Netherlands

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 The Netherlands 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?

At the time of the negotiations the political situation in The Netherlands was delicate. There was a minority government in power, led by the Liberals and Christian Democrats, that relied on support from the Party for Freedom (anti-EU) for a majority in the House of Representatives – see further under question VI.1. However, there were no particular political/legal difficulties encountered in the negotiation of the Six-Pack. The position of government, that is broadly supported by the main parties in the House of Representatives, was that the measures introduced with the Six Pack are necessary means to ensure – previous lacking – fiscal discipline of all Member States.[1] The position of government and main opposition parties in the House of Representatives is that the main cause for the crisis is the fact that some Member States did not follow the rules on fiscal discipline (‘the sick countries’). Therefore, the automatic sanctioning mechanism is considered very important. Government insisted also on increasing the power of the European Commission to supervise Member States that were not fulfilling their fiscal obligations (through the creation of a special Commissioner for this purpose). This is broadly supported by the House of Representatives.[2]  

At the same time, both the position of government and that of the main parties in the House of Representatives is that the measures should not lead to a transfer of sovereignty to the European Commission with respect to the Netherlands. The implicit assumption in the parliamentary debates was that the Netherlands would never get into a situation where they would be forced to install measures on the basis of the new legal infrastructure.[3] Therefore, even though the new legal framework would lead to an increase of powers of the European Union vis-à-vis Member States, this was only perceived as a matter of transfer of sovereignty for the ‘problematic’ Member States and, in practice, would never be relevant for the Netherlands.[4] The Netherlands is, today, however increasingly being confronted with the effects of the new mechanisms that do in fact put increasing pressure on implementing specific measures considered necessary from the European Commission’s perspective.

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)?

On 24 September 2012 the Dutch government tabled the bill Sustainable Public Finances Act (Wet Houdbare Overheidsfinanciën ‘HOF’) to, amongst others, implement Directive 2011/85/EU (see the overview of this Act at question II.2). The overview in the Commission report on the implementation of directive 2011/85 provides the measures that have been taken in The Netherlands.[5] For ease of reference below follow the main aspects of the implementation measures that have been directly copied from the report.  The overview specifically highlights the instances where there is new information, additional to the Commission report:[6]

Measures to implement the accounting and statistical requirements

“For local governments, the Dutch statistical office receives but does not publish quarterly data. A reform is under consideration. The draft law on the sustainability of public finances specifies that local governments should provide data of sufficient quality to the Dutch statistical office at a faster pace (within a maximum of 10 working days, instead of the current 30 days).”[7]

Measures to implement the transparency requirements

“A list of all general government units will be published by the Dutch Statistical Office in 2014-2015. Information on tax expenditures is already published every year in a separate annex to the Budget Memorandum. Relevant information on contingent liabilities with a potentially large impact on public finances, in particular guarantees, is already published for central government in the yearly Budget Memorandum and Financial Report. Information on central government participation in public corporations is already published in the balance sheet of the state and separately in an overview of the public corporations of central government. As regards local governments, contingent liabilities are usually part of their annual reports, but there is not yet an aggregation at national level.”[8]

Measures to implement the forecasts requirements

“Before the start of each government term, the CPB (Bureau for Economic Policy Analysis) publishes a medium-term macro-economic outlook for the Dutch economy. The CPB provides macro-economic forecasts within the annual budget cycle. There is currently no legal obligation for the government to do so, but the new law on the sustainability of public finances is to make this practice mandatory. Any significant differences between the CPB macro-economic forecasts and the forecasts of the European Commission will be explained in future in the annual Budget Memorandum.”[9]

Measures to implement the requirements on the fiscal rules

“The central feature of the rules regulating Dutch budgetary policy is the implementation of a medium-term expenditure framework (MTEF) along with other de facto fiscal rules for the budget process (acting as a revenue rule). The MTEF itself is established as a set of principles covering the term of the government implementing it. This is not subject to legally anchored fiscal rules, but is the product of a longstanding political tradition. A new framework is under consideration to enshrine this process more formally in law, while combining it with the European fiscal framework, i.e. numerical obligations under the SGP.

The draft law on the sustainability of public finances will anchor in law the basic principles of the Dutch trend-based budgetary policy. The law will also stipulate that trend-based budgetary policy needs to conform to the Treaty reference values and procedures on debt and deficit, and the MTO. If trend-based budgetary policy does not lead to outcomes in line with the Treaty reference values or the MTO, additional measures will be taken to increase revenues and/or cut expenditures.”[10]

Measures to implement the requirements of the medium-Term Budgetary Framework

“The current budgetary process of the Netherlands is already based on a four-year cycle with minimal annual revisions allowed to initial projections. … The government adheres to an expenditure framework that fixes the overall level of expenditure during the government’s term. The framework is usually drawn up in the new government’s first Budget Memorandum. It is based on multi-annual expenditure estimates, which are derived from the economic development scenario presented by the CPB.”[11]

