Latvia

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 Latvia 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.

There were no serious difficulties but some discussions arose in the process of approving the national position concerning the Six-Pack. 

Initial position

During the approval of the initial national position for the ECOFIN of 8 June 2010, even before the Commission issued the proposals for Six-Pack in September 2010, there were discussions in the Parliamentary Committee for European Affairs (PCEA) concerning the question whether Latvia should agree that in the name of greater financial stability the Member States should submit their budgets for evaluation in the EU even before their adoption in national parliaments. Vaira Paegle (the chairwoman for the PCEA, coalition, PS) argued that from one side this would help in disciplining the Member States and would not allow them to create too big of a budget deficit; on the other side, the question arises whether this will not limit the sovereignty of the Member States and whether this complies with the Lisbon Treaty. The chairman of the Budget Committee, Gundars Bērziņš (coalition, ZZS) stressed that such changes at the EU level would show in due time how the Latvian budgetary principles compare with other Member States. He, however, sceptically evaluated the possibility of financial sanctions for failing to comply with the Stability and Growth Pact and argued that a ban on access to cohesion funds for these Member States would only worsen their situation.[1]

The members of the committee brought up the question of sovereignty. The issue was emphasized by the chairwoman of the PCEA (Vaira Paegle, Pilsoniskā Savienība (PS)):

Concerning this question a well-balanced political decision is necessary. [We] have to decide whether we agree that in the name of greater financial stability the Member States will submit their budgets for evaluation to the European Union even before their approval in the national Parliaments. From one side, it would help to discipline the Member States and would not allow them to create too big budgetary deficits. At the same time it has to be carefully assessed whether such initiative does not limit the sovereignty of the Member States and is in compliance with the Treaty of Lisbon.[2]

Another member of the PCEA (Dzintars Rasnačs, Nacionālā Apvienība, NA) stressed the importance of the issue:

This is a question concerning the sovereignty of Latvia, and it can be taken only after broad discussions among experts and politicians. This could be a step towards a federal Europe and, thus, could limit the sovereignty of Latvia.”

The State Secretary of the Ministry of Finance agreed that this is a question of balance.[3] The position was, nevertheless, approved with Dzintars Rasnačs abstaining.[4]

The Position for the European Council (28-29 October 2010)       

On 22 October 2010, when the position of Latvia for the European Council meeting of 28-29 October was approved, the Six-Pack discussed some more. The position of Latvia was that it supported stronger fiscal and macroeconomic surveillance at the EU level. The national position stated that for defiance of fiscal discipline effective sanctions should be enforced – these should concern not only cohesion funds but all categories of EU budget expenditure. There is no indication that the discussions this time would have touched upon the question of sovereignty. The position was approved.[5]      

The Position for ECOFIN (7 December 2010)

The initial positions concerning particular instruments belonging to the Six-pack were approved all together on 3 December 2010 and, initially, without any discussions due to the fact that „they will be re-drafted many times because already at this stage the Member States have different opinions.”[6]

The Position for ECOFIN (15 February 2011)

In the meeting on 14 February 2011 the PCEA decided on the position of Latvia for the ECOFIN Council of 15 February 2011. The general approach on the implementation of the macroeconomic imbalances procedure was that in principle Latvia supports stricter rules for the Member States and increased automacity in the decision-making procedures. Latvia supported the idea that the chosen form of the instrument should be a Directive.[7] The position emphasized that it is important not to create a hulking and administrative-burden-consuming procedure. In principle the position supported the proposal but expressed an opinion that the levels of indicators in the macroeconomic imbalances procedure for non-euro countries have to differ from the Eurozone countries (due to the necessity to catch up). This was kept as an objection in the position because it was not considered to be enough to mention this in the preamble and, instead, the position argued that this has to be included in the main body of the measure.[8]

Concerning the expected implementation measures, the Finance Minister stated that the Law on Fiscal Discipline has to be adopted. There was some discussion as well concerning the fact that excessive macroeconomic imbalances are not allowed and one MP (Dzintars Rasnačs, opposition, NA) asked what would happen in the case of force majeure. To this the Finance Minister answered that divergences are allowed in case of economic downturn.[9]

