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.
What positions did France 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?
The Six Pack entered into force in the middle of the French Presidential campaign. Nicolas Sarkozy’s party and the main opposition party, the socialist party, had diverging understandings regarding the pace that had to be followed in reaching again a financial balance but not regarding the need to adopt the Six Pack itself. At that point in time, France did not experience financial difficulties and tried, on the contrary, to be an example for the rest of Member States. Indeed, as it was also the case with other crisis instruments, the Franco-German tandem was very active in this matter. President Sarkozy and Chancellor Merkel sent a letter to the Presidents of the European Council and of the EU Commission on 6 May 2010 affirming the need to ‘reinforce the economic governance of the Eurozone’ and drawing three main areas in which intervention was needed:
1. ‘reinforcement of the budgetary surveillance within the Eurozone with a strengthening of the sanctions in case of excessive public debt and reinforcement of the coherence between the national budgetary procedures and the Growth and Stability Pact’
2. ‘Enlargement of the surveillance to structural and competiveness issues and to unbalances and reinforcement of the efficiency of the political economic recommendations of the Commission’
3. ‘For the future, the options to create a solid framework for crises resolution respecting the principle of budgetary responsibility of each Member State’.
This Franco-German commitment is further noticeable in the publication by finance ministers Lagarde and Schäuble on 21 July 2010 of a paper on the ‘European economic government’. This paper contained concrete proposals developing the three main ideas above mentioned. These were most similar to those prepared by the working group led by Herman van Rompuy and those prepared by the EU Commission.
Two Senators, Pierre Bernard-Raymond (UMP at the time) and Richard Yung (PS) also prepared an information report. Generally, they considered the reform of the Stability and Growth Pact to be necessary but they argued for other criteria, such as the investments made by a Member State for research and development, to be taken into account.
Still before the Six Pack entered into force, but later in time, the Socialist group of the Senate made a resolution proposal which, however, was rejected by the finances Committee. This resolution was very critical of the Six Pack, which was said to be insufficient and not taking into account the priorities defined in the strategy EU 2020 that were deemed to have become unreachable in this ‘context of generalized austerity policies’. Furthermore, the introduction of the reverse majority voting mechanism was said to result in a loss of power for the French state. This resolution proposal was rejected because it arrived too late both in the European and the national time-frame.
On the other hand, the EU affairs committee of the National Assembly organized a joint meeting with the members of the EU affairs committee of the Senate and the French MEPs on 30 March 2011 on the economic governance but no resolution was adopted.
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)?
The implementation of Directive 2011/85/EU – and of the Six Pack in general – is strongly intertwined with the implementation of the TSCG (hence, see also part IX.4 ).
Directive 2011/85/EU was implemented by several laws and a decree.
The Decree on public budgetary and accounting management (Decree 2012-1246 of 7 November), contains very detailed rules related to the public budget and its control, hence giving compliance to the European requirements in this domain. It updates and replaces provisions previously contained in several legal documents which now are all gathered in the Decree.
The Organic Law on Programming and Governance of Public Finances and the Programming Act for 2012-2017 also served the implementation of this Directive as mentioned in Part II.1. Indeed, Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States is said to be partially transposed in the Organic Law in its articles 1 to 5 and 11 to 23. However, it is not always clear which provisions of the Organic Law should be referred to the requirements of Directive 2011/85 or to those of the Fiscal Compact. Only article 5(7) of the Organic Law mentions explicitly Directive 2011/85, in order to clarify the meaning of the requirements pertaining to the inclusion of the projections of the government on public finances in the informational reports annexed to the Programming Acts. In fact, this article contains the requirement anchored in Directive 2011/85/EU for Member States to prepare a medium-term budgetary framework that contains projections of each major expenditure and revenue item for the budget year and beyond, based on unchanged policies.
As regards the Programming Act for 2012-2017, it provided the first multiannual framework in respect with the European rules.
