VI - Euro Plus Pact

On March 11, 2011 the Heads of State or Government of the Eurozone endorsed the Pact for the Euro. At the 24/25 March 2011 European Council, the same Heads of State or Government agreed on the Euro Plus Pact and were joined – hence the ‘Plus’ – by six others: Bulgaria, Denmark, Latvia, Lithuania, Poland, Romania (leaving only the UK, Czech Republic, Sweden and Hungary out).  
The objective of the pact is to foster competitiveness, foster employment, contribute to the sustainability of public finances and reinforce financial stability. In the Euro-Plus-Pact the Heads of State or Government have entered into commitments on a number of policy areas, in which member states are competent.        

What political/legal difficulties
did Estonia encounter in the negotiation of the Euro-Plus-Pact, in particular in relation to the implications of the Pact for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process.

From a government document explicitly referring to the Euro-Plus-Pact, it follows that, in accordance with the founding Treaties, the Estonian government was willing to take additional steps in coordinating economic policies between the eurozone countries and countries outside the eurozone. According to the Government, the implementation and surveillance of agreements on economic policy must take place in the framework of the Europe 2020 process, the excessive deficit procedure and the macroeconomic imbalances procedure. Enhanced cooperation and the implementation of eurozone specific binding agreements must be based on the EU Treaties and secondary law. The additional steps in coordinating economic policies should not create new market barriers nor thereby impede with the functioning and development of the internal market.[1]

No difficulties were encountered.

What other information is relevant with regard to Estonia and the Euro-Plus-Pact?

Estonia assumed nine reform commitments that were subsequently approved by a decision of the Government of 28 April 2011 in the national reform programme “Estonia 2020”. The Programme was updated on 26 April 2012.

The reform commitments include the following:[2]

  1. initiatives implemented by April 2012:
    • launching a start-up programme for supporting the inception of innovative enterprises;
    • reducing the personal income tax effective 2015;
    • abolishing fringe benefit tax on formal education related to work;
    • lowering the upper limit on the income tax incentive to 1,920 euros;
    • bringing the budget into balance by 2013 and achieving a surplus by 2014 (state budget strategy);
  2. initiatives planned to be implemented by summer 2012:
    • reform of public service benefits and increasing the transparency of the salary system;
    • first stage of special pension reform;
    • higher education reform;
  3. initiatives to be implemented later:
    • the introduction of the budgetary balance requirement in the State Budget Act.

The reform plan to be executed by June 2013 includes the following initiatives:[3]

          Reform of the upper secondary school network and launching a programme of investments for raising the quality of the school system;

          Developing principles for funding of general education for raising the quality of education and enhancing the reputation of teachers;

          Liberalising the natural gas market;

          Implementing an environmentally friendly public transport investment programme;

          Completion of the first stage of investments into energy conservation;

          Simplifying and better targeting of entrepreneurship grants to raise competitiveness;

          Lowering the unemployment insurance premium rate in 2013 in order to reduce the tax burden on the workforce;

          Establishing occupational and professional health insurance along with a new insurance scheme for incapacity for work;

          Development of new programmes for improving employment among youths with low competitiveness;

          Modernisation of vocational education curricula;

          Completing reform of centralisation of financial and personnel accounting;

Reform of management and support systems of European Union funds. 

[1] White Book, supra note 4.

[2] Estonia 2020 action plan – ANNEX Estonian Reforms for Achieving the Objectives of the Euro Plus Pact, 26 April 2012.

[3] Supra note 9.