The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
What political/legal difficulties did Austria encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.
The governing parties SPÖ and ÖVP were in favour of approving the ratification of the treaty whereas the opposition parties FPÖ and BZÖ and – in contrast to the ESM position – also the Greens opposed it.
The Federal president authorized the negotiation on January 12, 2012 while the National and the Federal Council were informed about the initiation of the negotiation. The Ministry for European and International Affairs has regularly reported about the negotiations to both chambers.
Prior to its ratification, the discussion in Austria was centred around a (higher) deficit ceiling introduced in Austria prior to the ratification of the TSCG – this is explained in question VII.1. The debate on the deficit ceiling was obviously triggered by the TSCG negotiations.
The ÖVP and SPÖ position on the Fiscal Compact was that it complemented of the ESM, that economic coordination was necessary if on the other hand bailout measures were taken. There was no monetary union without economic coordination and for that, a common framework was necessary. The Green position was that the ESM did not need the Fiscal Compact to go with it, that it was economically counter-productive and that it would lead to unemployment. Additionally, the Greens argued that the Fiscal Compact would have to been approved with a constitutional majority. The FPÖ and BZÖ stuck to usual jargon on loss of sovereignty and the call for a referendum.
How has the Fiscal Compact been ratified in Austria and on what legal basis/argumentation?
Treaties leading to the amendment or completion of laws need approval by the National Council, see question V.2.
After the positive report from the Constitutional Committee from July 2, 2012, the treaty was approved at the plenary session of the National Council by a simple majority of 103 versus 60 votes. The Federal Council approved by a 42 versus 13 vote.
The Federal President signed the treaty on July 17, 2012 and therewith ratified it. For the significance of the president’s signature see question VIII.2. It was counter-signed by the Federal Chancellor and deposited at the European Council on July 30, 2012. It was published in the official gazette on January 22, 2013.
What political/legal difficulties did Austria encounter during the ratification of the Fiscal Compact?
The main issue criticized about the ratification of the TSCG is that it was approved based on Art. 50 (1) 1 B-VG only. The opposition parties and several experts hold that it is in many regards constitution-amending and that it should therefore have been approved by higher majorities.
The debate in the parliament took place right after the debate on the ratification of the ESM (see question VIII.1). The expert hearing in the Constitutional Committee from June 28, 2012 was divided in two parts, the first on the ESM and the second on the Fiscal Compact. Experts stressed that growth incentives need to go hand in hand with budgetary discipline. Griller, professor of constitutional law and the expert who is to a large extent the author of the application regarding the constitutionality of the TSCG brought to the Austrian Constitutional court, pointed out that the TSCG could only be approved by a constitutional majority (see question IX.3 for details). His main point was that the TSCG is constitution-amending as far as it goes beyond the SGP and Six-Pack obligations (see also question VII.1). The head of the constitutional service of the Federal Chancellor’s office sustained, however, that a simple majority is sufficient. Griller held that the Fiscal Compact was in as far constitution amending, as it went beyond the Six-Pack (question VII.1). His three major points (among others) are the following: First, he argues that the rules on the deficit of Art. 2a of regulation 1466/97 as amended by Six-Pack regulation 1175/2011 differs from Art. 3 (1) TSCG when it comes to the upper limit of the structural deficit: The regulation allows 1% whereas the TSCG only 0.5%. Therefore, the deficit ceiling of its Art. 3 (2) compromises budgetary sovereignty and would have needed a constitutional amendment. Second, Art. 7 TSCG (the reversed majority issue) is problematic because it transfers a sovereign right (Art. 9 (2) B-VG) to the Commission. Even if one does not share that opinion, Griller holds that the fact that the Austrian member in the Council has to vote with the commission amounts to the Austrian member being subject to superior instructions – what he is not supposed to be as highest member of the administration (Art. 20 (1) in connection with Art. 69 (1) B-VG), amounts to a constitutional amendment. Third, he argues that the compatibility clause in Art. 2 (2) TSCG is problematic because it would force the Austrian Minister to evaluate the compatibility of the Commission’s recommendation with EU law – a competence that is new. In order to introduce such a competence, a constitutional amendment would be necessary.
