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.     

What political/legal difficulties
did The Netherlands 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.

There were no political/legal difficulties with respect to the negotiation of the Fiscal Compact.  The position of government has consistently been that a tightening of the fiscal discipline rules is a necessary answer to address the debt crisis and this position is broadly supported within the House of Representatives.[1]

The main issue with respect to the phase of the negotiation of the Fiscal Compact debated in the House of Representatives concerned the insurance that the Fiscal compact would be subjected to the ordinary legislative procedure and submitted to the council of state for advice during the ratification process.[2]  

How has the Fiscal Compact been ratified in The Netherlands and on what legal basis/argumentation?

The Fiscal Compact has been ratified in the Netherlands in July 2013.[3] The ratification process has taken place on the basis of Article 91(i) of the Dutch Constitution, which means that the legislative process is comparable to that of an ordinary law (as described above in the answer to question V.2). Article 91 states that the Kingdom shall not be bound by treaty without prior approval of the States-General, except for those cases where law determines no such approval is necessary. The choice of legal basis for this ratification in The Netherlands has not been provided with any argumentation but is a standard legislative procedure followed for international Treaties.[4]

Ratification difficulties           
What political/legal difficulties
did The Netherlands encounter during the ratification of the Fiscal Compact?

The ratification process so far has not brought any real political/legal difficulties in The Netherlands.  The Council of State raised the point that the creation of the Fiscal Compact outside of the EU legal order could undermine the existing EU based obligations and weaken their authority.[5] Furthermore, the Council of State noted that the reversed quality majority voting procedure constituted a change of the Treaty as compared with the existing situation in article 126 TFEU and raised the point whether this was legal in view of the fact that such a Treaty amendment would normally require another procedure within the EU legal order.[6] Government disagreed and considered that the reversed qualified majority voting mechanisms left the existing structure intact and only added a moment of ‘informal’ decision making within the Council for specific situations where the Commission wants to take further measures within the SGP. This decision making moment will then determine then whether during the ‘formal’ decision making process these countries will vote for or against the Commission proposal, leaving the original decision making moment on the basis of article 126 TFEU intact.[7]

Eventually, the Fiscal Compact was supported by a clear majority within the House of Representatives – all major political parties (with the exception of the main opposition parties – Party for Freedom (PVV) and Socialist Party (SP)) supported the Fiscal Compact.[8] Surprisingly, the Greens (GroenLinks), clearly and consistently a pro-Europe party, voted against this Treaty. The main reason for this was that the Fiscal Compact is negotiated outside of the EU legal order and the government refused to commit itself to take a proactive stand in the integration of the Fiscal Compact within the EU legal order.[9]

The main issues that were debated during the ratification process concerned how the balanced budget rules and the Medium Term Objective would work in practice. I have included further specifics on these debates in the answers to the following questions. A main point of discourse that has become a focal point for parliamentary approval on new EU measures is that the House of Representatives insists on the pledge of government to make sure that no control is lost over the determination of specific socio-economic policy measures.[10] Government at the same time consequently promises not to allow the transfer of sovereignty at the level of implementation of specific policy measures.

There have been some debates in the literature on the question to what extent these measures deprive the parliamentary budget right from any real meaning. Legal commentators agree that there is a big impact when taking the perspective of the budget right as being a substantive tool to influence policy. That is to say that the House of Representatives could use its budget rights to influence policy in a certain direction. The position taken by one legal commentator is that Fiscal Compact significantly limits this potential and thereby infringes article 105 of the Dutch Constitution.[11] However, article 105 merely provides the House of Representatives with a right to control the expenses of government and the interpretation of parliamentary budget rights as a constitutional right to influence the policy through these rights is unconventional. Other legal commentators identify similarly that the Fiscal Compact has a big influence on the potential of the House of Representatives to influence specific policy measures but do not consider this to infringe 105 of the Constitution.[12]

Balanced Budget Rule    
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 The Netherlands? 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.

