IX – Fiscal Compact

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Austria

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Austria encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The governing parties SPÖ and ÖVP were in favour of approving the ratification of the treaty whereas the opposition parties FPÖ and BZÖ and – in contrast to the ESM position – also the Greens opposed it.

The Federal president authorized the negotiation on January 12, 2012 while the National and the Federal Council were informed about the initiation of the negotiation. The Ministry for European and International Affairs has regularly reported about the negotiations to both chambers.

Prior to its ratification, the discussion in Austria was centred around a (higher) deficit ceiling introduced in Austria prior to the ratification of the TSCG – this is explained in question VII.1. The debate on the deficit ceiling was obviously triggered by the TSCG negotiations.

The ÖVP and SPÖ position on the Fiscal Compact was that it complemented of the ESM, that economic coordination was necessary if on the other hand bailout measures were taken. There was no monetary union without economic coordination and for that, a common framework was necessary. The Green position was that the ESM did not need the Fiscal Compact to go with it, that it was economically counter-productive and that it would lead to unemployment. Additionally, the Greens argued that the Fiscal Compact would have to been approved with a constitutional majority. The FPÖ and BZÖ stuck to usual jargon on loss of sovereignty and the call for a referendum.

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

Treaties leading to the amendment or completion of laws need approval by the National Council, see question V.2.

After the positive report from the Constitutional Committee from July 2, 2012[1], the treaty was approved at the plenary session of the National Council by a simple majority of 103 versus 60 votes.[2] The Federal Council approved by a 42 versus 13 vote.

The Federal President signed the treaty on July 17, 2012 and therewith ratified it.[3] For the significance of the president’s signature see question VIII.2. It was counter-signed by the Federal Chancellor and deposited at the European Council on July 30, 2012. It was published in the official gazette on January 22, 2013.[4]

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

The main issue criticized about the ratification of the TSCG is that it was approved based on Art. 50 (1) 1 B-VG only. The opposition parties and several experts hold that it is in many regards constitution-amending and that it should therefore have been approved by higher majorities.

The debate in the parliament took place right after the debate on the ratification of the ESM (see question VIII.1). The expert hearing in the Constitutional Committee from June 28, 2012 was divided in two parts, the first on the ESM and the second on the Fiscal Compact. Experts stressed that growth incentives need to go hand in hand with budgetary discipline. Griller, professor of constitutional law and the expert who is to a large extent the author of the application regarding the constitutionality of the TSCG brought to the Austrian Constitutional court, pointed out that the TSCG could only be approved by a constitutional majority (see question IX.3 for details). His main point was that the TSCG is constitution-amending as far as it goes beyond the SGP and Six-Pack obligations (see also question VII.1).[5] The head of the constitutional service of the Federal Chancellor’s office sustained, however, that a simple majority is sufficient. Griller[6] held that the Fiscal Compact was in as far constitution amending, as it went beyond the Six-Pack (question VII.1). His three major points (among others) are the following: First, he argues that the rules on the deficit of Art. 2a of regulation 1466/97 as amended by Six-Pack regulation 1175/2011 differs from  Art. 3 (1) TSCG when it comes to the upper limit of the structural deficit: The regulation allows 1% whereas the TSCG only 0.5%. Therefore, the deficit ceiling of its Art. 3 (2) compromises budgetary sovereignty and would have needed a constitutional amendment. Second, Art. 7 TSCG (the reversed majority issue) is problematic because it transfers a sovereign right (Art. 9 (2) B-VG) to the Commission. Even if one does not share that opinion, Griller holds that the fact that the Austrian member in the Council has to vote with the commission amounts to the Austrian member being subject to superior instructions – what he is not supposed to be as highest member of the administration (Art. 20 (1) in connection with Art. 69 (1) B-VG), amounts to a constitutional amendment. Third, he argues that the compatibility clause in Art. 2 (2) TSCG is problematic because it would force the Austrian Minister to evaluate the compatibility of the Commission’s recommendation with EU law – a competence that is new. In order to introduce such a competence, a constitutional amendment would be necessary.

Potacs and Mayer[7] articulate counter-arguments to Griller’s theses. First, they argue that the difference between the secondary law provision and the TSCG provision on the upper limit for a structural deficit is so little, that one can conclude that the TSCG provision (Art. 3 (2)) is covered by EU law and that therefore no constitutional amendment is necessary, because of direct effect. They read it as “specifying” Art. 2a of regulation 1466/77. Second, regarding Art. 7 TSCG, they say that there is no transfer of a sovereign right taking place, Council members merely agree to self-bind themselves. Third, the authors also do not so a constitutionality problem Art. 2 (2) TSCG. In their opinion, this is nothing new for members of the administration because they always have to evaluate the compatibility of laws with EU law – because of the latter’s primacy. They conclude that the TSCG does not contain any constitution-amending or constitution-completing provision, which is why its approval by simple majority (according to Art. 50 (1) 1 B-VG) was legitimate.

The constitutional court decided on this case on October 3, 2013, and will be discussed in Annex I.2.

Balanced Budget Rule    
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Austria? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

 A balanced budget rule had already existed prior to the signature of the Fiscal Compact. It had been introduced on December 29, 2011 and commits Austria on the federal level to a maximum structural deficit of 0.35% of the GDP with exceptions foreseen for extraordinary fluctuation of business cycles and natural catastrophes.[8] Further, agreements with the provinces and the municipalities have to be made so that they also comply with the limit.[9] It was introduced as simple law by simple majorities because it did not get enough votes (2/3) to pass as law in constitutional rank.[10] The debate whether this was sufficient to comply with Art. 3 (2) TSCG continued and will be discussed in question IX.5.

Debate Balanced Budget Rule     
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The debate about the deficit ceiling was rather intense. The governing parties SPÖ and ÖVP wanted the law introducing such a limit (see question IX.4) to pass in constitutional rank, with a 2/3 majority. In the plenary session of the National Council, it did not get the necessary majority, which is why it was sent back to the Constitutional Committee and then passed as simple law in the plenary.[11]

The governing parties favoured the debt ceiling for several reasons. The biggest reason was that when it was negotiated, Austria was afraid of loosing the triple-A rating for its government bonds. The introduction of the debt ceiling, so they thought, would calm down the markets. The opposition parties, in particular the Greens, said that this was mere rhetoric.[12] The Greens point out that the debt ceiling is unnecessary because the Six-Pack already foresees a rather tough deficit reduction. A debt ceiling would be an excuse for the government to push through unpopular reforms. The FPÖ and BZÖ oppose the debt ceiling because of democracy issues and accuse the government of not having any other solutions to avoid the threatening downgrading.

