided by the EU under the EFSM;


The European Parliament, and the Parliament CONT committee in particular, within the context of the budgetary discharge, approve the implementation of the budget that includes information from EFSM operations, inter alia:

Within the Consolidated financial statements: the amount of loans granted under the EFSM and borrowing operations entered into under the EFSM, per memory EU guaranteed for lending operations under the EFSM;

Within the consolidated reports on the implementation of the budget: revenue generated by borrowing and lending operations entered into under the EFSM;

The ECA’s Statement of assurance and performance audit that may include information on the EFSM operations.



specific information with respect to operations entered into by the Commission for the purpose of the EFSM assistance, therefore enabling the European Parliament, and the Parliament CONT Committee in particular, to exercise their democratic scrutiny on the EFSM :

Reports from the Commission with respect to the borrowing and lending activities of

the EU;

Reports from the Commission with respect to the guarantees covered by the general budget;

MoU signed-off by the Council and the beneficiary Member State under the EFSM programmes;

Quarterly reports from DG ECFIN on the monitoring of the adjustment programmes of beneficiary Member States.

specific initiative powers :

European Parliament Resolution adopted as a result of the information obtained as described above;

Request for specific opinion on any budgetary topic or information provided.

Request for exchange of view towards the CONT Committee or during a plenary session.

46 European Parliament legislative resolution of 20 November 2008 on the proposal for a Council regulation amending Regulation (EC) No 332/2002 establishing a facility providing medium-term financial assistance for Member States’ balances of payments (COM(2008)0717 — C6-0389/2008 — 2008/0208(CNS)) (2010/C 16 E/44).


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4. EXAMINATION OF THE ESM

4.1 ROLES AND RESPONSIBILITIES AND INVOLVEMENT OF KEY STAKEHOLDERS

KEY FINDINGS

Under the ESM Treaty, roles and reporting arrangements of the governing bodies have been clearly defined.

Via the Eurogroup Task Force for Coordinated Action, the European Commission and the ECB have been involved in drafting the Treaty establishing the ESM. Although the other EU institutions have not been involved in drafting the Treaty establishing the ESM, they have provided their opinion on the test before its final adoption.

Although the ESM does not form part of the EU institutional framework from a legal point of view, roles and responsibilities assigned under this mechanism are aligned with several EU governance principles in (i) respecting the Union sphere of competences (ii) involving and providing access to all Member States whose currency is the euro, (iii) being embedded in the strengthened EU fiscal, budgetary and economic policy surveillance framework (iv) involving (members of) the EU institutions where possible to avoid the establishment of double structures, as follows:

- the Commission endorses the same roles in setting and monitoring the macro- economic conditionality attached to the assistance provided;

- the Court of Justice handles disputes between ESM contracting parties;

- members of the Council, which is the decision authority as to financial assistance granted under the EU framework, will most probably sit in the ESM Board of Governors, which is the decision authority as to financial assistance granted under the ESM;

- the ECA is represented by a permanent seat in the ESM Internal Audit Board and will continue to perform financial and operational audits on the EU institutions involved in ESM operations;

- the ESM external audit function will provide assurance on its financial position in accordance with the international standards adopted at EU level.

Also, in view of the ESM legal basis and institutional form, some governance roles and responsibilities, which could not be assigned to EU institutions from a legal perspective, have been assigned to ESM internal or external governance bodies, such as:

- the ESM Board of Governors, for the approval of financial conditions related to the assistance provided;



- the ESM Board of Directors, for the approval of the ESM financial and risk management guidelines;

- the independent external auditor, for certifying the ESM annual financial statements.

In this respect, ESM governance arrangements are aligned with governance structures set up by similar international private (EFSF) and public financial assistance providers (IMF), and have therefore been adequately provisioned from a legal and institutional perspective. Furthermore, insofar these arrangements are consistent with governance prerogatives at EU level and allow, whether directly or indirectly, EU institutional involvement at all stages, they have been adequately designed to consistently support Union economic governance.

In accordance with the legal basis and institutional form of the ESM, the EU institutions have no liability as regards the financial resources of the ESM. However, these institutions remain accountable to the European Parliament as regards their conduct of operations and their resources involved in the administration of the ESM, in the context of the EU budget, and in accordance with their standard accountability provisions under the EU Treaties. The EU Parliament, and the Parliament CONT Committee, will therefore be in a position to exercise their parliamentary duties in the context of the budget and budget discharge over DG ECFIN specific activities performed for the purpose of ex-ante and ex-post monitoring required according to the ESM Treaty.

KEY RECOMMENDATIONS

As regards the governance of the ESM, the European Parliament could closely monitor the development of ESM bylaws and further rules of procedures to gain assurance as to the overall effectiveness of governance structures, use of international audit standards, interaction with SAI’s and reporting arrangements in place.


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4.1.1 ESM Governance structure

The governance organization of the ESM, establishing the responsibility and reporting arrangements of the mechanism, can be summarized as follows:

Board of Governors (Art 4-5 ESM Treaty), composed of members of the government of each ESM Member, who have responsibility for finance, and which is the decision authority inter alia as regards the financial structure of the ESM, the financial assistance provided by the ESM and related financial conditions, surveillance over the Board of Directors, appointment of the Board of Auditors, approval of the annual accounts, approval of the external auditor and adoption of the rules of procedure and by-laws of the ESM. The Treaty provides that other persons, including representatives of institutions or organisations, such as the IMF, may be invited by the Board of Governors to attend meetings as observers on an ad hoc basis (Art. 5);

Board of Directors (Art 6, 21 ESM Treaty), composed of specialists in economic and financial matters as appointed by each ESM governor, responsible to ensure that the ESM is run in accordance with the ESM Treaty and by-laws, setting the guidelines for ESM borrowing operations, review of ESM risk management tools;

Managing Director (Art 7, 21 ESM Treaty), appointed by the Board of Governors, for his competence in economic and financial matters, without having a mandate of Governor or Director or an alternate of either. The Managing Director is inter alia responsible for conducting the day-to-day operations under the supervision of the Board of Directors, and for supervising ESM staff, determining the modalities of ESM borrowing operations;

European Commission (Art 13 ESM Treaty): may be entrusted by the Board of Governors to perform a preliminary risk assessment (impact on euro area stability, public deficit, financial needs) of the ESM Member State requesting financial assistance. The Commission is entrusted to negotiate the conditionality attached to the financial assistance provided, to sign the MoU with the beneficiary Member State and to monitor compliance with the conditionality attached to the financial assistance facility in liaison with the ECB and the IMF;

European Central Bank (Art 13, 18 ESM Treaty): may be entrusted by the Board of Governors to perform a preliminary risk assessment (impact on euro area stability, public deficit, financial needs) of the ESM Member State requesting financial assistance. The ECB is entrusted to negotiate the conditionality attached to the financial assistance provided, to the risk assessment and the monitoring of compliance with the conditionality attached to the financial assistance facility in liaison with the Commission and the IMF;

Internal Audit (Art 28 ESM Treaty): an internal audit function shall be established according to international standards;

Board of Auditors (Art. 30 ESM Treaty), composed of 5 members appointed by the Board of Governors for their competence in auditing and financial matters, including two members from the supreme audit institutions of the ESM Members and one from the European Court of Auditors. The Board of Auditors must carry out independent audits, inspect the ESM accounts and verify that the operational accounts and balance sheet are in order. It reports its findings to the Board of Governors on an annual basis, which is made accessible to the national parliaments and supreme audit institutions of the ESM Members and to the European Court of Auditors;

The Court of Justice of the European Union (Art. 37 ESM Treaty), who is responsible for the resolution of disputes, with the Court’s judgment binding on the parties;



The International Monetary Fund, with which the ESM will cooperate very closely (Recital 8 and Art. 38), and notably through the following: representatives from the IMF may attend ESM Board of Governors’ meetings on an ad hoc basis as observers (Art. 5), and the IMF will be involved in the risk assessment of a requesting Member State, the negotiation of the MoU conditionality, and the related monitoring of compliance (Art. 13) in cooperation with the European Commission and the ECB.

