Belgium

IX - Fiscal Compact

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.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties did Belgium 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.

At the drafting stage, Belgium indicated it would be unable to implement the article 3(2) obligation of constitutional anchorage because it lacked the necessary two-thirds majority and because of the electoral phase in the constitutional amendment procedure.[1]

As the Council of State noted in its advisory opinion, the TSCG is intimately connected to the T(F)EU and can borrow from the latter normative status vis-à-vis the Belgian Constitution. Article 34 of the Constitution allows the delegation of powers to ‘supra or international’ organisations. Hence, the Council opined that no issues of compatibility between the TSCG and the Belgian Constitution arose.[2]

Ratification
IX.2
How has the Fiscal Compact been ratified in Belgium and on what legal basis/argumentation?

At the federal level, the TSCG was approved on the basis of article 77, 6° of the Constitution, following a bicameral procedure.[3]

There were several difficulties, which can be grouped in three clusters: one on the division of competences in federal Belgium (art. 167 Const.) , one on the role and autonomy of parliament, and one on the implementation of the TSCG. For this latter problem, see infra question IX.4.

The first cluster indicates the question which governments in Belgium have to assent to the TSCG.

The table below indicates the formal approval per parliament:

Level

Assembly

Date of approval
(formal act)

Document nr.

Federal

House

Law of 18 July 2013

53K2830

Senate

5S1939

Regions

Parliament of the Flemish Region

Decree of 21 December 2012

1815

Parliament of the Brussels Region

Ordinance of 20 December 2013

A476

Parliament of the Walloon Region

Decree of 23 December 2013

906[4]

Communities

Parliament of the Frenchspeaking Community Commissions (Brussels)

Decree of 23 December 2013

108

Parliament of the Flemish Community

Idem Flemish Region

Parliament of the Frenchspeaking Community

Decree of 23 December 2013

576

Parliament of the Germanspeaking Community

Decree of 14 October 2013

143

United Assembly of the Community Commissions (Brussels)

Ordinance of 20 December 2013

B84

On the role of parliament, one notable legal obstacle is the constitutional stipulation that “Each year, the House of Representatives approves the final accounts and the budget.” (Article 174 Constitution). As the Council of State observed, the House will have to abide by the TSCG, adhering to a balanced budget, with the automatic correction mechanism.[5] Because the Treaty in article 3(2) in fine explicitly refers to the prerogatives of the national parliaments, the Council of State found the Treaty in compliance with the Constitution.[6]

Ratification difficulties  
IX.3
What political/legal difficulties did Belgium encounter during the ratification of the Fiscal Compact?

Inspired by Declaration 51 to the Treaty of Lisbon, Belgium has issued a separate declaration to the TSCG[7], concerning the national parliaments.

“Déclaration du Royaume de Belgique relative aux Parlements nationaux

La Belgique précise que, en vertu de son droit constitutionnel, tant la Chambre des représentants que le Sénat du Parlement fédéral que les assemblées parlementaires des communautés et des régions agissent, dans le cadre de leurs compétences, comme composantes du Parlement national au sens du Traité sur la stabilité, la coordination et la gouvernance au sein de l’Union économique et monétaire.”[8]

This means that the automatic correction mechanism as it stems from article 3 TSCG is applicable to all governmental budgets approved by parliamentary bodies in Belgium. All regions and communities have assented to this Treaty by formal act.

However, some regional acts attached certain conditions to the functioning of the automatic correction mechanism: for instance, the Brussels Parliament imposed a social and environmental evaluation of possible budgetary corrections.[9] Moreover, a possible adjustment plan for a deficitary budget should “in no case impinge upon the competence to provide services of general interest of a non-economic nature”. This article will fail in the hypothetical case to protect those services of general interest of a non-economic nature.[10]

The opposition parties Groen and Ecolo submitted a proposal to call for a referendum on the ratification of the TSCG, but this was rejected.[11]

Balanced Budget Rule        
IX.4
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 Belgium? 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.

