VI – Euro Plus Pact

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Austria | Belgium | Bulgaria | Croatia | Cyprus | Czech Republic | Estonia | Finland | France | Germany | Greece | Hungary | Ireland | Italy | Latvia | Lithuania | Luxembourg | Malta | Netherlands | Poland | Portugal | Romania | Slovakia | Slovenia | Spain | Sweden | United Kingdom |

Austria

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.          
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Austria 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.

Besides legislation, the control of the executive (administration) is the second major task of the parliament (Art. 52 B-VG). One form of this control is the so-called “urgent request” (Art. 52 (1) B-VG) that can be made if certain conditions are met, for example when at least five members of parliament make it (Art. 93 Parliamentary Law – Geschäftsordnung des Natioanlrats)[1]. An “urgent request” is debated within the same session of the National Council within which it is made. For the Euro-Plus-Pact, a request was made by six members the National Council that belong to the BZÖ and it regarded the decisions made at the European Council on March 24 and 25, 2011, inter alia about the Euro-Plus-Pact. [2]  In the request, the major criticism was that the Federal Chancellor had made decisions without discussing them in the National Council in advance.

As far as the content of the Euro-Plus-Pact is concerned, the major criticism articulated in the request was the question of wages and the fear of loan-dumping. The parliamentary member Blucher, who made the oral reasoning of the request in front of the National Council[3], argued that the Euro-Plus-Pact lead to common wage- and fiscal policy and would be a first level of a central European government. “Brussels” would decide on minimum wages for example. The Chancellor answered that the Euro-Plus-Pact was important because it ensured competitiveness and took the focus away of the two well know criteria of debt and deficit. He however specified that no loan negotiations would take place in Brussels, that the social partners’ (traditionally very strong) role in wage determination would not change and that collective bargaining will take place in Austria and nowhere else. However, the urgent request did not lead to any decision or new legislation.

Miscellaneous
VI.2
What other information is relevant with regard to Austria and the Euro-Plus-Pact?

Since 2011, the measures taken in order to achieve the objectives of the Euro-Plus-Pact have been integrated into the overall Austrian National Reform Programs for the achievement of the European Agenda 2020. The Austrian National Reform Programs are coordinated by the Office of the Federal Chancellor (executive branch) but involve institutions on all levels (federal and province), social partners and NGOs.[4]

[1]              Öhlinger, Verfassungsrecht, 2009, p. 213.

[2]              Urgent Request“ in the National Council Plenary Session, No. 99, XXIV Legislative Period, March 30, 2011, http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00099/fname_214992.pdf, on pp. 130-137; oral reasoning of the request on pp. 137-142; response of the Federal Chancellor Faymann on pp. 143-144; general discussion on pp. 149-185; Summery of the Plenary Session from March 30, 2011in Press release at http://www.parlament.gv.at/PAKT/PR/JAHR_2011/PK0311/.

[3]              Stenographic Protocol No. 99 (see section IV, note 16), pp. 137-142.

[4]              National Reform Program 2011, at http://www.bka.gv.at/DocView.axd?CobId=43425, pp. 3-4 and Euro-Plus-Pact measures are separately listed in its Annex II at http://www.bka.gv.at/DocView.axd?CobId=43427; National Reform Program 2012 at http://www.bka.gv.at/DocView.axd?CobId=47619, pp. 15-16 with special focus on youth unemployment; National Reform Program 2013 http://www.bka.gv.at/DocView.axd?CobId=51122, Euro-Plus-Pact commitments are listed on p. 18 in Annex II at http://www.bka.gv.at/DocView.axd?CobId=51124

Belgium

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties did Belgium 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.

Prior to the March 24/25 European Council meeting, a parliamentary debate was scheduled, led by the Parliamentary Committee for Advice on European Affairs, joined by the Committee for Social Affairs and the Committee for Financial and Budgetary Affairs.[1] Severe criticisms arose, concerning the lack of transparency of the ECOFIN meetings, positions adopted by the government without a specific mandate from parliament, and the concern for the budgetary prerogative of the national parliament.[2]

After the European Council meeting, a debriefing was held before the same committees, on April 5th, 2011. One of the main concerns with respect to the Euro Plus Pact related to the budget of regional and local governments, and the instruments to control deficits at the subnational level.[3] The lack of social protection and measures was also lamented.[4] At that same meeting, the national reform programme of 2010 and regional memoranda were put forward.[5]

Miscellaneous
VI.2
What other information is relevant with regard to Belgium and the Euro-Plus-Pact?

None.

[1] The Parliamentary Committee for Advice on European Affairs is composed of 10 Members of the House, 10 Members of the Senate, and all Belgian Members of the European Parliament. The other two standing committees were in joined session, i.e. members of both House and Senate were present.

[2] Parl. Doc. House, 2010-11, nr. 53K1365/1, p. 7: « plusieurs membres ont fait part de leur vive inquiétude de voir les instances européennes intervenir d’une manière de plus en plus prégnante dans

les compétences dévolues aux parlement nationaux, en particulier dans le domaine de leurs prérogatives budgétaires. La rapidité des processus décisionnels, leur manque de transparence, notamment au sein du Conseil ECOFIN, ont été critiqués, de même qu’un manque de concertation préalable suffisante. Ils ont également exprimé certaines critiques au regard des engagements que le gouvernement était en train de prendre vis-à-vis des autorités européennes au nom de la Belgique, sans que le Parlement se soit encore prononcé en pleine connaissance de cause sur la base d’un mandat explicite précis. » http://www.dekamer.be/FLWB/PDF/53/1536/53K1536001.pdf

[3] Parl. Doc. House, 2010-11, nr. 53K1365/1, p. 27. http://www.dekamer.be/FLWB/PDF/53/1365/53K1365001.pdf

[4] Parl. Doc. House, 2010-11, nr. 53K1365/1, p. 23. http://www.dekamer.be/FLWB/PDF/53/1365/53K1365001.pdf

[5] Parl. Doc. House, 2010-11, nr. 53K1365/1, p. 69-121. http://www.dekamer.be/FLWB/PDF/53/1365/53K1365001.pdf

Bulgaria

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.          
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation       
VI.1
What political/legal difficulties
did Bulgaria 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.

From the little available information on the negotiations, it appears that the difficulties encountered during the negotiations at the EU level were mainly related to preserving the right of the Member States to independently conduct their tax policies. The position of the Government on the Euro-Plus Pact was never presented in a consolidated fashion and one needs to look at the different debates in order to extract parts of it. The position can be summarised in the following way. The Government supported the Pact as part of the measures designed to manage the Euro crisis and was keen for the Pact to include non-Eurozone Member States, in order to be able to participate in the creation of the solutions. However, an important cornerstone of the Bulgarian position was the abovementioned difficulty that issues of common taxation must be left out of the Pact. The Government supported the predominance of the measures in the Pact because they overlapped to a great extent with the measures the Government wanted to take anyway.

There are several main points of discussion that transpire from the numerous occasions that the Euro-Plus Pact was discussed at the National Assembly. While all of them are discussed in detail below a short summary is in order. A major point that was discussed was Bulgaria’s participation in the EU integration, generally. The Pact was presented as an important political opportunity and a gateway for Bulgaria to strengthen its role in the integration process. In that regard, a certain part of the discussion dealt with the issue of a two-speed Europe, which Bulgaria wanted to prevent or, failing that, not to be left in the ‘second speed Europe’. A more specific, but equally important, part of the integration-related debate was the point on Bulgaria’s Eurozone membership. In that regard, the debate focused on how the Pact would or should relate politically as well as legally to that membership. Another major point that appeared in the debates was taxation. Constantly, during the debates, the national representatives expressed concerns about a possible effect of the Pact on the sovereign power of the National Assembly to set the taxes within Bulgaria. The Government, in turn, repeatedly assured the national representatives that this fundamental interest of Bulgaria was protected. The third major point of discussion was focused on the prudence of the decision to limit, even if only politically, the freedom of manoeuvre of Bulgaria. The main question in that regard was why Bulgaria should be too strict in its policies when its economy needs to grow bigger and faster and this necessarily involves at some point greater spending.

The fourth major point was the political/legal nature as well as content of the commitments Bulgaria made under the Pact. On the nature of the commitments, the Government repeated time and again that the Pact was a political act containing political commitments and that the Government did not bound Bulgaria for which the approval of the National Assembly is required. On the content of the commitments, there was a great deal of controversy. The Government held that its actions in the scope of the Pact were stemming from its own policy and were not required by the Pact. However, the opposition insisted on its view that the Government’s actions such as increasing the retirement age were adopted in order to fulfil commitments the Government made at the EU level, that were hidden from the public. The fifth major point of discussion, relating to the previous one, was on the issue of transparency. On various occasions, national representatives from the opposition criticised the Government for the lack of transparency during the negotiation of the Pact and for the actual commitments made. Keeping this general overview in mind, it is now necessary to consider the Euro-Plus Pact discussions in detail.

The Euro-Plus Pact created a lot of controversies ever since the first time it was mentioned in the plenary hall of the National Assembly. This happened on 24 March 2011 when the Prime Minister Boyko Borissov introduced the Pact, shortly before he flew to Brussels to attend the European Council meeting adopting it. Following this statement, the Euro-Plus Pact was discussed several times. An overview of all of the discussions is needed to better understand and contextualise the debates relating to the Euro-Plus Pact.

The discussion on 24 March 2011,[1] as already indicated, was the first mentioning of the Euro-Plus Pact at the National Assembly, right before the European Council meeting. The Prime Minister started with an explanation of when is the Council of Ministers obliged to inform the National Assembly of its actions at the EU level. In sum, he said that there is no such legal obligation when it comes to the actions of the European Council, as it does not adopt legislative acts. However, the Prime Minister stated that he will explain the position which he will present at the European Council with respect to the Euro-Plus Pact. As such this is the only publicly available record of anything close to a negotiation position of the Government for the Euro-Plus Pact before its adoption.

The statement of the Prime Minister covered four main points. The first point was the significance of the Euro-Plus Pact as a key process of integration within the EU framework. The Euro-Plus Pact was seen as the way in which Bulgaria can become “an active participant in the European community and in the European economic family”. The support of Bulgaria for the Pact was seen as crucial in order to avoid the dangerous consequences of a two-speed Europe and of being left outside the general integration processes in the EU. The political support was seen as securing a place for Bulgaria on the table for discussions and as making Bulgaria part of the decision-making for the completion of the internal market and the future economic policies in Europe.

The second point was related to a great extent to the first one in that it dealt with a specific area of integration in which Bulgaria did not want to be left behind – the Eurozone. In particular, the view of the Prime Minister was that expressing support for the Euro-Plus Pact was an important stepping stone in view of Bulgaria’s desire for future participation in the Eurozone. The support for the Pact was said to be an opportunity “which will make the possibility for the future membership in the Eurozone a real one”.

The last two points concerned the non-politically-opportunistic reasons for supporting the Pact. In the view of the Prime Minister, in terms of interests, the “political declaration”, as he called it, will not be controversial for Bulgaria because the things that are expected to be included are either in part already achieved by Bulgaria or, with respect to the other part, the views of Bulgaria and the other Member States on how to proceed are similar. On the already achieved points, reference was made to the fact that Bulgaria was among the States with the lowest debts within the EU. On the similar views, the Prime Minster referred to the proposals that Bulgaria was going to make in the negotiations of the Euro-Plus Pact. In that regard, the Prime Minister stated that the Government has prepared a National Plan for Financial Stability in the context of its governance strategy. Part of the measures envisioned in this Plan was going to be proposed at the European Council meeting. The Prime Minister referred to eight general measures: (1) increase in the competition and limiting of the influence of monopolised structures; (2) modernisation of the education and science systems; (3) increase in innovations; (4) improvements in the regulatory framework and in the business environment; (5) a reform in the labour market;[2] (6) realisation of a pension reform;[3] (7) improvement of the fiscal frameworks; and (8) better and more transparent governance of the financial sector.

The fourth and last point in the statement of the Prime Minister dealt with the basic interest of Bulgaria in the negotiations. This basic interest is the independence in the area of tax policy. The low levels of taxation in Bulgaria are seen as the main competitive advantage of Bulgaria. The Prime Minister reassured the national representatives that the national interests of Bulgaria will be defended strongly and direct or indirect increase in taxation will not be allowed.

The statement of the Prime Minister attracted the comments of only one national representative who pointed out that even if the Euro-Plus Pact was a political declaration the other points on the agenda of the European Council such as the amendment of Article 136 TFEU and the Six-Pack are of a different character. Thus, it was pointed out that according to Article 105(4) CRB[4] the Prime Minister was obliged to inform the National Assembly of the results (sic!) of the European Council meeting. This last-moment briefing of the National Assembly on the Euro-Plus Pact became a main critique later-on against the Government with respect to its involvement in the Euro-crisis measures.

A few days later, on 30 March 2011, in the joint session of the Committees on European Affairs and Oversight of the European Funds and on Budget and Finance, the Euro-Plus Pact was discussed in the context of the discussion on the position of Bulgaria on the Six-Pack.[5] On the Euro-Plus Pact, the Deputy Minister for Finances gave a short overview and highlighted the main reasons for Bulgaria to participate in the Euro-Plus Pact. According to her, the main goals of the Pact overlap with the goals of the Government – increased competitiveness, employment, stability of the public finances and strengthening of the fiscal stability. It was also considered that the Pact was going to be an additional incentive for the economic reforms in Bulgaria – free competition and limiting the monopolies, more innovations, improved education and science, regulatory framework, reforms of the labour market and the pension reform. There were several questions asked on the Pact in the meeting. Those were (1) what would be the relationship between the Euro-Plus Pact and the SGP to the extent that there is no complete overlap of the Member States; (2) what would be the relationship between the Euro-Plus Pact and the Stability Fund; (3) is a common corporate taxation going to be adopted with the Pact; (4) was there going to be enforcement mechanism for the rules in the Pact; (5) how was the decision made to join the Pact? With respect to the last question, a critique was made by a representative from the Blue Coalition that such a solid and sovereignty-limiting instrument[6] was accepted without the prior agreement of the National Assembly, without debates in the plenary hall and without open consultations.

