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 Romania 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.
President Traian Băsescu was the representative of Romania at the European Council of 1-2 March 2012.
It was also the President’s sole decision to inform both the European Commission and the European Council that Romania shall support and accede to the agreement on the Fiscal Compact. After the European Council of 8-9 December 2011, the President declared that he committed in front of the EU leaders because as a chief of state a President could not have had another position even if he had not discussed the decision priorly with the Parliament and was perfectly aware of the risk that the Parliament (USL majority, hostile to the President) could block the agreement upon ratification. Therefore the difficulties were rather matters of internal politics and political rivalry.
One has to remind the national political background interests of the period (see section I on ‘political context’ above). The positive results of the referendum of November 2009 initiated by the President on a unicameral Parliament with 300 seats were not yet put in place because of lack of political support in the Parliament. The Fiscal Compact in its first draft mandated the amendment of the Constitution. Thus complementary to the declared fiscal discipline and economical reasons, the ratification of the Fiscal Compact would have provided for a feasible opportunity to ‘open’ the Constitution for amendment. Prior to the signature of the Treaty, the President held a meeting with the representatives of the political parties in the Parliament. Afterwards, the President said: „[n]o parliamentary political party will reject the ratification of the European Union’s fiscal union agreement in due time. The meetings have been extremely useful and they direct us towards consensus both on accession to the treaty and the amendment of the constitution”. [author’s translation from Romanian]
Following the informal European Council meeting of 30 January 2012, the reported objective of Romania as stated by the President was: “the widest possible participation as treaty signatories to the Eurozone summits”. A compromise solution was attained, according to the President: Romania as a non-Eurozone Member State but signatory shall participate in the summits that debate matters of general interest, and in any event at least one of the two established annual meetings shall be also open to non-euro Member States, including Romania.
After the signature of the Fiscal Compact on 2 March 2012, the President showed a great support for the Fiscal Compact, stating that the treaty presented two main advantages. On the one hand a deeper integration and harmonization of EU policies and on the other hand: “maybe more important, the increase of the control of the European Institutions on the coordination of national economic policies, especially the fiscal-budgetary ones.” On the particular advantage for Romania the President stated that by signing the Fiscal Compact, Romania has joined a common effort towards a deeper integration: “The Euro is no longer the currency of Eurozone Members, it is the currency of European Union”, he added. [author’s translation from Romanian]
Ionut Dumitru, the President of the Romanian Fiscal Council supported the decision of the President, but at the same time took a pragmatic stand: „[f]or Eastern European countries and for Romania in particular, the Fiscal Compact can be a significant advantage, if we think that fiscal discipline has never been a strong point of Romania’s. On the other hand, the downside of the Compact has to do with the more limited capacity to stimulate the economy, especially during periods of recession. Practically, we will only have a limited ability to help the economy when such help will be needed, but overall I can say that it may have a positive effect on fiscal discipline and this could be beneficial for the long-term sustainability of public finances.”
Even if the decision to join the Fiscal Compact was taken by the President alone, the position cannot be seen as diverging from the one of the present Government and the Prime Minister (Victor Ponta – PSD), even if the President and Prime-Minister Ponta have opposite political convictions. In this sense, the current governance programme for 2013-2016 states that the governance agenda is based on the fundamental principles of European governance, namely: “the macroeconomic prudence and fiscal-budgetary responsibility […] the principle of reducing the gaps between Romania and the European Union’s advanced countries, including the adaptation of European solutions […]” [author’s translation from Romanian]
How has the Fiscal Compact been ratified in Romania and on what legal basis/argumentation?
The Fiscal Compact was ratified after it got the approval of the two chambers of the Romanian Parliament – Chamber of Deputies and Senate. The emergency legislative procedure was employed allowing the Parliament to pass the law in less than 60 days. The ratification law was an ordinary law, voted by the majority of the members of the Parliament present.
Firstly on May 8, 2012 the legal proposal regarding the Ratification of the Treaty regarding the stability, coordination and governance within the Economic and Monetary Union signed in Brussels on 2nd March 2012 (Fiscal Compact) was approved by the Chamber of Deputies with 237 votes for, no vote against and 2 abstentions. No debates on the substance of the fiscal Compact were registered. After the rapporteur presented shortly the provisions of the Fiscal Compact treaty and one equally short supportive intervention the legal proposal for ratification was put to a vote. Onwards, the ratification law was discussed and adopted in the Senate with 89 votes for, one vote against and no abstentions, according to the transcript of the meeting of the Senate on the 21st of May 2012. The ratification law subsequently became Law no. 83/2012.
