Slovenia

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.consilium.europa.eu/european-council/pdf/Treaty-on-Stability-Coordination-and-Governance-TSCG/)

Negotiation
IX.1
What political/legal difficulties
did Slovenia 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.

On January 19 2012, the Government determined the strategy for the negotiations on the Treaty on stability, coordination and governance in the economic and monetary union. One of the key observations presented by Slovenia referred to the methodology for calculating the medium-term objective for each Member State. Slovenia suggested that the methodology should reflect an appropriate balance between explicit liabilities and implicit liabilities (taking into account the implicit liabilities arising from an aging population) that are projected to arise in the long term.[1]

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

Slovenia ratified the Treaty through a regular parliamentary act – the Act ratifying the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union adopted in April 2012. The adoption of the act was approved by the National Assembly (The Committee for Finance and the Committee for international affairs), adopted on April 11, 2012.

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

There were no major difficulties in the ratification of the Fiscal Compact. The Committee on Finance and Monetary Policy and the Committee on Foreign Policy discussed the ratification on April 11, 2012. During the discussion that took place at the National Assembly some deputies raised questions about the Treaty. Roman Jakic of Pozitivan Slovenija asked the rhetorical question whether this is just the first step in giving up Slovenian sovereignty. He questioned the coexistence of two systems that will manage public finances. The party nonetheless confirmed that it will vote in favour of the ratification.[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 Slovenia? 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 legislative basis for the Slovenia’s fiscal framework is established in Article 148 of the Slovenian Constitution. Before 2013, a fiscal rule was determined in an executive decreethe Decree on the documents of development planning bases and procedures for the preparation of the central and local government budgets. The Decree prescribed the annual procedure for budget formulation and set the upper limit on public expenditure. In March, 2012, the Government approved the proposal to begin the procedure to amend article 148 of the Constitution of the Republic of Slovenia that would introduce the fiscal rule in the Slovenian constitution. The amendment would determine that the national budget must be either balanced or in surplus within a mid-term. Such constitutional amendment would have to be approved by two-thirds majority of the present members of the National Assembly. The proposal for the constitutional amendment was nonetheless abandoned during the change of the government that took place in March 2013.

On May 24, 2013, a vote took place concerning the implementation of the fiscal rule in the Constitution. 78 deputies voted in favour and 8 against (the deputy that voted against are from the party SD) of the implementation of the fiscal rule in the constitution. The major argument for the SD was that the introduction of the fiscal rule by 2015 would have a major impact on the social aspect of the country.

The constitutional act amending article 148 of the Constitution entered into force in May 2013, and provides as follow: “All revenues and expenditures for the financing of public spending must be included in the budgets of the states. Revenues and expenditures of the budgets of the state must be balanced in the medium-term without borrowing, or revenues must exceed expenditures. Temporary deviation from this principle is only allowed when exceptional circumstances affect the state. The manner and the time frame of the implementation of the principle referred in the preceding paragraph, the criteria for determining exceptional circumstances, and the course of action when they arise, shall be determined by a law adopted by the National Assembly by a two-third majority vote of all deputies.”

The adopted Constitutional amendment thus provided for the adoption of the “implementation law” within six months from the entry into force of the amendment to the Constitution. The Law should determine more precisely the fiscal rule, in the way to fully implement the Council Directive and the regulations and Fiscal Compact. The law should propose a detailed solution on the actual fiscal policies, define the role of the independent Fiscal Council, specify what are considered to be exceptional circumstances, and what the correction mechanism looks like. In December 2014, the Government presented a draft of the Fiscal rule Act, but the act has not been adopted yet.[3]

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.

In April 11, 2012 the National Assembly discussed the process for changing Article 148 of the Constitution. The Constitutional Commission was in charge to prepare a draft of the amendment. There was an intensive debate about the implementation of the fiscal rule in the constitution.

Several commentators questioned the impact of the golden rule on the Slovenian economy. Professor Dr. Lojze Ude did not agree with the idea of a fiscal rule. He argued that the adoption of the fiscal rule reflects the position of only part of the economic theory, and neglects other economic theories. Further, Dr. Ude maintained that there is no need to implement the rule in the Constitution. He maintained that Slovenia was legally bound by its international agreements, and it was therefore already bound by a fiscal rule. Dr. Ude suggested that the rule should determine lower acts, rather than the constitution. He further argued that the fiscal function is only one of the state’s functions. He maintained that giving within a constitution priority to only one of the activities of the state, while leaving others to lower levels, is not an optimal solution. Likewise, also the economist Dr. Joze Mencinger questioned the reasonableness of the fiscal rule and its implementation in the constitution. In his view, the EU legislation imposes the “correct” fiscal rule to states with completely different environments and economical situations.[4] He maintains that the Fiscal compact limits the Slovenian budgetary sovereignty, and transfers the competences to the European Commission.

Some parties shared the opinion expressed by those economists. For example, Roman Jakic (Pozitivna Slovenia) was against the implementation of the rule in the constitution. He maintained that the ratification is sufficiently binding. He also pointed out that the “fiscal rule” is already part of the Public finance act adopted in 1992.

Other commentators were nonetheless more supportive regarding the implementation of a fiscal rule in the constitution. For example, Dr. Tone Jerovsek argued that the EU Treaty requires such changes to be implemented.[5] The economist Dr. Igor Masten emphasized that other countries, like Switzerland and Sweden, have adopted such a rule in the past, and, as a result, they were able to cope better with the economic crisis.

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)?

No references have been found.

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 Slovenia 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 Slovenia is a member of the Eurozone.

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

Not applicable.

[1] http://www.mf.gov.si/nc/si/medijsko_sredisce/novica/article//1132/

[2] http://www.dz-rs.si/wps/portal/Home/deloDZ/seje/evidenca?mandat=VI&type=pmagdt&uid=04C32B2F917AA4DFC12579DD0039DB88

[3] See, e g.,  Vlada pošilja zakon o fiskalnem pravilu v DZ, Delo (Dec. 4, 2014), http://www.delo.si/novice/politika/vlada-potrdila-predlog-zakona-o-fiskalnem-pravilu.html.

[4] See attachment: Annex IVc Fiscal council – mnenje 2012 , p. 5-6.

[5] http://www.dz-rs.si/wps/portal/Home/deloDZ/seje/evidenca?mandat=VI&type=pmagdt&uid=42954D591788B7BAC12579FE001F59AB