The Council of State disapproved of a Treaty imposing constitutional amendment. Treaties are assented to by simple parliamentary majority, while constitutional change can only be sanctioned by a two-thirds majority in a two-step process with intervening elections. Thus, the Council of State observed that because article 3(2) TSCG only “proposes” constitutional enshrinement of the balanced budget rule without strictly requiring it, the lawmaker does not impose any obligation on the constitution maker.[12]

The main problem was to ensure that all governments would abide by this rule, even more so because the overall budget of Belgium in the European semester is composed of “entity I” (federal state) and “entity II” (regions and communities) with political coordination, but no formal legal mechanism to resolve disputes. One solution, advocated by the Council of State, is to implement the TSCG obligations through a cooperation agreement between all governmental levels. This solution, which has in fact been chosen, has two advantages: because it is ranked above ordinary law, a cooperation agreement is binding on all parliaments of the levels of government in federal Belgium[13], and involving the regions through a cooperation agreement ensures the compliance with budgetary rules by local governments.[14]

Moreover, the adoption of a constitutional balanced budget rule would be overly rigid, posited the Council of State.[15] The Council deemed the common principles of the Commission to be subject to economic fluctuations.[16] This argument though, fails in my opinion. None of the seven principles put forward by the Commission lack flexibility.[17] Cooperation agreements are usually a matter for the executives. The instrument of cooperation agreements proves a valuable tool for cooperation and coordination in a federal setting. Based in the constitutionally guaranteed autonomy of each level of government, a cooperation agreement may “jointly set up and direct joint services and institutions”, or allow “the joint exercise of competences”, or “the joint development of initiatives” (article 92bis § 1, first paragraph of the Special Act Institutional Reform). Cooperation agreements are to be understood as a form of intrastate treaties, and their legal operation is often analogous to treaty law. The great bulk of cooperation agreements are agreements between the governments of some or all of the levels of government in the Federation. In a few exceptional cases, a purely parliamentary cooperation agreement has been set up.[18] When cooperation agreements touch upon issues reserved for parliaments under the principle of legality, or if they “encumber the Region or Community” or if they impose obligations on citizens, such cooperation agreements need parliamentary approval (article 92bis § 1, second paragraph of the Special Act Institutional Reform). In this case, because the cooperation agreement touches upon budgetary affairs, parliamentary assent was necessary.

The concertation committee is composed of the heads of the executives of the several levels of government and charged with intergovernmental relations.[19] In budgetary affairs, the committee will formally approve and adopt[20] the advice of the High Council for Finance pertaining to the budgetary objectives of the different levels of government.[21] The Secretary for Budgetary Affairs declared in the House committee on financial affairs that:

“The Belgian institutional structure precludes any form of hierarchy between the federal and the substate level. Hence, no level of government can command another level to abide by certain obligations. There is no other solution than cooperation. The cooperation agreement envisages coordination of the budgetary objective of the joint government in the Concertation Committee. The partition of this budgetary objective will be done through a formal decision of this Committee. […] This decision is based on objective evidence, by basing the decision on the advice of the High Council for Finance.”[22]

The cooperation agreement itself[23] essentially repeats the TSCG:

Article 2

§ 1er. Les budgets des parties contractantes doivent s’inscrire dans l’objectif d’équilibre des comptes des administrations publiques inscrit à l’article 3 du Traité.

§ 2. Cette règle est considérée comme respectée pour la Belgique si le solde structurel annuel de l’ensemble des pouvoirs publics atteint l’objectif à moyen terme, ou respecte la trajectoire de convergence vers celui-ci telle que définie dans le Programme de stabilité, la limite inférieure étant un déficit structurel de 0,5 % du PIB.

Cette limite peut cependant être portée à un déficit structurel de maximum 1 % lorsque le rapport entre la dette publique générale et le PIB est sensiblement inférieur à 60 % et que les risques à long terme pour la soutenabilité des finances publiques sont faibles.