The Proposal for a regulation 2011/385 as regards strengthened economic and budgetary surveillance over - inter alia ESM beneficiary - Member States, provides for additional governance roles to existing ESM bodies, as well as new entities in its governance structure, as follows:

European Commission: In accordance with EC Proposal for a regulation 2011/385 as regards strengthened economic and budgetary surveillance, the Commission may decide to make a Member State receiving a financial assistance on a precautionary basis from the EFSM, ESM or any other relevant IFI subject to “enhanced surveillance” (Art 2). In such a case, the additional roles of the Commission would be to :

request information as regards its financials, resilience to stress tests, assessment of its banking sector, etc and communicate them to EFC (Art 3);

adopt, in consultation with the Member State under enhanced surveillance and the ECB, measures aimed at addressing the (potential) sources of difficulties (Art 3);

conduct in liaison with the ECB review missions in the MS under surveillance to verify the progresses made in the implementation of measures adopted to address potential sources of difficulties and report the findings thereof to the EFC (Art 3);

where it is concluded that further measures are needed and the financial situation of the Member State concerned has significant adverse effects on the financial stability of the euro area, the Commission may make a proposal to the Council for recommending the Member State concerned to seek financial assistance and to prepare a macro-economic adjustment programme (Art 3);

where the recommendation of the Council in accordance with Art. 3 of the EC Proposal for a regulation 2011/385 as regards strengthened economic and budgetary surveillance, representatives of the Commission may be invited by the parliament of the Member State concerned to participate to an exchange of views (Art 3);

be informed, together with the Council, the ECB and the EFC, of the intention of a Member State to obtain financial assistance from EFSF, the ESM, the (IMF) and prepare, in liaison with the ECB and the IMF, a risk assessment of the MS concerned (including an analysis of the sustainability of the government debt and of its ability to repay the financial assistance) that is forwarded to the EFC (Art. 4);

prepare in liaison with the ECB, a draft adjustment programme aimed at re-establishing a sound and sustainable economic and financial situation and restoring its capacity to finance itself fully on the financial markets taking into account Art. 121 and 126 of the TFEU (Art 6);

in liaison with the ECB, the Commission is entrusted to monitor the progress made in the implementation of the adjustment programme approved by the Council and inform every three months the EFC on the progress made. The Commission, in liaison


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with the ECB and the Member State concerned, will also examine the changes that may be needed to its adjustment programme (Art. 6);

provide technical assistance to a Member State subject to an adjustment programme experiencing insufficient administrative capacity or significant problems in the implementation of its adjustment programme shall seek technical assistance from the Commission;

where a requesting Member State has obtained ESM financial assistance, representatives of the Commission may be invited by the Parliament of the Member State concerned to participate to an exchange of views on the progress made in the implementation of the adjustment programme (Art 8).

European and Financial Committee (EFC): The EFC47 is a committee of the European Union

set up to promote policy coordination among the Member States. It provides opinions at the request of the Council of the European Union or the European Commission. Its preparatory work for the Council includes assessments of the economic and financial situation, the coordination of economic and fiscal policies, contributions on financial market matters, exchange rate polices and relations with third countries and international institutions. For a beneficiary Member State of ESM financial assistance on a precautionary basis, the roles of the EFC would be, in accordance with Art. 3 of the EC Proposal for a regulation 2011/385, to monitor the progress made by the beneficiary MS put under enhanced surveillance in respect of measures adopted to address its financial difficulties under the enhanced surveillance based on findings from the review missions carried out by the Commission and the ECB (Art 3). The EFC is also informed every semester on the findings from the European Commission and the ECB as regards the economic, fiscal and financial situation of a Member State in the context of post-programme surveillance.

For a Member State expressing willing to obtain financial assistance from the ESM, the EFC is involved in the examination of the request based on the analysis received from the Commission (Art. 5).

European Central Bank: the ECB is involved in the process of enhanced budgetary surveillance of ESM beneficiary Member States in accordance with the provisions laid down by the EC Proposal for a regulation 2011/385 in collaboration with the European Commission and the EFC as described above ;

Council:

In accordance with Art. 3 of the EC Proposal for a regulation 2011/385 as regards strengthened economic and budgetary surveillance, upon receipt of a proposal from the Commission to grant ESM financial assistance to a requesting Member State, the Council, acting by a qualified majority, may recommend to the Member State concerned to seek financial assistance and to prepare a macro-economic adjustment programme. The Council may decide to make this recommendation public.

In accordance with Art. 6 of the same regulation:

upon receipt of a proposal from the Commission, the Council will approve the adjustment programme by qualified majority;

47 http://europa.eu/efc/index_en.htm



the Council has the task to decide, acting by a qualified majority on a proposal from the Commission, on any change to be made to the adjustment programme;

If the monitoring by the Commission and the ECB highlights significant deviations from the macro-economic adjustment programme, the Council, acting by qualified majority on a proposal from the Commission, may decide that the Member State concerned does not comply with the policy requirements contained in the adjustment programme.

European Parliament: Where the Council recommendation to seek financial assistance to a requesting Member State is made public, the relevant Committee of the European Parliament (most probably ECON) may invite representatives of the Member State concerned to participate to an exchange of views (Art 3). Where a requesting Member State has obtained ESM financial assistance, the relevant Committee of the European Parliament (most probably ECON) may invite representatives of the Member State concerned to participate to an exchange of views on the progress made in the implementation of the adjustment programme (Art 7). The competent Committee is being decided upon the subject matter of the exchange of views and based on Annex VII of the Rules of Procedure of Parliament which lays down the powers and responsibilities of the different committees within the EP. If the Rules of Procedure are unclear on this and a matter could fall within the remit of two or more Committees which cannot agree then the matter is being referred to the Conference of Committee Chairmen or ultimately to the Conference of Presidents. However, as a rule of thumb one can conclude that the lead committee dealing with the piece of legislation which provides for such a hearing will also be the relevant competent committee.