The legal basis for the ratification is Article 11 of the Constitution, which states – according to the dualist theory of international law reception – that: “the treaties ratified by the Parliament are part of the internal law”. The provisions of the ratified treaty have the same legal force in the national legal system as the law of ratification, in casu – an ordinary law.
The legislative process was based on the following provisions of the Romanian Constitution:
The Chamber of Deputies and the Senate shall pass laws, and carry resolutions and motions, in the presence of the majority of their members.”
(1) Parliament passes constitutional, organic, and ordinary laws.
(1) The Chamber of Deputies, as a first notified Chamber, shall debate and adopt the bills and legislative proposals for the ratification of treaties or other international agreements and the legislative measures deriving from the implementation of such treaties and agreements […].
(2) The first notified Chamber shall pronounce within 45 days. […]
(3) After the first notified Chamber adopts or repeals it, the bill or legislative proposal shall be sent to the other Chamber, which will make a final decision.
(1) Organic laws and resolutions concerning the Standing Orders of the Chambers shall be passed by the majority vote of the members of each Chamber.
(2) Ordinary laws and resolutions shall be passed by the majority vote of the members present in each Chamber.”
There was no discussion on whether a special majority was needed, as the vote was almost unanimously in favour of approval.
It must be stressed that the present law was only the ratification law. Further legislative measures were carried out to actually implement the provisions of the Fiscal Compact in late 2013. Please see section IX.5 below.
What political/legal difficulties did Romania encounter during the ratification of the Fiscal Compact?
The ratification bill of the Fiscal Compact was passed by the Chamber of Deputies on May 8, 2012 without amendments and no actual debates. On May 21, 2012 the law was approved by the Senate equally with no amendment and no actual debates. The ratification law entered into force on 23.06.2012, three days after the publication in the Official Journal of Romania on 20.06.2012.
No legal or political difficulties were encountered by the Romanian authorities and no further public debates were reported on the ratification of the Fiscal Compact.
Political and legal difficulties were encountered and are still pending regarding the implementing measures of the Balance Budget Rule. See section IX.5 below.
As to opinions expressed by Romanian politicians, Ion Iliescu, Romania’s former President and the Social Democrat Party’s (PSD) Honorary President, declared on 15 February 2012 that the Romanian authorities are rushing to sign the European Fiscal Treaty without analysing its consequences for Romania. Ion Iliescu said that “the opposition does not oppose Romania’s accession to the Fiscal Treaty, but it wants a debate on the consequences of signing the European Act. We [the prior USL coalition] do not have reserves and negative attitudes, but we want to understand better, to analyse and decode it”, the politician stated. He was asked by a journalist, why he thinks the government is rushing to sign the Treaty, and Iliescu answered as follows: “I cannot explain it to myself; I do not understand the rush, when everyone in Europe sits and analyses it. Nobody rushes us to sign it now because we are still outside the Euro Zone. I do not know why Mr. Băsescu [President] is rushing into things, I do not know what knowledge he has and how much economics knowledge he has and what he understands out of this. Why does he push the country to engage in an affair? I cannot explain it to myself, because this is an adventure where people participate without having any clue about it.” The PSD’s Honorary President added that before the Government signs the Treaty, debates should be organized about the consequences of the accession to the Treaty, but also about future policies within the EU to reduce the discrepancies between the EU Member States. Iliescu avoided commentaries on the possible risks that Romania would face by signing the Treaty.
The Romanian Government on 28th February 2012 authorised the signature the Fiscal Compact. After President Traian Băsescu signed the document, Dan Suciu, the spokesman of the Executive declared: “[f]ollowing negotiations, Romania obtained the status of participating non-Euro-Zone State to the joint meetings of all Signatory States under certain conditions”.
A Protocol on Accession to the Fiscal Compact was signed a week earlier by the coalition’s leaders and PSD’s President, Victor Ponta [current prime-minister of Romania], admitting that the USL Government agreed that Romania would sign and ratify the Fiscal Compact.
In his speech on 7 March 2012 in the plenary meeting of the Parliament, President Băsescu asked the Parliament to ratify the Fiscal Treaty as soon as possible: “it will be a signal of the decision, the political will to become a powerful economy and a powerful state that would secure our own resources for development and, especially, ensure sustainable development, with several pillars, including EU funding”, the President stated. The President also affirmed that “Romania meets many of the conditions required by the Fiscal Treaty. Romania will not step back even if the Euro zone will be in recession in the second half of the year (…). In 2012 through the Fiscal Treaty a step forward was made. We cannot have a healthy euro if only Germany has a pragmatic approach […]. This rule makes the Euro lasting and the economy of the EU a stronger one”. 