In her answers the Deputy Minister started by saying that the Euro-Plus Pact was a political commitment which does not contain specific commitments prescribing a particular course of action or financial commitments and that the ESM was a completely different document and the two were not connected. The explanations with respect to the ESM are included in the answer to Question VIII.2. As regards the taxation question, the answer was that, indeed, in the beginning there was such a provision on common taxation. However, at the moment of talking, the text was referring to coordination of tax policies which was completely different. The Deputy Minister continued by saying that it was against the interest of Bulgaria to support external models which would force it to increase its taxes and that Bulgaria had made this clear. At that time the question of harmonising tax rates was not even being discussed. With respect to the enforcement mechanisms, such were not included in the Pact as it was a political commitment and the enforcement was to be dealt with in the Six-Pack.

The main discussion of the Euro-Plus Pact was on 4 May 2011[7] where all parties joined the debates. The Prime Minister started the discussion by reintroducing the Pact and giving more explanations about it as well as more details on the reasons for supporting it. He heavily emphasised that it was a political act which Bulgaria needed to support in order not jeopardise its European development. After briefly explaining the history of the Pact, the Prime Minister clarified the concrete consequences stemming from it with respect to Bulgaria.

The Prime Minister focused on six main points. On the first point, with respect to the obligations of Bulgaria flowing from the Pact, the Prime Minister stated that it should be clear that what was at hand was a set of measures which Bulgaria had to adopt anyway in order to break away from the bottom of the competitiveness and innovativeness charts in Europe and join the Eurozone. This meant promoting competitiveness and employment opportunities and increasing the stability of the public finances and strengthening the financial stability in general.

The next three points related to salary increases and labour productivity and will be considered together. On the second point, with respect to the obligation to stop wage indexation – the Prime Minister state that there was no such formulation in the Pact. According to the Prime Minister, this option was abandoned in the first drafts of the Pact. The final version left much more room for interpretation and expressly stated that any reconsideration of the salary-setting arrangements must respect the national traditions of social dialogue and collective bargaining. On the third point, with respect to the requirement that salaries should not be increased at a higher rate than the increase in productivity – in the words of the Prime Minister, such requirement was also lacking. According to the Prime Minister, due to the low salaries in Bulgaria, the rate of increasing the salaries was to be higher than the one of the increase in productivity for the years to come. However, he continued, the difference in the rates should not be too big as this would lead to the ‘Greek scenario’ and was contrary to the Eurozone ambitions of Bulgaria. On the fourth point, with respect to the labour productivity, the Prime Minister explained that notwithstanding the low labour productivity in Bulgaria, at that time Bulgaria was not facing big problems due to the low current-account and trade balance deficits. This meant that the Euro-Plus Pact did not preclude increases in the salaries. What it did, however, was to prevent such increases from happening in an arbitrary way – that is, being paid more than the value of the actual work done.

On the fifth point, with respect to the concerns that Bulgaria will be obliged to increase the retirement age, the Prime Minister stated that this was a possibility but not a mandatory requirement of the Pact. Irrespective of the Euro-Plus Pact, the increase of the retirement age was a possible response by the Government in the case of a lack of funds to support the pension scheme.

On the sixth and final point, with respect to the tax policy, the Prime Minister repeated to the national representatives that the text of the Pact stated “Direct taxation remains a national competence”.[8] He reassured the national representatives that the tax policy of Bulgaria will be decided by Bulgaria alone. The Prime Minister concluded by stating that clear principles that are backed by legislative measures are needed to deal with the crisis and prevent its reoccurrence. The introduction of such measures was suggested by the Government even before the decision to join the Pact and it was, thus, not provoked by the Pact. The floor was consequently open for statements and questions by the national representatives.

Ivan Kostov (the Blue Coalition) expressed a position evolving around the relationship between the Euro-Plus Pact and the future membership of Bulgaria in the Eurozone. In particular, he asked whether the political support for the Pact on behalf of Bulgaria was tied to an assurance that it will be invited to join the Exchange Rate Mechanism (ERMII). According to Mr Kostov, the Blue Coalition insisted for a policy that will lead to the membership of Bulgaria in the Eurozone and not for a policy that burdens Bulgaria with extra criteria which are not a necessary precondition for joining the ERMII.

Plamen Oresharski (Coalition for Bulgaria) focused on the perception that the Euro-Plus Pact was tailored to address to a great extent the issues of the old and developed economies and to a much lesser extent the issues concerning the newly-formed market economies in the new Member States. Mr Oresharski referred to four issues to show how the new market economies were at a disadvantage. Those were: (1) the mechanism for common corporate tax base, (2) limitations in whatever form on the salaries, (3) the significance of the current-account and trade balance deficit indicators and (4) the system of contributions to the ESM. According to Mr Oresharski, the first three issues have different significance for the developed economies and for the new market economies. In the case of the latter, in his opinion, more discretion and freedom should be given in order to reach the level of development of the latter. The fourth issue related to the question whether the relative future share of Bulgaria in the ESM would be disproportionate, considering the low debt of Bulgaria, and, thus, force Bulgaria to indirectly finance the debts of other Member States

Aliosman Imamov (DPS) expressed support for the place of Bulgaria in the Euro-Plus Pact. However, this support was coupled with a number of concerns as well. The first and main concern was, as with Mr Kostov, the membership in the Eurozone. The position that was expressed was that the participation of Bulgaria in the Pact must in every possible way be connected with or otherwise subjected to guarantees for joining the EMRII. The other concerns were put forward in the form of questions. In particular, what would be the advantages and disadvantages for Bulgaria flowing from the Pact, before and after the eventual membership in the Eurozone; what would be the impact on the changes in the salaries in Bulgaria; to what extent would the economic growth be impacted by the Pact; what are the advantages and disadvantages for Bulgaria that are stemming from the attempts for partial regulation of the corporate tax bases? Finally, Mr Imamov concluded by focusing the attention to the new, at that time, developments increasingly regulating financial aspects, such as the European Semester, which, according to him, are purely national issues. As such Mr Imamov, indirectly, raised certain subsidiarity concerns but without elaborating further on them.

Pavel Shopov (ATAKA) expressed unequivocal and unreserved support for the participation of Bulgaria in the Euro-Plus Pact. The support was based on three points. First, the Pact was seen, with respect to other States that speculated and created the crisis, as a guarantee that such crisis will not repeat. Second, the Pact did not entail that Bulgaria was going to pay for the debts of the other States. Third, it was high time that Bulgaria left the currency board and the Pact was seen as helping in that regard.

Menda Stoqnova (GERB) expressed full support for the participation of Bulgaria in the Euro-Plus Pact. She stated that the questions that were already asked dealt with details relating to EU measures that are on the agenda of the Committee on European Affairs and Oversight of the European Funds, such as the Directive on the common tax base. In her opinion the issue at hand was weather Bulgaria wants to be part of the European family and be member of the Eurozone. Since the answer to this is in the positive, Bulgaria’s place is in the Pact in order to participate in the discussions relating to the new policies and the texts of the new legislative initiatives. The position of GERB was, therefore, one of supporting the participation of Bulgaria in the Pact because of the desire to be true Europeans.

Then the Prime Minister gave a few short answers before leaving the floor to the Ministers to elaborate in further details on the questions and comments that were made. Firstly, with respect to the Eurozone, the Prime Minister stated that the desire the join it has not wavered and that the participation in the Pact was necessary in that respect. This participation was also needed in order to know first-hand what are the developments in Europe and not to learn about them from the media. Secondly, with respect to the tax policy, he referred to the ‘battle’ that the Finance Minister fought for two months, side by side with his Slovak colleague, to have the mentioning that the tax policy was a national competence. Finally, the Prime Minister concluded with the created understanding that no obligations for making financial contributions flow from the Pact.

Next, the Minister of Finances, Simeon Djankov, took the stand and addressed four questions. First, with respect to the issue whether participation in the Euro-Plus Pact was negotiated as a precondition to entering the ERMII, the answer of the Minister was – no. This was not considered appropriate by the Government as a condition at that point. It was considered that Bulgaria had to show to its partners that it had done its job of keeping low deficits and debt and then the political decision to enter the ERMII was to be made. Second, and connected to the first point, with respect to the current-account deficits, the Minister stated that Bulgaria has shown that it can balance its deficits during the crisis. As such the current-account deficits were not posing a problem for Bulgaria to join ERMII. However, the outstanding issue in that regard was how to make sure that the future Governments was going to be strict and follow this discipline? The answer to this challenge the Minister referred to Bulgaria’s own initiative to adopt its own financial stability pact which would include various measures including amendment in the Constitution (see the answer to Question III.2). Only after reaching this goal the Minister thought it appropriate to call on the other Member States to act in the direction of Bulgaria entering ERMII.

Third, with respect to tax base, the Minister made references to earlier drafts of the Pact. In particular, he reminded the national representatives that in the first draft it was spoken of common tax rates. The Minister and his Slovak colleague completely rejected this. Minister Djankov said that the only way he could have supported this was if the Bulgarian tax rate was adopted as the EU level. Then, the negotiations turned to a common tax base which was the object of heated discussions and abandoned in the end with the result that the Pact expressly reserves the tax policy to the Member States’ competences. Fourth, with respect to the contributions to the ESM, the Minister restated to a great extent what was said in the joint session of the two Committees on 30 March (further discussed in Question VIII.2).

Finally, the Minister of Foreign Affairs, Nikolay Mladenov, completed the debate with a few comments. First, the Minister reminded that the opening of the Pact for non-Eurozone Member States was done after States, such as Bulgaria, insisted on it. This was done because a two-speed Europe should be avoided as much as possible and Bulgaria should not be a reason for a two-speed Europe. Second, the attention was focused on the issue of the rate with which salaries are increased. The Minister referred to the aftermaths of Bulgaria’s 1996 economic crisis and stated that it would not be serious to maintain in the National Assembly that salaries should grow faster than the labour productivity. He referred Hungary’s decision to do exactly this some years ago and that the Hungarian economy was still trying to recover from it. Then, the Minister quoted a statement of the Prime Minister during the European Council meeting in March saying that Bulgaria will participate in the coordination of policies only insofar as it does not slow down its economic growth. Finally, the Foreign Affairs Minister commented on the preparation of Bulgaria to join the Eurozone and stated that the participation in the Euro-Plus Pact was an important step in that regard. Although the participation was not a formal (legal) requirement to enter ERMII, and consequently the Eurozone, it was practically a mandatory requirement. With this the central debate on the Euro-Plus Pact was concluded.

The discussion on 20 May 2011[9] was in the form of questions from Georgi Pirinski (Coalition for Bulgaria) to the Foreign Affairs Minister, which were based on the position of Bulgaria at the European Council meeting on 24 and 25 March 2011. The discussions relating to the Euro-Plus Pact following this one, referred to the Pact only in the context of debates on different points. Mr Pirinski’s questions dealt with (1) the lack of debate in the National Assembly before the Prime Minister announced that Bulgaria will join the Euro-Plus Pact, (2) the argument that joining the Pact was in order to prevent a two-speed Europe, (3) the relationship between the Pact and the membership in the Eurozone.

In particular, on the first question, Mr Pirinski criticised the last-minute approach of the Government in informing the National Assembly. He stated that Bulgaria’s position at the European Council meeting would have been stronger and more comprehensive if the National Assembly was consulted earlier-on and a clear mandate was given for the negotiations of the Euro-Plus Pact. Even more, the critique was that by proceeding this way the Government, instead of looking for the support of the National Assembly, was creating unnecessary division and politicisation. On the second question Mr Pirinski emphasised that a two-speed Europe is not only about willingness to participate but also about ability to participate. The differences between the stronger and the weaker economies created the two-speed Europe in that case. Mr Pirinski also pointed to the divergence in the statements of the Prime Minister and the Finance Minister on 4 May 2011 when it came down to the rate of salary increases. On the third question, Mr Pirinski pointed once again to the fact that Bulgaria was not a Member States with irresponsible budget. According to him, Bulgaria’s conservative budgetary policy was a capital that the society accumulated with great sacrifices. Mr Pirinski saw it natural to respond to the invitation to participate in the Pact by requesting commitments for entering into the ERMII, where, in his opinion, it was not about meeting the Maastricht criteria but about making a political decision.

On the first question the Minister disagreed that the Government was confrontational towards the National Assembly. He reminded that the Prime Minister went to the National Assembly right after the decision was made to participate in the political declaration called the Euro-Plus Pact. It was emphasised that the Pact was a political declaration and not an international agreement in need of ratification. Thus, the Government fully observed its legal obligations.[10] The Minister stated that when the Pact was initially reviewed, three options were considered with respect to the participation in it. The first one was not joining, but since the Pact was going to be mandatory to Eurozone Member States and Bulgaria wanted to join the Eurozone, this option was not considered viable. The second one was to join the Pact at a later stage but it was also considered not viable because it would have prevented Bulgaria from expressing and protecting its positions at the crucial discussions that were to be made in that circle. Thus, the last option was accepted, which was joining from the very beginning and protecting the Bulgarian interests from the onset.

On the second question, the Minister agreed that there are different ways in which a two-speed Europe could be formed. One of them is when States, such as Bulgaria, decline to participate in initiatives aimed at further integration. This was considered as a mistake and against the Bulgarian interests. The Minister also said that the existence of richer and poorer States was a reality with which Bulgaria has to deal and not to ignore and that the poorer States have different tools to deal with this problem. The main tool for Bulgaria is the low tax rate and it was vigorously fought over at the European level.

On the third question, the Minister answered that he is convinced that Bulgaria should not attempt making political trade-offs in areas where there are clear criteria that are set out in the Treaties and that must be fulfilled. In the case of joining the ERMII, the Minister stated, the criteria were clear and the Ministry of Finance and the whole Government was working for their fulfilment.

The discussion on 15 June 2011[11] was in the context of the debates on the amendments of the LPSB.[12] The proposed amendments were mainly including rules for 2% deficit and limiting the State’s redistribution role at a level of up to 40% of the GDP. Interestingly, while Bulgaria’s Euro-Plus Pact commitments, according to the Commission included the strengthening of the domestic fiscal framework by adopting a Financial Stability Pact including binding numerical fiscal rules,[13] the explanations to the LPSB amendments did not make reference to the Pact. Instead, reference was made to the SGP, which is something different. Nevertheless, some of the national representatives connected the proposed amendments with the Pact in their comments without elaborating on this connection.