The Position for ECOFIN (15 March 2011)

The initial position presented before the PCEA on 14 March 2011 was not approved. The (not-approved) position provided that Latvia in the name of a compromise supports that the penalty payments under the sanction mechanism for avoiding macroeconomic imbalances in Eurozone will go to the ESM. The doubts concerning the question that these penalty payments go to a fund from which the rule-breakers will later receive aid remained. The position also supported the amendments to Regulation No 1466/97 concerning the ‘expenses rule’ (the expenses of the government cannot grow faster than the GDP). In the same way the position supported amendments to the Regulation concerning speeding up of the excessive deficit procedure and explanation of its implementation. In addition, the position supported the taking into account of the net costs of the pension reforms and allowing of a deficit level which does not substantially exceed the reference level in Member States where the level of debt is lower than 60% GDP.[10]

In this meeting a short discussion arose concerning the allocation of penalty payments under the proposals.[11]

The main discussions however centered on sovereignty. While the government representative emphasized the need to reach a compromise among all Member States, MP J. Dombrava (opposition, NA) asked why Latvia should lose a part of its sovereignty by adopting all these instruments and why we should limit our operations in favour to supranational organisations. “What will happen in case there is a situation when Latvia needs to exceed the deficit – like in Japan – then we would have to pay the penalty?” she continued. The Government representative expressed the opinion that the essence of the Six-pack is that it is hard to create a united market, to have a united currency, if the fiscal policy is not united. He argued that some sort of sovereignty has to be given up in order to create a level playing field for economic processes and that budgetary deficit ceilings are meant for normal and not extreme situations.[12]

Another member of the NA (opposition), Dzintars Rasnačs expressed suspicion that this would be a step towards federalization and asked “who will determine the sanctions and whether it will not be the case that the small Member States will be punished while the breaches by the big Member States will be overseen?” He expressed suspicions that double-standards are being used by the EU. The Government representative answered that the sanction mechanism is provided in the agreement and in the recommendation of the European Commission. He argued that “we support stable criteria and if they are breached, then there is a clear mechanism for punishment.”[13]

In addition, MP S. Dolgopolovs (opposition, Saskaņas Centrs (SC)) expressed the opinion that already now there was a budgetary deficit and sanctions will only worsen the situation. MPs J. Dombrava (NA), S. Dolgopolovs (SC) and Dz. Rasnačs (NA) inquired about the potential amount of penalty payment in case Latvia does not comply with the limits of budgetary deficit.[14] Due to the fact that the Finance Minister did not participate in the meeting, the potential amount of the sanctions was unclear as well as from what means they would be paid, the argumentation in favour of these instruments was not considered to be convincing. Hence the position was not approved (5 – in favour, 8 – abstained; in general, it seems that the opposition MPs abstained but the precise divide between position and opposition has not been indicated).[15]

The Position for ECOFIN (16/17 May 2011)

From the Informative Report concerning the questions planned for consideration in the ECOFIN on 16-17 May, it follows that the Government was of the opinion that the discussions with the European Parliament concerning the proposals of the six-pack were not very transparent.[16] The Report stated that, even though it was necessary to deal with all these issues rapidly, in order for these proposals to come into force as soon as possible, the discussions should not have been so premature in order not to loose the quality of the proposals. The report stated that many of the EP’s suggestions made the proposals less clear and more complex (especially the EP suggestions concerning the proposal for the Regulation on macroeconomic imbalances where the EP wanted a much broader role for itself). According to the Government such solution would make the implementation procedure unnecessarily complex and create an additional administrative burden in the Member States.[17]

The Position for ECOFIN (20 June 2011)

On 17 June 2011 the national position for the ECOFIN meeting of 20 June 2011 was approved by the PCEA. The position provided that Latvia has no problems with the reversed majority voting procedure.[18] The main question for Latvia which was emphasized was that the sanctions for the excessive imbalances procedure should apply only to the Eurozone member states.[19] In the position Latvia in the name of compromise agreed to the inclusion of the EU 2020 indicators, even though the initial position concerning this question was negative. Latvia was opposed to the use of delegated acts but was ready to yield in the name of compromise.[20]

Position for ECOFIN (4 October 2011)        