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4.1.2 Findings Under the ESM Treaty, roles and reporting arrangements of the governing bodies have been clearly defined. As presented in the table below, the governance structure and reporting arrangements of the ESM as described under the provisions of the ESM Treaty presents features that are aligned with common practice in financial assistance entities with a similar institutional form and a similar legal basis (EIB, EFSF, IMF) as the ESM:

Features ECB EIB IMF Legal basis

EU institution

- TEU, TFEU

- Statute of the European System of Central Banks and of the European Central Bank

- TFEU Protocol n°4

Non EU institution

- Council Regulation n° 407/2010, 11 May 2010

- TFEU

Non EU institution

- Articles of Agreement of the IMF

- By-Laws Rules and Regulations of the IMF

Institutional form European Central Bank, lender of last resort

Long-term financing institution

International Financial Organization

Governance body in charge of credit analysis

Executive Board and staff Management Committee - International Monetary and Financial Committee (IMFC)

- Development Committee

-

Governance body in charge of credit decision

Governing Council Board of Directors Board of Governors

Governance body in charge of credit monitoring

Executive Board and staff Management Committee - Executive Board and Staff

- Intergovernmental groups and committees

Internal Audit Internal Audit Function Audit Committee - Independent Evaluation Office

- Internal Audit Committee

Public reporting - Public annual report

- Quarterly and weekly consolidated accounts

- Annual external audit report

- Annual report

- Operational program

- The IMF’s Annual Report (published by the Ethics Office)

- The ‘External Audit Committee’ (EAC) report to the Board of Governors



Regarding the consistency and interaction between the role and responsibilities of EU institutions as set down in the ESM Treaty and the one laid down by the Proposal for a regulation 2011/385: The respective roles of the EU institutions and of the ESM internal governance instances are

clearly defined: EU institutions conserve ownership on setting of conditionality attached to the financial assistance granted, consistently with TFEU provisions as regards economic policy monitoring of EU Member States, while ESM internal governance instances have inter alia, decision power over the amount and form of financial assistance granted;

The governance bodies involved in the monitoring of the beneficiary Member State compliance with the conditionality attached to the financial assistance granted under the ESM are aligned and consistent between provisions of the ESM Treaty and the Proposal for a Regulation on enhanced budgetary surveillance;

Democratic scrutiny powers devoted to the European Parliament towards beneficiary Member States of ESM financial assistance are only to be found under the Proposal for Regulation 2011/385;

The extent to which the EFC is involved in the surveillance arrangements to be applied to a requesting Member State and/or beneficiary Member State are only to be found under the Proposal for Regulation 2011/385.

In accordance with the legal basis and institutional form of the ESM, established as an international financial institution under Luxemburg law and outside the EU legal framework, none of the EU institutions’ liabilities are involved in the mechanism, except for the resources of the EU institutions involved in the administration of the ESM (e.g. the Commission and the ECB), which are accountable to the European Parliament as regards their cost of operation in the context of the EU budget. Notwithstanding, the ESM governance model entrusts several of the EU institutions (e.g. the Commission and the ECB) in some of the procedural arrangements of the ESM, those EU institutions remaining accountable to the European Parliament as regards their cost of operation and administration in the context of the EU budget. Via the Eurogroup Task Force for Coordinated Action, the European Commission and the ECB have been involved in drafting the Treaty establishing the ESM. Although the other EU institutions have not been involved in drafting the Treaty establishing the ESM, they have provided their opinion on the test before its final adoption. Finally, given that the by-laws and the rules of procedure of the ESM have not been published yet, the assessment as to the adequacy of responsibilities and reporting arrangements of the ESM remains incomplete as regards the implementation modalities that will stem from these documents, and should therefore be treated with the necessary caution.


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4.2 BUDGETARY CONTROL AND FINANCIAL MANAGEMENT

KEY FINDINGS

ESM, as an intergovernmental financial institution, is not subject to budgetary control activities” but rather sound financial management control.

In line with its legal basis, institutional form and financial structure, the ESM presents financial control mechanisms that are common practice within similar private and public financial assistance providers, where:

- the risk management framework forms an integral part of the sound financial management for ESM borrowing and lending operations, as compared to budgetary control mechanisms applicable to borrowing and lending operations under the EU institutional framework;

- “budgetary control activities” only apply to the ESM budget, covering for its administrative costs.

The credit risk management framework of the ESM follows relevant market practice, i.e. to implement lending limit vs. capital stock, use risk management tools;

However, given the immunities laid down by the Treaty, the ESM is exempted from any control under EU or international law applicable to similar financial institutions, except where specifically provided otherwise by the Treaty.

As regards ESM specific financial control activities:

ESM annual accounts are approved by its Board of Governors and published in an annual report made available to the national parliaments, to the supreme audit institutions of the ESM Members and to the ECA.

ESM operations are audited by its Internal Audit function, established according to international standards;

ESM internal control principles and financial management guidelines are approved by its Board of Directors;

ESM annual accounts are certified by an Independent external auditor appointed by the Board.



KEY RECOMMENDATIONS

As regards financial control on the ESM, the European Parliament could:

Request that EBA standards on risk management are taken into account in the implementation guidelines adopted by the ESM Board of Directors, in line with common practice for European banking, such as risk governance standards providing for ALM, liquidity risk, market risk, and operational risk functions.

Make use of indirect means to assess the ESM’s financial and risk management practices, drawing on information that is available on a voluntary basis, upon request, or through existing reporting arrangements.

4.2.1 Definition of budgetary control under EU law

As defined in Council regulation n° 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (Art 3), The EU budget must be established and implemented in compliance with the budgetary principles of unity, accuracy, annuality, equilibrium, unit of account, universality, specification, sound financial management which requires effective and efficient internal control, and transparency.

In view of these core principles, the EU budgetary procedure involves the preparation and adoption of the budget, establishing the annual amount and the distribution of EU expenditure as well as the revenue necessary to cover it. Budgetary control is then exercised over the implementation of the budget to ensure funds have been used in accordance with sound financial management principles.

In this context, this section first analyzes the financial structure of the ESM, in order to determine to what extent budgetary control mechanisms are adequate for the monitoring of borrowing and lending activities of the ESM.

4.2.2 ESM Financial structure

In accordance with the provisions of the ESM Treaty, the financial structure of the ESM will be constructed as follows:

The assets of the ESM will comprise:

ESM property (Art. 32);

Financial assistance granted by the ESM:

precautionary financial assistance, in the form of a precautionary conditioned credit line or in the form of an enhanced conditions credit line in accordance with the detailed guidelines adopted by the Board of Directors on the modalities for implementing the ESM precautionary financial assistance (Art. 14);

loans to an ESM Member for the re-capitalisation of financial institutions of that Member, in accordance with the detailed guidelines on the modalities for


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implementing financial assistance for the re-capitalisation of an ESM Member's financial institutions (Art. 15);

loans to an ESM Member, in accordance with the detailed guidelines on the modalities for implementing ESM loans (Art. 16);

primary market support facility, granted in the form of the purchase of bonds of an ESM Member on the primary market upon the decision of the Board of Governors and with the objective of maximising the cost efficiency of the financial assistance (Art. 17);

Secondary market support facility, granted in the form of operations on the secondary market in relation to the bonds of an ESM Member upon the decision of the Board of Governors with the objective of addressing contagion (Art. 18).

Lending operations transferred from the EFSF, in accordance with Art. 39.

The liabilities of the ESM will comprise :

the funding mobilised by the ESM, through borrowing operations on capital markets from banks, financial institutions or other persons or institutions and in accordance with the modalities determined by the Managing Director, as defined in the detailed guidelines to be adopted by the Board of Directors (Art 21).

The equity of the ESM will comprise:

an “authorised capital stock” of EUR 700 000 million, divided into seven million shares having a nominal value of EUR 100 000 each (Art. 8), subscribed by the ESM Members in accordance with the subscription key of their national central banks to the ECB's capital (Art. 11);

reserves and other funds established by the Board of Governors. The reserve fund will be constituted from the net income generated by the ESM operations and the proceeds of the financial sanctions received from the ESM Members under the multilateral surveillance procedure, the excessive deficit procedure and the macro-economic imbalances procedure established under the TFEU. The reserve and other funds will be invested in accordance with guidelines to be adopted by the Board of Directors (Art 24).

ESM equity and reserves serve for the purpose of loss coverage stemming from ESM activities (Art 25).

