Estonia

VII - Six-Pack

The ‘Six-Pack’ is a package of six legislative measures (five regulations and one directive) improving the Economic governance in the EU. The Commission made the original proposals in September 2010. After negotiations between the Council and the European Parliament, the package was adopted in November 2011 and entered into force on December 13, 2011. Part of the ‘Six-Pack’ measures applies only to the Eurozone member states (see the individual titles below).    
The ‘Six-Pack’ measures reinforce the Stability and Growth Pact (SGP), among others by introducing a new Macroeconomic Imbalances Procedure, new sanctions (for Eurozone member states) and reversed qualified majority voting. Also, there is more attention for the debt-criterion.        
(
http://ec.europa.eu/economy_finance/economic_governance/index_en.htm)

Negotiation
VII.1
What positions did Estonia adopt in the negotiation of the ‘Six-Pack’, in particular in relation to the implications of the ‘Six-Pack’ for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process.

No difficulties were encountered. The Estonian government has been supportive of automatic sanctioning (see: question VI.1).

Directive 2011/85/EU    
Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States

Implementation       
VII.2
What measures are being taken to implement Directive 2011/85/EU on requirements for budgetary frameworks (required before 31 December 2013, article 15 Directive 2011/85/EU)?

Since 2004, all public sector institutions are subject to a common legal framework on accounting.[1]

By a new State Budget Bill, Directive 2011/85/EU will be implemented in Estonia. The current State Budget Act will be replaced with a new Act in which provisions will be introduced on a balanced state budget and automatic corrective mechanism required by the Fiscal Compact Treaty. In addition to the State Budget Act, a total of 42 laws need to be amended but only to the extent of technical details (new numbering of references to the State Budget Act, etc.).[2]

Implementation difficulties       
VII.3
What political/legal difficulties
did Estonia encounter in the implementation process, in particular in relation to implications of the directive for (budgetary) sovereignty, constitutional law and the budgetary process?

A question arose in the parliamentary debate as to a possible infringement of the principle of separation of powers by a provision of the State Budget Bill. The Financial Affairs Committee made a request to the Committee on Constitutional Affairs for an opinion on the constitutionality of the Bill. Proposals were made during the parliamentary debate to separate the provisions on budgetary balance from other amendments in order to give more time for the discussion of the latter.

On 12 November, the Auditor General Alar Karis submitted an opinion to the Riigikogu on the State Budget Bill. In his Opinion, the Auditor General makes a number of suggestions, none of which relate to the provisions implementing Directive 2011/85/EU. The conclusion of the Auditor General is that the implementation deadline for the Directive should not adversely affect the adoption of a politically broadly supported State Budget Act. If necessary, the Auditor General suggests amending the State Budget Act currently in force in order to implement the Directive but to continue discussion on other matters until satisfactory solutions have been found.[3]

The Financial Affairs Committee asked for an opinion on the Bill from the European Central Bank (ECB). In its opinion, the ECB is critical of some of the additional tasks the draft Bill would impose on the Bank of Estonia (Eesti Pank).[4] The text of the Bill as it currently stands is not final. The second reading of the Bill in Riigikogu continues. The answers to the following questions on the Six-Pack which reflect the original Bill are, therefore, subject to change.

Macroeconomic and budgetary forecasts     
VII.4
What institution will be responsible for producing macroeconomic and budgetary forecasts (article 4(5) Directive 2011/85/EU)? What institution will conduct an unbiased and comprehensive evaluation of these forecasts (article 4(6) Directive 2011/85/EU)?

The macroeconomic and budgetary forecasts will be produced by the Ministry of Finance and an unbiased and comprehensive evaluation of these forecasts will be conducted by Eesti Pank (Bank of Estonia). Pursuant to §15 subsection 2 of the State Budget Bill, the officials producing the forecasts are unbiased in the compiling of the forecasts as well as in their choice of methodology. § 16 subsection 1 of the Bill specifies that the evaluation of Eesti Pank is not binding but that the Ministry of Finance is to justify not taking the evaluation into account.

Fiscal Council 
VII.5
Does Estonia have in place an independent Fiscal Council (article 6(1) Directive 2011/85/EU: ‘independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States’)? What are its main characteristics? Does Estonia have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?