What political/legal difficulties did France encounter in the implementation process, in particular in relation to implications of the directive for (budgetary) sovereignty, constitutional law and the budgetary process?
The need for a multiannual framework was not particularly difficult to implement since Programming Acts had existed since the constitutional reform of 2008. The Organic Law for the Programming and Governance of Public Finances modified their content by requiring that they also specify the trajectory of the effective and structural balances of public administrations in order to reach the Medium Term Objective. The other provisions of the Directive did not provoke any further implementation difficulties.
The Constitutional Council issued a decision on the Organic Law for the Programming and the Governance of the Public Finances but none of its declarations of unconstitutionality or its reserves of interpretation regarded financial measures. Of interest in the implementation of Directive 2011/85 is the freedom this decision guaranteed to Parliament at the time of approving annual Financial Acts and the protection of the Government’s prerogatives guaranteed in article 20 of the Constitution (‘The Government shall determine and conduct the policy of the Nation’) in spite of the existence of the Programming Act. (See also parts IX.4.).
Macroeconomic and budgetary forecasts
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 Direction générale du Trésor (Treasury Direction general) of the Ministry of Finance and economy produces macroeconomic and budgetary forecasts.
The High Council of Public Finance, created by the law on the Programming and the Governance of Public Finances, is in charge of conducting an unbiased and comprehensive evaluation of these forecasts (see Part VII.5.).
It is worth noting that disagreements exist between the DG Treasury of the Ministry of Finance and Economy, Eurostat, the IMF, the EU Commission and the OECD regarding the value of the output gap as a result of different calculation methods of the structural balance. In her Information report prepared before the Debate of orientation in preparation of the budget for 2015, PS deputy Valérie Rabault underlined these differences and asked for a common definition between the Government, the parliamentarians and the EU Commission to be found.
Does France 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 France have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?
France decided to create an independent fiscal council, the High Council of Public Finance (HCFP) created by the Organic Law 2012-1403 on the Programming and the Governance of Public Finances.
This Council is an independent body created within the Cour des Comptes (Court of Auditors – art. 11). Both organs assume complementary functions since the Cour des Comptes is, among others, responsible for the control of public expenditure and its certification and the High Council of Public Finance has to give opinions (avis) on the potential GDP and the macroeconomic previsions used as bases for the proposal of Programming Act and on the macroeconomic previsions at the basis of the proposal for yearly Budget Act and Social Security Financing Act.
Furthermore, article 17 of the organic law 2012-1403 foresees the intervention of the High Council of Public Finance after the Government has elaborated its Stability program and at least two weeks before the Stability program is submitted to the Commission. Its opinion is attached to the Stability program. When the HCFP assesses the Stability programme, though, it takes the content of the Programming Act into account but its analysis is limited to the macroeconomic previsions used by the Government to present its Stability Programme.
It also intervenes after the proposal of each yearly Accounting Act (see below).
This intertwinement between both organs (HCFP and Court of Auditors) is further reinforced by the fact that the President of the Court of Auditors is also the President of the High Council of Public Finance. In fact, the High Council of Public Finance is composed of ten members in addition to its President: four judges of the Court of Auditors, four members nominated respectively by the President of the National Assembly, the President of the Senate, the Presidents of the finance committees of each assembly ‘because of their competences in the domain of macroeconomic previsions and public finances’ (art. 11(2)). These four last members are nominated after a joint public hearing by the committees of finance and the committee of social affairs of the designating assembly.
Another member is nominated by the President of the economic, social and environmental Council because of his or her competences in the domain of macroeconomic previsions and public finance; this member cannot have any elected public function at the time either. Finally, the General Director of the Institut national de la statistique et des études économiques (INSEE – National institute of statistics and economic research) is also a member.
All members – apart from the General Director of the National institute of statistics and economic research – are nominated for a mandate of five years, renewable once for the judges only. Half of them are to be designated every 30 months. Furthermore, they all have to provide the President with a declaration of interests upon their designation.