Rights and obligations:

EFSF rights and obligations, in accordance with Art. 40.

The overall financial structure of the ESM, where assets are essentially composed of granted loans, where liabilities stem from the funding contracted to finance the lending activity, and where capital and reserves are loss absorbent, is very similar to the financial structures in place within public and private credit institutions. The financial structure of the ESM is therefore aligned with market practice, taking into account its institutional form, legal basis and legal purpose.



As regards the capital stock of the ESM, it is constituted in alignment with the capital contribution principles applicable to the capital stock of the ECB and the EIB. These capital contribution principles are aligned with common practice observed within other international financial institutions with a similar legal purpose, such as the IMF, where capital contributions, named “quotas”48, are paid in by IMF Members and calculated in accordance with several variables such as the weighted average of GDP, the “openness”, the “economic variability”, and international reserves of each Member. The method for determining the capital contribution key of ESM Members (in accordance with ECB capital contribution keys) is therefore, although more simple, consistent with the method in place at the IMF.

Given the financial structure and legal basis of the ESM, the EU budget has no liability towards the financial position of the ESM. Therefore, budgetary control activities, as provided for under the EU legal framework, are not directly transposable to the financial framework of the ESM, which requires instead a financial management and control framework that is in line with that of international credit institutions, as elaborated under the next section.

4.2.3 ESM financial management

In accordance with the provisions of the ESM Treaty, the financial management of the ESM will be performed in accordance with the following main principles:

As regards investment management:

A “prudent” investment policy, implemented by the Managing Director to ensure its highest creditworthiness, in accordance with guidelines to be adopted and reviewed regularly by the Board of Directors (Art. 22);

The resources of the reserve fund and other funds will be invested in accordance with guidelines to be adopted by the Board of Directors (Art. 24).

As regards capital and equity management:

The Board of Directors has the task of deciding on the appropriate course of action for ensuring that ESM Members settle their debts to the ESM within a reasonable period of time (Art. 25);

Dividends may be distributed to the ESM Members upon the Board of Director’s decision, where the amount of paid-in capital and the reserve fund exceed the level required for the ESM to maintain its lending capacity and where proceeds from the investment are not required to avoid a payment shortfall to creditors. Dividends are distributed pro rata to the contributions to the paid-in capital (Art. 23);

The funds other than the reserve fund will be established in accordance with the rules adopted by Board of Directors;

Losses arising in the ESM operations will be charged firstly, against the reserve fund, secondly, against the paid-in capital and lastly, against an appropriate amount of the authorised unpaid capital, which shall be called in accordance with Article 9(3).

As regards financial and risk management of ESM operations:

48 IMF Articles of Agreement, IMF, 2011 and Reform of Quota and Voice in the International Monetary Fund—Report of the Executive Board to the Board of Governors, IMF, March 2008.


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Respect of the lending limit vs. capital stock: the Board of Governors regularly reviews and may decide to change the maximum lending volume and the authorised capital stock of the ESM. During the transitional phase spanning the period from the entry into force of this Treaty until the complete run-down of the EFSF, the consolidated ESM and EFSF lending may not exceed the consolidated capital stock. The Board of Directors will adopt detailed guidelines on the calculation of the forward commitment capacity to ensure that the consolidated lending ceiling is not breached;

The operations of the ESM shall comply with the principles of sound financial and risk management (Art. 22);

The ESM shall use appropriate risk management tools, which shall be reviewed regularly by the Board of Directors (Art. 23);

The ESM shall establish an appropriate warning system to ensure that it receives any repayments due by the ESM Member under the stability support in a timely manner (Art. 13);

As regards “credit risk management” of ESM operations:

“Credit policy setting” (Art. 14-20), notably as regards the type of instruments that can be used and related pricing provisions, is under the responsibility of the Board of Directors of the ESM, while the adoption of these standards is under the responsibility of the Board of Governors;

“Credit analysis and advisory activities" (Art. 13) are essentially carried out by the European Commission, in liaison with the ECB and IMF, notably on the preparation of a preliminary risk assessment and advisory role to the Council and the Board of Governors as to the necessity of granting financial assistance to an ESM Member;

“Credit decision” (Art.13) authority is the Board of Governors, notably as regards the decision of granting financial assistance, the type of financial assistance granted, the pricing applied etc.;

“Credit decision implementation and management” (Art. 7 and Art. 13) is essentially performed by the ESM staff, under the supervision of the Managing Director and in accordance with the guidelines defined by the Board of Directors;

Credit monitoring (Art. 13) is essentially carried out by the Commission and the ECB, notably on the monitoring of compliance with conditions attached to the financial assistance granted.

As regards financial reporting:

The Board of Governors approves the annual accounts of the ESM (Art. 27);

The ESM publishes an annual report containing an audited statement of its accounts and circulates to its Members a quarterly summary statement of its financial position and a profit and loss statement showing the results of its operations (Art. 27).

As regards internal audit and external audit, we refer to the next section of this chapter;

As regards immunity and privileges, to the extent necessary to carry out the activities provided for in this Treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature (Art. 12).



4.2.4 Findings As regards the financial structure of the ESM:

The financial structure of the ESM is in line with market practice, taking into account its institutional form, legal basis and legal purpose;

The capital contribution principles applicable to capital stock of the ESM are consistent with the capital contribution principles applicable to financial institutions with a similar legal purpose, such as the ECB, the EIB and the IMF;

Given the financial structure and legal basis of the ESM, the EU budget has no liability towards the ESM.

As regards the adequacy of budgetary control on the ESM:

Consistent with its financial structure, the ESM presents financial and risk management principles that are similar to the principles set out by private and public credit institutions, where:

The risk management function constitutes a cornerstone of the ESM sound financial management, by providing for the control over borrowing and lending operations, as compared to the EU control activities on borrowing and lending operations, which are essentially covered by budgetary control mechanisms;

ESM budgetary control activities are only applicable to the ESM budget, covering its costs of operation.

The credit risk management framework of the ESM follows relevant market practice, i.e. to implement lending limit vs. capital stock, use risk management tools;

However, given the immunities laid down by the Treaty, the ESM is exempted from any control under EU or international law applicable to similar financial institutions, except where specifically provided otherwise by the Treaty;

Subject to the publication of the by-laws and rules-of-procedure of the ESM, the current ESM Treaty provisions prescribe the implementation of sound risk management without specifying whether the commonly observed risk governance standards shall apply to the ESM, such as the set up of an ALM function, a liquidity risk, a market risk, an operational risk function.


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4.3 EXTERNAL AUDIT, ACCOUNTABILITY AND TRANSPARENCY

KEY FINDINGS

In order to ensure appropriate arrangements for public external audit, accountability and transparency it is of common practice that international financial assistance providers are subject to both internal and external audit.

The ESM Treaty provides for three levels of control: (i) an Internal Audit function, established according to the international standards, (ii) a Board of Auditors composed of five members appointed by the Board of Governors, and (iii) Independent External Auditors, appointed by the Board of Governors. The Board of Auditors may inform the Board of Directors at any time of its findings. On an annual basis, the Board of Auditors reports to the Board of Governors and makes its report accessible to the national parliaments, the SAI’s of ESM Members and to the ECA. Under the ESM Treaty provisions, this report is not made available to the European Parliament.

According to the European Treaties, the ECA is entrusted with the external audit of Union budget. In that perspective, the ECA could not be granted such a competence for an institution that, according to its legal basis and institutional form, does not draw on the EU budget, either directly or in the form of a guarantee.