Since Austria was downgraded by Standard and Poor’s on January 15, 2012, the deficit ceiling issue was debated again on January 18, 2012 in the National Council.[13] The debate was requested by the head of the BZÖ.[14] However, none of the parties changed a previous position.

Strong criticism of the Fiscal Compact and in particular the debt ceiling (in its European dimension was articulated in academia though, notably by Oberndorfer[15]. A critique of the Austrian version of the debt ceiling and of the attempt to lift it into constitutional rank provided by Noll.[16]

Relationship BBR and MTO  
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?

The question was raised in the context of the constitutionality of an approval of the TSCG by simple majority (see question IX.3).

Case law        
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

The Austrian Constitutional Court ruled on the constitutionality of the TSCG on October 3, 2013.[17] As opposed to the ESM-judgement that had been rendered upon an application of the FPK-government of the province of Carinthia (see Annex I.2), this application was brought by deputies of all opposition parties. Whereas the ESM was opposed only by the far-right parties FPÖ and BZÖ/FPK, the TSCG was also opposed by the Greens. The major argument of the applicants is that the TSCG is constitution-amending and/or constitution-completing. As a consequence, it would have had to be approved by the 2/3 majorities in the National Council and in the Federal Council.

Non-Eurozone and binding force       
IX.8
Has Austria decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable.

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

No other relevant information.

[1]              Report of the Constitutional Committee of the National Council No. 1881 on the TSCG, from July 2, 2012, at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01881/fname_258130.pdf.

[2]              Stenographic Protocol No. 164, (see section V, footnote 1), p. 198. 

[3]              Federal President’s communication (see section VIII, footnote 12).

[4]              Publication of approval of the TSCG Treaty in BGBL III 2012/17, athttp://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2013_III_17/BGBLA_2013_III_17.pdf.

[5]              Press release on expert hearing on Fiscal Compact from June 28, 2012, http://www.parlament.gv.at/PAKT/PR/JAHR_2012/PK0564/index.shtml.

[6]              Griller, S., Zur verfassungsrechtlichen Bedeutung des Fiskalpaktes, Journal für Rechtspolitik, 177 (2012)

[7]              Potacs, M., Mayer, C., Fiskalpakt verfassungswidrig?, Journal für Rechtspolitik, 140 (2013)

[8]              Debt ceiling” introduced on December 29, 2011, BGBl 150/2011, at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2011_I_150/BGBLA_2011_I_150.pdf; Upper limit on federal guarantees from December 29, 2011, BGBL 149/2011, at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2011_I_149/BGBLA_2011_I_149.pdf

[9]              Press release on debt ceiling debate in the National Council from December 7, 2012, at http://www.parlament.gv.at/PAKT/PR/JAHR_2011/PK1204/

[10]             See section VIII, footnote 19.

[11]             Stenographic Protocol of the National Council’s Session No. 137, XXIV Legislative Period, December 7, 2011, at http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00137/fname_245620.pdf.

[12]             Stenographic Protocol No. 137, see section VIII, footnote 21.

[13]             Stenographic Protocol of the National Council’s Session No. 140, XXIV Legislative Period, January 18, 2012, at http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00140/fname_245459.pdf; Press Release summarizing the session at http://www.parlament.gv.at/PAKT/PR/JAHR_2012/PK0028/.

[14]             Stenographic Protocol No. 140 (cit. supra note 84), Aktuelle Stunde „Genug gezahlt – keine neuen Steuern“; p. 46-70.

[15]             Oberndorfer L., Der Fiskalpakt – Umgehung der „europäischen Verfassung“ und Durchbrechung demokratischer Verfahren?, juridikum 2012, 168;

[16]             Noll A., Schuldenbremse – Vertrottelter Angriff auf die Demokratie, juridikum 2011, 405

[17]             Österreichischer Verfassungsgerichtshof, Decision 1/2013-15, 03.10.2013

Belgium

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties did Belgium encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

At the drafting stage, Belgium indicated it would be unable to implement the article 3(2) obligation of constitutional anchorage because it lacked the necessary two-thirds majority and because of the electoral phase in the constitutional amendment procedure.[1]

As the Council of State noted in its advisory opinion, the TSCG is intimately connected to the T(F)EU and can borrow from the latter normative status vis-à-vis the Belgian Constitution. Article 34 of the Constitution allows the delegation of powers to ‘supra or international’ organisations. Hence, the Council opined that no issues of compatibility between the TSCG and the Belgian Constitution arose.[2]

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

At the federal level, the TSCG was approved on the basis of article 77, 6° of the Constitution, following a bicameral procedure.[3]

There were several difficulties, which can be grouped in three clusters: one on the division of competences in federal Belgium (art. 167 Const.) , one on the role and autonomy of parliament, and one on the implementation of the TSCG. For this latter problem, see infra question IX.4.

The first cluster indicates the question which governments in Belgium have to assent to the TSCG.

The table below indicates the formal approval per parliament:

Level

Assembly

Date of approval
(formal act)

Document nr.

Federal

House

Law of 18 July 2013

53K2830

Senate

5S1939

Regions

Parliament of the Flemish Region

Decree of 21 December 2012

1815

Parliament of the Brussels Region

Ordinance of 20 December 2013

A476

Parliament of the Walloon Region

Decree of 23 December 2013

906[4]

Communities

Parliament of the Frenchspeaking Community Commissions (Brussels)

Decree of 23 December 2013

108

Parliament of the Flemish Community

Idem Flemish Region

Parliament of the Frenchspeaking Community

Decree of 23 December 2013

576

Parliament of the Germanspeaking Community

Decree of 14 October 2013

143

United Assembly of the Community Commissions (Brussels)

Ordinance of 20 December 2013

B84

On the role of parliament, one notable legal obstacle is the constitutional stipulation that “Each year, the House of Representatives approves the final accounts and the budget.” (Article 174 Constitution). As the Council of State observed, the House will have to abide by the TSCG, adhering to a balanced budget, with the automatic correction mechanism.[5] Because the Treaty in article 3(2) in fine explicitly refers to the prerogatives of the national parliaments, the Council of State found the Treaty in compliance with the Constitution.[6]

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

Inspired by Declaration 51 to the Treaty of Lisbon, Belgium has issued a separate declaration to the TSCG[7], concerning the national parliaments.

