Finland

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)

Negotiations
VII.1
What positions did Finland 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?

Government Memorandum

The whole legislative package was taken to the Parliament based on a single Government memorandum dated on 7 October 2010 (U 34/2010 vp), and the Parliament considered all the proposals as a package. Therefore, it is not always entirely easy to single out positions concerning individual legislative proposals. Since the six-pack was based on ‘ordinary EU legislation’, it was considered by the Parliament based on Section 96 of the Constitution. In its memorandum, the Government expressed its general support for the six-pack, noting its linkage with earlier European Council Conclusions.

A key feature of the negotiations leading to the six-pack was that during the time of the relevant negotiations the Finnish economy was still in a relatively good shape, and the problems in the distant corners of Europe were not really seen to involve it. Therefore, Finland often felt it was in a position to set demands on others together with the Commission and the European Central Bank. It was felt that those states that did not have an excessive budgetary deficit should be left outside strengthened monitoring altogether, and that strengthened overall coordination was not entirely necessary.

Constitutional Law Committee

When considering the package 8 December 2010 the Constitutional Law Committee noted (PeVL 49/2010 vp) that the proposed six-pack was based on TFEU provisions concerning economic politics and that the proposed legal bases seemed largely appropriate, but voiced some reservations on the use of Article 136 TFEU, which was new and open to interpretations. The Committee established that several of the proposed pieces of legislation had implications for the budgetary powers that the Parliament exercises under the Constitution, including the proposed measures preventing an increase of public expenditure, the closely connected obligations relating to tax policies and the limitations of public debt, to which a sanctions mechanism was also attached. For the purposes of the Constitution, however, the Committee established with reference to its earlier practice (see PeVL 46/1996 vp, p. 2/II) that, most crucially, the proposed measures involved no new procedures or other additional elements that had not already been approved when ratifying the EU Treaties. The proposed measures did not impinge on sovereignty or independence of local government in a manner that would have been problematic for the Constitution. The Committee stressed, however, that the factual effect of the proposed measures would due to their future contents and interpretative practice potentially be more extensive and thus affect the Parliaments budgetary and financial competence. For this reason the Committee stressed that the rights of information and participation of the Parliament needed to be appropriately secured in particular in the context of subsequent reporting and control. In addition, the Government was to pay special attention to the adequacy and appropriateness of the legal bases in case the instruments were to be amended. The Committee further stressed that secondary legislation could not be used to influence institutional balance in the EU even if this effect would be indirect (for similar agumentation earlier, see in PeVL 49/1998 vp).

Grand Committee

Following this the Parliament’s Grand Committee on 22 October 2010 considered (see SuVL 9/2010 vp) that it seemed evident that the six-pack included elements that affected the budgetary powers of the Parliament. The proposed measures were intended to affect the overall management of public finances in the Member States, which also involves impinging on municipalities and the functioning of centers for pensions. The Committee required the Government to urgently provide a full-scale explanation of the constitutional implications of the proposed package. In addition, the Committee required more information concerning the proposed legal bases and the implications for subsidiarity and proportionality; the size of envisaged sanctions, and the implications that the proposed regulation for the prevention and correction on macroeconomic imbalances might have on the interinstitutional relations and the competence of Member States in the area of economic policy. While the Committee generally supported the Government’s positive view on the matter, it was unable to formulate a position before additional information had been provided by the Government.

Additional Government Memorandum

The Government gave an additional memorandum on 12 November 2010 specifying these matters (related to U 34/2010). In its memorandum it took a largely positive view on the proposed legal bases, and stressed that since the crisis had a clearly European dimension, measures needed to be taken at the European level. This finding was further justified with the existence of a common monetary policy.

As regards the constitutional dimension of the debate, the Government first analyzed the obligations accepted at the time of acceding the Union, in particular those concerning budgetary deficits and their monitoring. The new measures were seen to enforce these obligations. The Government then pointed out that both the Accession Treaty and Lisbon Treaty had been approved through the procedure of exceptive enactments (see also question III.2), since they were found to include provisions that conflicted with the Constitution. The Commission proposals linked with various Sections of the Constitution: Section 3 establishing that ‘the legislative powers are exercised by the Parliament, which shall also decide on State finances’; with its Chapter 7 on State Finances and thus also with Section 1 establishing that ‘Finland is a sovereign republic’. The proposed regulations would also affect public finances in a wider perspective and outside state administration, including municipal and other regional self-government under Section 121, the Åland Islands under Section 120 and also indirect public administration. The key features of the Parliament’s budgetary powers involve questions relating to the state budget and supervision concerning its implementation (Section 83 of the Constitution), taxation and state debt (Section 82 of the Constitution). Particularly relevant from this perspective were the proposals linking to the limitations of public spending, required measures in the area of taxation and the limitations relating to public debt. In Conclusion, the Government found that the proposed measures did not add significantly to Finland’s previous obligations.

The Grand Committee returned to the matter after receiving the Government memorandum (SuVL 11/2010 vp) and after hearing the positive view of the Constitutional Law Committee on these findings, with some remarks concerning the individual instruments explained below. It gave a positive position, opening up the way for government agreement to the Six-Pack.

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)?

As far as we can see, Finland has not yet notified any legislative amendments for the Republic, only a number of pieces of legislation, some of them adopted in this context, for the Åland Islands (Lagtingsordning för Åland (No 97/2011); Landskapslag om Landskapsrevisionen (No 25/2013); Landskapslag om landskapets finansförvaltning (No 69/2012), Kommunallag för landskapet Åland (No 73/1997), Budgetförordning för landskapet Åland (No 70/1979).

