Lithuania

IX - Fiscal Compact

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.     
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties did Lithuania encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The Ministry of Finance gave the following reply to this question on my request under the Law on the Right to Obtain Information from State and Municipal Institutions:

‘During the negotiations Lithuania supported the idea that the eurozone should enhance coordination of economic policy by strengthening fiscal discipline, in order to encourage economic growth and competitiveness. Lithuania in principle was in favour of the provisions enhancing fiscal discipline, however, as it was not yet a member of the eurozone, it had reservations on the provisions of the program of economic partnership which may imply a huge administrative – political burden on the country at the very start of the excessive deficit procedure. Lithuania supported the application of the method of a reversed qualified majority both with respect to the criteria of an excessive budgetary deficit and an excessive debt, and supported the idea to allow participation of non-eurozone members at the European summits.[1] Lithuania also supported the flexible formulation on the requirement to include in the Constitution the provision on a balanced budget or a surplus budget. These provisions of the Fiscal Compact were taken by Lithuania to be completely in its interests, because they imposed on the governments of the Member States a duty to conduct a responsible and sustainable fiscal policy.’[2]

The Treaty was presented in Lithuania as one which does not encroach on national sovereignty, and is merely a logical conclusion to the earlier agreements on stricter financial discipline, which introduces sanctions for countries‘ failure to comply with substantive rules and expands the competence of the EU Court of Justice.[3]

This position was publically maintained throughout the negotiations. This is clearly seen from the joint decision of the Seimas‘ committees on European Affairs and Foreign Affairs, which endorsed the Government‘s position with respect to the TSCG to be discussed at the European Council meeting of 30 January 2012.[4] Notably, it is one of the very few decisions that are accessable to the public. The only specific provision of the document touching on negotiations of the TSCG was point 2.2., which requires that the Government insists on the position that all States which have ratified the Treaty are equal, therefore art. 12 of the Treaty should specify that the leaders of the countries which are not members of the eurozone are invited to all meetings of the heads of the Member States.[5] In his interview to BNS the Lithuanian ambassador to the EU observed that on this issue the provision which found its way to the Treaty was more than Lithuania‘s intended minimum, which resulted from Poland‘s tough negotiating line.[6]

Ratification
IX.2
How has the Fiscal Compact been ratified in Lithuania and on what legal basis/argumentation?

The Fiscal Compact was ratified on 28 June 2012 by a Law adopted by the Seimas on 28 June 2012 with 80 votes in favour, 11 against and 21 abstentions.[7] The Law was adopted by an expedited procedure.[8] The ratification was supported by the ruling coalition, however, 7 votes out of 11 of those who voted against were from the party Order and Justice, which is a member of the coalition. Its other three members voted in favour, and 6 abstained. The next day the leader of the Order and Justice Party made an announcement that the ratification of this Treaty was premature and that it was a question which should have been left to the People, because the Treaty enabled a ‘foreign subject’ to have an impact and to exercise control over the State budget, which was a significant restriction of the State’s sovereignty.[9] In his view by ratifying this treaty Lithuania blindly lost a part of its sovereignty, without even seeking to ensure the application of the principle of equality and without attempting to bargain for favours in exchange for its support.

The Seimas, with 86 votes in favour, 4 against and 14 abstentions also adopted a protocol decision linking the implementation of the Treaty with the following conditions:

  1. That Lithuania gets the same structural funds agricultural support as that received by the other EU Member States which acceded to the EU earlier;
  2. Lithuania’s funding from the Cohesion Fund would not be reduced;
  3. The EU will ensure the funding necessary for the closure of the Ignalina nuclear plant.

The protocol decision was adopted on the initiative of the Labour Party.[10]

The legal significance of this protocol decision is next to nothing, as even national law does not provide for a possibility of adopting an act in such a form at a time of ratification. This protocol decision cannot be considered as a reservation, because all reservations should be explicitly identified in the text of the law ratifying the treaty. The Statute of the Seimas only includes two articles with respect to ratification of treaties. Art. 18026 provides that when provided by the EU Treaty or the TFEU the EU legislative acts are approved by Seimas adopting a law to this effect. Art.181 regulates ratification and denunciation of treaties; it requires a 2/5 majority of all members of the Seimas for ratification and a 3/5 majority of all members of the Seimas for denunciation of a treaty. It further specifies that the borders of the State can only be amended by a treaty, which is ratified by 4/5 majority of all members of the Seimas.