“Déclaration du Royaume de Belgique relative aux Parlements nationaux

La Belgique précise que, en vertu de son droit constitutionnel, tant la Chambre des représentants que le Sénat du Parlement fédéral que les assemblées parlementaires des communautés et des régions agissent, dans le cadre de leurs compétences, comme composantes du Parlement national au sens du Traité sur la stabilité, la coordination et la gouvernance au sein de l’Union économique et monétaire.”[8]

This means that the automatic correction mechanism as it stems from article 3 TSCG is applicable to all governmental budgets approved by parliamentary bodies in Belgium. All regions and communities have assented to this Treaty by formal act.

However, some regional acts attached certain conditions to the functioning of the automatic correction mechanism: for instance, the Brussels Parliament imposed a social and environmental evaluation of possible budgetary corrections.[9] Moreover, a possible adjustment plan for a deficitary budget should “in no case impinge upon the competence to provide services of general interest of a non-economic nature”. This article will fail in the hypothetical case to protect those services of general interest of a non-economic nature.[10]

The opposition parties Groen and Ecolo submitted a proposal to call for a referendum on the ratification of the TSCG, but this was rejected.[11]

Balanced Budget Rule        
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Belgium? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The Council of State disapproved of a Treaty imposing constitutional amendment. Treaties are assented to by simple parliamentary majority, while constitutional change can only be sanctioned by a two-thirds majority in a two-step process with intervening elections. Thus, the Council of State observed that because article 3(2) TSCG only “proposes” constitutional enshrinement of the balanced budget rule without strictly requiring it, the lawmaker does not impose any obligation on the constitution maker.[12]

The main problem was to ensure that all governments would abide by this rule, even more so because the overall budget of Belgium in the European semester is composed of “entity I” (federal state) and “entity II” (regions and communities) with political coordination, but no formal legal mechanism to resolve disputes. One solution, advocated by the Council of State, is to implement the TSCG obligations through a cooperation agreement between all governmental levels. This solution, which has in fact been chosen, has two advantages: because it is ranked above ordinary law, a cooperation agreement is binding on all parliaments of the levels of government in federal Belgium[13], and involving the regions through a cooperation agreement ensures the compliance with budgetary rules by local governments.[14]

Moreover, the adoption of a constitutional balanced budget rule would be overly rigid, posited the Council of State.[15] The Council deemed the common principles of the Commission to be subject to economic fluctuations.[16] This argument though, fails in my opinion. None of the seven principles put forward by the Commission lack flexibility.[17] Cooperation agreements are usually a matter for the executives. The instrument of cooperation agreements proves a valuable tool for cooperation and coordination in a federal setting. Based in the constitutionally guaranteed autonomy of each level of government, a cooperation agreement may “jointly set up and direct joint services and institutions”, or allow “the joint exercise of competences”, or “the joint development of initiatives” (article 92bis § 1, first paragraph of the Special Act Institutional Reform). Cooperation agreements are to be understood as a form of intrastate treaties, and their legal operation is often analogous to treaty law. The great bulk of cooperation agreements are agreements between the governments of some or all of the levels of government in the Federation. In a few exceptional cases, a purely parliamentary cooperation agreement has been set up.[18] When cooperation agreements touch upon issues reserved for parliaments under the principle of legality, or if they “encumber the Region or Community” or if they impose obligations on citizens, such cooperation agreements need parliamentary approval (article 92bis § 1, second paragraph of the Special Act Institutional Reform). In this case, because the cooperation agreement touches upon budgetary affairs, parliamentary assent was necessary.

The concertation committee is composed of the heads of the executives of the several levels of government and charged with intergovernmental relations.[19] In budgetary affairs, the committee will formally approve and adopt[20] the advice of the High Council for Finance pertaining to the budgetary objectives of the different levels of government.[21] The Secretary for Budgetary Affairs declared in the House committee on financial affairs that:

“The Belgian institutional structure precludes any form of hierarchy between the federal and the substate level. Hence, no level of government can command another level to abide by certain obligations. There is no other solution than cooperation. The cooperation agreement envisages coordination of the budgetary objective of the joint government in the Concertation Committee. The partition of this budgetary objective will be done through a formal decision of this Committee. […] This decision is based on objective evidence, by basing the decision on the advice of the High Council for Finance.”[22]

The cooperation agreement itself[23] essentially repeats the TSCG:

Article 2

§ 1er. Les budgets des parties contractantes doivent s’inscrire dans l’objectif d’équilibre des comptes des administrations publiques inscrit à l’article 3 du Traité.

§ 2. Cette règle est considérée comme respectée pour la Belgique si le solde structurel annuel de l’ensemble des pouvoirs publics atteint l’objectif à moyen terme, ou respecte la trajectoire de convergence vers celui-ci telle que définie dans le Programme de stabilité, la limite inférieure étant un déficit structurel de 0,5 % du PIB.

Cette limite peut cependant être portée à un déficit structurel de maximum 1 % lorsque le rapport entre la dette publique générale et le PIB est sensiblement inférieur à 60 % et que les risques à long terme pour la soutenabilité des finances publiques sont faibles.

§ 3. Un écart temporaire par rapport à l’objectif à moyen terme ou à la trajectoire d’ajustement est uniquement autorisé en cas de circons- tances exceptionnelles.

§ 4. Dans le cadre de la mise à jour du Programme de stabilité, les objectifs budgétaires annuels de l’ensemble des pouvoirs publics définis en termes structurels conformément aux méthodes de la Commission de l’Union européenne sont répartis en termes nominaux et structurels entre les différents niveaux de pouvoir de l’ensemble des pouvoirs publics, en s’appuyant sur un avis de la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances. La Section Besoins de financement des pouvoirs publics du Conseil Supérieur des Finances examinera, à cette occasion, le comportement des pouvoirs locaux en matière d’investissements et tiendra compte de la mise à jour éventuelle de l’objectif à moyen terme.

L’objectif budgétaire global des pouvoirs publics fait l’objet d’une concertation préalable en Comité de concertation. Les parties contractantes s’engagent à faire un effort maximal pour aboutir à un consensus. La fixation en termes nominaux et structurels des objectifs budgétaires individuels des parties contractantes et des pouvoirs locaux devra être approuvée par une décision de Comité de concertation.

Article 3

Chaque partie contractante s’engage à prendre, dans l’exercice de ses compétences et/ou de sa tutelle à leur égard, toutes les mesures nécessaires pour que les pouvoirs locaux respectent les objectifs budgétaires tels qu’établis par l’article 2.

In article 4, the cooperation agreement puts the burden of verification of compliance with this rule with the Section “Public sector borrowing requirements” of the High Council of Finance (see supra VII.5 on the requirement of independence).