Several Romanian economists have taken critical positions regarding the ratification of the Fiscal Compact. Adrian Vasilescu, counsellor of the Romanian National Bank (BNR) Governor, for example highlighted the problem of lack of data: “[i]n Romania, nobody officially calculates this data [on structural deficit and potential GDP]. The Romanian National Bank (BNR) calculates the potential GDP, but it does it only for itself without communicating it. The EU Member States agreed that the ‘golden rule’ of not overcoming the deficit of 0.5% and 60% of GDP debt must be included in the Constitution. The problem is that the structural deficit cannot be measured, but only estimated based on an economic model.”
Economic analyst Ilie Şerbănescu (former Minister of Reform from 5 December 1997 until 17 April 1998) argued that the ratification would affect living standards.
Liviu Voinea, director of the Applied Economics Group, argued that the ratification of the Fiscal Compact would: “[…] increase the property taxes because [the] country collects four times less than the EU. […] Romania will now be forced to use all available resources in the coming years, namely higher absorption of EU funds or increasing the percentage of unexplored workforce (40%) for growth”.
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 Romania? 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.
Romania has decided to be bound by the Balanced Budget Rule on the basis of Article 14(5) Fiscal Compact already before joining the Euro area (see also section IX.1 above and IX.8 below).
The current provisions of the Romanian Constitution do not include a Balanced Budget Rule. The only existing constitutional rule limiting the budgetary decisions is set by Article 138 (5) of the Constitution, which states that: “[n]o budget expenditure shall be approved unless its financing source has been established”.
In the legal system of Romania, the Parliament adopts the following acts: laws, regulations, decisions, declarations, motions, messages and appeals. The only act of the Parliament with normative nature, of general application and with legally binding force is the law (‘legea’).
As to the types of laws, according to Article 73 (1) of Romanian Constitution: “Parliament passes constitutional, organic, and ordinary laws”. The constitutional laws are the ones on the revision of the Constitution. These are adopted by the Parliament with two thirds of the members of each Chamber being onwards subject to approval by referendum (Article 151, Constitution of Romania). The organic laws are adopted only in the expressly and exhaustively prescribed areas as detailed in the Constitution by the majority of the members of each Chamber of the Parliament – absolute majority (Article 73(3) and Article 76(1), Constitution of Romania). The ordinary laws are adopted by the majority of the present members of each Chamber of the Parliament – simple majority (Article 76(1), Constitution of Romania).
Subsequently, in the Romanian legal system the only provisions with both binding force and permanent character are the constitutional ones. No other legal acts may provide a sufficient guarantee of permanence. The other laws – organic and ordinary – can be changed with a majority of votes of the members of the Parliament or a majority of the members of the Parliament present, respectively.
It follows that, in order to comply with the provisions of Article 3 (2) of the Fiscal Compact, it can be argued that in Romania the amendment of the Constitution would have been imminent.
In practice, this was not the case. The provisions of Article 3(1) of the Fiscal Compact on the Balance Budget Rule and the correction mechanism were implemented in the national legal system by ordinary Law 377/2013 amending Law 60/2010 on Fiscal Budgetary Responsibility (Sections 3 and 4).
The legislative proposal to amend the Fiscal Responsibility Law no. 69/2010 was subject to the emergency procedure, in order to comply with the deadline of implementing the Fiscal Compact of 1 January 2014. The proposal was registered in the Senate on 19 November 2013, was voted by the Senate on 27 November 2013 (86 votes FOR, 0 Against and 8 Abstentions), and afterwards was also approved by the Chamber of Deputies on 10 December 2013 (242 votes FOR, 31 Against and 42 Abstentions ). On 18 December 2013, the legislative proposal, approved by both chambers of the Parliament, was promulgated by the Romanian President, becoming Law no. 377/2013.
The law is an ordinary one and requested a simple majority, as the fiscal discipline does not feed into the areas regulated by organic law provided for by Article 73(3) of the Constitution. It was published in the Official Journal on December 23, 2013 and entered into force on January 1st 2014.
The specific provisions implementing the Balanced Budget Rule, transpose closely the text of Article 3 (1) of the Fiscal Compact. It reads as follows:
“Article 51. In order to comply with the reference values for budget deficit and public debt, as they are mentioned in Protocol no. 12 on the Procedure Applicable to Excessive Deficits, attached to the Treaty on the Functioning of the European Union, the budgetary position of the public administration is either balanced or in surplus.