The independence of the HCFP is essential and required by the European norms. The independence of the General Director of the INSEE was subject to discussion. Indeed, the INSEE is associated to the Ministry of Finance but the criterion of independence was considered to be fulfilled since this independence is recognised by the EU Commission due to the existence of European rules that guarantee it. Furthermore, in spite of the fact that the independence of the other members is guaranteed by the incompatibility with any elective function and by the fact that none of the members are remunerated, the political balance between majority and opposition is secured since the president of the finance committee is always a member of the political opposition of each assembly.
As regards the independence of the Council itself, it is guaranteed by two elements: first of all, it is created within the Court of Auditors and, secondly, it was attributed a special budget deduced from that of the Court of Auditors in order not to increase the overall expenditure.
Finally, its independence is further ensured by its rules of procedures: its meetings take place upon a call of its President, it can organise hearings of any representative of an administration competent in the domain of public finances, statistics and economic forecast and it can call on any body or person outside of the public administration to assess the prospects for fiscal revenue, expenditure, balance or debt of the public administration. Additionally, the Government must answer any information request addressed to it while the HCFP prepares its opinion.
The HCFP is obliged to transparency, for example when it takes into account previsions on growth issued by bodies other than the EU Commission and the Government. Whenever it takes into account this external data, it must publish the list of the bodies which authored them.. Its members ought to keep any detail regarding its deliberations secret and are not allowed to publish any dissenting opinion. As was to be expected, the HCFP can only publish opinions when the Organic Law on the Programming and the Governance of Public Finances so foresees.
It is interesting to note that a rule guaranteeing equal numbers of men and women has been inserted in the Organic Law 2012-1403 whose article 11(4), par. 2 defines the modalities of the system for its respect. This innovative provision was added on a proposal by Senators André Gattolin and Jean-Vincent Placé.
The High Council of Public Finance has so far (August 2014) issued seven opinions and declared the activation of the correction mechanism (see Part II.1.).
The correction mechanism was included in the Organic Law 2012-1403 of 17 December 2012 on the Programming and Governance of Public Finances. Its Chapter IV defines that the High Council of Public Finance will issue an opinion on the Loi de règlement (Accounting Act) of the previous year in which it will compare the results of the execution of the previous year with the structural balance of the pluriannual orientations contained in the Law on the Programming of Public Finances. If it notes that an important deviation – as defined in the TSCG – exists, this observation will be stated in the opinion which is, in any case, always made public and transmitted to Parliament together with the act proposal. It should also take the existence of exceptional circumstances into account.
When such deviation exists, the Government has to explain the reasons for it when the project of Accounting Act is examined by each Chamber. It must also present the proposed corrective measures in a report mentioned in article 48 of LOLF. The Government should take account of this important gap in the Budget Act and the Social Security Financing Act of the next year by latest (it can also do so in an Amending Budget Act or an amending Social Security Financing Act).
A report appended to the projects of the Budget Act and the Social Security Financing Act of the following year analyses the proposed correcting measures – which may affect all public administrations or some sub-sectors only – in order to respect again the multiannual orientations of structural balance defined in the Programming Act. This report will justify, if required, the differences between the content of the Programming Act in terms of the extent and the calendar of the proposed measures.
The Government may request the HCFP to state whether the exceptional circumstances defined in article 3 TSCG are met or have ceased to be.
Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances
What political/legal difficulties did France 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 adoption of Regulation 1176/2011 on the prevention and correction of macroeconomic imbalances has not provoked any particular difficulties in France and, generally, the political debate focused on the Six Pack or even on the European economic governance as a whole. As mentioned in part VII.1., France had been very much in favour of the Six Pack. Even the critical resolution proposal made by Nicole Bricq and other members of the Socialist Group of the Senate (see VII.1.) – which was not adopted – considered this novelty positively, though warning about the potential risks depending on the parameters chosen to determine the existence of imbalances.