However, with the aim of sound governance, the Board of Auditors will include two members from the SAI’s of the ESM Members - with a rotation between the latter - and one from or proposed by the ECA. In addition to the annual report established by the ESM’s Board of Auditors, the ESM accounts will be made accessible to national parliaments, SAIs and the ECA. As commonly applied, it is most likely that the external audit statement will be made public through the ESM’s Annual Report disclosure.

Besides, some responsibilities related to the setting and monitoring of macro-economic conditionality have been assigned to the Commission by the ESM Treaty. As a European institution, the activities performed by the Commission according to the ESM Treaty will also be part of the scope of the ECA audits.

Finally, the European institutions may, at their initiative, request the ECA to provide with specific opinions on the subject that are of interest to them.



KEY RECOMMENDATIONS

As regards external audit and accountability, the European Parliament could:

Encourage the ECA to audit EU institutions involved in the ESM, placing a particular emphasis on ESM-related activities. Ensure timely scrutiny of the results of the ECA’s audit procedures, findings, and reports.

Submit requests for specific opinions to the ECA in order to obtain information on financial topics related to EU institutions’ involvement in ESM operations.

4.3.1 Governance of external audit within international organisations and financial institutions It is common and sound practice within international organisations to have appointed either internal or external independent audit, with the form and governance of these differing according to the type of organisation. According to the ESM Treaty, audit roles and responsibilities will be assigned to: Internal bodies, by means of:

An internal audit function, to be established according to international standards (Art.28);

A Board of Auditors whose composition is intended to ensure independent and knowledgeable competence, and whose role provides for the audit of the ESM accounts, access to any information necessary for the completion of its tasks and communication of its annual report to national parliaments, SAIs and ECA (Art.30).

External auditors, whose role provides for the certification of the ESM annual financial

statements and access to all books and accounts/information about ESM transactions necessary for the completion of its tasks (Art.29).

As presented in the table below, the governance structure, role and reporting arrangements of the ESM audit function, as described under the provisions of the ESM Treaty (Art. 28 to 30), presents features that are aligned with common practice in international organisation providing with similar financial assistance and legal requirements applicable to financial institutions as summarized below:


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Features IMF ECB EIB EFSF Form Inter-governmental

institution EU institution

Hybrid (non) EU institution

Non EU institution

Internal Audit bodies

- External Audit Committee

- Office of Internal Audit (in charge of internal audit)

- Independent Evaluation Office

- Internal Auditors Committee

- Internal audit function

- Audit Committee



External Audit bodies

- External audit firm designated by the Executive Board, after consultation of the External Audit Committee

- External audit firm designated by the Audit Committee, after consultation of the Management Committee

- European Court of Auditors


- European Court of Auditors


4.3.2 Mandate of the European Court of Auditors According to Art. 29 of the ESM Treaty, the accounts of the ESM must be audited by independent external auditors. It could therefore have been argued that the European Court of Auditors, as the case for the ECB and EFSM, could have been granted such a mandate. However, this is not conceivable according to:

a) The EU legal framework as established within the Treaties: On the basis of Art. 287 of the TFEU, the European Court of Auditors is assigned with defined roles and responsibilities, i.e. the audit of the accounts of the Union, bodies, offices or agencies that manages revenue or expenditure on behalf of the Union and in the Member States, including on the premises of any legal or natural person in receipt of payments from the budget. Since the ESM mechanism does not rely on Union budget, there is no legal basis according to the TFEU for the European Court of Auditors to be granted such an external audit mandate.

b) The ESM treaty: The ESM Treaty does not provide this international institution with an EU institution status;

The ESM Treaty does not enable the mechanism to access and/or use Union budget;

The Board of Auditors as established under Art. 30 of the ESM Treaty does provide with the designation of an ECA representative within its members. However, this later won’t “seek nor take instructions from ... any public or private body”, ie the Court Of Auditors itself for instance.



Notwithstanding, Art. 287, 4°, indent two, provides that institutions of the Union may request the Court of Auditors to deliver specific opinions or submit observations in the form of special reports. According to its Rules of Procedure , the Court of Auditors may also carry out such opinions on its own initiative. It is therefore conceivable that the EU Parliament could, as a result of the information collected by the Court of Auditors due to its access to the ESM Board of Auditors’ annual report, ask for such special report. 4.3.3 Reporting and disclosure arrangements In order to ensure sound governance and transparency and as commonly applied within inter-governmental and financial institutions of the kind of the ESM, the ESM Treaty provides with several reporting and disclosure arrangements, that could be further detailed within its by-laws and rules of procedures, i.e.: Disclosure of the annual report by the Board of Governors, containing audited statements

(Art.27);

Communication to the ESM Members of quarterly summary statements (Art.27);

Communication by the Board of Auditors of its annual report to the national parliaments and supreme audit institutions of the ESM Members and the ECA (Art.30).

In addition, according to the EU SAI’s Contact Committee, ECA may be informed by European SAIs through exchange of information about SAIs’ audit opinion on the use by the relevant Member State of funds raised under the ESM.

4.4 RELIABILITY OF DATA AND STATISTICS

KEY FINDINGS

The reliability of data and statistics collected by the ESM as regards the financial situation of EU Member States, will benefit from the same quality improvements as those collected by the Commission and the ECB in the context of the coordination of EU Member States economic policies, in accordance with Art. 121-126 of the TFEU;

Subject to the publication of the by-laws and rules-of-procedure of the ESM, the reliability of the ESM financial and risk management implementation modalities will highly contribute to ensure the quality of data and statistics stemming from the ESM.

Additionally, assurance on the reliability of ESM financial and operational data will be provided as a result of three audit authorities, namely the ESM internal audit function, the ESM Board of Auditors and the appointed external auditor.


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According to the provisions of the ESM Treaty (Art. 13) and the Proposal for a Regulation n° 2011/385 (Art. 6), data and statistics collected by the ESM as regards the financial situation of EU Member States, will be performed consistently with the standard measures of economic policy coordination implemented by the Commission and the ECB provided for in the TFEU (Art. 13 of the ESM Treaty). Therefore, the quality of data and statistics collected by the ESM as regards the financial situation of EU Member States will be consistent with the quality of data and statistics collected by the Commission and the ECB in the context of their economic policy coordination roles.

Subject to the publication of the by-laws and rules-of-procedure of the ESM, the quality of the ESM financial and risk management implementation modalities that will be rolled-out, will highly contribute to ensure the quality of data and statistics stemming from the ESM.