Finally, on 30 September 2011 the PCEA approved the national position providing for approval of the compromise reached after the Council discussions with the European Parliament “because it will promote strengthening of fiscal discipline in the EU as a whole and in each Member State individually”.[21]

There were some discussions concerning the question when the sanctions will apply to Latvia, to which the Government representative answered that it is planned to approve the regulations in the end of 2011, they will have to be observed starting with 2012 and implemented until beginning of 2014. Therefore, it was estimated that they will apply to Latvia starting with 2014 independently of whether or not Latvia will belong to the Eurozone.[22]

The question why Latvia should support a measure which could endanger its economic situation in the long-term was asked by MP J. Dombrava (NA, opposition). To this, the Government representative answered that the Six-Pack contains a long-term view and is not a reaction to the crisis; the states will have to obey fiscal discipline in both good and bad times.

Other questions concerned possible expectations and retreats in situations of crisis, the transition periods, potential proposals necessary for implementing the Six-Pack (the Government representative indicated that the Law on Fiscal Discipline will be submitted to the Parliament), the differentiation of sanctions and the question whether stopping of the funds is fair (to this the answer was that this would only be the case when there are grave breaches of fiscal policy, as was the case of, for example, Greece).[23]

From the Informative Report on questions discussed in the ECOFIN on 4 October 2011 it follows that Latvia concerning the redaction of the proposals supported the compromise version achieved during the Polish Presidency after problems in discussions during the Hungarian Presidency. Latvia supported the compromise version because it would contribute to strengthening of the fiscal discipline in the EU. In general, Latvia supported stricter coordination of the EU economic policy, since that would promote a practice of more responsible fiscal and macroeconomic policy in the Member States which, according to the position, is a precondition for the stability of the Eurozone and the economic and financial stability of the whole EU.[24]

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)?

In order to implement the Directive the Minister of Finance had two proposals:

        Fiscal risks. Article 14 of Directive 2011/85/EU provides that the Member States have to identify the potential liabilities. According to the suggestions for the second reading of the Draft Law on Fiscal Discipline, this provision has to be looked at in a broader context by taking into account the global tendencies of governance of fiscal risks with an aim to mitigate the negative effect such risks have on the stability of fiscal indicators. The Minister of Finances proposed to amend the Law on Fiscal discipline (which at the time was already after the first reading in the Parliament) to provide that the amount of the fiscal security margin, which after the first reading was proposed to be 0.5% GDP, in the future has to be calculated in accordance with the risks identified.[25] In the final, adopted version Article 17(2) of the Law on Fiscal Discipline provides that the amount of the fiscal security margin in the context of the Medium-term Budgetary Framework is determined in accordance with the quantifiable fiscal risks included in the fiscal risks declaration and it cannot be lower than 0.1% GDP.[26]

        Fiscal Discipline Council. Art 6(1)(b) of Directive 2011/85/EU provides that the Member States have to ensure monitoring of compliance with the fiscal rules, based on reliable and independent analysis carried out by independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States. An analogous requirement has been foreseen in the Fiscal Compact. Originally in the first reading the Draft Law on Fiscal Discipline did not provide for such a provision and stated that the obeyance of the fiscal rules has to be ensured by the Cabinet of Ministers. The Ministry of Finance’s suggestions for the second reading provided the establishment of a Fiscal Council with an aim to ensure independent supervision of compliance with the rules of fiscal discipline.[27] In the final, adopted, version of the Law of Fiscal Discipline Art 21 provides the establishment of the Fiscal Discipline Council as an independent collegial institution for monitoring the compliance with this law. According to Art 23 the members of this council are approved by the Parliament for a six-year period. The members cannot belong to political parties (Article 24(1)) and can be revoked only by the Parliament or after he or she has been convicted for a crime (Article 25) (see in more detail Question VII.5).

In more detail the requirements of Chapters V and VI of the Directive were implemented by Law on Fiscal Discipline (Articles 2(2), 4(7), 5, 6 and 7),[28] Law on Budget and Financial Management (Articles 16, 161, 162, 17, 19, 21, 22, 29, 30, 301, 31, 41 and 43)[29] and Law on Long-Term Stabilisation Reserve (Article 26).