Potacs and Mayer articulate counter-arguments to Griller’s theses. First, they argue that the difference between the secondary law provision and the TSCG provision on the upper limit for a structural deficit is so little, that one can conclude that the TSCG provision (Art. 3 (2)) is covered by EU law and that therefore no constitutional amendment is necessary, because of direct effect. They read it as “specifying” Art. 2a of regulation 1466/77. Second, regarding Art. 7 TSCG, they say that there is no transfer of a sovereign right taking place, Council members merely agree to self-bind themselves. Third, the authors also do not so a constitutionality problem Art. 2 (2) TSCG. In their opinion, this is nothing new for members of the administration because they always have to evaluate the compatibility of laws with EU law – because of the latter’s primacy. They conclude that the TSCG does not contain any constitution-amending or constitution-completing provision, which is why its approval by simple majority (according to Art. 50 (1) 1 B-VG) was legitimate.
The constitutional court decided on this case on October 3, 2013, and will be discussed in Annex I.2.
Balanced Budget Rule
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Austria? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.
A balanced budget rule had already existed prior to the signature of the Fiscal Compact. It had been introduced on December 29, 2011 and commits Austria on the federal level to a maximum structural deficit of 0.35% of the GDP with exceptions foreseen for extraordinary fluctuation of business cycles and natural catastrophes. Further, agreements with the provinces and the municipalities have to be made so that they also comply with the limit. It was introduced as simple law by simple majorities because it did not get enough votes (2/3) to pass as law in constitutional rank. The debate whether this was sufficient to comply with Art. 3 (2) TSCG continued and will be discussed in question IX.5.
Debate Balanced Budget Rule
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.
The debate about the deficit ceiling was rather intense. The governing parties SPÖ and ÖVP wanted the law introducing such a limit (see question IX.4) to pass in constitutional rank, with a 2/3 majority. In the plenary session of the National Council, it did not get the necessary majority, which is why it was sent back to the Constitutional Committee and then passed as simple law in the plenary.
The governing parties favoured the debt ceiling for several reasons. The biggest reason was that when it was negotiated, Austria was afraid of loosing the triple-A rating for its government bonds. The introduction of the debt ceiling, so they thought, would calm down the markets. The opposition parties, in particular the Greens, said that this was mere rhetoric. The Greens point out that the debt ceiling is unnecessary because the Six-Pack already foresees a rather tough deficit reduction. A debt ceiling would be an excuse for the government to push through unpopular reforms. The FPÖ and BZÖ oppose the debt ceiling because of democracy issues and accuse the government of not having any other solutions to avoid the threatening downgrading.
Since Austria was downgraded by Standard and Poor’s on January 15, 2012, the deficit ceiling issue was debated again on January 18, 2012 in the National Council. The debate was requested by the head of the BZÖ. However, none of the parties changed a previous position.
Strong criticism of the Fiscal Compact and in particular the debt ceiling (in its European dimension was articulated in academia though, notably by Oberndorfer. A critique of the Austrian version of the debt ceiling and of the attempt to lift it into constitutional rank provided by Noll.
Relationship BBR and MTO
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?
The question was raised in the context of the constitutionality of an approval of the TSCG by simple majority (see question IX.3).
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?
The Austrian Constitutional Court ruled on the constitutionality of the TSCG on October 3, 2013. As opposed to the ESM-judgement that had been rendered upon an application of the FPK-government of the province of Carinthia (see Annex I.2), this application was brought by deputies of all opposition parties. Whereas the ESM was opposed only by the far-right parties FPÖ and BZÖ/FPK, the TSCG was also opposed by the Greens. The major argument of the applicants is that the TSCG is constitution-amending and/or constitution-completing. As a consequence, it would have had to be approved by the 2/3 majorities in the National Council and in the Federal Council.
Non-Eurozone and binding force
Has Austria decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?
What other information is relevant with regard to Austria and the Fiscal Compact?
No other relevant information.