The Statute of the Seimas only mentions a protocol decision on two occasions: 1) under Art. 18020 the Seimas adopts a protocol decision approving or disapproving a candidacy to the position of the European Commissioner, the Court of Auditors or the European Union Court of Justice; 2) under Art. 151 a protocol decision may be adopted if the Seimas decides to return a draft law for improvement. In this situation the protocol decision should specify the necessary changes. Arguably, Art. 151 of the Statute of the Seimas served as a source of inspiration for the idea to adopt a protocol decision in this situation.

Although the document does not have any legal significance either in national or European law, it shows the prevalent pragmatic political approach to the adoption of eurocrisis legislation in Lithuania and perhaps should be considered as a politicians’ attempt to present themselves to the electorate as protecting national interests.

 

Legal basis/argumentation

The position prevailed that it was not necessary to amend the Constitution and address the provisions regarding structural deficit in it, and that a constitutional law (lith. Konstitucinis įstatymas)[11] would be sufficient for this purpose. The peculiarity of the constitutional law is that it is not considered to be a part of the Constitution, therefore theoretically the law still must comply with the Constitution, although it has a higher legal power than an ordinary law. It differs from an ordinary law by the procedure of its adoption (adoption of a Constitutional Law requires a qualified majority vote, more than half of all members of Seimas) and amendment (a majority of at least 3/5 members of Seimas). Art. 69 (3) of the Constitution also requires adopting a separate law providing for a list of constitutional laws.

However, the doctrine on constitutional laws in Lithuania has not yet been successfully tested. A former president of the Constitutional Court prof. Egidijus Kūris has bluntly described them as a 'Lithuanian misunderstanding'.[12] Therefore if Lithuania really wanted to incorporate the Fiscal Treaty to the Lithuanian constitutional system, it was necessary to amend the Constitution itself.[13]

This did not persuade the politicians, who presented their own interpretation of the Constitution. The chairman of the Seimas' Committee on the Budget and Finance Kęstutis Glaveckas referred to Art. 135 of the Constitution in support of his opinion that the Treaty complies with the Lithuanian Constitution because Art. 135 of the Constitution clearly enshrines that in its foreign policy Lithuania is quided by generally accepted principles and rules of international law, seeks to ensure its security and independence, welfare of its citizens and their fundamental rights, and contributes to the creation of the international order based on law and justice. In his view, the new treaty specifically focuses on the interests of the welfare of the people, since it is a consensus opinion that fiscal discipline is necessary and that excessive borrowing needs to be restrained in order for Europe to successfully overcome the crisis.[14]

President Grybauskaitė‘s position was that this Treaty does not introduce anything new to Lithuania, because the country already follows a strict austerity policy.[15] The same position was held by prime minister A. Kubilius, who also expressed his hope that after ratification of this treaty the society will also understand that the times of excessive spending are in the past and that it will not be possible to derogate from this provision even if the ruling coalition changes.[16] 

Ratification difficulties           
IX.3
What political/legal difficulties did Lithuania encounter during the ratification of the Fiscal Compact?

No political/legal difficulties encountered. See discussion under IX.2

Balanced Budget Rule    
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Lithuania? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The balanced budget rule was included in Art. 4 (2) and Art. 4 (4) of the Constitutional Law on the Implementation of the Fiscal Treaty, and provides:

2. Each budget attributable to the general government sector, with the exception of the budget of the State Social Insurance Fund of the Republic of Lithuania, the State budget and the budget the planned appropriations which do not exceed 0.3 % of GDP in the preceding year at current prices, must be planned, approved, amended and implemented to be in surplus or balanced when judged by its structural balance indicator calculated on accrual basis.

4. Each budget attributable to the general government sector the planned appropriations of which do not exceed 0.3 % of GDP in the preceding year at current prices shall be planned, approved, amended and implemented in such a way that the appropriations of the budget would not exceed its revenue, with the exception of the year when a negative output gap is projected according to the economic development scenario which is made public by the Government or its authorized institution and in regard to which the monitoring authority published its conclusion. In the latter case, the appropriations may not exceed revenue by more than 1.5 %.

For more details on the status of the Constitutional Law on the Implementation of the Fiscal Treaty, see question IX.2.