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

See Question VII.1.

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)?

According to Art 20 Law on Fiscal Discipline the Ministry of Finance is responsible for producing medium-term macroeconomic forecasts, including the forecasts of growth of the GDP, potential growth of the GDP and GDP deflator forecasts. These macroeconomic forecasts have to be coordinated with the Bank of Latvia and the Ministry of Economics.[30]

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

No, there was no independent Fiscal Council in line with the requirements of the Directive 2011/85/EU and it has been specially created by the Law on Fiscal Discipline.[31] Before Directive 2011/85/EU was adopted it was foreseen that this supervision will be exercised by the Government (Cabinet of Ministers).[32] This last aspect was changed due to the Directive 2011/85/EU.

The Law on Fiscal Discipline concerning the Fiscal Discipline Council (Council) provides[33] :

        The Council is an independent collegial institution established for monitoring compliance with this law (Article 21).

        The Council consists of six members: three are proposed by the President of the Bank of Latvia in cooperation with the Finance minister and three by at least 10 MPs (Article 22). The candidates are elected by the Parliament for a six-year period. The same member can be elected for two successive terms. (Article 23).

        The Council is led by a chairmen or chairwoman elected by the Council members. He/she organizes the work of the Council, leads the meetings, employs the secretary of the Council and represents the Council (Article 26).

        The Council monitors the obeyance of fiscal rules in the preparation of the yearly budget law and the budgetary framework, checks the correctness of implementation of the balanced budget rule and expenditure growth condition, monitors the compliance with the Law on Fiscal Discipline in regard to the state budget, budgets of municipalities and derived public bodies (the institutions having a completely independent budget). The Council as well prepares an opinion concerning the allowed derogation from the balanced budget rule in case of serious economic downturn and prepares various reports (e.g. report concerning compliance with fiscal discipline and other questions regarding fiscal policy and macroeconomic development) (Article 28(1)-(8)).

        The Council has rights to cooperate with state and local government institutions, legal and natural persons and foreign institutions, to request and receive information from the state institutions necessary for fulfilling its tasks, to submit suggestions to the Ministry of Finance and the Cabinet of Ministers regarding the drafting of the yearly budgetary law and budgetary framework law, to invite experts and other specialists to give an opinion at the Council meetings and to submit suggestions to the Cabinet of Ministers concerning necessary changes in the laws concerning fiscal discipline (Article 28(9)).

        The Council drafts a report before the budgetary framework is submitted to the Parliament and this report is added to the proposal (Article 29(1)).

        If the Council discovers a breach of the Law on Fiscal Discipline, it drafts an irregularity report which has to be submitted to the Cabinet of Ministers and the Parliament (Article 29(2)).

        Technically the work of the Council is ensured by the Ministry of Finance (Article 31(2)) and its members belong to the united wage system for public employees (Article 31(3)).[34] This means that the Ministry of Finance plans the budget for the Council in a separate programme (Article 31(6)) and makes sure that the Council has all the administrative and technical means for carrying out its tasks. The Council, however, has full independence in carrying out its functions.

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 Latvia 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?

There is no information about any difficulties associated with the regulation in particular. For the general discussion concerning the Six-Pack negotiations please refer to Question VII.1.

With regard specifically to Regulation (EU) No 1174/2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area, the information concerning the negotiation regarding any concerns is that, according to an Informative Report prepared by the Ministry of Finace, during the negotiations concerning the proposal for this Regulation Latvia disagreed with the European Parliament’s proposal to apply this Regulation as well to the non-euro Member States.[35]


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?

The Law on Fiscal Discipline adopted by the Parliament on 31 January 2013 (came into force on 6 March 2013) provides:

        According to Art 5(1) the medium-term budgetary framework draft law (framework) is prepared for a three year period and it determines the maximum allowed Government spending for the first and second year according to the previously determined amount for the second and third year. If the framework has not been prepared the previous year, then the maximum allowed government spending is determined in the amount that was determined for the third year of the last framework.

        According to Art 5(2) if the adjusted allowed maximum Government spending minus the security of fiscal reserve for the appropriate year in comparison to Government spending minus the security of fiscal reserve determined in the previous framework differs for more than 0.1% GDP, the draft framework for the next year has to include an adjusted maximum Government spending.