However, in her report on the Amending Budget Act for 2012, PS senator Nicole Bricq considered for instance that it did not bring ‘anything particularly new’ compared to what existed before, this being due, according to her, to the fact that the legal basis provided by article 121 TFEU is rather weak.
This question was also discussed during the joint meeting organised by the EU affairs committee of the National Assembly with the members of the EU affairs committee of the Senate and the French MEPs on 30 March 2011 on the economic governance already mentioned. PS deputy Christophe Caresche highlighted the fact that it is absolutely necessary that macroeconomic indicators are also taken into account.
It should furthermore be noted that the EU Commission considers that France suffers from macroeconomic imbalances. In its 2014 in-depth review, it concluded that ‘France continues to experience macroeconomic imbalances, which require specific monitoring and decisive policy action.[…and that] The need for decisive action so as to reduce the risk of adverse effects on the functioning of the French economy and of the euro area is particularly important given the size of the French economy and potential spillovers onto the functioning of the euro area.’ It further concluded that ‘Given the need for policy action already called in the 2013 IDR, the Commission will put in motion a specific monitoring of the policies recommended by the Council to France in the context of the European Semester, and will regularly report to the Council and the Euro Group.’
France necessity to reform its economy is at the centre of the political debate since the publication of this review and the observation that the aim of the 3% deficit will not be matched in 2015. President Hollande launched a ‘pacte de responsabilité et de solidarité’ (responsibility and solidarity agreement) in January 2014 in order to remedy to the economic problems France is currently facing and further reforms are expected in autumn 2014. Furthermore, the majority (PS) is divided since spring 2014 and some of its members urge the President to change the orientation of his economic policy.
Regulation No 1175/2011 on strengthening budgetary surveillance positions
What changes to the rules on the budgetary process are made to accommodate the amended Medium-term Budgetary Objective (MTO) Procedure?
As mentioned in Part II.1., the requirement to define a medium-term budgetary objective (MTO) procedure has been included in the Organic Law 2012-1403 of 17 December 2012 on the Programming and Governance of Public Finances.
Its article 1 states that ‘In the respect of the aim of account balance of public administrations contained in article 34 of the Constitution, the Programming Act defines the medium term objective of public administrations mentioned in article 3 of the treaty on stability, coordination and governance in the economic and monetary union, signed in on 2 March 2012, in Brussels.’
The current medium-term budgetary objective of France foresees that France will reach structural balance by 2016 (see Part VII.11. for more information on this point).
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 new rules on a European semester for economic policy coordination have led both assemblies to follow up and prepare communications, resolutions and reports at the different stages of the European Semester since its introduction in 2011.
For instance, the National Assembly has started following up intensively the procedure of the European Semester, publishing communications and reports on the recommendations of the Commission on the Stability Programme for example. It also repeatedly insists on the necessity to imply the French Parliament further by allowing it to present amendments on the stability programme for example. A similar evolution is visible in the Senate where ‘the ‘moments’ of the European semester are linked to publications by the finance committee on the programming – or the execution – of public finances: in consequence the European semester is perfectly integrated to its activities’.
The opinions of the Commission and/or the Council are commented on during the Debate on the Orientations of Public Finances in June, allowing the deputies and senators to take them into account when discussing in the view of the preparation of the Budget Act of the following year.
Additionally, art. 14 of the Programming act for 2011 (law 2010-1645 of 28 December 2010) contained the obligation for the Government to provide the Parliament with its project of Stability program at least two weeks before its transmission to the EU Commission. It foresaw that Parliament would debate on this project and express its opinion through a vote. This possibility for parliamentary participation has been widened by the organic law 2012-1403 whose article 10 now provides for the possibility to organise debates in the National assembly and the Senate ‘when European Union law institutes coordination procedures of the economic and budgetary policies that require the exchange and examination, at periodic intervals, of documents produced by the Government and the European institutions’. Although the content of this article is rather vague in its reference to ‘documents produced by the Government and the European institutions’ exchanged ‘at periodic intervals’, a reference to the documents exchanged during the European Semester introduced by the Six Pack should surely be seen here, although this article provides a basis for parliamentary debates on documents sent in the framework of the Two pack arrangements too.
