Nature national instruments
What is the character of the legal instruments adopted at national level to implement Euro-crisis law (constitutional amendment, organic laws, ordinary legislation, etc)?
The range of legal instruments adopted in Spain in order to implement Euro-crisis law has been very broad and diverse. It has included constitutional amendments (e.g., Article 135 of the Spanish Constitution), the approval of different organic laws, royal-decree laws, decree-laws, ordinary laws, decisions, etc., and most importantly, the crisis and the critical financial situation have led to a different approach towards the way of legislating, having a much more coral and integrative vision of Spain within the European Union.
Have there been any constitutional amendments in response to the Euro-crisis or related to Euro-crisis law? Or have any amendments been proposed?
On September 2011, Article 135 of the Spanish Constitution (Constitución Española) on public debt, was amended, setting in the text the concept of “budget stability” while introducing the absolute priority of debt and interest repayment. The Spanish Government approved a law in congress to amend the Constitution to require a balanced budget at both the national and regional level by 2020.
The detailed process of adoption of the amendment is stated when answering Question VI.2.
If national constitutional law already contained relevant elements, such as a balanced budget rule or independent budgetary councils, before the crisis that are now part of Euro-crisis law, what is the background of these rules?
Most of the relevant elements concerning Euro-crisis constitutional law in Spain (e.g., amendment of Article 135 CE; Organic Law 2/2012 of 27 April; on Budgetary Stability and Financial Sustainability; the creation of the National Commission for Local Administration (CNAL), etc.) have been developed in response to the crisis and were not contained in the law before the start of the financial crisis in Europe.
Purpose constitutional amendment
What is the purpose of the constitutional amendment and what is its position in the constitution?
For 33 years the Spanish Constitution had been considered untouchable by the ruling parties, only amended once in order to adapt the country’s legislation to the European Union’s legal framework. However, on August 2011, in a span of two weeks since Prime Minister Zapatero announced that he was planning an amendment, a new article was added in a bid to reassure international markets that Spain was serious in cutting its deficit.
The main purpose of new Article 135 of the Constitution is to subject all public administrations to comply with the principle of budgetary stability, forbidding them to incur a deficit position above the thresholds defined in the Stability and Growth Pact. The political agreement set a maximum structural deficit of 0.4% of GDP to be achieved by 2020, which was distributed at the rate of 0.26% for the State and the remaining 0.14% for the Autonomous Communities. Soon later, Organic Law 2/2012 resolved that no administration may incur into structural deficit, so that 0.4% is only allowed when the deficit is the result of structural reforms to be made and when having long-term budgetary impact. The idea of constitutional limits on debt levels was broached at the July 21 European Summit, when European Union leaders approved a new loan package for Greece and encouraged member states to implement fiscal discipline. Germany has already included this stipulation in its constitution, while France and Italy were working on it.
Article 135 is embedded in Part VII of the Spanish Constitution (“Economy and Finance”, Articles 128-136). Title VII deals with the organization and distribution of national wealth, although this also appears on more articles.
Article 128 establishes that the Tax Office shall be subordinated to the general interest and public initiative. Participation in private and public sectors (e.g., Social Security) is established in Article 129. Attention to the modernization and development of the economic sectors, especially the most disadvantaged is given in Article 130. Economic planning is allowed (Art.131), as well as the creation of local tax offices (Art.133). Article 132 determines which the goods under public property domain are. This will enable the funding mechanisms of the autonomous communities (Article 156) and Territorial Compensation Fund (Fondo de Compensación Territorial) contained in Article 158 of the Constitution. Article 134 says that State expenditure must be submitted through official budget presented by the Government in order to be approved later by Parliament. In addition, the Government may issue public debt and may get credit (Art.135). Finally, Article 136 expresses that all expenses and income, and the economic management of the State will be audited by the Court of Auditors (Tribunal de Cuentas).
Title VII should be interpreted in light of international treaties.
Relationship with EU law
Is the constitutional amendment seen as changing the relationship between national and European constitutional law?
The reform of Article 135 of the Spanish Constitution of September 27, 2011, the second that has been made since the adoption of the Constitution in 1978, meant a profound modification of this provision. The two sections that included this article in its original wording were turned into six, which gives an idea of the depth and relevance of the amendment carried out.
The deal followed calls by Germany and France for Spain and other states at the sharp end of the euro zone debt crisis to set binding limits on their deficits to regain the trust of investors.
As stated in the Article 135 Preamble, the reason for the amendment was to meet Spain’s commitments acquired when joined the European Monetary Union, a framework in which fiscal stability acquires structural value, conditioned to the ability for financial performance by the public administrations. Fiscal stability is conceived as essential to the maintenance and development of the Welfare State as proclaimed in Article 1.1 of the Spanish Constitution. Accordingly, it comes included in the constitutional text, therefore granting fiscal stability the maximum regulatory status possible within the Spanish legal system.