        According to Art 5(3) the framework for every year of the period contains the following indicators:

§  forecasted GDP at constant and current prices;

§  forecasted potential GDP, its forecasted growth rate and its growth rate for the next two years following the third year of the period;

§  planned general government structural balance (it is noted in the law that this term has to be understood in the same way as in Regulation No 1175/2011);

§  planned general Government budgetary balance expressed as interest from the GDP;

§  forecasted state budget revenues;

§  adjusted expenses;

§  adjusted maximum public spending;

§  fiscal security reserve;

§  other necessary indicators.

        According to Art 7(1), if in the previous year a framework was prepared, then the yearly budget law is prepared in accordance with the framework.

        According to Art 7(2), when the yearly budget is prepared, the state budget expenditure has to be determined below the adjusted maximum allowed Government spending according to the framework for the appropriate year. This difference serves as the fiscal security reserve.

        According to Art 7(3) and 5(1), when the yearly budget is exercised the adjusted maximum allowed Government spending minus fiscal security reserve cannot normally be exceeded except in situations determined by Article 5(1) (changes in such budgetary positions as the expected expenditure concerning recipients of social benefits and pensions, the expected expenditure concerning the social security recipients and the average estimates of pensions and benefits, the increase in expenditure concerning prevention of material losses due to natural disasters, accidents etc., the increase in expenditure necessary for exercising the judgments of international courts and the Constitutional Court, the payments to Budget of the EU and payments in the context of international cooperation and in some other similar cases).

When the Government defined the objectives of the budget balance for 2012 it took into account Art 9(1) which provides that the Member States until the achievement of medium-term budgetary objectives have to improve the structural balance with the rate 0.5% GDP per year. According to this the general governmental budget deficit for 2012 has been determined to be 2.1% GDP, for 2013 – 1.4% GDP, 2014 – 0.8% GDP and 2015 – 0.3% GDP.[36]

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)?

There is no information concerning changes to the rules and practices on the national budgetary timeline specifically for implementing the new rules on European Semester for economic policy coordination.

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

In general Latvia supported a greater involvement of national parliaments in the context of the European Semester but disagreed with a greater involvement of the European Parliament.[37] For the general positions concerning the Six-Pack please refer to Question VII.1.

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)?

Every year a budgetary framework draft law for three following years is prepared and submitted to the Parliament. This draft law determines the maximum allowed Government spending. According to Article 7(1) Law on Fiscal Discipline, if in the previous year a framework was prepared, then the yearly budget law is prepared in accordance with the framework.  When a yearly budget is prepared, the state budget expenditure is determined below the adjusted maximum allowed Government spending according to the framework for the appropriate year (Article 7(2) Law on Fiscal Discipline). According to Article 7(2) Law on Fiscal Discipline, when the yearly budget is exercised, the adjusted maximum allowed government spending minus fiscal security reserve cannot normally be exceeded.[38]

According to the Law on Medium-term Budgetary Framework for 2012, 2014 and 2015 it aims to ensure fiscal discipline in accordance with inter alia Regulation No 1466/97 (Article 1(1))

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

The Law on Medium-term Budgetary Framework  (adopted by the Parliament on 15 November 2012, came into force on 1 January 2013) for 2013, 2014 and 2015 determines that in drafting this law the forecast used for GDP was 16 958 000 000 in 2014 and 17 988 700 000 in 2015 (Article 4).[39]

The general Government deficit target for 2013 is 1.4% GDP, for 2014 – 0.8% GDP and for 2015 – 0.3% GDP (Article 5). In structural terms the general Government deficit target cannot exceed 1.3% GDP in 2013, 0.9% GDP in 2014 and 0.4% GDP in 2015 (Article 6).[40]

The state budget financial balance amount, the maximum total government expenditure and the revenue forecasts are stated in the annexes of the Law on Medium-term Budgetary Framework.[41]

The Law on Medium-term Budgetary Framework for 2014, 2015 and 2016 which was adopted by the Parliament on 6 November 2013 and came into force on 1 January 2014 provides that[42] :