4.5 POLITICAL AND DEMOCRATIC SCRUTINY

KEY FINDINGS

Although the ESM Treaty defines no roles of political scrutiny for the European Parliament on the mechanism, the European Parliament will be able to exercise indirect political oversight in accordance with the relevant provisions of the TFEU (Art. 121-126) and consistently with the provisions of the Proposal for a Regulation on strengthened budgetary surveillance in the context of Art. 13 of the ESM Treaty and Art. 136 of the TFEU, on measures of economic policy coordination;

National Parliaments can exercise political scrutiny over the ESM through the political scrutiny of their government representatives included in the ESM Board of Governors. Further, they will have access to the following information: (i)the annual report of the Board of Auditors, communicated to each Member State; and (ii) the ESM annual report, containing an audited statement of its accounts, quarterly summary statements of its financial position, and a profit and loss statement showing the results of its operations, which will be circulated to ESM Members. Additionally, in the context of strengthened budgetary surveillance on Member States seeking financial assistance, representatives of the Commission may be invited by the parliament of the Member State concerned to participate to an exchange of views;

Other persons, including representatives of institutions and organisations, such as the IMF, may be invited by the Board of Governors to attend meetings as observers on an ad hoc basis;

It is common practice of international financial assistance organizations to report on a voluntary basis to legislative authorities and to organize discussion platforms with parliamentary associations to enable political and democratic scrutiny with a view to allow informed and timely decisions in a broader economic context;

International financial market stakeholders play a major role in requesting transparent public disclosure of information by international financial assistance providers, and thereby contribute to the democratic scrutiny of the mechanism;

The European Parliament can best add value to this scrutiny process by exercising indirect democratic scrutiny in virtue of the TFEU legal provisions establishing accountability of EU institutions involved in the administration of the ESM as to their conduct of activities and use of resources for that purpose. Parliamentary scrutiny can be exercised by means of reviewing the respective annual reports published by each institution, and in accordance with budgetary adoption and discharge procedures. Further, the Parliament – and its CONT Committee in particular – can exercise political scrutiny by requesting an exchange of views, the formulation of parliamentary questions or adoption of parliamentary resolutions, which require information on either a voluntary or required basis.


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Given that no Euro-bonds have yet been created or issued, current regulatory provisions define no political scrutiny roles for the European Parliament in this respect.

KEY RECOMMENDATIONS

As regards political scrutiny of the ESM, the European Parliament could request that the ESM Board of Governors also makes the ESM annual report accessible to the European Parliament. Alternatively, the European Parliament could address this request to National Parliaments, in the context of enhanced cooperation, or to the ECA.

4.5.1 Democratic scrutiny over international institutions under EU law

Given the increasing role of international institutions in the governance and management of European and global crises, concerns arise over the apparent lack of democratic scrutiny of these institutions.

While the European legal framework does not provide the European Parliament with direct parliamentary scrutiny of such international institutions, the Council of Europe and its Parliamentary Assembly has considered a possible way of action in resolution 1289(2002)49.

In the light of this resolution, democratic scrutiny toward international institutions could be considered in several ways:

Exercise by national parliament of their powers via debates on the international institutions’

activities and use of means at national parliament’s disposal (i.e. budgetary procedures);

Attendance by national parliamentarians within national delegations at meetings with international institutions;

Debates organised at pan-European level (for instance like currently the case between the Council or Europe and the OECD, IMF, WTO, etc.).

4.5.2 Definition of democratic scrutiny roles on the ESM The ESM Treaty, provides that other persons, including representatives of institutions or organisations, such as the IMF, may be invited by the Board of Governors to attend meetings as observers on an ad hoc basis (Art. 5), which could possibly mean that members of government of non euro area Member States, as well as members of Parliament of any EU Member State may attend the Board of Governors’ meetings as observers.

49 European Parliament, Parliamentary scrutiny of international institutions, Resolution 1289 (2002).



In addition, the Treaty provides that:

the annual report of the Board of Auditors will be communicated to each Member State (Art.

30);

the ESM annual report, containing an audited statement of its accounts, quarterly summary statements of its financial position, and a profit and loss statement showing the results of its operations, which will be circulated to ESM Members (Art. 27).

Moreover, in the context of the Proposal for a regulation as regards strengthened budgetary surveillance 2011/385, representatives of the Commission may be invited by the parliament of the Member State concerned to participate to an exchange of views, both in the context of the risk assessment of the Member State (Art. 3), as in the context of monitoring compliance with macro-economic conditionality (Art. 6).

By contrast with existing EU financial assistance mechanisms, the ESM is not subject to a discharge procedure in Parliament In view of its specific legal basis and institutional form. 4.5.3 Definition of European Parliament political scrutiny on the ESM

The ESM Treaty defines no political scrutiny roles for the European Parliament on the ESM. However, the Proposal for a regulation 2011/385 as regards strengthened budgetary surveillance provides that:

in case the Council makes public a recommendation to a Member State to seek financial assistance, the ECON Committee of the European Parliament may invite representatives of the Member State concerned to participate to an exchange of views (Art. 3), consistent with the provisions of the TFEU defining the role of the Parliament in the context of EU Member States’ economic policy coordination;

where a requesting Member State has obtained ESM financial assistance, the relevant Committee of the European Parliament (most probably ECON) may invite representatives of the Member State concerned to participate to an exchange of views on the progress made in the implementation of the adjustment programme (Art 7). The competent Committee is being decided upon the subject matter of the exchange of views and based on Annex VII of the Rules of Procedure of Parliament which lays down the powers and responsibilities of the different committees within the EP. If the Rules of Procedure are unclear on this and a matter could fall within the remit of two or more Committees which cannot agree then the matter is being referred to the Conference of Committee Chairmen or ultimately to the Conference of Presidents. However, as a rule of thumb one can conclude that the lead committee dealing with the piece of legislation which provides for such a hearing will also be the relevant committee (most probably ECON).

Given that, in accordance with Art. 13 of the ESM Treaty, the economic policy conditionality attached to the financial assistance granted by the ESM must be consistent with the measures of economic policy coordination provided for in the TFEU, the European Parliament will be able to exercise indirect political oversight in accordance with the relevant provisions of the TFEU (Art. 121-126).

These provisions are consistent with the democratic scrutiny powers devoted to the European Parliament by the TFEU (Art. 121-126) as regards the monitoring of economic policy developments in EU Member States.


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4.5.4 How appropriate democratic scrutiny on international financial assistance providers can be ensured

As a relevant source for comparison, political and democratic scrutiny over existing international financial assistance providers, such as the IMF and the EIB, are identified as complementary actions:

With a view to ensure transparency on their financial situation and business conduct, existing international financial assistance providers publicly report on their activities and their financial situation, and report to parliamentary authorities on a voluntary basis. For example, the EIB reports to the European Parliament, and the IMF towards the Parliamentary Network on the World Bank and other global and regional parliamentary organizations, such as the Global Organization of Parliamentarians Against Corruption, the Parliamentarians for Global Action, the Parliamentary Centre, the Commonwealth Parliamentary Association and the Inter-Parliamentary Union.;

International financial market stakeholders, including regulatory and surveillance authorities, credit rating agencies, public and private investors, lobbies and associations, play a major role in requesting transparent public disclosure of financial and management information, and thereby largely contribute to the democratic scrutiny of the financial institution.

4.5.5 The way in which the European Parliament can best add value to the democratic and political scrutiny of the ESM

Except for the political and democratic scrutiny the European Parliament can exercise on the ESM in the context of EU monitoring of Member States’ economic policy developments, the European Parliament disposes of indirect scrutiny powers:

towards the EU institutions whose resources are involved in the administration of the ESM (e.g. the Commission and the ECB), and are therefore accountable to the European Parliament as regards their activities and use of resources, in the context of the EU budget, and notably through the following:

approval of the EU budget, in accordance with Art. 324 of the TFEU;

the monitoring of EU budgetary implementation in accordance with Art. 318 of the TFEU and the discharge given to the European Commission for implementation of the EU budget, in accordance with Art. 319 of the TFEU.

towards EU institutions involved in the administration of the ESM and towards National Parliaments, in the context of the following TFEU regulatory provisions:

On a yearly basis, the Commission reports to the European Parliament on the conduct of its activities (Art 249. TFEU). In the context of this reporting, the Commission could also report to the European Parliament on the specific activities performed as regards the administration of the ESM;

In accordance with Art 230 of the TFEU, the European Parliament and its members are entitled to request a hearing of the Commission and to question the Commission, which must reply in oral or in writing. In virtue of this right, the European Parliament can scrutinize the Commission on its activities conducted in the context of the ESM;

In accordance with TFEU Protocol n° 1, the European Parliament and national Parliaments determine the organisation and promotion of effective and regular



interparliamentary cooperation within the Union. In the context of the interparliamentary cooperation, the European Parliament can question National Parliaments on the financial assistance provided by the ESM to the government of the EU Member State concerned.