Article 52. The rule provided under article 51 shall be considered complied with if one of the following requirements is fulfilled:
(a) The medium-term budgetary objective does not exceed a lower limit of the annual structural balance of the public administration of -0.5% of GDP expressed at market prices;
(b) When the ratio between the public debt calculated according to the EU methodology and the GDP at market prices is significantly below 60% and when the risks related to long-term sustainability of public finance are low, the lower limit of the medium-term budgetary objective may not exceed an annual structural balance of the public administration of maximum -1.0% of GDP at market prices;
(c) The annual structural deficit of public administration converges towards the medium-term budgetary objective according to an adjustment path agreed with the institutions of the European Union, according to the Council Regulation (EC) no. 1466/1997, as subsequently amended and supplemented.” 
It must be recalled that the President of Romania on January 30, 2012, shortly before the signature of the Fiscal Compact, pleaded for the absolute necessity of amending the Constitution by the end of 2013, at the latest, to respect the commitments undertaken by Romania under the agreement.
As well, on December 11, 2011 after the European Council of 8-9 December 2011, the President declared that the transposition of the relevant provisions of the Fiscal Compact shall be checked by the Court of Justice of the European Union: “[…] the concrete way in which the relevant objectives of the Growth and Stability Pact shall be introduced in the Constitution or in the equivalent legislation shall be analysed and approved by the Court of Justice of the European Union”, he stated. [author’s translation from Romanian]
Two projects on the revision of the Constitution were put forwards in the reference period: in 2011 and 2014, respectively. Please refer to sections III.2 and III.4 above.
The 2011 legislative proposal on the revision of the Constitution, registered in the Parliament on June 26, 2011, envisaged the inclusion of a new Article 138-1 ‘Financial policy’ regulating the Balance Budget principle. The project was initiated by the President on the proposal of the Government (both the cabinet and Prime Minister members of PDL), exercising the attributes stipulated in Article 150 of the Constitution. In July 2011, Prime Minister Emil Boc (in office until February 2012), referring to the proposal stated: “I will tackle the provision of Article 138-1 regarding the state financial policy, which requires, for the first time in the Romanian Constitution, a limit of the deficit at 3% and of the public debt exceeding 60% of GDP. Such a constitutional provision is not new, or completely new, to European constitutions. We already have the precedent of Germany in 2009, which included a provision almost exactly as ours on the budget balance and the discussions are well advanced in France, for the purposes of such an approach to the provision in the Constitution of certain rules to keep the financial balance. I think that such a rule is absolutely necessary to be imposed at the constitutional level. I say this especially in view of the lessons the crisis have taught us about how vulnerable governments and countries are facing populism, demagogy and the policies responsible for buying votes with public money. We need such a provision to be a safeguard against any populist policies of buying votes with public money.” [Author’s translation from Romanian]
As well, the constitutional review project proposed the amendment of Article 138 (2) with an additional obligation of the Government to submit the annual draft budget laws to the institutions of the European Union.
Later on, the aforementioned constitutional review project initiated by the President was rejected by the Parliament (USL majority) on May 21, 2013 before being submitted to a referendum (see sections III.2 and III.4 above).
In 2013 a new constitutional reform was initiated by the Parliament with a formal proposal registered in the Parliament in 2014 (USL majority). This time, the constitutional revision project was initiated by the Parliament. The 2014 project does not include the Article 138-1 ‘Financial policy’ and the relevant provisions on a Balanced Budget Rule. The amendment of Article 138 (2) Constitution on the obligation of the Government to submit the annual draft budget laws to the institutions of the European Union after informing the Parliament is maintained.
The current 2014 project has been reviewed by the Constitutional Court on its own motion. By Decision 80 of February 16, 2014 the Constitutional Court found more than twenty instances of unconstitutionality of the proposed constitutional revision initiative. Currently, the constitutional revision legislative proposal is pending in the 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.
The provisions of the Fiscal Compact, including the Balanced Budget Rule were implemented by law 377/2013 amending law 69/2010 on Fiscal Budgetary Responsibility. The particular rush in implementing the Fiscal Compact provisions left no time for parliamentary debates. The implementing law proposal was registered with the Senate on November 21, 2013. Onwards the law was passed to the Chamber of Deputies and adopted by simple majority according to the emergency legislative procedure on December 10, 2013. The whole legislative process lasted less than one month, under considerable time pressure, as the law was due by January the 1st of 2014. In both Chambers of the Parliament the debates were a mere formality, meaning that the rapporteur announced the legislative novelty of the proposed law followed by no intervention from the parliamentary groups – the only ones allowed to take the floor during the emergency legislative procedure debates.