Article 4

§ 1er. Chaque année, la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée d’évaluer le respect des engagements pris par les parties contractantes dans le cadre du présent accord de coopération et des décisions du Comité de concertation visées à l’article 2, § 4.

A cette occasion, elle identifie, en cas d’écart constaté dans le résultat des pouvoirs locaux, la part de cet écart découlant de l’impact nouveau des mesures prises par l’Etat fédéral et dont la responsabilité n’incombe dès lors pas aux Régions et Communautés. Elle formule également un avis relatif notamment à l’existence de circonstances exceptionnelles visées à l’article 2, § 3.

§ 2. Si la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances constate un écart important d’une partie contractante par rapport à ses engagements dans le cadre de l’évalua- tion visée au § 1er, la partie contractante concernée est tenue de justifier cet écart et de prendre des mesures immédiates de correction. Les mesures de correction doivent permettre de remédier à l’écart dans un délai de 18 mois, sauf si la réalité économique ou institutionnelle justifie une période plus longue selon l’avis de la Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances. Dans tous les cas, le délai précité ne peut être en contradiction avec un éventuel délai fixé par l’Union européenne à l’égard de la Belgique.

La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée d’émettre un avis sur l’ampleur des mesures de correction à prendre.

§ 3. La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée de vérifier la mise en œuvre des mesures de corrections, visées au § 2, et d’émettre un avis annuel à ce sujet. A cette fin, toutes les données nécessaires à l’exercice de cette mission par le Conseil supérieur des Finances lui seront fournies par les Gouvernements concernés.

§ 4. La Section Besoins de financement des pouvoirs publics du Conseil supérieur des Finances est chargée de procéder à une évaluation globale de l’application du Traité et de l’accord de coopéra- tion par les différents niveaux de pouvoir de l’ensemble des pouvoirs publics belges au plus tard le 31 décembre 2017.

The section public borrowing requirements of the High Council of Finance will monitor the budgetary developments of each level of government, and, should a significant deviation be detected, will start a bilateral procedure between the Section and that level of government.[24]

Article 5 gives the High Council of Finance an additional competence. In the case of a financial sanction taken by the Council in the framework of the excessive debt procedure, the Section “Public sector borrowing requirements” will determine the pro rata defaults of the various governments concerned. Note that article 5 does not apply to possible sanctions imposed by the Court of Justice for non-compliance with article 3 TSCG following the jurisdiction conferred in article 8 TSCG – it only applies to the sanctions ex Regulation 1173/2011.[25] Moreover, no predefined distribution key has been developed. Analogous to the enforcement of transposition of EU directives and the sanctions under article 260 TFEU[26], this may prove a severe future problem, albeit hypothetical for the moment.

Another problem with cooperation agreements is their lack of enforceability.[27]  Legal disputes are theoretically reserved for a specific arbitrage-like court, but such court has never been installed. A solution might be to perceive loyal execution of the cooperation agreement as a part of the principle of federal loyalty, guaranteed in article 143 of the Constitution. In such interpretation, local or regional budgets that violate the cooperation agreement, can be challenged before the Constitutional Court. However, this hypothetical example seems very impractical, consider for instance the effects of a nullification of a governmental budget.

Debate Balanced Budget Rule
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

Several members of parliament noted the unclear definition of ‘exceptional circumstances’.[28]

Relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

No observations made in the parliamentary debates on this particular issue.

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Not yet. Three cases are pending before the Constitutional Court: two appeals challenging the constitutionality of the Federal act approving the TSCG[29], and one appeal specifically challenging the cooperation agreement that implements article 3(2) TSCG.[30] These three appeals are merged, but to date no hearing has been scheduled.[31]

Non-Eurozone and binding force   
IX.8
Has Belgium decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable – Belgium is part of the Euro area.

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

The delayed ratification and implementation, only by the end of 2013, was due to political disagreement. The main pressure to ensure implementation was Council decision 2013/370/EU[32] of 21 June 2013, by which the Council gave notice to Belgium to take measures for deficit reduction under article 126(9) TFEU.

On the cooperation agreement implementing the TSCG, the Commission noted that: “While the agreement represents substantial progress, much will depend on implementation and on the High Council of Finance’s ability to reach a consensus on both medium-term fiscal targets for general government and the distribution of these targets. Additional arrangements might be needed to make targets beyond 2014 binding and coordinate strategies to minimise the negative impact of remaining consolidation efforts.”[33]

[1] See implicitly Parl. Doc. Senate, 2012-13, nr. 1939/1, p.10. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[2] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 47, point 6. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[3] Article 77, 6° reads: “The House and the Senate are equally competent for the laws approving international treaties.”

[4] Because of the asymmetrical nature of the division of competences between the Frenchspeaking Community and the Walloon Region, two decrees contain the assent to the TSCG: nr. 906 (principal assent by Walloon Region), 907 (assent for matters transferred by Frenchspeaking community to the Walloon Region) – see their joint approval on 20 December 2013, Parl. Debates, Walloon Parliament, 20 December 2013, p. 19 ff.

[5] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 53-54. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[6] Id at p. 54.

[7] See on the meaning and significance of Declaration 51 with respect to the Early Warning mechanism on subsidiarity as laid down in Protocol 2 to the TEU: P. Popelier & W. Vandenbruwaene, “The subsidiary mechanism as a tool for inter-level dialogue in Belgium : on ‘regional blindness’ and cooperative flaws” in 7 European constitutional law review (2011), 204-228.

[8] See Parl. Doc. Senate, 2012-13, nr. 1939/1, p.40. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[9] See Articles 4 and 5 of the Ordinance of 20 December 2013 approving the Cooperation Agreement of 13 December 2013.

[10] K. Brams & T. Corthaut, ‘De financiering van de gemeenschappen en de gewesten na de Zesde Staatshervorming – responsabilisering in de schaduw van Europa’ in A. Alen et al. (eds.), Het federale België na de zesde staatshervorming (die Keure 2014) 616.

[11] Parl. Doc. House, 2011-12, nr. 53K2105. http://www.dekamer.be/FLWB/PDF/53/2105/53K2105001.pdf

[12] Advice of the Council of State nr. 51.725/VR of 18 September 2012, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 51, point 8.3.1. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[13] If a cooperation agreement is approved by Parliamentary Act, one can draw an analogy to international treaties and their binding nature based on the adage of pacta sunt servanda. Similarly, the obligation to abide by cooperation agreements follows from federal loyalty (article 143 Constitution).