        In drafting this law the forecast used for GDP in comparative prices is 11 562 300 000 euro in 2014, 12 021 800 000 euro in 2015 and 12 501 800 000 euro in 2016 and the forecast used for GDP in factual prices is 24 763 600 000 euro in 2014, 26 391 800 000 euro in 2015 and 28 136 300 000 euro in 2016 (Article 3).In drafting this law the forecast used for potential GDP in comparative prices is 11 502 800 000 euro in 2014, 11 972 400 000 euro in 2015 and 12 465 500 000 euro in 2016 (Article 4) and the potential GDP growth speed froecast is 3.7% for 2014, 4.0% for 2015, 4.1% for 2016, 4.1% for 2017 and 3.9% for 2018 (Article 4).

        The aim for the general government structural balance target is -1% GDP in 2014, -1% GDP in 2015 and -0.9% GDP in 2016 (Article 5).

        The aim for general government budget balance is -0.9% GDP in 2014, -0.9% GDP in 2015 and -0.8% GDP in 2016 (Article 6).

The annotation of this recently adopted law provided: the allowed structural deficit objective is determined by taking the national MTO (which according to Article 10 of the Law on Fiscal Discipline is -0.5% GDP) as a basis and by using the allowed deviations for increasing the contributions to the second level pension system (allowed by Regulation No 1175/2011). The increase in contributions to the second level pension system is carried out in three parts: in 2013 the contributions are increased from 2 to 4% (the fiscal impact 0.5% GDP), in 2015 – from 4 to 5% (the fiscal impact 0.27% GDP) and in 2016 from 5 to 6% (the fiscal impact 0.29% GDP). In accordance with this provision the structural deficit aim is determined in amount of 1.0% GDP in 2014 and 2015 and 0.9% GDP in 2016. Latvia will completely delete the deviations and return to the MTO in 2019.[43]

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

Until 31 December 2013 Article 7(2)(a) consolidated Regulation 1466/97 was applicable. The Convergence programme was prepared by the Ministry of Finance and approved by the Government (the Cabinet of Ministers) by a simple majority vote. The Programme is further discussed in the Foreign Affairs Committee of the Parliament and approved.[44] After it has been approved by the Government and the Parliamnetary Committee it is submitted to the European Commission.[45] The objective in the 2012 Convergence programme was to correct the excessive deficit by 2012 and to approach the MTO by the end of the programme period. For 2013 the programme targets deficit of 1.4% GDP. In general it is planned that Latvia will approach its MTO by the end of the Convergence programme period – in 2015.[46]

Since 1 January 2014 Article 3(2)(a) consolidated Regulation 1466/97 applies to Latvia and the MTO is incorporated in the stability programme. The procedure for adopting and incorporating the stability programme will likely be the same as for the convergence programme.


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

There were no difficulties or specific debates concerning this Regulation. For the negotiations of the Six-Pack in general please refer to 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 Latvia encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

Please see Question VII.1.

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?

So far it seems that there is no need to further amend the budgetary process in order to comply with the Six-Pack.

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

Not applicable.

[1] Annex I Information from the Parliament, p. 10.

[2] Ibid, p. 10

[3] Ibid, p. 10

[4] Ibid.

[5] Annex XXII_Saeimas 9 Protokols 65 22_10_2010, p. 2-3.

[6] Annex XXIV_Saeimas 10 Protokols 12 03_12_2010, p. 7.

[7] in the end the adopted instrument was a Regulation.

[8] Annex I Information from the Parliament, p. 16-17.

[9] Ibid, p. 17.

[10] Annex XXVI_Saeimas 10 Protokols 23 14_03_2011, p. 1-2.

[11] Ibid, p. 2.

[12] Ibid, p. 3.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] Annex III Informtīvais Ziņojums Finanšu ministrija 130511, p. 2.

[17] Ibid.

[18] Ibid.

[19] Ibid.

[20] Ibid, p. 20-21.

[21] Annex XXIII_Saeima 10 Protokols 2 30_09_2011, p. 6.

[22] Ibid. This statement seems to be false, since the regulations containing sanctions do not apply to non-eurozone countries.

[23] Ibid, p. 6-7.

