“The financial and debt crisis has underlined high levels of interdependence particularly within the euro area. The smooth functioning of the EMU requires not only the swift and vigorous implementation of the measures already agreed under the reinforced economic governance framework (notably the Stability and Growth Pact and the Treaty on Stability, Coordination and Governance), but also a qualitative move towards a fiscal union. In the context, within the euro area, of greater pooling of decision making on budgets commensurate with the pooling of risks, effective mechanisms to prevent and correct unsustainable fiscal policies in each Member State are essential.” Source: HvR June 2012 Report
Economic and Budget Coordination
Early in 2010, Member States were quick to realise that the sovereign debt crisis in one country can rapidly spill over to others and cause unprecedented damage to the entire European economy. A decision was made that, in order to prevent dramatic consequences to the entire system, economic and budgetary coordination at the EU level was necessary. This system of coordination was named the European Semester and was launched in January 2011.
Budgetary surveillance package of euro area Member States - An overview of the autumn 2013 package
The European Semester: Main steps at the EU level
See also EPP info