[14] Regions have the administrative capacity to sanction local governments, or even adopt acts devolving their responsibilities – see article 6 § 1 VIII and article 7 of the Special Act on Institutional Reform. See with more detail the Advice, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 52. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=fr

[15] Advice, Parl. Doc. Senate, 2012-13, nr. 1939/1, p. 53. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1939&VOLGNR=1&LANG=nl

[16] COM(2012)342.

[17] The Advice of the Council of State mentions the ‘future principles to be developed by the Commission’, although COM(2012)342 predates the advice by almost four months.

[18] For instance, on subsidiarity or a parliamentary ombudsman. These matters clearly pertain to the prerogatives of parliaments.

[19] See article 31 of the Ordinary Act on Institutional Reform.

[20] The formal decision of the Conertation Committee is not a legal act. The Council of State in its opinions has always denied the possibility to endow joint institutions with statutory powers through a cooperation agreement. See on this point  Y. Peeters, De plaats van samenwerkingsakkoorden in het constitutioneel kader [The place of cooperation agreements in the constitutional framework] University of Antwerp, doctoral thesis, to be defended 2015, p. 396-401.

[21] See on this L. Buffel & E. Vanalme, “De omzetting van de nieuwe Europese budgettaire regelgeving in België” Service Public Fédéral Finances – Belgique, Bulletin de Documentation, 74ème année, n° 1, 1er trimestre 2014, p. 133-135.

[22] Secretary Chastel responding to question n° 21596 on an internal stability pact: Parl. Doc. , Proceedings, Committee on Financial and Budgatry Affairs, 22 January 2014, p. 5. http://www.dekamer.be/doc/CCRI/pdf/53/ic906.pdf

[23] The French and Dutch version can be found at (link to the Official Journal) http://goo.gl/jzNzAV

[24] See Advice of the High Council of Finance, March 2014, p. 23-24: (in French) http://www.docufin.fgov.be/intersalgfr/hrfcsf/adviezen/PDF/csf_fin_avis_2014_03.pdf

[25] See K. Brams & T. Corthaut, ‘De financiering van de gemeenschappen en de gewesten na de Zesde Staatshervorming – responsabilisering in de schaduw van Europa’ in A. Alen et al. (eds.), Het federale België na de zesde staatshervorming (die Keure 2014) 616.

[26] See ECJ, C-533/11, Commission v. Belgium [2013] ECLI:EU:C:2013:659, for a case where the failed transposition was a regional competence. A commentary (in dutch) is P. Popelier, C. Janssens Christine, W. Vandenbruwaene, “De interne verdeling van financiële sancties op grond van artikel 260 VWEU” in Chroniques de droit publique – Publiekrechtelijke kronieken (2014) p. 59-78. In that case, the political decision on the partition of the fine remains to be taken.

[27] Politically, the cooperation agreement and the concertation committee function: in 2013, the subnational levels of government formally denied to approve the stability program, which they on the contrary did approve in 2014 – see L. Buffel & E. Vanalme, “De omzetting van de nieuwe Europese budgettaire regelgeving in België” Service Public Fédéral Finances – Belgique, Bulletin de Documentation, 74ème année, n° 1, 1er trimestre 2014, p. 134.

[28] Parl. Doc. House, 2012-13, nr. 2830/2, p. 22.

[29] Pending cases nr. 5920 and 5917.

[30] Pending case nr. 5930.

[31] See http://www.const-court.be/cgi/hzap.php?recour=yes&question=yes&lang=nl&start=0&nb=-1#5930

[32] See also the Commission’s recommendation COM((2013)381: point 9 “no significant progress has been made to adjust the fiscal framework in order to ensure that the budgetary targets are binding at the federal and subfederal levels, and increase transparency and accountability across government layers”.

[33] SWD(2014)402, p. 11.

Bulgaria

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Bulgaria encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The difficulties encountered during the negotiations at the EU level were related to the topics of tax harmonisation and the participation of Bulgaria, as a non-Eurozone Member State observer, in the Euro Summits. The position of the Government was generally supportive of the Fiscal Compact as it has been generally with the other Euro-crisis measures. However, the support was not unequivocal. It was subject to retaining the competence to determine the taxes at the national level, that is – no tax harmonisation. Another important point for Bulgaria was the participation of the non-Eurozone Member States in the decision-making under the Fiscal Compact. The compliance with EU law and the inclusion of the EU institutions to the highest extent possible was yet another important point for the Government. Furthermore, the Government wanted to make sure that the Fiscal Compact will not involve financial obligations. Finally, a major part of the position of the Government was opting out of Title IV of the Fiscal Compact.

The main issues that were debated in the National Assembly overlapped to a great extent with the position of the Government. This overlap related to the issues of tax harmonisation, participation in Title IV and its added value, financial obligations stemming from the Fiscal Compact and Bulgaria’s status of participation in the Euro Summit. An additional point of discussion that was not very prominent was on transparency and the level of consultation with and accountability to the National Assembly during the negotiation process.

The position of the Government, unlike in the case of the Euro-Plus Pact, was constructed with increased participation of the National Assembly. This can be explained with, first, the heavy criticisms on the exclusion of the National Assembly before Bulgaria joined the Pact and, second, the fact that the Fiscal Compact was going to take the form of an international agreement, which required a ratification. Nevertheless, the Government was still criticised for not consulting the National Assembly before the meeting on 9 December 2011 when the Eurozone Member States decided to adopt further measures through an international agreement.[1] This criticism was to a certain extent related to the fact that, even though the Prime Minister explicitly stated at the European Council meeting that the decision on participation in the Compact will be taken only after consultations with the National Assembly, he expressed support for the new rules and measures that were discussed.[2]

The criticisms were expressed from representatives of the Blue Coalition, ATAKA and the Coalition for Bulgaria. The leitmotif was that if the National Assembly was consulted beforehand and it gave a clear mandate to the Government to discuss those issues, Bulgaria would have had a stronger position during the discussions. Ivan Kostov (the Blue Coalition) called upon the Government to present a framework position to the National Assembly stating its negotiation position. Otherwise, the Blue Coalition was going to propose a draft Decision which will set out the mandate. The Minister underlined that the process for discussions of the Compact was just beginning and that no decisions were taken for which the National Assembly had to be consulted.

