The eu has been taking concrete steps for a much stronger integration within the economic and monetary union. Eu action has been focusing on restoring the sustainability of public finances and addressing other macroeconomic imbalances as well as on providing financial assistance to member states in difficulties. In addition, new rules will ensure stronger and more effective economic governance, particularly for the euro area, with adequate mechanisms to monitor progress and ensure enforcement.

Treaty on stability, coordination and governance in the economic and monetary union fiscal compact . This treaty, also known as the fiscal compact , entered into force on 1 january 2013 following its ratification by finland. The treaty aims to strengthen fiscal discipline in the euro area through the balanced budget rule and the automatic correction mechanism. The esm is designed to safeguard financial stability in the euro area by providing conditional financial assistance to member states under severe market pressure. It entered into force in october 2012 and will gradually replace the temporary european financial stability facility efsf .

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This reinforced the stability and growth pact with new rules on economic and fiscal surveillance and introduced a new macroeconomic imbalances procedure. Which aims to prevent the emergence of harmful imbalances and to correct those already existing. This allows eu member states to coordinate ex ante their budgetary and economic policies, in line with both the stability and growth pact and the europe 2020 strategy. The two pack , a strengthened budgetary surveillance in the euro area: the european commission proposed two new regulations on 23 november 2011. Published by the european commission on 23 november 2011, it structures the political debate in the eu on the rationale, pre conditions and possible options of coordinated or joint debt issuance. They aim to reduce over reliance on credit ratings while at the same time improving the quality of the rating process.

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Under the new rules, credit rating agencies will have to be more transparent when rating sovereign states. More information on credit rating agencies the eu action is aimed at implementing a stricter regulatory regime for the financial sector not only internally but also on a global level g20. At the same time, it is necessary to strengthen the financial sector so that banks can support the economy by providing credit. Several new rules and initiatives have been or are being put in place as part of a financial regulation programme in response to the financial crisis and to g20 commitments. A set of temporary state aid control rules to assess public support to financial institutions during the crisis. This crisis regime was first adopted in 2008 2009 in the wake of the financial crisis that followed the collapse of lehman brothers. A new financial supervision architecture based on four new european supervisory authorities launched on 1 january 2011: eba for banks, esma for securities markets, eiopa for insurance and pensions, together with a european systemic risk board esrb to contribute to the prevention or mitigation of systemic risks to financial stability in the union that arise from developments within the financial system.

The aim of such tests is to assess the resilience of financial institutions to adverse market developments, as well as to contribute to the overall assessment of systemic risk in the eu financial system. Stricter capital requirements and better corporate governance for banks and investment firms: the european commission adopted a legislative package the fourth capital requirements directive to strengthen the regulation of the banking sector on 20 july 2011. The european council agreed a banking package on 26 october 2011 in order to support banks in accessing term funding and to increase the level of high quality capital that banks hold. The european central bank has agreed on specific measures to support bank lending and money market activity on 8 december 2011.

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On 15 october 2013 the council adopted regulations creating a single supervisory mechanism for the oversight of banks and other credit institutions, thus establishing the first pillar of europe's banking union. The single supervisory mechanism ssm will be composed of the european central bank ecb and the supervisory authorities of the member states. It will cover the euro area as well as non eurozone countries that choose to participate. The eu action also aims to encourage structural reforms and to support growth enhancing investments to strengthen the single market especially for services, energy and e commerce and to tackle unemployment, especially youth unemployment.

It was proposed by the commission and was endorsed by the european council two years ago. Based on the principles of smart, sustainable and inclusive growth, europe 2020 sets out five key targets in the areas of employment, research and innovation, education, poverty reduction and climate/energy. This strategy remains valid and should help member states to pull in the same direction. Completing the single market in services and building the eu digital single market have significant growth potential.

The december 2011 european council agreed to fast track a list proposed by the commission of important proposals in this area, especially those in the single market act. A series of 12 key measures proposed by the commission in april 2011 with the aim of tapping fully the potential of the eu single market. Others form part of efforts to create a digital single market by 2015. The commission put forward a proposal, subsequently endorsed by the eu council and european parliament, to increase to 95% the eu contribution to co funded projects in countries benefitting from financial assistance programmes. The commission has also been taking action to re programme eu structural funding where appropriate, for example to guarantee funding for smes in greece. The commission also put forward a proposal to use eu project bonds to stimulate private financing of key infrastructure projects. Looking beyond the immediate term, the commission wants the 2014 2020 multiannual financial framework to be closely tied to the europe 2020 growth agenda and to that end has proposed allocating euro 80 billion to research and innovation.

Euro 50 billion to strategic transport and energy links and digital networks and euro 2.5 billion to support the launch of new companies. The commission has also tabled proposals to ensure that eu social and regional development funding in 2014 2020 similarly reflects the growth and jobs agenda. To give further impetus to the governance reforms, 23 member states, including six outside the euro area bulgaria, denmark, latvia, lithuania, poland and romania , signed the euro plus pact in march 2011. The pact commits signatories to even stronger economic coordination for competitiveness and convergence, also in areas of national competence, with concrete goals agreed on and reviewed on a yearly basis by heads of state or government.

The euro plus pact is integrated into the european semester and the commission monitors implementation of the commitments. The eu rsquo s economic governance system allows for an appropriate steer and follow up at eu level. Each year, the commission carefully analyses the national reform programme of each member state and checks whether the policies are in line with the orientation set out above. Its findings are subsequently reflected in the country specific recommendations that the commission adopts in may and presents for approval to the european council in june. The newly introduced macroeconomic imbalance procedure guarantees enhanced monitoring of macroeconomic imbalances with the possibility of sanctions for euro area member states that do not address these when they become excessive. support for countries in difficulty european stabilisation actions provide financial assistance which is capable of supporting eu member states in difficulty and thereby preserving the financial stability of the eu.

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Financial assistance is linked to strict macroeconomic conditionality and aims to support the country's efforts to restore fiscal sustainability and to implement structural reforms in order to improve the competitiveness of the economy, thereby laying the foundations for sustainable economic growth and job creation. In december 2012, the council discussed the draft memorandum of understanding for financial assistance to cyprus which outlines the main elements for the macroeconomic adjustment programme for the country, agreed by cyprus and the troika european commission, european central bank and the international monetary fund. In march 2013, euro area finance ministers reached an agreement with the cypriot authorities for a future economic adjustment programme. Greece was the first euro area member state to find itself frozen out of international bond markets.