Based on our consultations, the Ministry of Finance still seems to be in a process of preparing the relevant measures, even if it seems that most of the requirements are fulfilled by the Act relating to the adoption of the Fiscal Compact (see question IX.2). The government proposal relating to the Fiscal Compact makes explicit reference to various provisions of the directive and the aim of implementing them in the same context.

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

See also above question VII.1.

A key challenge relates to the relationship of the directive with Section 121 of the Constitution relating to Municipal and other regional self-government and stressing their independent position in relation to the central government:

Finland is divided into municipalities, whose administration shall be based on the self-government of their residents. Provisions on the general principles governing municipal administration and the duties of the municipalities are laid down by an Act.

The municipalities have the right to levy municipal tax. Provisions on the general principles governing tax liability and the grounds for the tax as well as on the legal remedies available to the persons or entities liable to taxation are laid down by an Act.

Provisions on self-government in administrative areas larger than a municipality are laid down by an Act. In their native region, the Sami have linguistic and cultural self-government, as provided by an Act.

Noting that the directive contains provisions involving local government (including municipalities), it infringes on matters that have usually been left to the municipalities to settle more or less independently (PeVL 49/2010 vp).

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 Ministry of Finance based on Government Decree No 610/2003.

Fiscal Council  
VII.5
Does Finland 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 Finland have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?

This function is exercised by the National Audit Office. Provisions on its tasks relating to independent monitoring and evaluation of fiscal policy are laid down in the act on the implementation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union and on multi-annual budgetary frameworks (No 869/2012) (see question IX.2  on the Fiscal Compact).

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 Finland 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?

The Government pointed out in its Memorandum (U 34/2010 vp) that the Commission proposal was linked to the experiences from the Stability and Growth Pact: recommendations do not work unless they are linked to possible sanctions. In the Government’s view, the measures proposed by the Commission would be used as a last resort, if a Member State were to repeatedly refuse addressing serious problems and imbalances. The Government took a positive view of this proposal, even if the legal basis was the one that provoked most discussion. The Constitutional Law Committee was also somewhat hesitant as regards the last point (PeVL 49/2010 vp). The Government also stressed that the sanctions were not automatic but resulted from a procedure consisting of a number of stages and were only to be applied in case Member State proved incapable of acting.

The Grand Committee established (SuVL 11/2010 vp) with reference to the findings of the specialist Committees that even if necessary as such, the proposed regulation would need to be specified as regards the economic indicators to be used by the Commission, keeping in mind that averting from the figures set by the Commission would lead to half-automatic sanctions. For this reason, the powers of the Commission needed to be specified through examples of possible future indicators or by presuming a consultation prior to the introduction of any new indicators. As indicated above under question VII.1, the Grand Committee also had concerns relating to the impact of the proposed measures on the EU interinstitutional balance.

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?

There has been no need to change the rules of budgetary process because of the MTO. In line with fiscal policy law the Government defines the MTO when adopting the Stability Programme. The Council of the European Union will assess the MTO and ensure that it is appropriate. Then it is the task of the National Audit Office of Finland (Fiscal Council, on which see also questions VII.5 and IX.2) which operates in affiliation with Parliament to ensure that the budgetary process is in line with the MTO and the fiscal policy rules. According to the Section 90 of the Constitution,  an  “independent body affiliated with the Parliament, the National Audit Office, exists to audit the financial management of the state and compliance with the budget.” The National Audit Office is directed by the Auditor General, who is elected by Parliament for a term of six years.

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)?

The existing budgetary timelines are in line with the new rules so that there has been no need to adjust them because of the European Semester.

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

The Government found that the Commission proposals to amend regulations 1466/97 and 1467/97 were in line with the Finnish position and interests and would strengthen the stability of euro area and the achievement of long-term goals (U 34/2010 vp).


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)?

The Government is expected to take the Medium-term Objective into account according to fiscal policy rules when it adopts its framework decision on budget each year. The law obliges the Government to assess the need of corrective measures if a risk of deviation from the MTO is observes or if the National Audit Office interferes.

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

The minimum objective is -0,5%, leaving flexibility for reaching a higher percentage.  The objective is set in the Finnish Stability Program 2014, available at https://www.vm.fi/vm/fi/04_julkaisut_ja_asiakirjat/01_julkaisut/02_taloudelliset_katsaukset/20140411Suomen/name.jsp.

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

The MTO is proposed by the Ministry of Finance, and approved by the Government in the context of approving the stability program (see Article 2 of the Fiscal Compact Act, Laki on talous- ja rahaliiton vakaudesta, yhteensovittamisesta sekä ohjauksesta ja hallinnasta tehdyn sopimuksen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta ja sopimuksen soveltamisesta sekä julkisen talouden monivuotisia kehyksiä koskevista vaatimuksista and Government degree on julkisen talouden suunnitelmasta (120/2014). See also question VII.7).

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 Finland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

For general considerations, see above question VII.1.

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 Finland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

The Government expressed in Memorandum 34/2010 vp its general agreement with the proposal, which was found to contribute substantively to the credibility and implementation of the Stability Pact. The Government stressed the speedy nature of the new mechanism and the fact that it involved several subsequent stages, which contributed to their preventive nature. The Government expressed its support for the reversed qualified majority voting proposed, since the mechanism was to be as automatic as possible and contain little political discretion. It was also of importance that the mechanism could be used as soon as possible and also involves non-euro States. Sanctions involving the budget should be as comprehensive as possible, strengthening the elements linked to conditionality. Economic sanctions should be directed at national budgets, not private operators receiving support.

 

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?

No changes have been made to the rules on the budgetary process in order to comply with the six-pack rules specifically.

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

Not applicable.