On March 11, 2011 the Heads of State or Government of the Eurozone endorsed the Pact for the Euro. At the 24/25 March 2011 European Council, the same Heads of State or Government agreed on the Euro Plus Pact and were joined – hence the ‘Plus’ – by six others: Bulgaria, Denmark, Latvia, Lithuania, Poland, Romania (leaving only the UK, Czech Republic, Sweden and Hungary out).
The objective of the pact is to foster competitiveness, foster employment, contribute to the sustainability of public finances and reinforce financial stability. In the Euro-Plus-Pact the Heads of State or Government have entered into commitments on a number of policy areas, in which member states are competent.
What political/legal difficulties did Spain encounter in the negotiation of the Euro-Plus-Pact, in particular in relation to the implications of the Pact for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process.
The Euro Plus Pact was agreed at the European Council that took place on 24 and 25March 2011. A month earlier, on 15 February 2011, Trinidad Jiménez-García Herrera (Minister for Foreign Affairs and member of the Partido Socialista Obrero Español) appeared before the Parliamentary Commission for the EU in order to explain Government’s position towards the upcoming European Council. According to Trinidad Jiménez-García, it was at this stage that the negotiations on the specific content of the Euro-Plus-Pact were taking place.
The Minister of Foreign Affairs stated clearly that Spain supported the Euro-Plus-Pact (back then this Pact was referred to as the “pact for competitiveness”). Becerril Bustamante (from PartidoPopular) agreed with the need to introduce the element of competitiveness into the economic governance of the EU, and remarked that this was done under the leadership of France and Germany. Moscoso del Prado Hernández (from Partido Socialista Obrero Español) tackled the issue of salaries being part of the Euro-Plus-Pact. He claimed that productivity and competitiveness depended on a number of factors other than salaries, and that he hoped the Pact fitted the different models of production across the EU.
The discussions at the Parliamentary Commission for the EU evidence that, although linking salaries with productivity was controversial, the Government fully supported the approval of the Euro-Plus-Pact as allegedly presented by France and Germany.
On 30 March 2011, once the Euro-Plus-Pact had been approved, President Zapatero appeared before the Congreso plenary session in order to inform about the European Councilmeeting held in Brussels a few days before (24-25 March). At this meeting President Zapatero expressed unambiguous support, stating his and the Government’s conviction about the benefits that the measures taken during the European Council would bring in order to foster competitiveness, foster employment, reinforce financial stability and contribute to the sustainability of public finances in the Eurozone. The main party in the opposition, Partido Popular, as well as the Catalan group Covergència i Unió and the Basque coalition EAJ-PNV they all joined in support and agreement with the decisions taken at the European Council. One of the main concerns debated in the Parliament was that, being the measures adopted susceptible of being interpreted as unpopular and damaging for the welfare state, that the European Union cannot afford a deficit of democratic legitimacy, so it is necessary for EU citizenship to clearly perceive who takes action, where, when and why. As Mr Duran i Lleida (Convergencia I Unió) stated: “It is essential to avoid the feeling, for example, among Spanish citizenship, that four European bureaucrats decide the salary of the Spanish workers, their pensions or their retirement date”.
The “setback in labour and social rights” such as the wage cuts for civil servants and their subsequent decreasing purchasing power was a controversial issue brought about by the left-wing coalition in the Parliament, In their view, European economic governance contains serious omissions such as the lack of mention on the rising levels of inequality on wages, the growing gap between executives of large companies and their employees, or the remuneration of bankers and their “colossal appetite” for bonus. Another topic subject of debate was the deteriorating conditions of many employment contracts caused by the growth of precarious work (“flexicurity”) in the Eurozone. Mr Jorquera Caselas (Bloque Nacionalista Galego) claimed that “the so-called Pact for the Euro is a new twist in this direction, a battery of distinctly antisocial measures that advance the deregulation of economic and labour relations and aim to undermine the redistributive capacity of the state”.
What other information is relevant with regard to Spain and the Euro-Plus-Pact?
Even before that the Euro-Plus-Pact was adopted by the Member States, the Spanish Government had already adopted some of the measures covered by the Pact, such as cuts in public spending, a delay in the retirement age, reform of the pensions system, an increase in VAT, and more significantly, a labour reform linking wages with productivity as the main modification, among some other important measures.
The approval of the Euro-Plus-Pact was followed by a modification of the Law of Budgetary Stability (July 2011) in order to limit the administration’s level of public expenditure. Likewise, in August 2011 the Government embarked on a modification of the Spanish Constitution so as to include a limitation of public debt and deficit.