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REFERENCES

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Council of the European Union (2007) Council regulation (EC, Euratom) N° 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ L 248, 16.9.2002, p. 1), Official Journal of the European Communities (2002R1605)

Council of the European Union (2010, May 12) Council regulation (EU) N° 407/2010 of 11 May 2010 establishing a European Financial Stabilisation Mechanism, European Council, May 12, 2010

Council of the European Union (2010) Extraordinary Council meeting: Economic and Financial Affairs. Press release (9596/10 (Presse 108))

Council of the European Union (2010) States, Decision of the Representatives of the Governments of the Euro Area Member States Meeting within the Council of the European Union & Decision of the Representatives of the Governments of the 27 EU Member (ECOFIN 265 UEM 179)

Council of the European Union (2011) Treaty establishing the European Stability Mechanism (ESM), Council of the European Union.

Council regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure.

European Commission (2010) Amending letter N° 2 to the draft general budget 2011 statement of revenue and expenditure by section: Section III – Commission (SEC(2010)1199 final)

European Commission (2010) Communication from the commission to the council and the Economic and Financial Committee on the European Financial Stabilisation Mechanism (COM(2010)713 final)

European Commission (2011) Economic governance: Commission proposes two new Regulations to further strengthen budgetary surveillance in the euro area (MEMO/11/822)

European Commission (2011) Proposal for a Regulation of the European Parliament and of the Council on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area (COM(2011)821 final, 2011/0386 (COD)

European Commission (2011) Proposal for a Regulation of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro (COM(2011)819 final, 2011/385 (COD))

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European Financial Stability Facility, from http://www.efsf.europa.eu/about/index.htm

European Financial Stability Facility (2010) Charter for Audit and Control, efsf.europa.eu: http://www.efsf.europa.eu/about/corporate-governance/index.htm

European Parliament and Council (2010) Regulation N° 1081/2010 of the European Parliament and of the Council of 24 November 2010 amending Council Regulation (EC, Euratom) N° 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities

European Parliament (2011) Global imbalances and global governance, Directorate General for Internal Policies, Brussels

European Parliament (2011) Resolution of the European Parliament of 10 May 2011 with observations forming an integral part of its Decisions on discharge in respect of the implementation of the general budget of the European Union for the financial year 2009, Section III – Commission, Brussels.

European Parliament (2011), Rules of Procedure

European Parliament (2011) The ECB, the EFSF (and the ESM) European Parliament, Directorate General for Internal Policies, Brussels.

European Parliament resolution of 23 March 2011 on the draft European Council decision amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro (00033/2010 – C7-0014/2011 – 2010/0821(NLE)).

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____________________________________________________________________________________________


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Task Force to the European Council Strengthening Economic Governance in the EU, Report of the, Brussels, 21 October 2010.



ANNEX


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ANNEX 1: TERMS OF REFERENCE


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ANNEX 2: INTERNATIONAL FINANCIAL SUPPORT AT A GLANCE

Instrument MFA BoP EFSM (European Financial Stabilisation Mechanism)

EFSF(European Financial Stability Facility) - Temporary crisis management

ESM (European Stability Mechanism) -permanent crisis management

IMF (International Monetary Fund) -permanent crisis management

Legal base Art.212 of the TFEU

Council Regulation (EC) N° 332/2002 of 18 February 2002 establishing a facility yproviding medium-term financial assistance for Member States' balances of payments

Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism

Framework agreement (2010) Treaty establishing the European Stability Mechanism (ESM) - T/ESM2012

Articles of Agreement of the IMFBy-Laws Rules and Regulations of the IMF

Legal/institutional form EU mechanism EU mechanism EU mechanism Private company owned by euro

area countries Intergovernmental organisation Intergovernmental organisation

Capital structure

Guaranteed by EU budget (i.e. all EU Member States) and the Guarantee Fund for External Action

Guaranteed by EU budget (i.e. all EU Member States)

Guaranteed by EU budget (i.e. all EU Member States)

Eur 80 billion paid-in capitalEur 700 billion callable capital

Eur 80 billion paid-in capitalEur 620 billion callable capital IMF assets

Investment grade

Not Preferred creditor compared to IMF




Not Preferred creditor compared to IMF Preferred creditor

Lending capacity No ceiling

Eur 50 billionEur 6.5 billion for HungaryEur 3.1 billion for LatviaEur 5 billion for Romania

Eur 60 billionEur 22.5 billion for IrelandEur 26 billion for Portugal

Eur 440 billionEur 17.7 billion for Ireland (plus Eur 4.8 billion in bilateral loans w/UK, Denmark and Sweden)Eur 26 billion for Portugal

Eur 500 billionEur 60 billionEur 22.5 billion for IrelandEur 26 billion for Portugal

Validity Exceptional - mobilised on a case-by-case basis

Exceptional - mobilised on a case-by-case basis May 2010 until end of June 2013

The EFSF will be liquidated on the earliest date after 30 June 2013 on which there are no longer loans outstanding to a euro-area Member State and all Funding Instruments issued by EFSF and any reimbursement amounts due to Guarantors have been repaid in full.This means that after June 2013, EFSF would not enter into any new programmes but will continue the management and repayment of any outstanding debt and will close down once all outstanding debt has been repaid.

Initially June 2013. Brought forward to July 2012 (European Council, 9/12/2011)

Permanent

Who can be helped?

Third countries (potential or current EU candidates and EU neighbours)

Non Euro area MS All MS Euro area MS Euro area MS IMF Members


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Activity/instrument

grants loan or financial facility to third countries with short-term balance-of-payment problems, public finance stabilisation and structural reforms implementing needs (guaranteed by EU bdg)

grants loan or financial facility to non Euro-zone MS with balance of payments difficulties (guaranteed by EU bdg)

grants loan or credit line to MS in severe economic/financial circumstances (guaranteed by EU bdg)

-issue bonds or other debt instruments on the market to raise the funds needed to provide loans to countries in financial difficulties.-intervene in the debt primary market-intervene in the debt secondary markets-act on the basis of a precautionary programme-finance recapitalisations of financial institutions through loans to governments including in non-programme countries

The ESM will perform the same activities as the EFSF

Special drawing rights or currenciesFinancial and technical services, incl. administration of resources contributed by members

Governance Economic and financial committee council

Economic and financial committee council

Economic and financial committee council

The board of the EFSF comprises high level representatives of the 17 euro area Member States The European Commission and the ECB each have observers on the EFSF board. The EFSF board is headed by the Chairman of the EU’s Economic and Financial Committee.