Furthermore, article 50-1 of the French constitution that foresees that ‘The Government may, before either House, upon its own initiative or upon the request of a political group, as set down in article 51-1, make a declaration on a given subject, which leads to a debate and, if it so desires, gives rise to a vote, without making it an issue of confidence’ was also used in 2011 in the Senate regarding the Stability programme.
In spite of the change in the scheduling of the presentation of the stability programmes (previously, multiannual programs were presented in December and covered a period of three years starting from the following year whereas the stability program presented in spring in the framework of the European Semester contains previsions that start the following year), according to the President of the Haut Conseil des Finances Publiques ‘the new European rules adopted in 2011 did not substantially modify the conditions in which the Government prepares and presents its stability program.”
What political/legal difficulties did France encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?
Regarding the need for a MTO itself, it was generally accepted. The need for healthy public finances was presented as a national necessity as well given the deficit France has been suffering from for a decade, and given the fact that the reimbursement of the French debt amounted to a large part of the budget.
How is respect of the Medium-term Budgetary Objective included in the national budgetary framework (section 1A, article 2a consolidated Regulation 1466/97)?
The High Council of Public Finance checks the coherence between the Programming Act and the Medium-Term Budgetary Objective and the European commitments towards the European institutions of the French State.
Since the adoption of the Organic Law on the Programming and Governance of Public Finances in 2012, each proposal for a Budget Act must contain a ‘article liminaire’ (preliminary article) in which a table will state the prevision of structural and effective balance for all public administrations for the year of the Budget Act (that is, the following year). This table should also contain the same information regarding the previous year and the expected figures for the current year. This preliminary article is common to the initial Budgetary Act and Social Security Financing Act but in the event of the proposal for an amending Budget Act or Social Security Financing Act, each proposal will contain its own preliminary article. This preliminary article facilitates the Parliament’s task since it now has an overview of the financial situation in one document.
When the Budget Act proposal (or amending Act proposal) is submitted to the HCFP, it assesses two elements. The first one is the macroeconomic previsions at the basis of the proposal and the second one consists in the assessment of the coherence between the preliminary article and the structural balance pluriannual orientations contained in the Programming Act in order to reach the MTO. For example, in its opinion on the Budget Act proposal and Social Security Financing Act proposal for 2014, it clearly indicated the lack of respect of the orientations contained in the Programming Act in terms of structural deficit and warned the Government that the correction mechanism could be activated in May 2014. And so it was. (See Part VII.5. on the activation procedure). Furthermore, according to article 9 of the Programming Act, the Government has to provide the Parliament with a report before the Debate on the orientations of Public Finances organised in June (this is the preparatory debate before the Budget Act proposal is debated after the summer). In this report, the Government has to justify any potential gap between the Programming Act in force and the last Stability Programme transmitted to the Commission.
What is France’s current Medium-term Budgetary Objective (section 1A, article 2a consolidated Regulation 1466/97)? When will it be revised?
France’s current medium-term budgetary objective is contained in the Law 2012-1558 of 31 December 2012 on the Programming of Public Finances for 2012-2017 and it foresees that France will reach structural balance by 2016. It should however be reminded that the Programming Act are ordinary laws in France and are not fully binding neither on the Government nor on the Parliament when they elaborate the annual Budget Act and of the Social Security Financing Act (see Part VII.3.).
Although this law covers a 5-year period ending in 2017, it will be revised in autumn 2014: the French Government has announced that it will present a proposal in September 2014, in spite of the fact that the previous law was only adopted in December 2012. As stated in part II.1., the Programming Acts can be revised at any point in time, the condition of a change in government foreseen in article 11 of Directive 2011/85/EU has not been introduced in the National law. This is a consequence of the interpretation made by the Constitutional Council in its decision of 13 December 2012 (on this point, see question VII.2. as well).