(i) The new rule of Government spending in the Law of Budgetary Stability: At his appearance before the Congreso de los Diputados on 30 March 2011, President Zapatero detailed the manner in which the Euro Plus Pact would translate into Spanish legislation. When tackling the field of ‘Sustainability of public finances’, he expressed the Government’s intentions to introduce a rule that limited public expenditure in relation with nominal GDP growth (this rule would only apply to the central and local administrations, as Zapatero did not want to touch upon the competences reserved to the regions). Following Zapatero’s pronouncement, the Real Decreto-ley 8/2011 of 1 July introduced the new ‘Rule of Government spending’ by means of amending the Law of Budgetary Stability. In particular, a new Article 7 of the Law established that spending of public entities may not exceed the rate of growth in the medium term of reference of the Spanish economy. Limiting the levels of public expenditure would in this way reinforce budget stability and limit the possibilities of indebtedness.In this line, article 8 further added that the income derived above the projected would be devoted entirely to reduce the level of public debt. The consequences of non-compliance with these rules were foreseen in Article 10, which stated that breaking the rule of government spending would result in the responsible administration taking extraordinary measures of immediate application that guaranteed the return to levels of expenditure within the limits of Article 7. The preamble of the Real-Decreto-ley 8/2011 justified the modifications introduced as “necessary to anticipate the adoption of some of the measures discussed in the framework of the Euro-Plus-Pact”.
(ii) Amendment of the Spanish Constitution: On 22 August President Zapatero unexpectedly announced that the Government and the main opposition party have agreed upon the amendment of the Spanish Constitution in order to limit public debt and deficit. Note that at his appearance before the Congreso on 30 March, he did not mention this measure as part of the agenda of implementation of the Euro-Plus-Pact, although the leader of the opposition Mariano Rajoy had pointed out that the principle of budgetary stability should be armoured against legislative changes such as the amendment of the French and German constitutions. Indeed the Euro-Plus-Pact prompted the participating Member States to make sure that EU fiscal rules are translated into national legislation of a strong and durable nature (e.g. constitution or framework law). It seems, however, that Zapatero’s unexpected announcement of a constitutional amendment were provoked by the letter that the ECB had sent him earlier that month in which, among other instructions, the President was prompted to “take audacious measures that guarantee the sustainability of public finances”.
The new Article 135 of the Constitution give constitutional status to the principle of budgetary stability, and precludes all public administrations from incurring a structural deficit above the thresholds set by the European Union (however, this disposition on maximum structural deficit will not enter into force until 2020). The process followed for this constitutional amendment has been the “simplified procedure’ set out in Article 166 of the Constitution, reserved to those reforms that do not affect the Preliminary Title, the second section of Title I (on fundamental rights and freedoms), or Title II (on the Crown). The simplified procedure requires the initiative to be endorsed by two parliamentary groups or one-fifth of the Deputies, and the text of amendment to be approved by tree fifths of MPs at both Congreso and Senado (or, failing that, a simple majority at the Senado and two-thirds at the Congreso).A referendum only takes place if requested by one tenth of the MPs.
The amendment proposal was made on August 23, 2011 by the President of the Government. On 26 August 2011 the Socialist and Popular parliamentary groups in the Congreso jointly presented the proposal of reform for Article 135. Both parties requested that the amendment be processed by the emergency procedure and approved in a single reading. The Plenary of the Congreso mostly agreed with the use of the emergency procedure and the approval by single reading in its meeting held on 30 August 2011.Those MPS who voted against included members of nationalist and regionalist parties (the Partido Nacionalista Vasco, Esquerra Republicana de Catalunya, Nafarroa Bai and Bloque Nacionalista Galego), who were primarily concerned with maintaining their regional authority vis-à-vis Spain and other global actors.Other dissenting voices came from the left-wing parties Izquierda Unidaand Iniciativa per Catalunya Verds, as they considered the reform to represent a threat for the welfare state. Finally, Union Progreso y Democracia and one deputy of the Partido Socialista, Antonio Gutiérrez (ex-general secretary of the Comisiones Obrerastrade union) also voted against the amendment. The centre-right Catalan nationalist group Convergencia I Unió abstained.
When the reform process started at the Congreso, twenty-four amendments were presented: ten by the Grupo Parlamentario Mixto (one by the Galician Nationalist Bloc, two by the Basque coalition Nafarroa, two by the Canarian Coalition, five by Union Progreso y Democracia)four by the Catalan-Republican-Left-Greens, two by the Basque Parliamentary Group and eight by Convergencia I Unió.These amendments were discussed at the plenary meeting on 2 September 2011. They were all rejected and only only a grammatical correction was admitted in the third paragraph of Article 135(3). With this small correction, the new Article 135 was approved by 316 votes in favour and 5 against.
Later at the Senado, 29 amendments were presented: eight by the Catalan party Convergencia i Unió, four by the Parliamentary Group of Nationalist Senators, two by the Mixed Parliamentary Groupand fifteen by the Catalan left-wing coalition Entesa Catalana de Progrés. The Constitution’s Committee rejected the amendments and gave a positive report to the text submitted by the Congreso, albeit with four dissenting votes. On 7 September 2011the plenary of the Senado debated the positive report of the Constitution’s Committee. The report (and therefore the constitutional amendment) was approved by 233 votes in favour and 3 against.
As explained above, after approval from the Congreso and Senado a referendum only takes place if requested by one-tenth of the MPs of any of the chambers. As both the governing party (Partido Socialista) and the main opposition party (Partido Popular) supported the reform and they made more than 90% of the MPs, the constitutional amendment did not require a referendum. The amended Article 135 was published in the Official Bulletin of the State on 27 September 2011. The reforming process has been called the “express amendment”, as it took only thirty-two days from the submission of the proposal.