Debate Balanced Budget Rule    
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The issue was not raised during the debate.

 

Relationship BBR and MTO  
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

The issue was not raised during the debate.

 

Case law        
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

No.

Non-Eurozone and binding force       
IX.8
Has Lithuania decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

No.

Miscellaneous
IX.9
What other information is relevant with regard to Lithuania and the Fiscal Compact?

No further information.

 

[1] A. Jonušas, „Fw: Dėl informacijos pateikimo“ Message to Loreta Šaltinytė“, 7 September 2015. Email in Lithuanian. Translated by Loreta Šaltinytė.

[2] Ibid.

[3] BNS R.Karoblis: Briuseliui daug naujų galių neperduodame – interview [BNS interview with R. Karoblis: we do not transfer many new powers to Brussels] (n.b. R. Karoblis was an ambassador of Lithuania to the EU at a relevant time) 2012-02-05 www.delfi.lt.

[4] Lietuvos Respublikos Seimo Europos reikalų komiteto ir Lietuvos Respublikos Seimo Užsienio reikalų komiteto Bendras sprendimas Dėl Lietuvos Respublikos pozicijos Europos Taryboje dėl svarstomo Sutarties dėl Stabilumo Koordinavimo ir Valdymo Ekonominėje ir Pinigų Sąjungoje projekto, 2012-01-25, Nr. 100-S-1 [Seimas’ Committees of European Affairs and Budgetary Affairs, “A common decision on the position of Lithuania in European Council on the draft Treaty on Stability Coordination and governance in EMU”, 25 January 2012.] available in Lithuanian at http://www3.lrs.lt/docs2/EEVFGZZH.DOC

[5] Lietuvos Respublikos Seimo Europos reikalų komiteto ir Lietuvos Respublikos Seimo Užsienio reikalų komiteto Bendras sprendimas Dėl Lietuvos Respublikos pozicijos Europos Taryboje dėl svarstomo “Sutarties dėl Stabilumo Koordinavimo ir Valdymo Ekonominėje ir Pinigų Sąjungoje” projekto, 2012-01-25, Nr. 100-S-1 [Seimas’ Committees of European Affairs and Budgetary Affairs, “A common decision on the position of Lithuania in European Council on the draft Treaty on Stability Coordination and governance in EMU”, 25 January 2012.] available in Lithuanian at http://www3.lrs.lt/docs2/EEVFGZZH.DOC

[6] BNS, R.Karoblis: Briuseliui daug naujų galių neperduodame – interview [BNS interview with R. Karoblis: We do not transfer many new powers to Brussels] www.delfi.lt, 2012-02-05.

[7] Lietuvos Respublikos fiskalinės sutarties įgyvendinimo konstitucinis įstatymas [Constitutional law on the Implementation of the Fiscal Treaty], TAR, 2014-11-18, Nr. 17028.

[8] Lietuvos Respublikos Seimo statutas [Statute of Seimas of the Republic of Lithuania], Žin., 1994-02-25, Nr. 15-249.

[9] R.Paksas, Pritarimas Fiskalinės drausmės sutarčiai – skubotas ir nenaudingas. [Approval of the Fiscal Treaty is  hasty and useless] http://www.tvarka.lt/index.php?id=7612

[10] Seimo rytinio posėdžio stenograma,[Seimas‘ morning session transcript] 2012-06-28.

[11] This is a Lithuanian version of an organic law. See Sinkevičius V.,  Konstitucinių įstatymų samprata: teoriniai aspektai. [eng: The Concept of Constitutional Laws: Theoretical Aspects] Jurisprudencija, 2008 2(104): 28-38.

[12] Prof. E. Kūris expressed his position at a public conference, organized on 24 February 2012 by the Ministry of Foreign Affairs. A summary of the views expressed at the event is available in Lithuanian at http://www.snaujienos.lt/naujienos/salyje/21183-e-kris-pasiraius-naujosios-fiskalins-drausms-sutarties-suderinamumo-su-konstitucija-sutart-silo-kreiptis–kt

[13] Ibid.

[14] Fiskalinės drausmės paktas į Lietuvos Konstituciją nesikėsins? www.Veidas.lt, 2012-03-15 [last accessed on 22 July 2015].

[15] Ibid.

[16] Ibid.