[24] Annex IV Informatīvais Ziņojums Finanču ministrija 300911, p. 2.

[25] Annex V Informtīvais ziņojums 12032012. ‘Finanšu minustra priekšlikumi fiskālās disciplīnas likumprojekta izskatīšanai otrajā lasījumā Saeimā’, p. 3-4.

[26] Fiskālās disciplīnas likums, “Latvijas Vēstnesis”, 36 (4842), 20 February 2013. Available under: http://likumi.lv/doc.php?id=254896 (last visited 23 June 2013).

[27] Annex V Informtīvais ziņojums 12032012. ‘Finanšu minustra priekšlikumi fiskālās disciplīnas likumprojekta izskatīšanai otrajā lasījumā Saeimā’, p. 3-4.

[28] Please find the information concerning the implementation of the Directive under http://www.estiesibas.lv/case_view.aspx?id=134714&list=LegislativeActs (last visited 15 January 2014).

[29] Ibid.

[30] Fiskālās disciplīnas likums, “Latvijas Vēstnesis”, 36 (4842), 20 February 2013. Available under: http://likumi.lv/doc.php?id=254896 (last visited 23 June 2013).

[31] Z. Zablovska, ‘Fiskālās disciplīnas ievērošanai veidos jaunu padomi; sola nekavēt attīstību’, 27 March 2012. Available under: http://www.db.lv/finanses/makroekonomika/fiskalas-disciplinas-ieverosanai-veidos-jaunu-padomi-sola-nekavet-attistibu-369613 (last visited 23 June 2013).

[32] Ibid.

[33] Fiskālās disciplīnas likums, “Latvijas Vēstnesis”, 36 (4842), 20 February 2013. Available under: http://likumi.lv/doc.php?id=254896 (last visited 23 June 2013).

[34] Ibid.

[35] Annex VII Informatīvais ziņojums Finansu minstrija 100611, p. 4.

[36] Annex VIII Informatīvais ziņojums Finanšu minstrija, 120412, „Vidēja termiņa makroekonomiskās attīstības un fiskālās politikas ietvara novērtējums 2012. – 2015. gadam”, p. 1.

[37] Annex VII Informatīvais ziņojums Finanšu ministrija 100611, p. 3-4.

[38] Fiskālās disciplīnas likums, “Latvijas Vēstnesis”, 36 (4842), 20 February 2013. Available under: http://likumi.lv/doc.php?id=254896 (last visited 23 June 2013).

[39] Par vidēja termiņa budžeta ietvaru 2013., 2014. un 2015.gadam,  “Latvijas Vēstnesis”, 192 (4795), 6 December 2012. Available under: http://likumi.lv/doc.php?id=253191 (last visited 23 June 2013).

[40] Ibid.

[41] The annexes are available under: http://www.likumi.lv/wwwraksti/2012/192/BILDES/L_BUDZIETVARS/L_BUDZIETVARS_01.XLS and http://www.likumi.lv/wwwraksti/2012/192/BILDES/L_BUDZIETVARS/L_BUDZIETVARS_02.XLS (last visited 23 June 2013).

[42] The Draft Law and the accompanying annotation is available under: http://titania.saeima.lv/LIVS11/saeimalivs11.nsf/0/B441456116087730C2257BF7004ED99A?OpenDocument last visited 18 Nov 2013).

[43] Ibid.

[44] Saeimas Eiropas lietu komisija apstiprina Latvijas konverģences programmu. Available under: http://www.saeima.lv/lv/aktualitates/saeimas-zinas/20896-saeimas-eiropas-lietu-komisija-apstiprina-latvijas-konvergences-programmu (last visited 15 January 2014)

[45] Finanšu ministrija, ‘Apstiprina Latvijas Konverģences programmu’, 29 April 2013. Available under: http://www.fm.gov.lv/lv/aktualitates/jaunumi/makroekonomika/46203-apstiprina-latvijas-konvergences-programmu (last visited 23 June 2013).

[46] Recommendation for a Council Recommendation on Latvia’s 2012 national reform programme and delivering a Council opinion on Latvia’s convergence programme for 2012-2015, COM(2012) 320 final, p. 4.