Mihail Mikov (Coalition for Bulgaria) heavily criticised the proposed amendments and referred to the Euro-Plus Pact by questioning its legal/political nature. According to him, if the LPSB amendments under consideration were in the context of the Euro-Plus Pact, what exactly were the commitments made – purely political or maybe the Prime Minister lied to the National Assembly. He asked whether they were commitments relating to changes in the legislation; to what extent are they binding on Bulgaria, while it is not within the Eurozone; and what are the possibilities that these changes in the LPSB will benefit Bulgaria with respect to its relationship with its European partners?

Martin Dimitrov (the Blue Coalition) started by referring to proposed amendments to the LPSB, that he and other national representatives had initiated in September 2010, which also called for stricter budgetary discipline. While supporting the amendments that were tabled, Mr Dimitrov expressed concerns with respect to the Euro-Plus Pact and even called for adopting a formal position on the Pact, which did not happen eventually. Substantively, the critiques related to the allegations that, through the Pact, the EU was determining the taxation in Bulgaria and the level of the salaries in Bulgaria; that the Pact required Bulgaria to give €3 billion in guarantees and €6 more billion in potential loans – that is to pay for bankrupting States, which even have a higher level of average wages. The Finance Minister, however, did not respond to the statements of these two national representatives.

The discussion on 22 July 2011[14] was in the context of the debates on the adoption of a Decision of the National Assembly. There were actually two draft Decisions proposed – one by the majority and one by the minority. Naturally, the one of the majority was eventually adopted. Nevertheless, it is worth looking at the debates that the proposals spurred. The draft Decisions were to a great extent a reaction to the Commission’s Recommendation to Bulgaria of 7 June 2011.[15] Kornelia Ninova (Coalition for Bulgaria) presented the draft Decision of the minority. In her presentation she pointed out all negative observations of the Commission and blamed them on the policies of GERB. More specifically, for the Euro-Plus Pact, Ms Ninova highlighted the part of the Commission Recommendation stating that some of Bulgaria’s commitments under the Pact included the suspension of pension indexations and salary increases, the eventual increase of taxes and the retirement age. Sergei Stanishev (Coalition for Bulgaria) made the same comments on the Pact. While the debate was quite long on the draft Decisions, very little was said constructively. It is worth noting with respect to transparency that Ms Ninova and Mr Stanishev said that it was through the Recommendation that the National Assembly learned what the Bulgarian commitments under the Pact were.

The discussion on 28 July 2011[16] was in the context of the debates on the amendment of the CRB (see the answer to Question III.2). The Euro-Plus Pact received a brief but crucial mentioning. It was stated by a national representative of the majority that the measures of the Government to inter alia increase the stability of the public finances address the aims of the Euro-Plus Pact. Part of these measures is the Bulgarian Pact for Financial Stability which includes the proposed amendment to the Constitution.[17] As such, although in the explanations to the proposed constitutional amendment the Euro-Plus Pact was not mentioned but only the SGP was (as in the case of the LPSB amendment), the proposed amendment was to be seen as implementing the Euro-Plus Pact as well. During the debates, a reference was also made to the opinion of the governor of the BNB that was expressed in the constitutional Committee. According to him, the inclusion of the new budgetary rules was mandated by the Euro-Plus Pact and EU law in general. Furthermore, while he did not comment on whether the rules must be constitutionally entrenched or included in ordinary laws, according to him, the former option did not contradict the Euro-Plus Pact because the Pact gave freedom to the Member States as to the type of instruments used when implementing it.

The discussion on 14 December 2011[18] was in the context of the introduction by the Foreign Affairs Minister of the results of the meeting of the European Council on 9 December 2011, which discussed new measures for dealing with the Euro crisis. In particular, the focus was on the decision that was taken to conclude, what would become known as, the “Fiscal Compact” in the beginning of 2012 as an international agreement and not as an act within the EU framework due to the UK’s veto. Here again it was emphasised that in all EU discussions Bulgaria underlines the importance to have the right to follow its own tax policy guaranteed, as it was highlighted in the Euro-Plus Pact. This discussion of the 9 December meeting again sparked the debate on the Pact but new arguments were lacking. 

The criticisms relating to the Euro-Plus Pact were delivered by Meglena Plugchieva (Coalition for Bulgaria). She focused on the issues of transparency and Bulgaria’s commitments under the Pact. On the issue of transparency, she argued that the Government had to consult with the National Assembly before the 9 December meeting. In her view, this lack of debates before the 9 December meeting contradicted not only the national Parliaments’ rights under the Lisbon Treaty but also the CRB.[19] In that regard, she also referred to the way the Euro-Plus Pact was presented earlier that same year, right before the Pact was agreed upon in Brussels. Ms Plugchieva said that no one in the National Assembly understood, at the time, what was that Pact all about and, months later, one had to consult the European Council’s website to understand the commitments. She expressed the concern that this was repeating. Then, Ms Plugchieva turned to the commitments. Firstly, she referred to the pension reform and the increase of the retirement age. In her words this was done just a few weeks before exactly because Bulgaria had to ‘report’ on its commitments at the EU level.[20] Secondly, Ms Plugchieva, again, opened the question of corporate taxation and said that the Euro-Plus Member States had to ‘report’ in the following year (2012) on unification or common base for a common tax policy in terms of increase of the corporate taxes, as required by the Pact.

The Foreign Affairs Minister responded that the criticisms were unfounded. In particular, as regards the transparency criticisms, the Minister underlined that the process was just beginning and that a decision, for which the National Assembly was not consulted, had not been made. According to him, the legal framework was unclear and if Protocols 13 and 14 to Lisbon Treaty were to be amended ratification would not have been needed. He called for understanding and patience and said that when there was more clarity the National Assembly was going to be informed. As regards the issue of taxation he repeated once again that nothing in the Euro-Plus Pact obliged the Member States that had agreed to it to harmonise their corporate taxes. For the first time, however, the determination of the taxes in Bulgaria by the National Assembly was referred to as an issue of sovereignty which the Government was not going to transfer.

The discussion on 10 February 2012[21] was in the context of questions by national representatives on the Statement of the Members of the European Council of 30 January 2012 and, in particular, the point stating that the Member States call for “progress in structured discussions on the coordination of tax policy issues and the prevention of harmful tax practices in the context of the Euro Plus Pact”.[22] Naturally, once again, the question of taxation was raised. First, the Prime Minister referred to the wording of the Pact which keeps the tax policy within the national competences. Second, he referred to the Decision of the National Assembly on Bulgaria’s participation in the Fiscal Compact,[23] which prohibited Bulgaria to make commitments for the harmonisation of tax policies. The Prime Minister reassured the national representatives that he clearly stated at the European Council meeting that Bulgaria shall not sign an agreement containing such commitments. This was the last time the Euro-Plus Pact was referred to somewhat more substantively before its place was taken by the Fiscal Compact and the new debates concerning its adoption and implementation. No other discussions were found in which the Pact was more than just mentioned.

Miscellaneous 
VI.2
What other information is relevant with regard to Bulgaria and the Euro-Plus-Pact?

The rules and practices of the budgetary process were slightly amended in 2011 (proposed on 26 May and adopted on 30 June). This amendment effectively included a budgetary discipline rule of 2% structural deficit and limiting the State’s redistribution role at a level of up to 40% of the GDP as well as the inclusion of a budgetary forecast for three years ahead in the LPSB (see the answer to Question VI.1). During that time there was also a pending proposal for an amendment of the CRB which is further explained in Question III.2. However, these changes were not made in the context of the Euro-Plus Pact, at least not explicitly.

It is not easy to find what measures specifically have been adopted in reaction to the Euro-Plus Pact because of the lower level of transparency surrounding them, which was most probably due to the highly politicised nature of those measures. In any event there are several measures that can be identified by consulting Bulgaria’s NRPs and the debates in the National Assembly.

According to Meglena Plugchieva (Coalition for Bulgaria), in her statement on 14 December 2011 in the National Assembly, the increase in the retirement age that was done a few weeks earlier was one of the Euro-Plus Pact commitments that the Government was hiding. According to her, the change was made because the Bulgarian delegation ‘was supposed to report’ on its fulfilment of the Euro-Plus Pact commitments. The reform, to which Ms Plugchieva was referring, was the amendment of certain provisions in the Social Security Code that were contained in the final and transitional provisions of the Law on the Budget for the Social Security for 2012.[24] The amended Article 68 of the Social Security Code provides that from 31 December 2011 onwards the retirement age will increase with four months every year until the age becomes 67 (used to be 65). In the explanations to the draft Law, with respect to the increase of the retirement age, there is no mentioning of the Euro-Plus Pact. There is only a reference to a Decision of the Council of Ministers adopting a Report on the results and the required improvements in response to the Council Recommendations from 2011.[25]

The amendment of the Social Security Code even attracted the veto of the President but it was overcome in the National Assembly. The increase in the retirement age was one of the four reasons the President pointed out for vetoing the Law. In his opinion, by doing this the State was being unpredictable and inconsistent in the determination of the rules in its social policy. In that regard the President referred to an agreement reached just a year ago on the pension reform which was being violated with these changes. However, in the reasons of the President, there was no mentioning of the EU and/or the Euro-crisis measures as being the ones to be blamed. Accordingly, while there were criticisms in the National Assembly that these measures were adopted in reaction to the Euro-Plus Pact, they were never officially earmarked as such.

The only earmarked measures as such were found in the NRP of Bulgaria and, more specifically, its 2012 and 2013 Updates. In the 2012 Update it is stated that the implementation of the measures set in the NRP also delivers on the country’s commitments under the Euro + Pact for fostering competitiveness, employment and public finance sustainability”.[26] However, specific measures were barely identified.

As regards competitiveness, the Report states that this Euro-Plus Pact commitment is being achieved through “the implementation of the measures under national target 2 for investments in R&D and national target 4 for education, as well as the measures for improving the business environment (GF 3)”. On this point in the Report a more specific explanation can be found. Under the heading Building and Improving the Scientific Research and Innovation Infrastructure one of the points is:

Two grant procedures for building and expanding the innovative infrastructure and fulfilling the country’s commitments under Euro+ Pact are underway − they are currently at the stage of evaluation of project proposals (as defined in NRP 2011−2015) – the procedure Establishing New and Strengthening the Existing Technology Transfer Offices in the amount of EUR 5 million, and Procedure Establishing New and Strengthening the Existing Technological Centres in the amount of EUR 20 million”.[27]

As regards employment, the Report states that this Euro-Plus Pact commitment is being achieved through “the implementation of the measures under national target 1 for employment and national target 4 for education”. However, by looking at the explanatory text to the measures again no specific measure appears. It is only stated that the “programmes and measures implemented in these areas will also contribute to delivering on the commitments undertaken under the Euro+ Pact and strengthen the operation of the factor to sustainable economic growth “Ensuring better and more efficient utilisation of the economy’s labour potential””.[28] The areas the quote is referring to are “unemployment and the social consequences of the crisis with a special focus on youth unemployment and long-term unemployment”.[29]

As regard strengthening fiscal consolidation, the Report states that this Euro-Plus Pact commitment is being achieved through actions included in the CP. In the CP of Bulgaria for 2011-2015, (the only CP where the Euro-Plus Pact was mentioned) it was just stated that the policies presented therein for “further enhancing the sustainability of public finances, as well as the policies for promoting the competitiveness of the economy” also address the Pact’s objectives.[30] Again, no further identification of measures was made.

In the 2013 Update only one measure was identified that was meant to implement Bulgaria’s commitments under the Euro-Plus Pact. This was a draft for a Law on Innovations, under national target 2.[31] According to the explanation in the Update, the law envisages to set up “an Innovations Agency the chief task of which would be to provide advice to businesses on developing their innovation activities and administer public funds in the capacity of second-level spender of budget appropriations. Grant financing will be provided on a competitive basis under national and international programmes”.[32] However, as it was pointed out in the Update, the early parliamentary elections in 2013 may delay the adoption of the Law[33] and they did to the extent that the draft Law is still not properly submitted to the National Assembly for consideration. That is, the only measure that was openly promoted as an implementation of the Euro-Plus Pact is yet to be adopted. There was no mentioning of the Euro-Plus Pact in the 2014 Update and it is unlikely that there will be a mentioning of it in the future Updates either.

[1] National Assembly, Stenographic records of the 212th meeting, 24 March 2011.

[2] According to the Prime Minister, this reform was to be aimed at the introduction of the flexibility principle combined with security and maintenance of law taxes on labour to stimulate the employment.

[3] According to the Prime Minister, this reform was to be aimed at limiting the schemes for early retirement and at determining the age of retirement in accordance with the life expectancy

[4] The provisions states that:

“(4) When participating in the drafting and adoption of European Union instruments, the Council of Ministers shall inform the National Assembly in advance, and shall give detailed account for its actions.”

[5] National Assembly, Stenographic records of the 240th meeting, 30 March 2011.

[6] The concerns over the limitations on the sovereignty were not elaborated further.

[7] National Assembly, Stenographic records of the 225th meeting, 4 May 2011.

[8] European Council 24/25 March 2011, Conclusions, EUCO 10/1/11 REV 1, 20 April 2011, Annex I, The Euro Plus Pact Stronger Economic Policy Coordination for Competitiveness and Convergence 13, 20.

[9] National Assembly, Stenographic records of the 232nd meeting, 20 May 2011.

[10] It should be pointed out here that obviously the Minister and the national representative were talking about consulting the National Assembly from different points of view, the division being politico-legal.

[11] National Assembly, Stenographic records of the 242nd meeting, 15 June 2011.

[12] These amendments will be discussed in further detail in various answers infra. Only the statements of the national representatives relating specifically to the Euro-Plus Pact will be considered here.

[13] Commission Staff Working Paper, Assessment of the 2011 national reform programme and convergence programme for Bulgaria, SEC(2011) 711 final, 7.

[14] National Assembly, Stenographic records of the 259th meeting, 22 July 2011.

[15] Commission Recommendation for a Council Recommendation on the National Reform Programme 2011 of Bulgaria and delivering a Council opinion on the updated Convergence Programme of Bulgaria, 2011-2014, SEC(2011) 818 final, Brussels, 7 June 2011.

[16] National Assembly, Stenographic records of the 261st meeting, 28 July 2011.

[17] See the answers to Questions III.2 and III.7.