At the 28 December 2011 meeting of the Council of Ministers, a Decision was taken with respect to the participation of Bulgaria in the negotiations.[3] According to this Decision the Council of Ministers (1) approved the expressed intention by the Prime Minister for Bulgaria to participate in the process of preparing a draft International Agreement for Stronger Economic Union after consultations with the National Assembly; (2) approved the draft for the International Agreement as basis for negotiations; and (3) proposed to the National Assembly to approve the participation of Bulgaria in the negotiations on the International Agreement on the basis of Article 86(1) CRB.[4] The verbatim record of the meeting sheds some more light on the Decision. The draft Decision was presented by the Foreign Affairs Minister. He referred to (and as such the Decision was referring to) the version of the draft Agreement that was communicated by the General Secretariat of the Council on 16 December 2011. The Minister also included a preliminary position of Bulgaria. The preliminary position was along two main lines. First, Bulgaria considered that there is a need to further elaborate on the powers and competences of the European Court of Justice (ECJ) under Article 8, Title III of the Agreement. Second, with respect to Title IV it was a priority to have guaranteed the right of the Member States to adopt independently their tax policies. Accordingly, it was going to be insisted that tax harmonisation was expressly excluded from the economic convergence. The Finance Minister added that in the draft agreement there was no mentioning of tax harmonisation which was due to express insistence of Bulgaria and of six other Member States.

The different draft versions of the Fiscal Compact have been discussed with the National Assembly on three occasions behind closed doors – 14 December 2011, 12 and 25 January 2012 but no results from these discussions are publicly available. During the negotiations of the Fiscal Compact, national representatives inquired on Bulgaria’s position on two occasions. The first time, on 13 January 2012, the questions were addressed to the Prime Minister by Martin Dimitrov (the Blue Coalition). Those questions were (1) whether the increased economic coordination meant tax harmonisation; (2) whether guarantees were put in place for Bulgaria not to be bound to pay for the debts of the other Member States; (3) why the draft agreement included an entry-into-force clause which required only 12 ratifications, which was seen to lead to Europe on three speeds. The Prime Minister reiterated that tax harmonisation was never something to which Bulgaria would agree and that Bulgaria was not going to agree to contribute financially to solving the debt problems of richer Member States. No answer to the third question was identified in the statement. The second time, on 20 January 2012, the questions were addressed to the Finance Minister by Georgi Pirinski (Coalition for Bulgaria). Effectively, there was only one question expressing critiques for an alleged lack of consultation with the National Assembly. The point was why the Minister did not consult the National Assembly before sending his letter on 16 January 2012 to the other ECOFIN members in which he expressed position on inter alia Title IV. The answer of the Minister was that the letter was part of the negotiation process with the aim to identify supporters for strengthening the Bulgarian position, nothing else.

Finally, a draft Decision of the National Assembly was indeed proposed by three national representatives from GERB on 24 January 2012. On 25 January the draft Decision was considered by the Committee on European Affairs and Oversight of the European Funds, the Committee on External Policy and Defence and the Committee on Budget and Finance in a joint session.[5] The Report from the joint session approved the participation of Bulgaria in the Fiscal Compact.[6] The operative part of the approved draft Decision contained three cumulative conditions for the participation of Bulgaria in the Compact: (1) Bulgaria will apply the provisions of Title III after the National Assembly ratified the Fiscal Compact; (2) Bulgaria’s participation in the Fiscal Compact does not amount to financial obligations and commitments for harmonisation of tax policies; (3) the Compact will be applied in full only after Bulgaria joins the Eurozone and the derogation under Article 5 of the Act of Accession of Bulgaria and Romania to the European Union is terminated.[7]

The verbatim record again gives further crucial insights.[8] When the draft Decision was presented, it was emphasised that the participation of Bulgaria in the Compact was a historical moment for Bulgaria and Europe. The working version at the time was the version of 19 January 2011. It was mentioned that during the few weeks preceding the Report there were several sessions behind closed doors of the Committees involved discussing the different versions. The Foreign Affairs Minister highlighted that the basic elements of the position of Bulgaria were already fulfilled during the negotiations of the Compact and were reflected in the 19 January working version. Thus, while the draft Decision was meant to set out Bulgaria’s position and mandate in the negotiations of the Fiscal Compact, it becomes clear from the Minister’s statement that the actual negotiation position of Bulgaria had already been formed beforehand.

This position can, to a certain extent, be distilled from the demands that the Foreign Affairs Minister discussed and held to be reflected in the text of the draft Agreement. Several of these demands were related to aligning the Fiscal Compact to EU law and, specifically, preserving the right to follow an independent tax policy and preserving the functioning of the internal market due to its importance for the Bulgarian economy. The other demands were (1) the inclusion of EU institutions, in particular the Commission and the European Parliament; (2) building a clear framework for decision-making within the Compact itself; (3) the exclusion of additional financial obligations for Bulgaria; (4) the inclusion of the possibility for non-Eurozone Member States to participate in the Compact; (5) the assurance that non-Eurozone Member States will be able to participate in meetings of the Eurozone group if new mechanisms were being created, which was rated as a key question for Bulgaria so that it is not excluded from the making of decisions which could influence the rest of the EU.

Then the Minister identified five issues which were still open and provided Bulgaria’s position on some of them. The first issue was on Article 7 and the commitment to support the recommendations of the Commission for finding a violation of the deficit criterion in the framework of the excessive deficit procedure. The position of Bulgaria was in support of the inclusion of the debt criterion as a basis for an infringement procedure. The second issue was on Article 8 concerning the powers of the ECJ to rule on the transposition of the Balanced Budget Rule and the possibility of imposing a sanction of up to 0.1% GDP. The position of Bulgaria was in support of the imposition of sanctions by the ECJ. The third issue was whether there should be an explicit reference in the Compact to the Euro-Plus Pact. The position of Bulgaria was that there should not be any reference. The fourth issue was of the exact participation status (observer, active observer, etc.) of the non-Eurozone Member States and the President of the European Parliament. The fifth issue was on how many and which Member States need to ratify the Compact in order for it to enter into force. Bulgaria’s position was not mentioned on the last two points.

Next, the Finance Minister joined the discussion with several updates from the ECOFIN meeting that took place during the preceding two days (23 and 24 January 2012). The Minister started by saying that the new, seventh, version of the draft agreement was expected the following day and that his comments are about what was to be seen in that new version. With respect to references to the Euro-Plus Pact and harmonisation of direct taxation – those were finally left out as Bulgaria had insisted. With respect to the participation of non-Eurozone Member States, a provision was included saying that they would be invited to all such meetings. With respect to the active observer status of non-Eurozone Member States, Bulgaria strongly insisted on this and did not face opposition from the other Member States. With respect to Article 7, Bulgaria shared the position of Germany, Sweden, the Netherlands and Finland that automatic sanctions should be included which was countered by the position of France, Spain, Belgium, Portugal and Malta.