In addition to the above information that comes directly from the Commission report it is relevant to note that the Netherlands tabled a law that obligates local government to centralise their financial household on State level (Verplicht schatkistbankieren voor decentrale overheden ­ Obligated Treasury banking for local governments). Although not directly related to the Directive this law is intended to stabilise and cut back the EMU debt. The main point of the law is that local governments will be obligated to keep all their excess cash and investments at the Ministry of Finance. As an effect the external financing needs of the Dutch government will be reduced.[12]

Implementation difficulties 
VII.3
What political/legal difficulties
did The Netherlands encounter in the implementation process, in particular in relation to implications of the directive 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. There are, however, increasing protests from five local governments (Overijssel, Noord-Brabant, Friesland, Gelderland and Limburg) against the implementation of the Law. They argue that the law leads to damaging limitations of local governments to be sufficiently autonomous and invest in economic sectors that they deem necessary.[13] Furthermore, because of supposedly different accounting mechanisms on a central and local level of government, the effects of budget norms would be much bigger on a local level. The protesting local governments produced an economic report to support their claims and started intensive lobbying against the implementation plans of the Wet Hof.[14] The report has been submitted to the Senate, where the law is currently on the table (plenary debate scheduled for 26 November 2013). The minister of financial affairs has responded to the report, claiming it to be incorrect and flawed in its economic effects analysis.[15]

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.[16] 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.[17]

Macroeconomic and budgetary forecasts     
VII.4
What institution will be responsible for producing macroeconomic and budgetary forecasts (article 4(5) Directive 2011/85/EU)? What institution will conduct an unbiased and comprehensive evaluation of these forecasts (article 4(6) Directive 2011/85/EU)?

The Netherlands implements these obligations through making use of the existing institutional framework. The Bureau For Economic Policy Analysis (het Centraal Planbureau ‘CPB’) will be responsible for producing macroeconomic and budgetary forecasts on the basis of Article 2 Wet Hof. Currently the CPB already provides similar forecasts of the effects of intended government policy.

In cycles of five years, the policy relevance and scientific quality of the CPB is assessed by s ‘visitation commissions’.[18] Although these commissions are supposed to be independent (http://www.cpb.nl/kwaliteitscontrole) these are ad hoc commissions without any legal basis in the Wet Hof to ensure unbiased reporting.

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

This is the CPB. Research at CPB is carried out on CPB’s own initiative, or at the request of the government, the House of Representatives, individual members of the House of Representatives, national trade unions or employers’ federations. CPB is a part of the ministry of Economic Affairs. Its director is appointed by the Minister, in consultation with other members of the government. CPB is considered as fully independent as far as the contents of its work is concerned. It has its own legal mandate and an independent executive and advisory committee.

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 The Netherlands 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?

Until now, any changes necessitated on the basis of EU measures on the national budget have been made through ad hoc supplementary budget measures (suppletoire begrotingsmaatregel), which are passed through the House of Representatives as ordinary laws. There is increasing critique on the implementation of the crisis measures, in particular as to the role of the House of Representatives. The Council of State (Raad van State) has provided an assessment of this situation in the beginning of 2013– on the request of the Senate – and concluded critically that the EU measures have potential significant effects on the national budgetary process that are currently not addressed. For example, the Council of State identified that the European Semester does not align with the current national budgetary process and considers this to be a potential problem in terms of the parliamentary involvement in its possibilities to influence policy through the use of its budget rights.[19] See further the answer to question II.1.

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 correction mechanisms introduced with the MTO procedure have been implemented in the draft law on the sustainability of public finances (Wet Hof) – as discussed in questions VII.3 and VII.16. The law provides for legal obligation for central and local government to produce economic recovery plans in cases of breach of the MTO. The procedure to produce such plans has been constructed in the draft law. This process, as far as possible, is integrated in the existing budgetary process. In case ad hoc changes have to be produced that do not fit within the normal budgetary cycle, ad hoc measure will be presented in the form of supplementary budget measures (suppletoire begrotingsmaatregel), which pass through the House of Representatives as ordinary legislation.

Also see the overview of the Wet Hof at question II.2.

European semester 
VII.8
What changes have to be made to the rules and practices on the national budgetary timeline to implement the new rules on a European Semester for economic policy coordination (section 1-A, article 2-a consolidated Regulation 1466/97)?

The reporting mechanism that has been established with the Commission in which the Dutch government reports on its policy objectives in response to the economic challenges (the National Reform and Stability Programs) will be further institutionalised in order to ensure sufficient parliamentary involvement. For this purpose the House of Representatives has also appointed a special parliamentary rapporteur on the European semester that will provide the House of Representatives with information on the process of the European Semester.[20]

See further the answer to question VII.6.

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

See answer to question VII.8.

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)?

See answer to question VII.7.