[18] National Assembly, Stenographic records of the 297th meeting, 14 December 2011.

[19] However, it is to be noted that no specific provisions were cited and the argument was rather political than legal.

[20] The reference, while not explicit, was mainly to the amendment of Art 68 of the Code for Social Security through the Law for the Budget for the State Social Security for 2012, SG 100 of 20 December 2011.

[21] National Assembly, Stenographic records of the 315th meeting, 10 February 2012.

[22] Statement of the Members of the European Council, Towards growth-friendly consolidation and job-friendly growth of 30 January 2012, 4.

[23] National Assembly, Decision for the Participation of the Republic of Bulgaria in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, SG 10 of 3 February 2012.

[24] Law on the Budget for the Social Security for 2012, SG 100 of 20 December 2011.

[25] Council of Ministers, Decision № 605 for Approval of Report concerning the achieved results and the necessary follow-up actions in response to the Recommendations of the Council of the European Union concerning the National Reform Programme of the Republic of Bulgaria (2011-2015) and the Opinion of the Council of the European Union concerning the Convergence Programme of the Republic of Bulgaria (2011-2014) of 5 August 2011.

[26] Europe 2020: National Reform Programme, 2012 Update (Sofia, April 2012) 7.

[27] Ibid., 41.

[28] Ibid., 61.

[29] Ibid.

[30] Convergence Programme of the Republic of Bulgaria: (2011–2014), (Sofia April 2011), 7.

[31] Europe 2020: National Reform Programme, 2013Update (Sofia, April 2013), 24.

[32] Ibid.

[33] Ibid., 70.

Croatia

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Croatia 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.

Croatia did not participate in the negotiation of the Euro-Plus-Pact. No evidence of any kind of debate by the Government of by the Parliament can be found. It is not known whether Croatia would join the Euro Plus Pact once it has become a Member State.         

Miscellaneous
VI.2
What other information is relevant with regard to Croatia and the Euro-Plus-Pact?

Not applicable.

Cyprus

Negotiation
VI.1
What political/legal difficulties
did Cyprus 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.

No information known.

Miscellaneous
VI.2
What other information is relevant with regard to Cyprus and the Euro-Plus-Pact?

Not applicable.

Czech Republic

VI     Euro-Plus-Pact

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.        
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did the Czech Republic 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.

After the Pact was endorsed on March 11, 2011 on the European level, it was discussed in the Parliament. On a general level, the Czech Government appreciated that the Pact was based on intergovernmental cooperation and not on a coordination method which would put the Commission at the helm. However, concerns about the unclear role of the Commission were raised. Regarding the content, a majority of the suggested measures have been already in force in CR or introduced as part of the Government’s national reform programme. CR however strongly disagreed with tax harmonization, including the suggested financial transaction tax. CR took into account that the Pact had softened these measures, however CR was worried about the future direction in this area, in particular, that the Pact might incite further plans on tax harmonisation and spread in the future into other areas that would mean practical enlargement of EU competences.[1]

PM Nečas further worried about a number of potential issues – unclear legal basis of the Pact, unclear role of the Commission and other institutions (e.g. without any concrete legal basis in the Treaty the Pact untrusted the Commission with monitoring of the obligations resulting from the Pact). Given the obligation to incorporate the commitments into national reform programmes under Europe 2020, the Commission would in fact not only monitor, but also evaluate the progress of a MS and issue concrete recommendations on what to change. In result, the role of the Commission would be as strong as in the coordination method. PM also criticized that through such measures like Euro Plus Pact, a group of states would use the Commission (paid from the Czech contribution to the EU budget) for tasks that go beyond the competences of the Union. Finally, PM complained that CR could not participate in the negotiations (as non-Eurozone MS) and was presented with the final product only and asked to “take it or leave it” without a reasonable time to discuss the Pact, which would entail to adopt number of national legislative measures, with the Parliament and social partners getting involved (it is worth mentioning that the main trade union urged the Government not to participate in the Pact). Given all these reservations towards the Pact, CR decided not to join the Pact at the moment and wait for further development.[2] The main opposition party, the Social Democrats, supported the Pact in general (including the possible future tax harmonization and creation of EU corporate taxes) and urged the Government to join the Pact.[3]

Miscellaneous
VI.2
What other information is relevant with regard to the Czech Republic and the Euro-Plus-Pact?

CR does not participate in the Pact.

[1] PM Petr Nečas, stenographic protocol, Chamber of Deputies of the Parliament of the Czech Republic, March 23, 2011. Available at: http://www.psp.cz/eknih/2010ps/stenprot/014schuz/s014131.htm#r2.

[2] Ibid.

[3] MP Lubomír Zaorálek, stenographic protocol, Chamber of Deputies of the Parliament of the Czech Republic, March 23, 2011. Available at: http://www.psp.cz/eknih/2010ps/stenprot/014schuz/s014134.htm.

Estonia

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.        
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Estonia 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.

From a government document explicitly referring to the Euro-Plus-Pact, it follows that, in accordance with the founding Treaties, the Estonian government was willing to take additional steps in coordinating economic policies between the eurozone countries and countries outside the eurozone. According to the Government, the implementation and surveillance of agreements on economic policy must take place in the framework of the Europe 2020 process, the excessive deficit procedure and the macroeconomic imbalances procedure. Enhanced cooperation and the implementation of eurozone specific binding agreements must be based on the EU Treaties and secondary law. The additional steps in coordinating economic policies should not create new market barriers nor thereby impede with the functioning and development of the internal market.[1]

No difficulties were encountered.

Miscellaneous
VI.2
What other information is relevant with regard to Estonia and the Euro-Plus-Pact?

Estonia assumed nine reform commitments that were subsequently approved by a decision of the Government of 28 April 2011 in the national reform programme “Estonia 2020”. The Programme was updated on 26 April 2012.

The reform commitments include the following:[2]

  1. initiatives implemented by April 2012:
    • launching a start-up programme for supporting the inception of innovative enterprises;
    • reducing the personal income tax effective 2015;
    • abolishing fringe benefit tax on formal education related to work;
    • lowering the upper limit on the income tax incentive to 1,920 euros;
    • bringing the budget into balance by 2013 and achieving a surplus by 2014 (state budget strategy);
  2. initiatives planned to be implemented by summer 2012:
    • reform of public service benefits and increasing the transparency of the salary system;
    • first stage of special pension reform;
    • higher education reform;
  3. initiatives to be implemented later:
    • the introduction of the budgetary balance requirement in the State Budget Act.

The reform plan to be executed by June 2013 includes the following initiatives:[3]

          Reform of the upper secondary school network and launching a programme of investments for raising the quality of the school system;

          Developing principles for funding of general education for raising the quality of education and enhancing the reputation of teachers;

          Liberalising the natural gas market;

          Implementing an environmentally friendly public transport investment programme;

          Completion of the first stage of investments into energy conservation;

          Simplifying and better targeting of entrepreneurship grants to raise competitiveness;

          Lowering the unemployment insurance premium rate in 2013 in order to reduce the tax burden on the workforce;

          Establishing occupational and professional health insurance along with a new insurance scheme for incapacity for work;

          Development of new programmes for improving employment among youths with low competitiveness;

          Modernisation of vocational education curricula;

          Completing reform of centralisation of financial and personnel accounting;

Reform of management and support systems of European Union funds. 

[1] White Book, supra note 4.

[2] Estonia 2020 action plan – ANNEX Estonian Reforms for Achieving the Objectives of the Euro Plus Pact, 26 April 2012.

[3] Supra note 9.

Finland

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. 
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Finland 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 matter was debated in the Parliament several times. The Government (memorandum E 146/2010 vp) argued for measures in four areas: increasing employment, rising productivity, reducing debt and improving coordination in taxation. The Government stressed that a majority of these issues fall under national competence and that the envisaged Pact should not involve Treaty changes. Existing procedures, such as the European Semester, Europe 2020 etc) should be fully used.

The most crucial debate in Finland took place in the Parliament’s Grand Committee under Section 97 of the Constitution, which establishes that “[t]he Prime Minister shall provide the Parliament or a Committee with information on matters to be dealt with in a European Council beforehand and without delay after a meeting of the Council. The same applies when amendments are being prepared to the treaties establishing the European Union.” Prime Minister Kiviniemi appeared before the Grand Committee on 10 March 2011 to present the agenda of the European Council. The Committee held a debate and voted on its position before the adoption of statement (SuVX 165/2010 vp) indicating that as far as urgent measures relating to financial stability in the euro area and the European Stability Mechanism were concerned, based on the information available no factual measures could be taken in the European Council. The Committee also pointed out that the Government had not asked for the powers to increase Finnish guarantee commitments. If this matter was to change, the Committee reserved a right to formulate its position prior to decision-making at EU level.

The Committee was convened again on 11 March 2011 in the evening to consider the events in Brussels based on a memorandum with attachments from the Prime Minister’s office, for which confidentiality had been requested and was granted until the end of the European Council meeting. Questions raised during the debate involved questions relating to an increase in financial commitments and the proposed Euro-Plus Pact, which was seen to be problematic since it contained interference with pay policy, opening-up of closed sectors, moving the emphasis of taxation to consumers and the weakening of pensions and social security. Draft Conclusions were also not seen to present clear bail-in provisions or satisfactory obligations for Ireland. Following the debate, the Committee approved Statement (SuVL 171/2010 vp) indicating that the Committee supported the Government position, however, with ten dissenting opinion.

Miscellaneous
VI.2
What other information is relevant with regard to Finland and the Euro-Plus-Pact?

Not applicable.

France

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.    
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did France 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 French government presented the Euro-Pact as the result, for a great part, of its own leadership – but in cooperation with Germany[1]. The government thus emphasised relatively enthusiastically, before Parliament, its novelty and necessity. It stressed how the Euro-Pact mentioned for the first time the notion of a “European economic government” as the counterpart of the single currency. Beyond the balancing of public finances, the government praised the introduction of concerns for more “offensive competitiveness” through investment and facilitation of youth employment; the association of the social partners to the economic government; and the talks about more fiscal convergence and harmonisation of part of corporate tax law.

Miscellaneous
VI.2
What other information is relevant with regard to France and the Euro-Plus-Pact?

Not applicable.

[1] Comptes rendus de la Commission des Affaires européennes du Sénat, 22 Mars 2011: http://www.senat.fr/compte-rendu-commissions/20110322/2011-03-22.html

Germany

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.           
(http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Germany 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.

No difficulties known.

 

Miscellaneous
VI.2
What other information is relevant with regard to Germany and the Euro-Plus-Pact?

See question V.4.

Greece

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.         
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties did Greece 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 issue of the Euro-plus pact was not extensively debated in Parliament. In general, in Greece, most of the relevant constitutional and political issues have been raised in the context of the bailout agreements and their implementation measures. These measures were often perceived as intrusive and/or in violation of the Constitution. Otherwise, increased supervision from Brussels was never perceived as a major issue by the mainstream political world and by the media, as long as it is accompanied by more help.

Concerning the Summit on the Euro-plus Pact, on the 1st of April 2011, the President of the Parliamentary Group of SY.RI.ZA. raised a question to the Prime Minister in the context of the Parliamentary scrutiny of the Government. In his speech Alexis Tsipras criticized Giorgos Papandreou for establishing long-term commitments that burden the Greek people, without even introducing them to Parliament for ratification according to article 28 of the Constitution. Papandreou responded that Tsipras’s objective was to terrorize the public opinion and that the Euro-plus Pact only contained policy objectives which were espoused by the Government and in some cases already adopted by it.[1]

No other discussion on the legal/political nature of the Pact could be retrieved. The general idea that is given from the public debate on the issue is that the Euro-plus pact has been perceived as another step in the financial integration of the Eurozone. It has always been closely connected to the establishment of a European financial support mechanism, as the fulfilment of its provisions has been perceived as a condition for the support of the Greek economy.

Miscellaneous
VI.2
What other information is relevant with regard to Greece and the Euro-Plus-Pact?

Not applicable.

[1] See the Minutes of the Greek Parliament, Plenary Session of the 1st of April, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110401.pdf.

Hungary

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.          
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties did Hungary 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.

Hungary is not a member state joining the Euro-Plus-Pact.[1] According to the Prime Minister, the Government decided not to join because the pact can reduce the right of member states to decide about their own tax systems. According to him ‘Hungary’s tax benefit system greatly relies on the corporate tax base – certain allowances, such as research and development-, culture- or sport-related ones, are deductable from the tax base. Changing it would require the modification of the whole allowance system, which would result in the elimination of certain tax benefits.’[2]

Prime Minister Viktor Orbán said on the topic in the Parliament on 4 April 2011: ‘I recommend it to the plenum to never support a European tax harmonization, because we, the Hungarians can only lose with it: mostly lose workplaces. I ask for your support for the Government on this issue.’[3] He also said, that joining the pact would mean 1% of decline in economic growth for Hungary and the loss of 50 000 to 70 000 workplaces in the country.

According to Péter Oszko, former Minister of Finance, the real reason for Hungary not joining the pact was that it would integrate the system of different corporate tax systems, not by equalizing the rate of the tax but by adopting the same system to calculate the amount of the tax. In this model it would be obvious however that the Hungarian corporate tax rate is relatively low; other taxes in the system (like local business tax or the so-called ‘crisis taxes’ imposed on big international companies after the beginning of the economic crisis) make it expensive to run a business in the country. As a consequence the reason of not joining to the pact was to avoid transparency.[4]

Miscellaneous
VI.2
What other information is relevant with regard to Hungary and the Euro-Plus-Pact?

No, Hungary is not a member to the Euro-Plus-Pact.

[1]See also: Zsofia Danko: Corporate tax harmonization in the European Union, MPRA Paper No. 40350, posted 6. August 2012 14:29 UTC, page 215.

[2]http://www.bbj.hu/business/4-reasons-for-hungary-to-join-the-euro-plus-pact-%E2%80%93-and-4-not-to_57929

[3]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=82&p_felsz=14&p_szoveg=versenyk%E9pess%E9gi%20and%20paktum&p_felszig=14

[4] http://www.vg.hu/velemeny/publicisztika/oszko-egyelore-keves-az-eredmenye-a-titkolt-megszoritasoknak-344746http://www.vg.hu/velemeny/publicisztika/oszko-egyelore-keves-az-eredmenye-a-titkolt-megszoritasoknak-344746

Ireland

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. 
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Ireland 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.