§ 3. Un écart temporaire par rapport à l’objectif à moyen terme ou à la trajectoire d’ajustement est uniquement autorisé en cas de circons- tances exceptionnelles.

§ 4. Dans le cadre de la mise à jour du Programme de stabilité, les objectifs budgétaires annuels de l’ensemble des pouvoirs publics définis en termes structurels conformément aux méthodes de la Commission de l’Union européenne sont répartis en termes nominaux et structurels entre les différents niveaux de pouvoir de l’ensemble des pouvoirs publics, en s’appuyant sur un avis de la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances. La Section Besoins de financement des pouvoirs publics du Conseil Supérieur des Finances examinera, à cette occasion, le comportement des pouvoirs locaux en matière d’investissements et tiendra compte de la mise à jour éventuelle de l’objectif à moyen terme.

L’objectif budgétaire global des pouvoirs publics fait l’objet d’une concertation préalable en Comité de concertation. Les parties contractantes s’engagent à faire un effort maximal pour aboutir à un consensus. La fixation en termes nominaux et structurels des objectifs budgétaires individuels des parties contractantes et des pouvoirs locaux devra être approuvée par une décision de Comité de concertation.

Article 3

Chaque partie contractante s’engage à prendre, dans l’exercice de ses compétences et/ou de sa tutelle à leur égard, toutes les mesures nécessaires pour que les pouvoirs locaux respectent les objectifs budgétaires tels qu’établis par l’article 2.

In article 4, the cooperation agreement puts the burden of verification of compliance with this rule with the Section “Public sector borrowing requirements” of the High Council of Finance (see supra VII.5 on the requirement of independence).

Article 4

§ 1er. Chaque année, la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée d’évaluer le respect des engagements pris par les parties contractantes dans le cadre du présent accord de coopération et des décisions du Comité de concertation visées à l’article 2, § 4.

A cette occasion, elle identifie, en cas d’écart constaté dans le résultat des pouvoirs locaux, la part de cet écart découlant de l’impact nouveau des mesures prises par l’Etat fédéral et dont la responsabilité n’incombe dès lors pas aux Régions et Communautés. Elle formule également un avis relatif notamment à l’existence de circonstances exceptionnelles visées à l’article 2, § 3.

§ 2. Si la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances constate un écart important d’une partie contractante par rapport à ses engagements dans le cadre de l’évalua- tion visée au § 1er, la partie contractante concernée est tenue de justifier cet écart et de prendre des mesures immédiates de correction. Les mesures de correction doivent permettre de remédier à l’écart dans un délai de 18 mois, sauf si la réalité économique ou institutionnelle justifie une période plus longue selon l’avis de la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances. Dans tous les cas, le délai précité ne peut être en contradiction avec un éventuel délai fixé par l’Union européenne à l’égard de la Belgique.

La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée d’émettre un avis sur l’ampleur des mesures de correction à prendre.

§ 3. La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée de vérifier la mise en œuvre des mesures de corrections, visées au § 2, et d’émettre un avis annuel à ce sujet. A cette fin, toutes les données nécessaires à l’exercice de cette mission par le Conseil supérieur des Finances lui seront fournies par les Gouvernements concernés.

§ 4. La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée de procéder à une évaluation globale de l’application du Traité et de l’accord de coopéra- tion par les différents niveaux de pouvoir de l’ensemble des pouvoirs publics belges au plus tard le 31 décembre 2017.

The section public borrowing requirements of the High Council of Finance will monitor the budgetary developments of each level of government, and, should a significant deviation be detected, will start a bilateral procedure between the Section and that level of government.[24]

Article 5 gives the High Council of Finance an additional competence. In the case of a financial sanction taken by the Council in the framework of the excessive debt procedure, the Section “Public sector borrowing requirements” will determine the pro rata defaults of the various governments concerned. Note that article 5 does not apply to possible sanctions imposed by the Court of Justice for non-compliance with article 3 TSCG following the jurisdiction conferred in article 8 TSCG – it only applies to the sanctions ex Regulation 1173/2011.[25] Moreover, no predefined distribution key has been developed. Analogous to the enforcement of transposition of EU directives and the sanctions under article 260 TFEU[26], this may prove a severe future problem, albeit hypothetical for the moment.