Board of Governors consisting of the Ministers of Finance of the euro area Member States (as voting members) with the European Commissioner for Economic and Monetary Affairs and the ECB President as observersA Managing Director responsible for the day-to-day management of the ESM. The Managing Director will chair the Board of Directors. Board of Directors have one Director and one alternate Director per euro area Member State

Board of GovernorsInternational Monetary and Financial Committee (IMFC) and Development Committee in charge of credit analysisExecutive Board and Staff and Intergovernmental groups and committees in charge of credit monitoring

Decision making body Council ECOFIN council ECOFIN council Eurogroup/EFSF board of Directors

Eurogroup/ESM Board ofGovernors and ESM Board ofDirectors

Board of Governors







COM role

1.COM borrows and lends2.COM discusses third country in liaison with the ECB and IMF, an assessment of applicant third country' financial needs3.COM proposes to Council for approval Union financial assistance4. COM and beneficiary third country conclude a Memorandum of Understanding detailing the general economic policy conditions laid down by the Council.5. COM re-examines, in consultation with the ECB and IMF, the general economic policy conditions of third country at least every six months and discusses with the beneficiary third country the changes that may be needed

1.COM borrows and lends2.COM discusses non Euro-zone MS in liaison with the ECB and IMF, an assessment of applicant non Euro-zone MS' financial needs3.COM proposes to Council for approval Union financial assistance4. COM and beneficiary non Euro-zone MS conclude a MoU detailing the general economic policy conditions laid down by the Council.5. COM re-examines, in consultation with the ECB and IMF, the general economic policy conditions of non Euro-zone MS at least every six months and discusses with the beneficiary non Euro-zone MS the changes that may be needed. Every 3 years the Council shall examine, based on report from the Commission and after the EFC's opinion, whether the facility established still meets, in its principle, arrangements and ceiling, the need which led to its creation.

1.COM borrows and lends2.COM discusses, in liaison with the ECB and IMF, an assessment of applicant MS' financial needs3.COM proposes to Council for approval financial assistance4. COM and beneficiary MS conclude a MoU detailing the general economic policy conditions laid down by the Council.5. COM re-examines, in consultation with the ECB and IMF, the general economic policy conditions of MS at least every six month, discusses with the MS the changes that may be needed6.The Commission to provide the EFC and to the Council, within six months following the entry into force of this Regulation and where appropriate every six months thereafter, a report on the implementation and on the continuation of the exceptional occurrences that justify its adoption.

-assesses whether there is a risk to the financial stability of the euro area as a whole (together with the IMF,ECB)-ensures consistency between different kinds of aid-sends experts along with the ECB and IMF to the contry in difficulty to draw up a support programme-signs MoU with the country-monitors (together with the IMF,ECB) compliance with the macroeconomic adjustment programme, reporting to the ECOFIN Council and the Board of Directors of the ESM

1. COM assesses the existence of a risk to the financial stability of the euro area as a whole;2.COM undertakes - wherever possible, together with the IMF - a rigorous analysis of the debt sustainability of the ESM Member concerned4. COM negotiates, in liaison with the ECB, the economic policy conditionality attached to each financial assistance (MoU)5.COM signs the MoU on behalf of the ESM6. COM (together with the IMF, and in liaison with the ECB) monitors the compliance with the economic policy conditionality attached to the financial assistance. On the basis of the report of the European Commission, the Board of Directors shall decide on the disbursement of the tranches of the financial assistance subsequent to the first tranche.

None

EP role

The Parliament is informed of the content of the MoU between COM and beneficiary third country and Council decision to grant the assistance

The Parliament is informed of the content of the MoU between COM and beneficiary MS and Council decision to grant the assistance

The Parliament is informed of the content of the MoU between COM and beneficiary MS and Council decision to grant the assistance

Although there is no specific statutory requirement for accountability to the European Parliament, EFSF has a close relationship with the relevant committees.

The European Commission will supervise the implementation of this programme, and will report back to the European Parliament together with the Council.

None


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Internal auditing

The Commission, including the European Anti-Fraud office, shall in particular have the right to send its officials or duly authorised representatives to carry out in the beneficiary third country any technical or financial controls or audits that it considers necessary in relation to that assistance.

The Commission, including the European Anti-Fraud office, shall in particular have the right to send its officials or duly authorised representatives to carry out in the beneficiary MS any technical or financial controls or audits that it considers necessary in relation to that assistance.

The Commission, including the European Anti-Fraud office, shall in particular have the right to send its officials or duly authorised representatives to carry out in the beneficiary MS any technical or financial controls or audits that it considers necessary in relation to that assistance. (art. 8.3 l.b.)

Independent Internal Auditor

An internal audit function shall be established according to international standards.The Board of Auditors shall consist of five members appointed by the Board of Governors for their competence in auditing and financial matters and shall include two members from the supreme audit institutions of the ESM Members - with a rotation between the latter - and one from the European Court of Auditors

Independent Evaluation OfficeInternal Audit Committee

External auditors

ECA has the right to carry out in the beneficiary third country any financial controls or audits that it considers necessary in relation to the management of the assistance. (art 142, 5° of the Financial Regulation)

ECA has the right to carry out in the beneficiary Member State any financial controls or audits that it considers necessary in relation to the management of the assistance. (art 142, 5° of the Financial Regulation)

ECA has the right to carry out in the beneficiary Member State any financial controls or audits that it considers necessary in relation to the management of the assistance. (art. 8.3 l.b.)

The Company shall have one or more statutory auditors appointed by vote of the shareholders' meeting for a maximum duration of 6 years (…)

The accounts of the ESM shall be audited by independent external auditors approved by the Board of Governors and responsible for certifying the annual financial statements. The external auditors shall have full power to examine all books and accounts of the ESM and obtain full information about its transactions.

None



ANNEX 3: ACKNOWLEDGEMENTS We would like to thank the many representatives of European Institutions and national Supreme Audit Institutions who participated in our study and supported us in the collection of information and data throughout the process of designing and conducting this study. These individuals also provided helpful feedback and creative suggestions which marked valuable contributions to the study and the final report presented here. We give special thanks to:

LAST NAME FIRST NAME INSTITUTION

AGUEDA Ollero-Montiel European Commission (DG BUDG)

ANGEL Benjamin European Commission (DG ECFIN)

BEERSING Sunil European Commission (DG ECFIN)

BOLKART Andreas European Court of Auditors

CARLSSON Jan European Commission (DG ECFIN)

CRISP Mark European Court of Auditors

CURIALE Vincenzo European Commission (DG BUDG)

DA COSTA OLIVEIRA Andrea Rita European Commission (DG BUDG)

DA SILVA CALDEIRA Vitor European Court of Auditors

DACO Daniel European Commission (DG ECFIN)

DRAUZ Philip Council

DREIMANE Sandra European Court of Auditors

FILIPKOVA Lenka European Commission (DG BUDG)

FRANKEL Christophe EFSF

GENTON Denis European Commission (DG BUDG)

GRAY Brian European Commission (IAS)

HRISTOVA Daniela European Court of Auditors

IVANOVA Iliana European Parliament

LANGEDIJK Sven European Commission (DG ECFIN)

LEQUILLER Francois Eurostat

LOBERA ARGUELLES Enrique European Commission (DG BUDG)

MADEIRA Jose European Commission (DG BUDG)

MADSEN Irene European Court of Auditors

MC CAN Angela European Court of Auditors

MURPHY Tony European Commission (DG ECFIN)

ROZENDAL Piet Dutch Supreme Court of Auditors

RÜBIG Paul European Parliament

SCHMIDT Burkhard European Commission (DG ECFIN)

SCHUETZ Daniela Central Bank of Germany

SIMPSON Geoffrey European Court of Auditors

STRUYVELT Eddy European Court of Auditors

VAN DER ZEE Reinder European Commission (DG BUDG)

VAN ROZENDAAL Peter Dutch Supreme Court of Auditors


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