There were no publically known significant political or legal difficulties encountered in the negotiation of the Euro Plus Pact.

The government was broadly supportive of the measures with the Taoiseach (Prime Minster) stating prior to the European Council Summit of 24 March 2011 that ‘[c]learly, Ireland will support measures that can contribute to a restoration of confidence in the markets, foster economic growth and job creation and help Europe move beyond the economic crisis.’[1] The summit was the first attended by the Taoiseach after the general election of March 2011. A general concern was to restore Ireland’s reputation amongst European colleagues and to secure a renegotiation of the financial programme including a reduction on interest rates.

A number of contributors to the Dáil debates focused on the issue of Ireland’s corporation tax rate and the need to resist any attempt by European actors to force a change on this issue. Media reports in preceding weeks had focused on comments made by Nicolas Sarkozy and Angela Merkel to the effect that a change in Ireland’s corporation tax rate may be a condition for any renegotiation of the deal. Cross-party support existed for maintaining a low rate with the leader of the opposition stating that ‘Ireland’s Government has changed but its negotiating position has not for the simple reason that it cannot. A deal on the support programme is worthless if to win it we would have to undermine a major proportion of economic activity in the country.’[2]

Only one deputy from the opposition Sinn Féin party raised possible implications for Ireland’s sovereignty resulting from the Euro Plus Pact. Pádraig MacLochlain, while noting that ‘there are no provisions for compulsion or sanctions’ maintained that ‘the pact for the euro will be converted into a binding agreement for euro area countries, representing a deep European penetration into national political and policy freedoms without any genuine democratic mandate.’[3]

Miscellaneous
VI.2
What other information is relevant with regard to Ireland and the Euro-Plus-Pact?

National measures are broken down into the four areas covered by the Euro-Plus-Pact; fostering competitiveness; fostering employment; maintaining sustainability of public finances and reinforcing financial stability.[4]

1.      Fostering Competitiveness.

·         Changes have been introduced in the procedure to create employment wage agreements through the Industrial Relations (Amendment) 2012.

·         State assets are to be sold and some of the proceeds invested into the economy.

·         Legislation has been enacted or proposed to introduce greater competiveness into the legal sector (Legal Services Regulation Bill 2011 – not yet enacted, in committee stage) medical services (Health (Provision of General Practitioner Services) Act 2012 – enacted) and pharmaceutical services (regulations on profit levels).

2.      Fostering Employment

·         Employer paid social insurance is to be reduced for lower income jobs for the first 18 months following the commencement of employment.

·          20,900 work placement, training and education positions have been made available.

·         A ‘Micro-Finance Fund’ of €100 million to lend to small and medium enterprises.

3.      Maintaining sustainability of public finances

·         A Comprehensive Expenditure Report 2012-2014 was completed and published on 5 December 2011.

·         A Fiscal Advisory Council was established and later given a legislative basis in the Fiscal Responsibility Act 2012.

·         The pension age was increased from 65 to 68 years of age, to be implemented in three steps between 2014 and 2028.

·         Undertakings were made to broaden the tax base including introducing a property tax. The introduction of a property tax has since become a focus of political debate.

4.      Reinforcing financial stability

·         Measures have been proposed to enhance the supervisory framework of banks in Ireland in the Central Bank (Supervision and Enforcement) Act 2013.

·         There has been a downsizing and radical restricting of the Irish banking sector focusing on two core ‘pillar’ banks namely Allied Irish Banks and Bank of Ireland.

Capital injections into the Irish banking sector totalling €73 billion have taken place since the beginning of the crisis.

[1]               An Taoiseach Enda Kenny Dáil Debates, 22 March 2011, Vol 728 No 3, 190.

[2]               Micheál Martin TD ibid, 192.

[3]               Pádraig MacLochlain ibid, 194.

[4]               Euro Plus Pact Commitments made by Ireland in May 2011: Update as of April 2012. Available at ec.europa.eu/europe2020/pdf/nd/eppcommittment2012_ireland_en.pdf. No more up to date documents are available. Efforts have been made to determine the current status of proposed legislation.

Italy

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.   
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Italy 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 pact was negotiated at the time by the government in charge (Berlusconi IV), with no formal ex-ante involvement of the Parliament.

It is therefore difficult to exactly trace the related institutional debates, at least in formalized terms.

Talking about political/legal difficulties, one can say the government did not meet specific obstacles in the negotiation, even though the objectives of the Pact are also considered as historical Italian weaknesses.

Miscellaneous
VI.2
What other information is relevant with regard to Italy and the Euro-Plus-Pact?

Italy did not take measures directly and formally categorized as a “reaction to the Euro-Plus-Pact”, as other Members States did.[1]

But if one considers the immediate reaction to the Pact, it is important to highlight that on 6 July 2011, following the activities of the European Semester and a number of informal “letters” between the EU institutions and the Italian government[2] , the Italian government approved the decree n. 98/2011, containing «urgent measures for financial stabilization», then converted by the Italian Parliament by Law n. 111/2011 on 15 July 2011.

On 12 July 2011 the Italian Parliament also converted the so called «development decree» (“Decreto sviluppo”) n. 70/2011 by Law no. 106/2011. With these measures, the Italian Government intended to comply with the «European commitments», i.e. to implement the recommendations on the National Reform Programme and the Stability Programme.

On 21 July 2011, the ECOFIN Council declared to be satisfied of the measures taken, approving «the package of budgetary measures recently presented by the Italian government, which will allow it to bring the deficit below 3% in 2012 and to achieve a balanced budget in 2014».

Given the traditional varied composition, and the consequent unsystematic quality, of the Italian legislative texts, and in particular of the Decrees of the government, it is difficult to exactly describe the «economic/social» substance of the aforementioned measures.

Law 111/2011 includes, in particular, various but important reforms for «reducing the costs of the political institutions» (Law n. 111/2011, Chapter 1, Articles 1-8), for the «rationalisation and monitoring of government expenditure» (Law n. 111/2011, Chapter 2, Articles 9-15), for the «containment and rationalization of the public expenditure on public sector employment, health, social security, school organization», and on the participation of the regional and local institutions to the financial stabilization (Law n. 111/2011, Chapter 3, Articles 16-20), for «financing the urgent expenditure measures» (Law n. 111/2011, Chapter 4, Art. 21 – 22), in the field of tax redistribution (Articles 23-25) (Articles 26-39) (Articles 40-41).

Law 106/2011, on the other hand, includes reforms on tax credits for investments in the field of scientific research (art. 1), tax credits for investments and hiring programs in the Southern part of Italy (art. 2); administrative simplification for business (artt. 3 and 8) and for the construction of public infrastructure (art. 4) and private buildings (art 5); other administrative simplification measures for small and medium-sized enterprises (art. 6);  simplification of tax measures (art. 7); measures for meritocracy in school and in research (art. 9); simplification of some public services offered to citizens (art. 10).

 The Italian rules on the budgetary process have undergone, in the last four years, important reforms. In 2009 the so called new “national accounting law” (L. 31 dicembre 2009, n. 196) was enacted, and soon some new amendments in 2011 (L. 7 aprile 2011, n. 39) to (obviously) adapt it to the new European standards, including the timing of the European Semester.[3] Moreover, a new Law n. 234/2012 on «general rules on Italy’s participation in the formation and implementation of legislation and policies of the European Union» was adopted (see Question VIII.6).

In terms of parliamentary procedures, the Camera dei deputati has adopted, through two special  “opinions” of its “Giunta per il regolamento” of 6 October 2009[4] and 14 July 2010,[5] an «experimental procedure» for the exercise of the control of subsidiarity and the of the «political dialogue» with the European Commission and the European Parliament.

But no formal changes have been made in order to specifically comply with the Euro-Plus-Pact.

[1]               See the prospectus here: http://ec.europa.eu/europe2020/making-it-happen/country-specific-recommendations/.

[2]               See under question VII.1.

[3]               http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/116306.pdf.

[4]               http://leg16.camera.it/593?conoscerelacamera=236.

[5]               http://leg16.camera.it/593?conoscerelacamera=241.

Latvia

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.        
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Latvia 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.

There is no information concering any difficulties encountered in the negotiation process.

The Prime Minister of Latvia (Valdis Dombrovskis) in the European Council meeting on 24-25 March 2011 confirmed that Latvia is ready to join the Euro Plus Pact. He argued that by joining this Pact Latvia participates in increasing the EU competitiveness and will be part of the EU strategy for economic growth.[1]

From the Informative Report from April 2011 it follows that Latvia joined the Euro Plus Pact because of its aim to join the Eurozone on 1 January 2014. The Report further states that Latvia will identify the necessary actions to reach the aims of the Pact and will implement them into the Convergence Programme and the National Reform Programme.[2]

In general Latvia aspired to realise a more effective Euro Plus Pact and was in favour of determining specific objectives and/or reference indicators for the courses of action established by the pact. Latvia supported the current European semester process and the individual recommendations for the Member States. The general national position concerning the Pacts which can be found on the webpage of the Ministry of Foreign Affairs states that the tax policy is considered a very important instrument for Latvia for attracting investments; therefore it wants to maintain national competence over tax policy. At the same time Latvia agrees to continue the coordination of tax policy questions among the Member States. It’s position was that it could support initiatives in the area of direct taxation, if they are based on non-binding recommendations. In addition, Latvia was in favour of actions aimed at coordinating the needs of labour markets with the skills of workforce.[3]

The positions of Latvia approved by the Government remained unchanged after the approvals in the Parliamentary Committee for European Affairs (PCEA). From the minutes of the meeting of the PCEA on 23 March 2011 it follows that the Foreign Affairs Minister (G.V. Kristovskis) informed the MPs that because the competitiveness and convergence have to be improved in the EU as a whole and not just in the Eurozone, and Latvia aims at joining the euro in 2014, Latvia is ready to join the Euro-Plus-Pact. The minutes state that Latvia supported the Pact’s aims to facilitate competitiveness, employment and sustainability of state finances and financial stability by at the same time taking into account that the choice of measures remains with the Member States. G.V. Kristovskis stressed that he appreciates that the Pact remains within the framework of the existing procedures and instruments. It was planned to include the actions for fulfilment of the Pact in the National Reform Programme and Convergence Programme.[4]

The position of Latvia concerning particular aspects:

        The competitiveness objective: The national exclusive competence has to be fully respected in the social area regarding determination of wage levels and development of pension systems. The different practice and situation in various Member States has to be taken into account. Investments in research and development in Latvia are one of the lowest in the entire EU; therefore availability of EU funds was considered to be very important here.

        The employment objective: Latvia supported tax reforms with an aim to facilitate employment.

        Sustainability of state finances objective: Latvia welcomed the determination to strengthen sustainability of state finances. The position stated that Latvia has already implemented various activities towards strengthening fiscal sustainability in the legal framework (e.g. a Law on Fiscal Discipline). Latvia fully supported that fiscal discipline should be embedded at all levels.

        Financial stability objective: Latvia intended to continue active participation in developing initiatives in the area of financial stability and in case of necessity undertook to implement them in the national legal framework.[5]

The position for the European Council of 23-24 June 2011, approved in the Parliamentary Committee for European Affairs (PCEA) on 21 June 2011, provided that Latvia agrees that in the future the Euro-Plus-Pact Member States should strive to better reflect the measures for fulfilment of the Pact’s requirements. At the same time the position stressed that the choice of these measures remains the individual responsibility of each Member State in light of the particular situation and available resources. [6]


Miscellaneous
VI.2
What other information is relevant with regard to Latvia and the Euro-Plus-Pact?

There is no information concerning any changes to the rules and practices of the budgetary process specifically aimed at complying with the Euro Plus Pact. However, in general the adoption of the Law on Fiscal Discipline has been mentioned as an example for implementing Euro Plus Pact requirements.[7]

Latvia dealt with the consideration of the necessary actions which should be undertaken in order to comply with the Euro Plus Pact in the Convergence Programme and the National Reform Programme.[8] The compliance with the Euro Plus Pact was done together with compliance with the Memorandums of Understanding (MoU). There was no clear separation in the dealing with both of these instruments. The Convergence Programme stated that

“At the same time with carrying out the measures foreseen in the MoU, Latvia respects the Annual Growth Report and macroeconomic and fiscal guidelines, as well as the commitments under the Euro Plus Pact”.[9]

Inter alia, the Convergence Programme provided that the obligations under the Euro Plus Pact have been dealt with and will be dealt with as follows:

        The task to ensure the sustainability of state finances

The general budget deficit in 2011 was 3.5% GDP. The budget for 2012 was prepared with a planned deficit of 2.1% GDP. Latvia had ensured the achievement of governmental budget and has tried to ensure a smaller budget deficit than requested by the international financial assistance programme in order to ensure the obeyance of the Mastricht criteria concerning budget deficit and to ensure the termination of the excessive deficit procedure.[10] During the financial assistance procedure the cooperation with the European Commission and the IMF has been very active and any essential decision having fiscal impact has been discussed with them.[11] During the preparation of the 2012 budget a list of measures for reducing the deficit was prepared. The draft law for the 2012 budget was submitted to the Parliament in the end of November 2011 and not the beginning of September as originally planned due to the emergency elections in October 2011 (see in more detail Question I.1). The Programme states that with all this the tasks under the Memorandum of Understanding, the Annual Growth Report and the Euro Plus Pact have been fulfilled.[12]

In order to ensure the sustainability of the social insurance system which is one of the commitments for Latvia under the Euro Plus Pact, it was planned to increase the retirement age to 65 years, increase the early retirement age and increase the minimal record of service for eligibility for state pension to 15 years.[13] This has been done with the changes in the Law on Pensions which provided that starting in 2014 the retirement age will increase for three months every year. From 2025 on the retirement age will be 60 years and the minimal record of services for eligibility for state pension – 20 years.[14]

        The strengthening of the financial sector

The work concerning bank restructuring was continued, as well as the work to strengthen the stability of the financial sector in compliance with the Memorandum of Understanding and Euro Plus Pact.[15]

An Advisory Council for State aid for program coordination and development had been established based on the government decision of 1 November 2011. The main task of the Council is to evaluate all existing state aid instruments. The Council evaluates the state aid programmes which fully or partly are implemented in the form of financial instruments.[16]

In 2011 the Government approved the strategy for selling Parex bank and Citadele bank. It was planned to sell one of the banks in an auction but due to the situation in the financial markets this decision has been deferred. It is planned to sell this bank before the end of 2014.[17]

It has been decided to change the status of the Parex bank and waiver its credit institution licence. In accordance with the restructuring plan approved by the European Commission the bank will continue the asset development to maximally regain the state investments. The working period for Parex bank has been determined until 2017.