Consequently, the floor was opened for questions by the Committees’ members. The substantive questions can be grouped as follows: (1) why Bulgaria was going to agree to Title III but not Title IV; (2) what was the idea and the added value of Title IV; (3) did the reference to the ESM in the preamble create financial obligations; (4) what was going to be the impact on the Bulgarian Fiscal Pact? The answers were given by the two Ministers and were the following.

The answer to the first group of questions was that, although the provisions of Title IV seemed general and harmless, for this exact same reason, they could be ‘slippery’. It was unnecessary for Bulgaria to commit to things which could become burdensome in the future. On the second group, the answer was that the idea of Title IV was that it was building upon the so-called Six Pack. It was based on the possibility in the Lisbon Treaty for increased cooperation by allowing the Eurozone Member States to begin an increased cooperation in the coordination of their economic policies. However, the exact added value was not clear as the provisions in the Title IV were changed many times, including the deletion of the tax harmonisation rules. On the third group of questions, the answer was that the reference to the ESM in the preamble did not create financial obligations. On the last group of questions, the answer was that the Bulgarian Fiscal Pact was in part already adopted through the amendment of the LPSB. As regards the other part, which included an amendment to the Constitution, it was stated that the process for the amendment was intentionally slowed down in order to see the end result of the Fiscal Compact and to decide whether the proposed amendment would need to be changed.

After the answers, there were several exchanges with regard to minor changes in the wording of the draft Decision and it was consequently voted upon. The voting was as follows: for the Committee on the European Affairs 11 ‘for’ and 5 ‘abstaining’ for the External Policy Committee 12 ‘for’ and 3 ‘abstaining’ and for the Budgetary Committee 13 ‘for’ and 6 ‘abstaining’. No explanations of the abstaining votes were provided.

 The draft Decision was discussed and adopted in the plenary session of the National Assembly on 27 January 2012.[9] After the draft Decision was presented, the Foreign Affairs Minister focused on six points: (1) aligning the Compact to EU law has been a key issue in order to guarantee the rights as well as the obligations of the Member States and to preserve the community method in the areas of interest for Bulgaria; (2) it was important to preserve the role of the existing institutions without allowing the creation of parallel structures in Europe and this was achieved to a large extent through the inclusion of the Commission and the European Parliament; (3) another key issue was reaching a consensus on the participation of non-Eurozone Member States which will conclude the Compact, such as Bulgaria, in the Euro Summit meetings; (4) the effective functioning of the internal market was guaranteed in the realisation of the increased cooperation; (5) provisions limiting the right to independently set the taxes were excluded; (6) the accession to the Compact was not going to imply financial commitments for Bulgaria. Then the floor was open for questions.

Ivan Kostov (the Blue Coalition) supported the Decision and the progress made during the negotiations. However, he suggested that Bulgaria should push further on two points. First, to dispose of the requirement for coordination of major reforms, that was included in Title IV. Mr Kostov suggested that the imposition of this requirement was redundant when talking about the observance of the rules for the stability of the Euro. Secondly, Bulgaria must become an observer at the Euro Summit. Martin Dimitrov (the Blue Coalition) made an interesting statement on the observance of the rules in the Compact. In particular, he suggested that the creation of an organ within the National Assembly that is operated by the opposition with the task to keep track on whether the rules were observed. However, this suggestion was not substantiated at all and was not even considered by the other participants in the debates.

Rumen Ovcharov (Coalition for Bulgaria) expressed several criticisms. He criticised the Compact for not putting the responsibility to the Member States that were responsible for the crisis and for not giving preferences to Member States, like Bulgaria, which followed strict fiscal discipline. Mr Ovcharov also repeated his question from the Committees’ meeting – why Bulgaria rejects Title IV if the tax harmonisation provisions were deleted and even if they were not? The last statement on tax harmonisation spurred a lot of criticisms against Mr Ovcharov stating that the tax harmonisation could be the worst possible scenario for Bulgaria. During those criticisms, the issue of three-speed Europe (see supra) was raised again. Mr Ovcharov insisted that it was an illusion that not accepting Title IV was better and was going to give a lot more freedom for action to Bulgaria. Plamen Oresharski (Coalition for Bulgaria) stated that the Fiscal Compact was not going to solve anything and as such it was redundant. Mr Ovcharov’s opinion that Bulgaria had to accept Title IV was voiced also by Sergei Stanishev (Coalition for Bulgaria).

Aliosman Imamov (DPS) started by pointing out the advantages of the Fiscal Compact – the enforcement mechanisms for the non-complying Member States. He also suggested that Bulgaria should accept Title IV as well and proposed the deletion of the limitation to the possible negotiated positions included in the draft Decision. Ventsislav Lakov (ATAKA), effectively, also proposed the removal of the limitations for negotiations but for different reasons. In his opinion, the idea of the Fiscal Compact was that the people of Europe pay for the deals of the rich. He also said that that with the draft Decision the Bulgarian tax system is getting carved in stone, which also means that the poor Bulgarian citizens pay instead of the rich. Nevertheless, he still supported the first point of the draft Decision which was approving the participation of Bulgaria in the negotiations.

Several other statements were made by national representatives but no substantively new points were introduced and, after a few minor editing proposals were made, the draft was put to a vote. The voting en bloque was 129 ‘for’ 1 ‘against’ and 48 ‘abstaining’.[10] It is interesting to note, however, that when the draft Decision was voted part by part, all 181 present and voting voted ‘for’ on the point of the Decision approving the Bulgarian participation in the negotiations. No explanations of the negative or abstaining votes were provided. After this the draft of the Compact was mentioned a few times during the report of the Prime Minister on10 February 2012 to the National Assembly on the development of the priority topics and files during the Polish and Danish Presidencies. However, no substantive debate on that point was made.[11] Finally, in view of the reached consensus on the text of the Fiscal Compact within the European Council meeting on 30 January, the Council of Ministers decided on 29 February 2012 to empower the Prime Minister to sign the Fiscal Compact.[12]

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

After looking at the debates on the negotiation of the Fiscal Compact one is left with the feeling that the ratification was going to follow soon after the agreement was concluded. However, this did not happen and no particular reason for this was found during the research.[13] The ratification process started at the Council of Ministers. With reference to Article 15(1) LIA, the Council of Ministers adopted a Decision in which it approved the Fiscal Compact and proposed to the National Assembly to ratify the agreement with a Declaration under Article 14(5) of the Fiscal Compact.[14] The ratification was proposed on the basis of Article 85(1) subparagraphs 5, 7 and 8 CRB. Those provisions relate to the mandatory ratification powers of the National Assembly to ratify international agreements which “envisage the state’s participation in international arbitration or legal proceedings”, “affect the action of the law or require new legislation in order to be enforced” and “expressly require ratification”, respectively.

