ECONOMIC GOVERNANCE : SIX PACK' EXPLAINED.

The European Parliament has just approved a bundle of laws designed to avert future debt crises, tightening EU scrutiny of national budgets and economic policies and introducing swift penalties for profligate states. The so-called six pack' on economic governance has been the subject of tense negotiations since it was published in September 2010, with MEPs and governments wrangling over whether to make sanctions automatic or allow countries leeway to overturn them.

Three of the six texts in the package focus on budgets (overhauling the Stability and Growth Pact), two set up a new alert and sanctions system for economic imbalances, and the sixth sets out common standards for national accounts. Here, Europolitics examines each one in detail to find out what it will mean for budget-making in future.

Regulation 1466/97 on budgetary and economic surveillance - amended (COM(2010)526)

What is it? One of the two regulations that make up the 1997 Stability and Growth Pact - the so-called preventive arm of the pact.

What does it say? Essentially, it tells member states to aim for balanced budgets. Under the existing rules, governments set their own medium-term budgetary objective (MTO) of between -1% of GDP and a balance or surplus. They are required to send annual stability (for euro countries) and convergence plans (for non-euro countries) to the Commission to show how they intend to do this.

What will change in future?

Timetable: Budget plans will now be sent to the Commission in April as part of the European semester', a revamped timetable for budget-making.

Expenditure rule: Countries are not allowed to increase spending by more than their average GDP growth over a given period.

Sanctions (for eurozone states): If countries fail to meet their MTOs, the Commission will issue a warning. If, after seven months, the country fails to take action, the Commission can levy a financial penalty of at least 0.2% of GDP on the government. The money is deposited with the Commission and accrues interest.

Reverse voting: At this stage, the sanction can only be overturned if a simple majority of countries (nine out of 17 eurozone states) oppose it.

When will it apply? From 2012.

MEP rapporteur: Corien Wortmann-Kool (EPP, Netherlands)

Regulation 1467/97 on the excessive deficit procedure - amended (COM(2010)522)

What is it? The second of two regulations that make up the 1997 Stability and Growth Pact - the so-called corrective arm of the pact.

What does it say...