Regarding the implications of the treaty for (budgetary) sovereignty, the President of Romania stated on March 2, 2012 shortly after the signature of the Fiscal Compact that: “the 25 countries that signed the Treaty accepted “voluntarily” to share the control over the budget and fiscal prerogatives with the EU Commission. The treaty is a step forward in the process of European integration of economic policies. This process will be done in two ways. Through increasing policy harmonization at EU level and, perhaps more importantly, by increasing the control exercised by the European institutions in the coordination of national economic policies, especially fiscal policy”. [author’s translation from Romanian] Therefore, the President rather saw the signature of the Fiscal Compact by Romania as an opportunity and a necessary step towards European integration than an intrusion into national sovereignty, as long as the member states agree on sharing decision powers regarding fiscal and budgetary policies.
The general debate on the revision of the constitution was a constant one between the President and the Parliament since 2009 and continues until the present days. The implementation of the Fiscal Compact fed into this long-standing debate. At the time the Fiscal Compact was signed, the President insisted on the immediate revision of the Constitution. In the period 2012-2013 the only project on the revision of the Constitution registered in the Parliament was the one initiated by the President on the proposal of the prior PDL government, the party in opposition since May 2012. During 2013, the USL coalition elaborated another legislative proposal on revision of the Constitution, however it was registered with the Parliament only in 2014 and did not include a Balanced Budget Rule. Please see sections III.2 and III.4 above.
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)?
There is no information concerning any public debates about the relationship between the Balanced Budget Rule of the Fiscal Compact and the Medium term budgetary objective in the six-pack.
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?
There is no court judgement either on the Fiscal Compact or on the Balanced Budget Rule contained therein.
Nevertheless, in June 2011, before the signature, ratification or implementation of the Fiscal Compact the Constitutional Court has expressed its opinion on the inclusion of a Balanced Budget Rule provision in the Constitution of Romania transposing the maximum reference values of the Stability and Growth Pact (budgetary deficit 3% of GDP and public debt 60% of GDP). By Decision 799 of 17 June 2011 concerning the legal proposal on the revision of the constitution, the Court found a constitutional amendment concerning a Balanced Budget Rule constitutional as these restate the obligations of the Stability and Growth Pact, Article 126 Treaty on the Functioning of the European Union, as well as Protocol 12. Moreover, the Court held that provisions of constitutional force that express the principle of budgetary balance are necessary as these are consistent with the Declaration on Article 126 TFEU whereby: “[…] a rule-based system is the best guarantee for commitments to be enforced and for all Member States to be treated equally.”
Having regard to the above reasoning, the Court concluded that:
“The constitutional review project enshrines at the level of constitutional legal norm the principle of budget balance: regulation of a maximum budget deficit of 3% of GDP and public debt not exceeding 60% of GDP. The proposal is based on the need of converting a constitutional criterion of economic exigency discipline and budgetary rigor and the review does not violate the Constitutional limits prescribed by article 152 (1).”  [Author’s translation from Romanian]
Even if the present 2014 Constitutional amendment initiative does not contain a similar article, the aforementioned Decision is important as it states the principled stand of the Constitutional Court on the matter. Most importantly, the Decision reviewed the constitutionality of the proposed Budget Balance Rule against Article 152 (1) of the Constitution of Romania ‘The limits of revision’ concluding that the amendment does not conflict with the fundamental constitutional foundations that may not be subject to revision, such as the independence of the Romanian state. Article 152(1) reads:
“The provisions of this Constitution with regard to the national, independent, unitary and indivisible character of the Romanian State, the republican form of government, territorial integrity, independence of justice, political pluralism and official language shall not be subject to revision.”
On the exact wording of the proposed article 318-1 see section III.2 above.
Non-Eurozone and binding force
Has Romania 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?
The decision to be bound by the Fiscal Compact was rather a political decision taken by the President and supported by the Government. Please see section IX.1 above.
Romania, although not a member of the Euro area, decided to be bound by the entire Fiscal Compact. Similar to other non-Eurozone signatories Romania is bound by the provisions of Title III and IV of the Treaty as of 1 January 2013 the date of entry into force of the Fiscal Compact Treaty only if it declares to be bound by these Titles. The ratification was notified to the Council of the European Union on 06th November 2012, including a Declaration to be bound by Title III and IV of the Treaty.
What other information is relevant with regard to Romania and the Fiscal Compact?