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

Between -0,5 % and 0,5% GDP for the period 2009-2012.[21]  Thereby the Netherlands went further than was required and committed itself to a MTO of max 0,5% GDP. This information cannot be found in the Dutch Stability program. Apparently there exists no autonomous document that anchors the Dutch MTO.[22]

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

The stability program is drafted by government and then discussed in the House of Representatives. The normal procedure with respect to Dutch budgetary policy is the implementation of the so called medium-term expenditure framework (MTEF). The MTEF itself is not subject to legally anchored fiscal rules, but is rather the product of a longstanding political tradition. The Commission report on the implementation of directive 2011/85 indicates that that a new framework is under consideration to institutionalise this process “more formally in law, while combining it with the European fiscal framework, i.e. numerical obligations under the SGP. The draft new law on the sustainability of public finances will anchor in law the basic principles of the Dutch trend-based budgetary policy.”[23]

The correction mechanisms introduced with the MTO procedure have been implemented in the draft law on the sustainability of public finances (Wet Hof). The law provides for legal obligation for central and local government to produce economic recovery plans in cases of breach of the MTO. The procedure to produce such plans has been constructed in the draft law. This process, as far as possible, is integrated in the existing budgetary process. In case ad hoc changes have to be produced that do not fit within the normal budgetary cycle, ad hoc measure will be presented in the form of supplementary budget measures (suppletoire begrotingsmaatregel), which pass through the House of Representatives as ordinary legislation.  As explained above, the forecasts of the CPB are the main basis for economic recovery plans in cases of breach of the MTO.

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

Not applicable.

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

See the answer to question VII.16.

General changes     
VII.15
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?

No further changes.

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

It is perhaps relevant to note, in view of the importance of the CPB within the new framework introduced with the six-pack, that there has been some controversy recently about the appointment of the new CPB director. Some professors in The Netherlands have questioned her independence since she was formerly working within the Ministry of Finance.[24]

Regulation (EU) No 1174/2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area

There were no changes made to the budgetary process in reaction to this regulation. The only change that is directly related to the possibility of sanctions is that local governments can be made co-responsible for payment of these sanctions in case the cause for non-compliance can be related to the fiscal behaviour of local government.[25]

The draft law on the sustainability of public finances will legally anchor the obligation for local governments to contribute their fair share (‘gelijkwaardige inspanning’) to achieving the Medium-Term Objective. The central government and local governments would need to conclude a multi-annual agreement on the budget balance for local governments. To this end, the Minister of Finance, in agreement with the Minister of the Interior and the Minister for Infrastructure after consulting the local governments, would determine the ‘fair share’. Two sanction mechanisms will apply if local governments do not adequately contribute to reaching the MTO. As a first step, they would be required to place a deposit with the central government. As a second step, they would be required to contribute to any EU financial sanction if the Netherlands as a whole does not comply with SGP requirements.[26] 

[1] Clearly stated in 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] 04 Six-Pack 231011 parliament debate on EU Council agenda, page 26 and further.

[3] See also http://www.denederlandsegrondwet.nl/9353000/1/j9vvihlf299q0sr/vitki5uuds91.

[4] As reflected in the parliamentary Europe debates of 03 Euro-Plus-Pact 230311 parliamentary debate 1/2, 03 Euro-Plus-Pact 230311 parliamentary debate 2/2. 

[5] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 66.

[6] Other source are the 04 Six Pack Wet HOF MvT, 04 Six-Pack CPB policy document.

[7] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 66.

[8] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 66.

[9] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 67.

[10] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 67.

[11] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 67.

[12] 04 Six-Pack Obligated Treasury banking for local governments

[13] http://www.binnenlandsbestuur.nl/bestuur-en-organisatie/nieuws/groeiend-verzet-tegen-financiele-afspraken.8802935.lynkx and http://www.volkskrant.nl/vk/nl/2844/Archief/archief/article/detail/3375408/2013/01/11/Ook-werkgevers-leveren-kritiek-op-de-Wet-Hof.dhtml

[14] 04 Six-Pack Ecorys effects wet HOF on Provincial investment programs

[15] 04 Six-Pack – Letter minister on Ecorys report Provincial investments

[16] 04 Six -Pack note on parliamentary committee Wet Hof.

[17] 04 Six-Pack voting overview.

[18] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 67.

[19] 04 Six-Pack 180113 Report RvS on Democratic Legitimacy crisis measures. For English summary see http://www.raadvanstate.nl/adviezen/samenvattingen/tekst-samenvatting.html?id=180

[20] Last year, the Dutch government last year sent the Netherlands’ reform programme to Brussels without it first being debated in parliament. http://euobserver.com/economic/120275. See 04 Six-Pack 070313 debate on state of EU, page 17.

[21] 04 Six Pack Wet HOF MvT, page 6

[22] 04 Six-Pack Reestman ‘de ondoorgrondelijke systematiek van het wetsvoorstel Hof footnote 6

[23] 04 Six-Pack report on the implementation of directive 2011/85/eu, page 67.

[24] http://www.nu.nl/economie/3408109/politici-verdedigen-keuze-nieuwe-cpb-directeur.html

[25] 04 Six Pack Wet HOF MvT

[26] 04 Six -Pack note on parliamentary committee Wet Hof.