Another problem with cooperation agreements is their lack of enforceability.[27]  Legal disputes are theoretically reserved for a specific arbitrage-like court, but such court has never been installed. A solution might be to perceive loyal execution of the cooperation agreement as a part of the principle of federal loyalty, guaranteed in article 143 of the Constitution. In such interpretation, local or regional budgets that violate the cooperation agreement, can be challenged before the Constitutional Court. However, this hypothetical example seems very impractical, consider for instance the effects of a nullification of a governmental budget.

Debate Balanced Budget Rule
IX.5
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.

Several members of parliament noted the unclear definition of ‘exceptional circumstances’.[28]

Relationship BBR and MTO   
IX.6
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)?

No observations made in the parliamentary debates on this particular issue.

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Not yet. Three cases are pending before the Constitutional Court: two appeals challenging the constitutionality of the Federal act approving the TSCG[29], and one appeal specifically challenging the cooperation agreement that implements article 3(2) TSCG.[30] These three appeals are merged, but to date no hearing has been scheduled.[31]

Non-Eurozone and binding force   
IX.8
Has Belgium 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?

Not applicable – Belgium is part of the Euro area.

Miscellaneous
IX.9
What other information is relevant with regard to Belgium and the Fiscal Compact?

The delayed ratification and implementation, only by the end of 2013, was due to political disagreement. The main pressure to ensure implementation was Council decision 2013/370/EU[32] of 21 June 2013, by which the Council gave notice to Belgium to take measures for deficit reduction under article 126(9) TFEU.

On the cooperation agreement implementing the TSCG, the Commission noted that: “While the agreement represents substantial progress, much will depend on implementation and on the High Council of Finance’s ability to reach a consensus on both medium-term fiscal targets for general government and the distribution of these targets. Additional arrangements might be needed to make targets beyond 2014 binding and coordinate strategies to minimise the negative impact of remaining consolidation efforts.”[33]

[1] See implicitly Parl. Doc. Senate, 2012-13, nr. 1939/1, p.10. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[2] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 47, point 6. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[3] Article 77, 6° reads: “The House and the Senate are equally competent for the laws approving international treaties.”

[4] Because of the asymmetrical nature of the division of competences between the Frenchspeaking Community and the Walloon Region, two decrees contain the assent to the TSCG: nr. 906 (principal assent by Walloon Region), 907 (assent for matters transferred by Frenchspeaking community to the Walloon Region) – see their joint approval on 20 December 2013, Parl. Debates, Walloon Parliament, 20 December 2013, p. 19 ff.

[5] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 53-54. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[6] Id at p. 54.

[7] See on the meaning and significance of Declaration 51 with respect to the Early Warning mechanism on subsidiarity as laid down in Protocol 2 to the TEU: P. Popelier & W. Vandenbruwaene, “The subsidiary mechanism as a tool for inter-level dialogue in Belgium : on ‘regional blindness’ and cooperative flaws” in 7 European constitutional law review (2011), 204-228.

[8] See Parl. Doc. Senate, 2012-13, nr. 1939/1, p.40. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[9] See Articles 4 and 5 of the Ordinance of 20 December 2013 approving the Cooperation Agreement of 13 December 2013.

[10] K. Brams & T. Corthaut, ‘De financiering van de gemeenschappen en de gewesten na de Zesde Staatshervorming – responsabilisering in de schaduw van Europa’ in A. Alen et al. (eds.), Het federale België na de zesde staatshervorming (die Keure 2014) 616.