On 24 September 2012 the Dutch government tabled the bill Sustainable Public Finances Act (Wet Houdbare Overheidsfinanciën) to implement this.[13] This is a regular Act of Parliament. 

Debate Balanced Budget Rule      
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.

There were hardly any political/legal difficulties encountered in the implementation process of Wet Hof in the House of Representatives. It is currently on the table at the senate but there are no difficulties to be expected there. There were some question raised in the House of Representatives as to the impact on sovereignty and the budgetary process but the position of government was that there were no real changes since most of the rules that were being implemented already existed on the basis of the Stability and Growth Pact.[14] The draft law was accepted by all major parties (Christian Democrats, Liberals, and Social Democrats) in the House of Representatives except for the Party for Freedom (PVV) and the Socialist Party.[15]

As said, the impact on the budgetary process is considered to be significant. I refer to the answers to question II.1 and II.2.

Update: the bill has been passed by the Senate and entered into force on 11 December 2013.

Relationship BBR and MTO  
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)?

A part of the parliamentary debate on 19 March 2013 concerned the question of how the balanced budget rule would work in practice, combined with the MTO. The question was raised how the Commission would measure and judge the relationship between policy restructuring and the Balanced Budget Rule combined with the MTO. There remained some unclarity on this but the government expected that this would be evaluated on the basis of the yearly Stability Programs that are submitted to the Commission.[16]

As a whole the position of government is that these measures did not embody significant changes as to the situation as it was before on the basis of SGP. Also the government maintains that the new framework does not mean that The Netherlands lost any sovereignty on what specific measures are being taken to ensure a more balanced budget.[17]

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


Non-Eurozone and binding force       
Has The Netherlands 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?

Not applicable, since The Netherlands is part of the euro area.

What other information is relevant with regard to The Netherlands and the Fiscal Compact?

Not applicable.

[1] See 04 Six-Pack 070911 Government vision on future of EMU first letter and 04 Six-Pack 231112 Government vision on future of EMU second letter.

[2] 06 Fiscal Compact – Parliament Debate on negotiation of Fiscal Compact, page 5.

[3] 06 Fiscal Compact – Fiscal compact implemented law

[4] See 06 Fiscal Compact – Van Rossem 2013 TvCR 2013, p. 49-54 for a discussion on the conditions under which the Fiscal compact could be perceived as a constitution amending Treaty and hence requiring a 2/3 majority – see also the answer to question 57.

[5] 06 Fiscal Compact – Advice council of state fiscal compact, page 3.

[6] Ibid., page 4.

[7] Ibid., page 6.

[8] 06 Fiscal Compact – Votes on Fiscal Compact


[10] 06 Fiscal Compact – 190313 Parliament demand to keep authority over the design of measures

[11] 06 Fiscal Compact – Van Rossem 2013 TvCR 2013, p. 49-54

[12] 06 Fiscal Compact – Warmelink 2013 Over afwijken en afwijkingen van de Grondwet TvCR 2013, p. 44-48, 05 ESM Treaty – Diamant/Van Emmerink ‘Het Nederlandse budgetrecht in Europees perspectief’ and 06 Fiscal Compact – Reestman 2013 Constitutioneel minimalisme 012013 TvCR, page 24.

[13] Kamerstukken II 2012/13, 33 416, nr. 2. See 06 Fiscal Compact – Draft law on sustainable public finances

[14] 06 Fiscal Compact – Policy nota on the basis of parliamentary questions, pages 6-7.

[15] 6 Fiscal Compact – Votes on Wet Hof

[16] 06 Fiscal Compact – 190313 parliamentary debate Fiscal Compact and 06 Fiscal Compact – Letter of government on relationship MTO and balanced budget rules. See also 04 Six-Pack Reestman ‘de ondoorgrondelijke systematiek van het wetsvoorstel Hof footnote 6.

[17] 06 Fiscal Compact – 190313 parliamentary debate Fiscal Compact, page 17.