According to the Convergence Programme the stability measures for the financial sector are being continued. The Financial and Capital Market Commission[18] continues to improve the normative framework in order to promote strengthening of the capital base of the banks. Alongside individual ‘horizontal’ bank checks are carried out in order to evaluate banking loan restructuring processes, market risk management and implementation of policies in accordance with Financial and Capital Market Commission provisions.

In the fall of 2011 the Financial and Capital Market Commission suspended the activity of AS ‘Latvijas Krājbanka’ and the bankruptcy procedure was started in the beginning of 2012.

The licencing of consumer credit providers (non-bank) began on 1 November 2011 in order to increase the protection of consumers.

The Convergence Programme foresaw that in 2012 and in the following years legislative measures will be taken in the financial sector connected with implementation of EU instruments adopted in this area and in order to improve the legal framework in general. In order to improve the legal framework for insolvency and liquidation of credit institutions, the Law on Credit Institutions will be amended. It was planned to improve the framework for supervision of credit institutions.[19]

        The facilitation of competitiveness and growth

Measures to ensure effective and transparent use of EU funds and to improve the quality of evaluations (e.g. seminars, workshops) were carried out. The question of optimization of implementation of EU funds was incorporated in the Government Declaration for the 2014-2020 planning period (for example, consolidation of work of institutions dealing with EU funds).[20]

Measures to ensure more effective use of energy and natural resources have been carried out. The work in progress is “the Strategy for Energetics 2030”. The EU measures in this area are being implemented, especially concerning the liberalization and integration of EU energy markets.[21]

        The Employment

Measures to implement effective active labour market policy with an aim to reduce the high risk of structural unemployment and to increase the employment and the level of economic activity were carried out. In addition, measures to reduce the black economy are being implemented and as well it is planned to reform the tax system of labour market.[22]

[1]  IR, ES līderi vienojas par glābšanas fonda restrukturizāciju, 25 March 2011. Available under: http://www.ir.lv/2011/3/25/es-lideri-vienojas-par-glabsanas-fonda-restrukturizaciju (last visited 23 June 2013).

[2] Annex II Informatīvais Ziņojums, Finanču ministrija 040411, p. 6.

[3]  Ārlietu ministrija, Eiropas Ekonomiskā un monetārā savienība. Available under:  http://www.mfa.gov.lv/lv/Arpolitika/eu/monetara-savieniba/#nostaja (last visited 23 June 2013).

[4] Annex XXVII_Saeimas 10 Protokols 26 23_03_2011, p. 3-4.

[5] Ibid, p. 3-4.

[6] Annex XXIX_Saeimas 10 Protokols 47 21_06_2011, p. 2.

[7] Annex XXVII_Saeimas 10 Protokols 26 23_03_2011, p. 3-4..

[8] Annex II Informatīvais Ziņojums, Finanču ministrija 040411, p. 6.

[9]  Latvijas Konverģences Programma 2012-2015. April 2012. Available under: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2012/01_programme/lv_2012-04-30_cp_lv.pdf p. 45 (last visited 23 June 2013).

[10] Ibid.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] L. Dārziņa, ‘Pensiju likuma izmaiņas, kas paredzētas no  2014. gada (II)’, 16 July 2012. Available under: http://lvportals.lv/skaidrojumi.php?id=250073 (last visited 15 January 2014).

[15] Ibid, p. 48.

[16] Ministru kabineta instrukcija Nr.5 “Kārtība, kādā Valsts atbalsta programmu koordinācijas un pilnveidošanas konsultatīvajā padomē piesaka un izvērtē valsts atbalsta programmas, kuras īsteno finanšu instrumentu veidā”, “Latvijas Vēstnesis”, 103 (4909), 30 May 2013. para. 1.

[17] Latvijas Konverģences Programma 2012-2015. April 2012. Available under: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2012/01_programme/lv_2012-04-30_cp_lv.pdf (last visited 23 June 2013), p. 49.

[18] Please refer to the information available under http://www.fktk.lv/en/ (last visited 18 Nov 2013)

[19] Latvijas Konverģences Programma 2012-2015. April 2012. Available under: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2012/01_programme/lv_2012-04-30_cp_lv.pdf (last visited 23 June 2013), p. 50.

[20] Ibid, p. 51.

[21] Ibid.

[22] Ibid, p. 53.

Lithuania

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.   
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties did Lithuania 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.

Being a non-eurozone Member State Lithuania did not participate at the negotiations of the Euro-Plus-Pact in March 2011. Nevertheless, it was among the six non-eurozone Member States which joined the Pact without being able to negotiate its terms and conditions. This suggestion to join the pact in the mode of “take it or leave it” was described by the minister of foreign affairs A. Ažubalis as arrogant.[1] Lithuania still agreed to join as the Euro-Plus-Pact was viewed as reflecting its interest to proceed towards becoming a part of the eurozone. President D. Grybauskaitė expressed her support to the Euro-Plus-Pact stating that it promotes employment, fosters business growth and, last but not least, ties the hands of those who may want to make excessively populist decisions.[2]

In its reply to this particular question, the Ministry of Finance commented that ҅during the negotiations Lithuania supported enhancing of the economic coordination for the sake of stability of the EU and of the eurozone. It was important for Lithuania to ensure that at this stage new criteria of membership in the eurozone were not created and that the following principles of the Pact were implemented: 1) direct taxes remained a part of national competence, 2) new initiatives were to comply with existing EU instruments (eg Europe 2020, European Semester, Stability and Growth Pact) and EU provisions of internal market 3) the European Commission and the EU Council in its relevant formations should be actively engaged in the process of surveillance of the implementation of the Pact.҆

Miscellaneous
VI.2
What other information is relevant with regard to Lithuania and the Euro-Plus-Pact?

No other relevant information.

 

[1]  ELTA, “Prezidentė: „Euro plius“ paktas bus naudingas Lietuvos žmonėms”, [President: “Euro-Plus-Pact will benefit the Lithuanian people” 25-03-2011],  http://ekonomika.tv3.lt/naujiena/prezidente-euro-plius-paktas-bus-naudingas-lietuvos-zmonems-6062.html#ixzz3gRpvs4j9

[2] Ibid.; ‘Lithuania joins EU’s new economic pact barring economic populism’, 29 March 2011 http://www.lithuaniatribune.com/5998/lithuania-joins-eus-new-economic-pact-barring-economic-populism-20115998/

Luxembourg

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.   
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Luxembourg 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.

No known discussions.

Miscellaneous
VI.2
What other information is relevant with regard to Luxembourg and the Euro-Plus-Pact?

Not applicable.

Malta

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.        
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Malta 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.

No information known.

Miscellaneous
VI.2
What other information is relevant with regard to Malta and the Euro-Plus-Pact?

Not applicable.

Netherlands

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.   
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did The Netherlands 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 political reality in The Netherlands at the time of negotiation of the Euro-Plus-Pact was delicate. At the time there was a minority government in power, led by the Liberals and Christian Democrats that relied on support from the Party for Freedom for a majority in the House of Representatives. However, the Party for Freedom is outspoken anti-EU and government had to rely on the pro-EU opposition parties to get a mandate for the negotiation of the Euro-Plus-Pact. A clear majority within House of Representatives (that includes the Social Democrats, Centre Right Liberals and Greens) is pro-EU and, eventually, government received a broadly supported mandate to negotiate the Euro-Plus-Pact.[1] The House of Representatives did request the government to ensure in all its negotiations on the combined economic governance measures, coined as the Europact in The Netherlands, to ensure not to move towards a political union. Concretely this meant that there could be no transfer of powers on the level of policy measures to be undertaken on a national level (e.g. changing pension age).[2] The government now consequently refers to this motion of House of Representatives – that is to say that they respect the boundaries set by the House of Representatives – in the policy updates it sends to the House of Representatives regarding EU negotiations. [3]

During parliamentary debates the government strongly maintained its position that the Euro-Plus-Pact would not involve any transfer of sovereignty. In so far as there was any transfer of sovereignty this could only be said to be the case with respect to the enforced stability and growth pact that would include stronger sanctioning mechanisms. It has been suggested by some parties in the discussion that the Pact did involve a transfer of sovereignty because of the process whereby reports have to be provided to the Commission that would then be graded on a benchmarking basis, which could then subsequently induce to changes in policy. The government maintained that this does not at all affect the capacity to set goals and the means to pursue them (it could only inspire to do better), therefore no transfer of sovereignty would take place.[4] As such the commitments made in the pact are considered to be a reflection of the determination to increase competitiveness without real mechanisms to force Member States to changes anything (in this sense they were considered to be more political than legal commitments).

Miscellaneous
VI.2
What other information is relevant with regard to The Netherlands and the Euro-Plus-Pact?

As to national measures on economic/social issues adopted in reaction to the Euro-Plus-Pact, the following can be said on the basis of the national reform programmes of The Netherlands that were submitted to the Commission.[5] The national reform programmes of 2011 and 2012 made explicit reference to links between the Euro-Plus-Pact and national reform measures. The 2013 reform programme no longer contains any references to the Euro-Plus-Pact.[6] It appears that the Euro-Plus-Pact objectives have been integrated in the more general reporting mechanisms of the European Semester and the country specific recommendations that are made in that context.

It is relevant to note that on a national level no references whatsoever are made that link the Euro-Plus-Pact objectives and the national measures. In fact, most of the measures that are presented in the context of national reform programmes as responses to the EU objectives already existed prior to the objectives of the Euro-Plus-Pact. From this perspective, the actual impact of the Euro-Plus-Pact is questionable. However, the below points have been communicated to the European Commission as being the implementing measures for the Euro-Plus-Pact.

1. Competitiveness: the introduction of a new business policy, consisting of a sectoral approach with more demand-side management by industry, fewer special-purpose grants, more generic  reductions in taxation and administrative burden and more freedom for entrepreneurs.

2. Employment: measures to ensure increased activating of social security and reduced dependency on unemployment  benefits through the introduction of a scheme to reform existing schemes for the lower end of the  labour market.

3. Sustainability of public finances: introduction  of a new Act to embed the Stability and Growth  Pact agreements in national legislation see further on this act below in the section of Fiscal Compact.

4. Financial stability: the introduction of a new Act that will provide more power to intervene in financial institutions than the statutory instruments of the Financial Supervision Act and the Bankruptcy Act.

[1] 03 Euro-Plus-Pact 230311 parliamentary debate 1/2, 03 Euro-Plus-Pact 230311 parliamentary debate 2/2. 

[2] 03 Euro-Plus-Pact 230311 Parliamentary condition no transfer of powers on the level of policy measures.

[3] For an example, 03 Euro-Plus-Pact 110311 policy update, page 6.

[4] 03 Euro-Plus-Pact 230311 parliamentary debate 2/2. 

[5] 03 Euro-Plus-Pact nrp2012 and 03 Euro-Plus-Pact nrp2013 in addition also 03 070411 Euro-Plus-Pact policy letter government on EuroPlusPact measures.

[6] 03 Euro-Plus-Pact nrp2013. 

Poland

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Poland 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 opposition (PiS) asked the government to present its position on the Euro-Plus Pact to the Sejm’s plenary session.[1]  According to the opposition, the government should have discussed the Pact with the parliament before agreeing to it.

During the debate, the Secretary of State in the Ministry of Foreign Affairs, Mikołaj Dowgielewicz summarised the negotiations of the Euro-Plus-Pact. In February 2011, according to Dowgielewicz, some Member States advanced the idea of the Pact so that the member states would agree to the financial aid for Greece. Dowgielewicz maintained that the government perceived this situation as possible to cause “Europe of two speeds”.  Hence, in the opinion of the government, it was necessary to open the Pact for non-Eurozone Member States. Other Member States supported this idea.[2] Dowgielewicz underlined also the good situation of Poland in the areas that the Pact refers to: the retirement system, consolidation of public finances or the salaries system in public administration.[3] Moreover, the Secretary of  State highlighted that the Pact incorporates the provisions stating that the pact cannot cause harm to the internal market, on which Poland insisted.[4]

The debate in the Sejm focused further on the questions from the PiS opposition with regard to the legal form of the Pact[5]; lack of previous information of the government to the parliament on the Pact[6] and on the CIT tax.[7] In general, in the view of the PiS opposition the Pact will decrease the competitiveness of Poland and Poland should not be joining it. The SLD opposition raised the question of obligations that the Pact will impose on Poland, including the accession to the Eurozone[8] or increase of the retirement age.[9] The coalition partner, PSL, sided with the government, underlining the possibility of creation of Two Speed Europe without the Pact.[10]

In addressing the questions of MPs, the Secretary of State underlined that the Euro-Plus-Pact is a political declaration approved in order to improve the supervision over competitiveness in the EU.[11] According to Dowgielewicz, Poland is not required to take any “radical steps” in the area of retirement and the EU does not get any competence to increase CIT.[12]

Miscellaneous
VI.2
What other information is relevant with regard to Poland and the Euro-Plus-Pact?

The National Reform Programme 2011[13] indicated the intention for ‘institutional strengthening’ of public finances, which will contribute to the delivery of the Euro Plus Pact objectives. The ‘institutional strengthening’ concerned the establishment of the permanent expenditure rule will aim at stabilising the structural deficit at the level of the medium-term budgetary objective (-1% of GDP).

The following commitments were adopted under the Euro-Plus-Pact in 2012 (unless stated differently).[14]

Economic measures:

       a new fiscal rule (implementation underway).