[11] Parl. Doc. House, 2011-12, nr. 53K2105. http://www.dekamer.be/FLWB/PDF/53/2105/53K2105001.pdf

[12] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 51, point 8.3.1. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[13] If a cooperation agreement is approved by Parliamentary Act, one can draw an analogy to international treaties and their binding nature based on the adage of pacta sunt servanda. Similarly, the obligation to abide by cooperation agreements follows from federal loyalty (article 143 Constitution).

[14] Regions have the administrative capacity to sanction local governments, or even adopt acts devolving their responsibilities – see article 6 § 1 VIII and article 7 of the Special Act on Institutional Reform. See with more detail the Advice, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 52. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[15] Advice, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 53. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=nl

[16] COM(2012)342.

[17] The Advice of the Council of State mentions the ‘future principles to be developed by the Commission’, although COM(2012)342 predates the advice by almost four months.

[18] For instance, on subsidiarity or a parliamentary ombudsman. These matters clearly pertain to the prerogatives of parliaments.

[19] See article 31 of the Ordinary Act on Institutional Reform.

[20] The formal decision of the Conertation Committee is not a legal act. The Council of State in its opinions has always denied the possibility to endow joint institutions with statutory powers through a cooperation agreement. See on this point  Y. Peeters, De plaats van samenwerkingsakkoorden in het constitutioneel kader [The place of cooperation agreements in the constitutional framework] University of Antwerp, doctoral thesis, to be defended 2015, p. 396-401.

[21] See on this L. Buffel & E. Vanalme, “De omzetting van de nieuwe Europese budgettaire regelgeving in België” Service Public Fédéral Finances – Belgique, Bulletin de Documentation, 74ème année, n° 1, 1er trimestre 2014, p. 133-135.

[22] Secretary Chastel responding to question n° 21596 on an internal stability pact: Parl. Doc. , Proceedings, Committee on Financial and Budgatry Affairs, 22 January 2014, p. 5. http://www.dekamer.be/doc/CCRI/pdf/53/ic906.pdf

[23] The French and Dutch version can be found at (link to the Official Journal) http://goo.gl/jzNzAV

[24] See Advice of the High Council of Finance, March 2014, p. 23-24: (in French) http://www.docufin.fgov.be/intersalgfr/hrfcsf/adviezen/PDF/csf_fin_avis_2014_03.pdf

[25] See K. Brams & T. Corthaut, ‘De financiering van de gemeenschappen en de gewesten na de Zesde Staatshervorming – responsabilisering in de schaduw van Europa’ in A. Alen et al. (eds.), Het federale België na de zesde staatshervorming (die Keure 2014) 616.

[26] See ECJ, C-533/11, Commission v. Belgium [2013] ECLI:EU:C:2013:659, for a case where the failed transposition was a regional competence. A commentary (in dutch) is P. Popelier, C. Janssens Christine, W. Vandenbruwaene, “De interne verdeling van financiële sancties op grond van artikel 260 VWEU” in Chroniques de droit publique – Publiekrechtelijke kronieken (2014) p. 59-78. In that case, the political decision on the partition of the fine remains to be taken.

[27] Politically, the cooperation agreement and the concertation committee function: in 2013, the subnational levels of government formally denied to approve the stability program, which they on the contrary did approve in 2014 – see L. Buffel & E. Vanalme, “De omzetting van de nieuwe Europese budgettaire regelgeving in België” Service Public Fédéral Finances – Belgique, Bulletin de Documentation, 74ème année, n° 1, 1er trimestre 2014, p. 134.

[28] Parl. Doc. House, 2012-13, nr. 2830/2, p. 22.

[29] Pending cases nr. 5920 and 5917.

[30] Pending case nr. 5930.

[31] See http://www.const-court.be/cgi/hzap.php?recour=yes&question=yes&lang=nl&start=0&nb=-1#5930

[32] See also the Commission’s recommendation COM((2013)381: point 9 “no significant progress has been made to adjust the fiscal framework in order to ensure that the budgetary targets are binding at the federal and subfederal levels, and increase transparency and accountability across government layers”.

[33] SWD(2014)402, p. 11.