An independent Fiscal Council was created by the new State Budget Act which introduced a new § 42 into the Bank of Estonia (Eesti Pank) Act.

Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances    
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1176:EN:NOT)

MEIP difficulties     
VII.6
What political/legal difficulties
did Estonia encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

No debates.

Regulation No 1175/2011 on strengthening budgetary surveillance positions 
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1466:20111213:EN:PDF)

MTO procedure         
VII.7
What changes to the rules on the budgetary process are made to accommodate the amended Medium-term Budgetary Objective (MTO) Procedure?

No changes.

European semester 
VII.8
What changes have to be made to the rules and practices on the national budgetary timeline to implement the new rules on a European Semester for economic policy coordination (section 1-A, article 2-a consolidated Regulation 1466/97)?

None.

MTO difficulties        
VII.9
What political/legal difficulties
did Estonia encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No debates.

Respect MTO   
VII.10
How is respect of the Medium-term Budgetary Objective included in the national budgetary framework (section 1A, article 2a consolidated Regulation 1466/97)?

§ 91 of the State Budget Act lays out conditions for the state budget strategy. Pursuant to § 91 subsection 3, the budget strategy shall be compiled for the following budgetary year and the subsequent three years and shall be approved by the Government of the Republic on the proposal of the Minister of Finance at least seven months before the beginning of the budgetary year.

§ 4 subparagraph 3 of the State Budget Bill contains an explicit reference to the Medium-term Budgetary Objective with a reference to Regulation 1466/97.

Current MTO 
VII.11
What is Estonia’s current Medium-term Budgetary Objective (section 1A, article 2a consolidated Regulation 1466/97)? When will it be revised?

Stability Programme 2012(-2015): the MTO of the Estonian Government is a general government structural surplus. The Stability Programme 2012 reaches the year 2016, as required from the budget strategy by § 91 subsection 3 of the State Budget Act (the next fiscal year and the three years following).

Adoption MTO        
VII.12
By what institution and through what procedure is Estonia’s Medium-term Budgetary Objective adopted and incorporated in the stability programme (Eurozone, article 3(2)(a) consolidated Regulation 1466/97)?

The Government approved the State Budget Strategy 2013-2016 and the Stability Programme 2012 on 26 April 2012. Before the approval the documents were discussed in the Committees of the Riigikogu.[5]

Pursuant to § 91 subsections 3 and 4 of the State Budget Act, the budget strategy is approved by the Government of the Republic on the proposal of the Minister of Finance. The Ministry of Finance has the right to obtain information from the state authorities and persons in the public sector. § 91 subsection 5 identifies the public sector as consisting of the state, local governments, other legal persons in public law, with the exception of the Bank of Estonia, the Compensation Fund, the Guarantee Fund, the Estonian Traffic Insurance Foundation and professional associations established under public law; and foundations founded by the abovementioned if more than half of the revenue thereof for the last two years has been comprised of support from such persons.

Regulation No 1177/2011 on the excessive deficit procedure
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1467:20111213:EN:PDF)

EDP difficulties          
VII.13
What political/legal difficulties
did Estonia encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No debates.

Regulation No 1173/2011 on effective enforcement of budgetary surveillance    
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1173:EN:NOT)

Sanctions
VII.14
What political/legal difficulties
did Estonia encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

None.

General changes       
VII.15
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?

None.

Miscellaneous
VII.16
What other information is relevant with regard to Estonia and the Six-Pack?

Not applicable.

[1] A. Naarits. “The Global Financial Crisis and Statistics”, 1 Quarterly Bulletin of Statistics Estonia 2012, p. 8.

[2] For complete list see: Explanatory report to the State Budget Bill, pp. 1-2.

[3] Summary of the Opinions of the State Audit Office on the State Budget Bill, 12 November 2013.

[4] Opinion of the European Central Bank of 18 December 2013 on Public Finances (CON/2013/91), http://www.ecb.europa.eu/ecb/legal/pdf/en_con_2013_91_f_sign.pdf, par. 5.5.

[5] Stability Programme 2012, p. 3.