       Introduction of a limit of deficit for the self-government sector – not implemented (the current provisions of the Act on public finance proved effective enough, thus introducing an additional rule for local self-government units was found ungrounded)

       changes in mining fees so that ‘the State participates in profits from exploitation of certain mineral resources that belong to the State’

       introduction of ‘elements of risk-based oversight to the current system of oversight of insurance and pension insurance market in Poland’

Social measures:

       ‘general pension reform (gradually equalising and raising the pensionable age of man and woman to reach 67 years for men in 2020 and women 2040)’.  In this regard, the government adopted the draft act amending the Act on pensions from the Social Insurance Fund and some other acts adopted by the Government in first half of 2012.

       continuation of ‘the policy of freezing wages in the public sector’, extending access to the regulated professions (which normally require certain qualifications provided for in the legislation),

       implementation of Applied Research Programme in 2012, implementation of the “TOP 500 Innovators” Programme,

       reducing the administrative burden and information obligations for pursuing business activity REGON). Assumptions for the draft act amending the Act on National Court Register and other acts

       fostering employment for the youngest and the oldest groups (implementation under way), under the Programme “Solidarity between Generations. Measures to Increase Professional Activity of people aged 50+” such aims as support for lifelong learning of persons 50+, etc.,

       introducing reduced disability pensions contribution of 8% instead of 13%,

       Implementation of the reform of vocational education system, adjusting the education/training system to the needs of the labour market. The Act of 19 September 2011 amending the Act on education system and certain other acts (Dz.U. No 205, item 1206) – the Act entered into force on 1 September 2012.

       introducing the “Toddler” programme for 2012  (care for children in childcare institutions below 3 years) and social insurance for 10.000 of nannies (partial implementation-in fact lower numbers).

       changes in the pension scheme for privileged groups (uniformed services – implemented, miners, clergymen – implementation underway), ‘(i) Assumptions for a draft act amending the Act on guarantees of freedom of conscience and religion, and some other acts, or (ii) assumptions for a draft act amending the Act on taking over mortmain estate by the State, on guarantees of farm ownership for parish priests and on establishing the Church Fund, and certain other acts’ (by the end of 2012) [implemented]

        limiting the number of recipients of the newborn allowance,

‘closing the possibility of circumvention of the capital gains tax on bank deposits’.

Finally, as regards as the Commitments for 2013 and 2014 under the Euro-Plus-Pact see further the National Reform Programme.

[1]  Sprawozdanie Stenograficzne z 89 posiedzenia Sejmu Rzeczypospolitej Polskiej w dniu 31 marca 2011 r., p. 162, http://orka2.sejm.gov.pl/StenoInter6.nsf/0/313BF2360B2FC51DC1257864007BC909/$file/89_b_ksiazka.pdf.

[2]  Id, p. 163.

[3]  Id, p. 164.

[4]  Id, p. 164.

[5]  Id, p. 165.

[6]  Id, p. 166.

[7]  Id, p. 170.

[8]  Id, p. 166.

[9]  Id, p. 171.

[10]  Id, p. 167.

[11]  Id, p. 179.

[12]  Id, p. 179.

[13]  National Reform Programme 2011, p. 11, http://ec.europa.eu/europe2020/pdf/nrp/nrp_poland_en.pdf,

[14]  This paragraph cites the National Reform Programme, Europe 2020, 2013/2014 Update, adopted by the Council of Ministers, 30.04.2013, Annex 3., p. 90-93.Available at: http://ec.europa.eu/europe2020/pdf/nd/nrp2013_poland_en.pdf

Portugal

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Portugal 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.

On 23 March 2011, Prime-Minister José Socrates resigned after the parliament rejected the document that came to be known as PEC IV (SGP 2011-2014).[1]  Request for external financial assistance followed shortly after.[2] Amidst the political turmoil it is not possible to identify a parliamentary debate specifically on the Euro Plus Pact.

 As to parliamentary debates that took place later in 2011 and the years that followed, as in other issues, debates in parliament very often alluded to very different measures as part of the same set of mechanisms.[3] Criticism multiplied indistinctly too: the Euro-Plus-Pact was a threat to national budgetary sovereignty as much as the six-pack or the TSCG; the terms of the reform of EU’s “economic governance” would attribute the commission the power to indicate what public policies to pursue. 

Taking into consideration the overlapping nature and substance of the measures contained in the Euro Plus Pact the government considered that both the adoption of resolution n.º 84/2012, of 3 July, that approved the TSCG (also known as fiscal compact) and resolution 9/2012, of 9 December 2012 that approved the treaty on the ESM “[provided] a more solemn framework to the set of EU coordinated initiatives such as the Euro Plus Pact, European Semester and the Six-Pack”.[4]

Miscellaneous
VI.2
What other information is relevant with regard to Portugal and the Euro-Plus-Pact?

No other relevant information.

[1] See: http://www.parlamento.pt/OrcamentoEstado/Documents/pec/21032011-PEC2011_2014.pdf

[2] See: http://ec.europa.eu/economy_finance/articles/financial_operations/2011-04-06-portugal_en.htm

[3] See http://debates.parlamento.pt/search.aspx?cid=r3.dar

[4] See http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n95-0003&type=texto&q=six-pack&sm=p

Romania

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.    
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties did Romania 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.

Romania was represented at the 24/25 March 2011 European Council by the President of Romania, Traian Băsescu (Former member of the PDL party). Although not part of the Eurozone, Romania joined the Euro-Plus-Pact. The reason behind this approach was, as reported by the media, the desire of not being excluded from the European process.[1]

Immediately after the March European Council summit, President Băsescu defended his choice in front of the Romanian public. The President declared that the Pact was a catalyst towards a complex national “roadmap”: “1. for sustainable economic growth, Romania has to become competitive again, which is why structural reforms must be pursued 2. Romania needs to continue the European convergence process to take advantage of the full benefits of the Single Market, and this process must be completed with the Euro adoption in 2015”. [2]

As mentioned above, the progress towards the adoption of Euro is a national priority. Romania is bound under the accession treaty to adopt the Euro, however no pre-established date is foreseen.[3] The ratification of the Euro-Plus-Pact was presented as an intermediate step towards accession to the Monetary Union. It was reported, that in order to limit the budget deficit and public debt sustainability, Romania would have to prepare the ground for institutional structural reforms. In this respect, the Euro-Plus Pact was presented as a useful complement to a rapid accession to ERM-II (European Exchange Rate Mechanism), also called the “euro waiting room”.[4]

First, the Government proposed 2015 as a timeline for adopting the Euro currency in the Convergence Programme 2012-2015,[5] although during the financial crisis the National Bank of Romania expressed some concerns about this time-table.[6] The current target for adopting the Euro currency as announced by the Ministry of Public Finance in the 2014-2017 Convergence Programme is January 1st, 2019.[7]

In terms of macroeconomic commitments, Romania has already implemented a good part of the reforms committed to under the Euro Plus Pact at the request of the IMF. No banking restructuring, nationalisation or sales of banks’ assets was reported. In this sense, the President declared after the European Council summit that the crisis-legislation has been already adopted in 2010 by Romania – as part of troika conditionality – which lines up the country perfectly with the objectives of Euro-Plus-Pact.[8] The Head of State has also declared that the decision to join the Euro-Plus-Pact was taken after Romania had the guarantee that the tax rates will remain a national decision: “[i]f [tax rates discretion] had been in question, Romania would not have joined (the Pact),” he commented.[9]

Therefore, it seems that signing the Pact was an easy political decision. As it was expressed even by President Băsescu: “[t]he exchange of best practice, combating fraud and tax evasion which are expressly mentioned in the decisions of the Council – we have no reason not to be a part of this Euro Plus Pact”.[10]

No ex ante comprehensive impact assessment was conducted, no debates on advantages and disadvantages were presented, no long-term implication studies were analysed before joining the Euro-Plus-Pact.

Miscellaneous
VI.2
What other information is relevant with regard to Romania and the Euro-Plus-Pact?

The measures envisaged by Romania under the Euro-Plus Pact have been adopted by the Government through a memorandum, on the 29th of April 2011 and fully integrated in the National Reform Programme 2011-2013.[11]

According to the implementation report of the Euro-Plus-Pact of March 15, 2012, the institutions in charge of Euro-Plus-Pact monitoring are the Ministry of European Affairs and the Ministry of Public Finances.[12] Each of the Ministries puts in place internal arrangements to accommodate their respective monitoring tasks of the National reform Programme and Convergence Programme. The monitoring is based on a concrete action plan with specific short and medium term targets to be achieved within a precise time-line. [13]

An ex post study undertaken by the European Institute of Romania – a public institution whose mission is to provide expertise in the field of European Affairs – provides a comprehensive analysis of the advantages and disadvantages of Romanian accession to the Euro-Plus-Pact.[14] According to the study, on the positive side, the economic policies undertaken under the Euro-Plus-Pact are able to foster the country’s convergence and facilitate the structural consolidation and labour market reforms undertaken by Romania.[15] However, on the other side of the medal, the study stressed that an independent monetary and fiscal policy would have proved a better medium-term choice for the country: “[f]or Romania it would be beneficial if it could maintain some degree of independence over fiscal policy. Deeper fiscal integration at the EU level would necessarily involve a higher coordination of fiscal policies across the EU which would lead to fiscal harmonisation. If Romania were to adjust fully to this, it would adversely affect its competitiveness. Tax policy, especially the existing low levels of income and profit tax, provides a competitive advantage compared to other EU countries.”[16]

[1] Corneliu Harea, Europuls Collaborator, available at Europuls: http://europuls.ro/index.php?option=com_content&view=article&id=553:pactul-euro-plus-oportuniti-i-provocri-pentru-romania-&catid=107:politica-economica&Itemid=1242

[2] http://www.europuls.ro/index.php?option=com_content&view=article&id=553:pactul-euro-plus-oportuniti-i-provocri-pentru-romania-&catid=107:politica-economica&Itemid=1242

[3] Protocol concerning the conditions and arrangements for admission of the Republic of Bulgaria and Romania to the European Union, Official Journal of EU L 157 of 21 June 2005.

[4] Corneliu Harea, Europuls Collaborator, available at Europulshttp://europuls.ro/index.php?option=com_content&view=article&id=553:pactul-euro-plus-oportuniti-i-provocri-pentru-romania-&catid=107:politica-economica&Itemid=1242

[5] “The commitment to adopt the euro in 2015 is maintained and it represents an important anchor for ensuring the consistency in time of the macroeconomic policy mix and of the structural reforms, as well as for fostering the adjustments needed to increase the resilience and flexibility of the Romanian economy.” Convergence Programme 2012-2015, p. 4.

[6] The Government did not include a specific moment as objective for joining Euro-zone in the 2013-2016 Convergence Programme. It only states that “[T]he commitment to adopt the euro is maintained for a date when will be attained the objective regarding the fulfilment of the real and nominal convergence criteria.” Convergence Programme 2013-2016, p. 4.

[7] Ministry of Public Finance, Convergence Programme 2014-2017, available at: http://www.mfinante.ro/noutatieco.html?pagina=ue

[8] The Presidency of Romania, Declaration of the President, March 25, 2012, available at: http://cms.presidency.ro/?pag=59&year=2011&sid=13115&id_p=13121

[9] http://www.evz.ro/detalii/stiri/cum-a-ajuns-romania-in-pactul-euro-plus-925049.html#ixzz2W0pz0Zal

[10] http://www.nineoclock.ro/romania-now-part-of-euro-plus-pact/

[11] Government of Romania, National Reform Programme 2011-2013, 55p, available at: http://ec.europa.eu/europe2020/pdf/nrp/nrp_romania_ro.pdf

[12] Ministry of Foreign Affairs of Romania, Report on the implementation of Euro-Plus-Pact, March 15, 2012, available at: http://ec.europa.eu/europe2020/pdf/nd/eppreport2012_romania_en.pdf

[13] Due to limited space, we refer to the Euro-Plus Pact Implementation Report issued by the Government of Romania – Ministry of European Affairs on March 15th 2012, which is annexed to the present Report.

[14] European Institute of Romania – Euro Plus Pact Adoption: Implications for Romanian Fiscal Policy, 2012, p. 146, available at: http://www.ier.ro/documente/spos_2011/SPOS_2011_-_nr_2_RO-EN_.pdf. Further information about the European Institute of Romania available at: http://www.ier.ro/en

[15] Ibidem.

[16] Ibidem, p. 206.

Slovenia

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Slovenia 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 National Assembly confirmed the position of Slovenia during this meeting on March 18th 2011. The transcript of the debate is however not publicly available.

Miscellaneous
VI.2
What other information is relevant with regard to Slovenia and the Euro-Plus-Pact?

Not applicable.

[1] Dirk-Jan Kraan and Joachim Wehner, budgeting in Slovenia, 4 OECD Journal on Budgeting, ¶ 60 (2005), available at http://www.oecd.org/slovenia/39997582.pdf.

[2] Uredba o dokumentih razvojnega načrtovanja in postopkih za pripravo predloga državnega proračuna in proračunov samoupravnih lokalnih skupnosti, Ur.l. RS, št. 44/2007.

[3] http://www.mf.gov.si/si/delovna_podrocja/proracun/splosno_o_proracunu/dokumenti/

[4] Računsko sodišče Republike Slovenije

[5] Court of Audit, Summary of the audit report Efficiency of the Preparation of Budgets of the Republic of Slovenia for the years 2011 and 2012, August 2013. See attachment: IVf Court of Audit Summary of the audit report, at 87.

[6] Zakon o spremembah in dopolnitvah Zakona o javnih financah, Ur.l. RS, št. 107/2010

[7] Zakon o dodatnih interventnih ukrepih za leto 2012, Ur.l. RS, št. 110/2011.

[8] Court of Audit, Summary of the audit report Efficiency of the Preparation of Budgets of the Republic of Slovenia for the years 2011 and 2012, augst 2013. See attachment: IVf Court of Audit Summary of the audit report, at 87

[9] Pravilnik o zaključku izvrševanja državnega in občinskih proračunov za leto 2012 Ur.l. RS, št. 71/2012.

[10] Pravilnik o skupnih osnovah za postopke dela finančnih služb neposrednih uporabnikov proračuna Republike Slovenije, Ur.l. RS, št. 84/2012.

[11] Pravilnik o pošiljanju podatkov o stanju in spremembah zadolžitve pravnih oseb javnega sektorja in občin, Ur.l. RS, št. 3/2013.

[12] http://www.mf.gov.si/fileadmin/mf.gov.si/pageuploads/tekgib/Proracunski_memorandum/pro_memor.pdf

Slovakia

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.   
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Slovakia 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.