This is another proof of what constitutes already a reality in Spain (worsened since the beginning of the current crisis), a reality which, among others Prof. Óscar Alzaga clearly expressed: the guidelines on economic policy coming from Brussels are increasingly accurate, so that the sovereign authority to prepare the State Budget will be heavily conditioned by the European economic governance policy. In short, the constitutional reform consecrated a new allocation of powers under the Constitution, required to continue the construction of the European Union.
The new Article 135 begins by establishing a principle of conduct for all public administrations in their actions: the budgetary stability principle. Moreover, paragraph 2 of the same article admits the existence of a structural deficit of the State and the Autonomous Communities, which in no case shall exceed the margins set by the European Union.
As for public debt, the amendment kept the content of former Article 135 in the new paragraph 3, establishing that the issue of debt must be authorized by law, and also the payment of term loans for satisfying public debt. It introduced an important new feature consisting in linking the total public debt for all public administrations, measured in relation to the GDP reference value set in the Treaty on the Functioning of the European Union (TFEU), particularly in Article 126, which is set at 60% of GDP. This represents another feature of the increasing relation between national and European constitutional law in Spain.
Have there been changes to organic laws or other types of legislation that are of a different nature or level than ordinary legislation, in relation to Euro-crisis law or the budgetary process?
On the changes of organic laws, see in particular Question VI.2.
Constitutional amendment and ordinary law
If ordinary legislation was adopted in conjunction with a constitutional amendment, what is the relationship between the two?
Organic Law 2/2012, of April 27, on Budgetary Stability and Financial Sustainability, is the law that develops the amendment of Article 135 of the Constitution, which also experienced a rapid process of parliamentary approval, responding to bipartisan agreement to reduce the deficit public and meet the new European legal framework enshrining the “golden rule” of balanced budgets (see Question VI.2).
It is the very own wording of new Article 135, which provides the mandate to develop the content of this article in organic law before June 30, 2012. With the approval of Organic Law 2/2012 on Budgetary Stability and Financial Sustainability for the Public Administration it is given full compliance to the constitutional mandate.
The reference to the rules of European stability, both in the Constitution and in LO 2/2012, is constant, being Spain one of the first countries to incorporate the European economic governance package to its domestic law. In addition, LO 2/2012 gives effect to the European Fiscal Stability Treaty (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union; also referred to as TSCG) of March 2, 2012, ensuring a continuous and automatic adaptation to European standards.
Organic Laws in Spain
Under the current Spanish Constitution of 1978, an Organic Law has an intermediate status between that of an ordinary law and of the constitution itself. It must be passed by an absolute majority of the Congress of Deputies. The Spanish Constitution specifies that some areas of law must be regulated by this procedure, such as the laws developing fundamental rights and freedoms recognized in the first section of Chapter Two of Title I of the Constitution, as well as the laws that approve the Statutes of Autonomy of the Autonomous Communities of Spain, among others. Prior to the 1978 constitution, this concept had no precedent in Spain, but was inspired by the similar concept in the current French Constitution of 1958.
Notice that, as established in Article 81 of the Spanish Constitution, the adoption of a Ley Orgánica requires the absolute majority of the Congreso de los Diputados (which, together with the Senado, constitutes the Spanish Parliament) in the final voting of the law.
Perception source of legal change
In the public and political discussions on the adoption of ordinary legislation, what was the perception on the appropriate legal framework? Was the ordinary legislation seen as implementing national constitutional law, or Euro-crisis law?
The economic crisis exposed the inadequacy of the national mechanisms of discipline on Budget laws and economic governance to control deficit, to ensure adequate funding of the public sector and to provide security to investors about the ability of the Spanish economy to grow and meet its national and international commitments. It also did not suit the path taken by the European Union seeing the need to advance the economic integration process, looking for achieving greater coordination and fiscal accountability of the Member States, and aiming towards greater economic and fiscal surveillance of them, with the consequent transfer of sovereignty.
In the medium and long term, in order to strengthen economic and fiscal policy that would allow ensuring permanent economic growth and the creation of jobs, according to the legislators, it was needed to ensure fiscal stability, which would help to strengthen the confidence in the Spanish economy and raise finance on better terms. Thus the Constitution introduced a fiscal rule limiting the structural public deficit and restricted public debt reference to the reference value of the Treaty on the Functioning of the European Union, being Spain pioneer in this regard.
Once analysed the legislation that has been developed in Spain to address the European crisis, the resulting perception is that Spanish legislators have been implementing national constitutional law, but in an increasingly integrated and complementary way with the “Euro- crisis law”.
What other information is relevant with regard to Spain and to changes to national (constitutional) law?
No other relevant information.