Arguably, this possibility to adopt a new law at any point in time might, in the long run, undermines the efficiency of the corrective measures created in implementation of the European norms.
By what institution and through what procedure is France’s Medium-term Budgetary Objective adopted and incorporated in the stability programme (Eurozone, article 3(2)(a) consolidated Regulation 1466/97)?
France medium-term budgetary objective is incorporated in the Programming Act adopted by Parliament. The Programming Act also contains the trajectory that will permit the achievement of this Objective.
The stability programme is prepared by the Direction générale du Trésor of the Ministry of Finance and Economy. In this programme, details as to how the Objective will be achieved are given. For example, in the latest Stability Programme (2014-2017), there is a chapter dedicated to the global strategy and the medium-term objective in which the French Government explains the actions it intends to take and how they will permit the achievement of the Objective.
According to article 9 of the Programming Act, the Government has to provide the Parliament with a report before the Debate on the orientations of Public Finances organised in June (this is the preparatory debate before the Budget Act proposal is debated after the summer). In this report, the Government has to justify any potential gap between the Programming Act in force and the last Stability Programme transmitted to the Commission.
In January 2014, a new Council, the Conseil stratégique de la dépense publique (Strategical Council of Public expenditure) was established by a Decree in order to propose and follow up the programme of development of structural savings presented in the stability programme. This Council is chaired by the President of the Republic and composed of the Minister of Finance, Minister of Economy, Minister of Social Affairs and Health, Minister of Employment, Minister in charge of the Reform of the State, decentralization and public service and the Secretary of State in charge of the Budget. For instance, in 2014, they analysed – at the highest possible level – all potential sources of economy, including the local and social expenditure.
The decisions made by the Council will be put into place and taken into account in the next Programming Act.
Regulation No 1177/2011 on the excessive deficit procedure
What political/legal difficulties did France encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?
During the debates that took place before the regulation proposal was made, France defended a semi-automatic sanction mechanism so that politicians would still have a say on its activation and it would not be let to experts.
When discussing about the Six Pack proposals, the members of the EU affairs committee of the Senate did not question the lack of legitimacy of the reformed Excessive deficit procedure, rather they pointed at the inefficiency of the preexisting system and the potential inefficiency of the reinforced one for some of them. They considered the possibility to introduce political sanctions instead of monetary ones.
France is additionally particularly impacted by the excessive deficit procedure since its excessive deficit was declared by the Commission in 2009. France was given until 2015 to correct this excess but the latest economic forecasts indicate that respecting this deadline might be difficult. In fact, PS secretary Jean-Christophe Cambadélis considered it ‘inevitable’ to change the criterion of 3% defined before crisis and there are hints that the 1% growth the Government foresaw for 2014 will not be reached.
What political/legal difficulties did the Member State encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?
With regard to the sanctions contained in this Regulation specifically, this question was first of all considered ‘probably the most delicate one in the framework of the negotiations on the reform of the European economic governance’. France had expressed its wish that the sanctions should not be completely automatic, and favoured the fact that the sanctions proposed by the Commission could be rejected by a simple majority of Member States instead of a qualified majority. This opposition to the reverse qualified majority voting was also voiced during the debate of the resolution proposal prepared by Senator Nicole Bricq on behalf of the Socialist group – which was nevertheless never adopted -: it was said to ‘threaten National parliaments’ sovereignty’. A large political consensus existed on this point in the Senate. The democratic deficit stemming from the automatic character of the sanctions was also mentioned again during the debates organized on the Fiscal Compact in the National Assembly. Hence, it seems that this question has been subject to large parliamentary attention.
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?
What other information is relevant with regard to France and the Six-Pack?