Slovakia focused on two priorities in the negotiations of the Pact: first, to include an explicit notion that direct taxes remained in the Member States’ competences, and, second, to maintain that the retirement age would depend on demographic developments in a MS.[1] Especially the idea of EU corporate tax was strictly refused by then PM Radičová.[2] This fear led to several constitutional bills being proposed stipulating that the competences in direct taxes could not be transferred to the EU. Neither of these efforts materialized.

Miscellaneous
VI.2
What other information is relevant with regard to Slovakia and the Euro-Plus-Pact?

Major changes were adopted through a constitutional law, the Fiscal Responsibility Act, and implementing laws (see the answers to questions VI.2, IX.4 and IX.5).

The National Reform Programme of 2012 stated that “[t]he Slovak Government made a political commitment under the Euro Plus Pact initiative to adopt several key measures (fiscal consolidation, pension and contribution reform, fiscal responsibility act, Labour Code, reducing administrative burden on businesses, fight against corruption and improved transparency).”[3] These measures were also part of the effort to implement the EU recommendations for the period of 2011-12.

I. Sustainability of public finances and financial stability aims of the Pact[4]

Fiscal consolidation

Measures in the total amount of €1.8bn, or 2.5% of GDP, were implemented in 2011 (compared to an unchanged policy scenario). General government deficit were expected to stand at 4.8% of GDP in 2011. This figure also included debts of healthcare facilities and debts towards railway companies incurred from 2004 to 2010. The total amount of these debts represented €633 million (0.9% of GDP) which, taking into account the 2011 bailout, accounted for a net negative effect on the public balance of 0.83% of GDP.[5]

The general government budget for 2012-2014 contained further consolidation measures to reduce the deficit in 2012. They include measures on the expenditure side, especially frozen wage expenditures and overhead costs, as well as savings on capital expenditures, which, however, should be compensated for by a more effective use of EU funds. On the revenue side, moderate changes were made in corporate income tax, the excise duty on tobacco products was increased and a bank levy was introduced.

In order to protect expenditures that promote economic growth, two basic and political expenditure priorities were apparent in the 2012 budget. The first one was the transport infrastructure, where allocations increased in the road and railway transport sectors. The second priority area was education where the volume of funds for regional schools per student increased by 5.0% year-on-year and in the tertiary school sector by 4.7%.

Pension and contribution reform

The reform of the second (fully-funded) pension system pillar came into force on November 1, 2011, but several changes in pension funds became only applicable as of April 1, 2012. The reform introduced the fourth type of pension fund, so-called index-linked, whose performance will replicate developments in one or more stock market indices. The proposed change enables savers to divide their savings into two pension funds, one of which must be a bond pension fund. In connection with this change, a gradual transfer of personal savings to a bond pension fund has been introduced, depending on the age of savers. The scope of insurers was defined anew, based on the principle of automatic entry, while the pension savers have the possibility to unilaterally opt out from the second pillar anytime during the first two years after their entry to the old-age pension saving scheme. A change was also made to one of the eligibility criteria for old-age pension payments from the 2nd pillar, namely that savers must participate in the old-age pension saving scheme for at least 10 years, compared to the original 15-year limit.[6]

Fiscal Responsibility Constitutional Act

The Fiscal Responsibility Constitutional Act approved by a constitutional majority in the Parliament on Dec. 8, 2011 and effective as of March 1, 2012 governs the establishment and competences of a Fiscal Responsibility Council, rules of fiscal responsibility and rules of fiscal transparency. The Fiscal Responsibility Council will be an independent body, which will monitor and assess the fulfilment of Government’s fiscal targets. The act sets the maximum limit on general government debt, including measures that must be implemented if the reported level of the general government debt reaches a certain limit, sets out the transparency rules to be observed when drafting a general government budget and introduces more stringent budgetary rules for local government. More information on the legal framework is supplied in the section on the Fiscal Compact.

II. Employment aim of the Pact

Labour Code

Under the amendment to the Labour Code effective from Sept. 1, 2011, the practice which entitled employees to both severance pay and full wage over the course of the notice period was cancelled; the notice period was cut from two months to one month for employment contracts shorter than one year; the maximum duration of fixed-term employment contracts was extended and the maximum number of their renewals was increased from two to three. Changes concerning working time and new provisions on overtime work without prior consent from employee representatives gave the employers better possibility to flexibly respond to changing economic conditions, but led to deterioration in the social dialogue. The amendment also introduced a working time account and made the flexi-account a permanent instrument.

III. Competitiveness aim of the Pact

Reducing administrative burden on businesses

The project to decrease the administrative burden on businesses contains a set of 94 legislative and deregulatory measures. Fourteen of them were fulfilled by the end of October 2011. For example, the Parliament approved an amendment to the Act on Business Register in December 2011, under which the statutory period for entry of data to the business register was shortened from five to two working days. Another change facilitating improvements in the business environment was the introduction of electronic publication of the Commercial Journal, which allowed for, among other things, shortening of publication periods from several months to a few days. The launch of its electronic version turned the Commercial Journal into a real source of information for entrepreneurs.

Single points of contact (SPC) were put in operation in January 2012, following the completion and testing of their electronic system. SPCs help remove redundant administrative burden on business entities and allow, for example, the submission of electronic applications/notifications when starting a business, including electronic payments, or applications for incorporation of companies in the business register. Entrepreneurs may thus handle all the necessary administrative requirements before starting their business in one place, including in electronic format.

Under an amendment to the Act on Bankruptcy and Restructuring, creditors have been permitted to file proposals for bankruptcy against their debtors due to debtor’s insolvency, which has put a natural pressure towards observing payment discipline. Debtors are also encouraged to timely resolve their pending insolvency or insolvency by means other than bankruptcy, namely through informal or formal restructuring. The amendment will also put an end to speculative practices used by some companies within bankruptcy proceedings, such as when a debtor company has declared bankruptcy too late, i.e., at a time when it officially held no assets to satisfy its creditors, or, possibly, when the bankruptcy proceedings have been agreed with “friendly creditors” and only served to transfer assets from one company to another.

Fight against corruption and improved transparency

The Slovak Government introduced rules for a more transparent and cost-efficient use of public assets and public funds. Contracts concluded by government entities and municipalities, as well as contracts involving public funds, may only enter into force on the day following the day of their publication on the Internet. A requirement was introduced to use electronic auctions to the greatest extent possible. The use of electronic auctions increased considerably last year; in the second half of 2011, approximately a quarter of all public tenders were carried out by means of electronic auctions. In 2011, contracting authorities bought goods and services 14% cheaper than planned.[7]

[1] Správa o siedmom roku členstva SR v EÚ (Report on the seventh year of the Slovak membership in the EU), Parliamentary Press No. 435, p. 4.

[2] Trend.sk, Lídri eurozóny sa dohodli na pakte pre euro, March 11, 2011. Available at: http://ekonomika.etrend.sk/svet/lidri-eurozony-sa-dohodli-na-pakte-pre-euro.html.

[3] National Reform Programme of the Slovak Republic 2012, April 2012, p. 14. Available at: https://www.finance.gov.sk/Default.aspx?CatID=5197.

[4] This is an abridged version quoted from the National Reform Programme 2012, id. at 8-14.

[5] A positive effect on the balance also came from one-off VAT revenue in the amount of €173.4 million (0.25% of GDP) in connection with the completion of R1 expressway sections built under a PPP project.

[6] The mechanism for calculating the annual success fee also changed. Changes also occurred with respect to guarantees: the requirement to replenish assets in under-performing stock pension funds and mixed pension funds was cancelled; the monitoring period for guarantee purposes was extended to 60 months for bond pension funds. No guarantees are provided in index-linked pension funds. New obligations were introduced in risk management and assessment in pension funds. The law also permits to acquire so-called exchange traded funds to the portfolios of pension funds and introduces an obligation to protect and secure the value of the assets of the fund against various risks. Investment in securities representing precious metals is also permitted (20% of net value of assets of mixed and stock pension funds). Id. at 9-10.

[7] Regarding the tax policy coordination aim, Slovakia was mostly concerned with direct tax sovereignty and has opposed EU plans on corporate tax.

Spain

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
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[1]. 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.[2]

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)[3]. 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”.

Miscellaneous
VI.2
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[4] (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[5]. 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.[6]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”[7].

 

(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[8]. 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[9]. 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[10] 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).[11] 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[12].

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[13].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.[14]

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[15]. 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[16].

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[17]. The reforming process has been called the “express amendment”, as it took only thirty-two days from the submission of the proposal.

[1]Diario de Sesiones de las Cortes Generales, Comisiones Mixtas para la Unión Europea No. 165  of 15 Feb 2011: http://www.congreso.es/public_oficiales/L9/CORT/DS/CM/CM_165.PDF.

[2]Diario de Sesiones de las Cortes Generales, Comisiones Mixtas para la Unión Europea No. 165 of 15 Feb 2011 at p. 32: http://www.congreso.es/public_oficiales/L9/CORT/DS/CM/CM_165.PDF. 

 

[3]Diario de Sesiones del Congreso de los Diputados, No. 236 of 30 May 2011: http://www.congreso.es/public_oficiales/L9/CONG/DS/PL/PL_236.PDF.

[4]Diario de Sesiones del Congreso de los Diputados, No. 236 of 30 May 2011 at p. 7: http://www.congreso.es/public_oficiales/L9/CONG/DS/PL/PL_236.PDF.

[5]Boletín Oficial del Estado No. 161, of 7 July 2011:

http://www.boe.es/boe/dias/2011/07/07/pdfs/BOE-A-2011-11641.pdf.

[6] See J F Bellod Redondo, ‘Techo de gasto y estabilidad presupuestaria’ in Presupuesto y Gasto Público 65/2011, p. 101 (article available at http://www.ief.es/documentos/recursos/publicaciones/revistas/presu_gasto_publico/65_06.pdf).

[7] Own translation. Original can be found at Boletín Oficial del Estado No. 161, of 7 July 2011:

http://www.boe.es/boe/dias/2011/07/07/pdfs/BOE-A-2011-11641.pdf..

[8] See http://politica.elpais.com/politica/2011/08/23/actualidad/1314128715_080054.html.

[9]Diario de Sesiones del Congreso de los Diputados, No. 236 of 30 May 2011 at p. 10: http://www.congreso.es/public_oficiales/L9/CONG/DS/PL/PL_236.PDF.

[10] Letter available at http://ep00.epimg.net/descargables/2013/11/27/2b10649fe77a0775a23fb7eb465ab974.pdf.

[11] The full text of the amended Article 135 is available at http://www.congreso.es/consti/constitucion/indice/titulos/articulos.jsp?ini=128&fin=136&tipo=2.

[12]In contrast, the ordinary amendment procedure entails the dissolution of the Parliament and the celebration of general elections. The new Congreso and Senado must approve the reform by a two-thirds majority, and approval by referendum must follow.

[13]Diario de Sesiones del Congreso de los Diputados No. 269, of 30 August 2011:

http://www.congreso.es/public_oficiales/L9/CONG/DS/PL/PL_269.PDF.

[14]Diario de Sesiones del Congreso de los Diputados No. 270, of 2 September 2011:

http://www.congreso.es/public_oficiales/L9/CONG/DS/PL/PL_270.PDF.

[15]Boletín Oficial de las Cortes Generales, Senado, No. 108, of 8 September 2011:

http://www.congreso.es/public_oficiales/L9/SEN/BOCG/2011/BOCG_D_09_108_704.PDF.

[16]Cortes Generales, Diario de Sesiones, Senado, No. 130, of 7 September 2011:

http://www.congreso.es/public_oficiales/L9/SEN/DS/PL/DS_P_09_130.PDF.

[17]Boletín Oficial del Estado No. 233, of 27 September 2011:

http://www.boe.es/boe/dias/2011/09/27/pdfs/BOE-A-2011-15210.pdf.

Sweden

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.           
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did Sweden 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.

Sweden does not participate in the Euro-Plus-Pact.

Miscellaneous
VI.2
What other information is relevant with regard to Sweden and the Euro-Plus-Pact?

Sweden does not participate in the Euro-Plus-Pact.

United Kingdom

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.        
(
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf)

Negotiation
VI.1
What political/legal difficulties
did the United Kingdom 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?

Why Britain did not join

David Lidington MP (Conservative, Minister for Europe) noted that the pact is an instrument that has been created in order to help the eurozone to overcome its problems. Since Britain is not planning to join the euro, he believes that it is right to stay outside of it. He accepts that the position is different for those countries that see their future as joining the euro.

Britain side-lined?

David Lidington MP also noted that the language of the 24-25 March Council conclusions focus primarily on areas that fall under national competence and not so much on those measures of economic policy that are governed already by various articles of the Treaty—a single-market Europe by 2020, economic governance and macro-economic surveillance. Those are all areas of economic policy in which he believes all of the EU will need to talk and to act together. He noted further the explicit commitment written into the March conclusions that the Euro Plus pact will respect the integrity of the single market and should not undermine the functioning of the single market. Lidington later stressed that, if the members of the Euro Plus pact were to decide, hypothetically, to act in a way that ran contrary to the principles of the single market, they would be open as individual Member States to infraction proceedings in a way that any other Member State would be for breach of treaty obligations.

On 25 April 2012, Lord De Mauley stated that “Of course, as the euro area moves closer towards integration, we must and will remain vigilant to protect the UK’s interests. Where matters are, rightly, for discussion or agreement by all 27 member states, for example on the single market or financial services, they must be agreed by all 27 member states.”[1]

Status of the decision whether to join

He also noted that the decision whether or not to join the Plus-Pact is a political decision, not a legal decision. The Government, or any future United Kingdom Government could decide to change policy and take part in the pact without the need for a referendum, or indeed legislation.[2]

Miscellaneous
VI.2
What other information is relevant with regard to the United Kingdom and the Euro-Plus-Pact?

The United Kingdom decided to stay out of the Euro-Plus-Pact


[1] House of Lords, Handsard, 25 April 2012, Col 1836 http://www.publications.parliament.uk/pa/ld201212/ldhansrd/text/120425-0002.htm

[2] Revised Transcript of Evidence Taken Before the Select Committee on the European Union: Inquiry on European Councils of 4 February, 11 March and 24-25 March 2011, Evidence Session No. 1. http://www.parliament.uk/documents/lords-committees/eu-select/Transcripts/cEUS040511ev1.pdf