The ratification proposal was submitted to the National Assembly on 11 November 2013 and the draft ratification law was discussed in the Committees on Foreign Policy, on the Committee on European Affairs and Oversight of the European Funds and on Budget and Finance of which the latter was the leading one. All three Committees in their reports proposed to the National Assembly to ratify the Fiscal Compact. The National Assembly considered the proposed draft law in its plenary session on 28 November 2013. The National Assembly approved the proposal and ratified the Fiscal Compact. It conjoined the two voting procedures within the same session, on the basis of Article 76(2) of the then applicable version of the Rules,[15] as there were no amendments proposed to the draft law. Finally, the law ratifying the Fiscal Compact was promulgated in the SG[16] by the President on the basis of Article 98(4) CRB on 3 December 2013,[17] as is the procedure for any other law.

There was no involvement of the BCC during the ratification process or after it. Furthermore, no referendum was convened, although during the debates on 27 January 2012 Sergei Stanishev, after referring to a statement by the Czech Republic, stated that this option should not be ruled out as this was a serious issue. Considering that the Government during the ratification was composed of a minority coalition, the bigger part of which was from the party of Mr Stanishev, who was also still its leader at the time, if he and his party considered the matter so important, there were all the preconditions for convening a referendum. However, considering the raging protests against that Government at that very same time this would have been ‘the last nail in the coffin’, which inevitably came during the European Parliament elections in the spring of 2014.

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

The ratification of the Fiscal Compact took place on 28 November 2013 and went through fairly easy and straightforward without encountering particular political or legal difficulties. However, there were a few things this author finds interesting to note. Firstly, in the verbatim record of the Council of Ministers meeting on 6 November 2013,[18] when the ratification was proposed, a comment was made on why Bulgaria had not already ratified, with an accusatory rhetoric to the previous Government. It is interesting because it was again Mr Stanishev who, in his 27 January 2012 comment, suggested that Bulgaria should not be swift with the ratification after the Compact was concluded.

In the Committees, it is interesting to note that in the Report of the Committee on the European Affairs the provisions of the CRB cited were Article 85(1) subparagraphs 1, 5, 7 and 8 thereof. That is, Article 85(1)(1) was included and it was replicated in the Report when presented in the National Assembly. This provision refers to international agreements which are of a political or military nature. However, the fact that there was no mentioning whatsoever on the constitutional basis in that regard seems to suggest that it was a typo.[19] As regards the voting, it shows as well the lack of difficulties with 17 ‘for’ and 1 ‘abstaining’ in the Committee on the European Affairs, 14 ‘for’ and 2 ‘abstaining’ in the Committee on Foreign Policy and 16 ‘for’ without negative or abstaining votes in the Committee on Budget and Finances. No explanations of the abstaining votes were provided.

In the National Assembly, an interesting comment was made by the President of the Committee on Foreign Policy after he presented the Report. He suggested that the Government formally sought a greater (than simple) majority for the ratification of the agreement. He referred to Article 85(1)(9) CRB which provides for a qualified two-thirds majority for transfer-of-competence agreements to the EU. The Government did not base the ratification on that provision because it was not required since Bulgaria preserved the right to form its own tax policy. However, the Committee President suggested that with this agreement the National Assembly lost powers with respect to adopting the State budget and its implementation. Be that as it may, he clarified that he was not making a formal proposal for changing the ratification procedure. Instead, he was focusing the attention on the importance of the agreement being ratified and its implications on the powers of the Government and the National Assembly. In the absence of other statements the ratification went to a vote. The voting was 114 ‘for’ and 9 ‘abstaining’ on the first reading and 109 ‘for’ and 5 ‘abstaining’ on the second reading.[20] No explanations of the abstaining votes were provided.

Balanced Budget Rule  
 IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Bulgaria? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The CRB did not contain a Balanced Budget Rule before the Euro crisis. There was, however, a proposal for the amendment of the CRB in that respect which failed to attract the support it needed. This is further explained in Question III.2. In order to comply with the provisions of Article 3(2) of the Fiscal Compact Balanced Budget Rules were nevertheless introduced in the Bulgarian legal order. The first round of these rules was introduced in the amendments to the LPSB, discussed above. However, with the Fiscal Compact a further amendment was needed. Considering the need for implementation of the Six-Pack, which is also discussed above, a new law was made (the LPF, discussed in the answers to the Six-Pack Questions). The LPF, next to implementing the Six-Pack, implemented also Title III of the Fiscal Compact, as it transpires from its explanations. In particular, the Balanced Budget Rules are contained mainly in Article 23 and to a certain extent in Article 25 LPF. Article 23 implements the 0.5% and 1% structural deficit rules but by putting a 40% limitation on the debt, as it was included in the LPSB. Article 25 LPF implements Article 3(1)(a) of the Fiscal Compact as well as the 3% deficit rule, which is mentioned in the preamble of the Fiscal Compact. The draft law on the Fiscal Council (see the answer to Question VII.5) elaborates further on the adoption and implementation of corrective mechanisms and explicitly states in its miscellaneous provision that it also implements requirements under Title III of the Fiscal Compact.

Accordingly, considering the wording of Article 3(2) of the Fiscal Compact it is barely respected. The laws discussed supra are not of constitutional character. They are permanent only in the sense that there is no temporal limitation put on them ab initio but they can be changed by another majority in the National Assembly. The Balanced Budget Rules being laid down in the LPF are, indeed, at the moment guaranteed “to be fully respected and adhered to throughout the national budgetary process”. However, time will show, considering the volatile political situation in Bulgaria which is explained in Question I.1, for how long Bulgaria will keep its part of the bargain.[21]  

Debate balanced Budget Rule    
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

One of the arguments for the participation of Bulgaria in the Fiscal Compact was that the Balanced Budget Rule is not going to negatively affect Bulgaria.[22] It was stated that Bulgaria can participate without the need to make cardinal changes in its policy or additional sacrifices.[23] As such the position of the Government was that the Balanced Budget Rule will continue the already established practice in Bulgaria; will indicate stability of the Bulgarian economy to the markets; and will be an opportunity for Bulgaria to be among the best performing Member States within the EU. The implementation of the Balanced Budget Rule through the LPF was the object of certain critiques from the opposition – Coalition for Bulgaria and DPS – during the first reading of the draft Law in the National Assembly on 15 November 2012.[24] The resulting critique was that these numerical indicators should not be included in the law that lays down the fundamentals for the creation of the State Budget. Firstly, it was argued, that Bulgaria never went beyond the 40% debt so there was no need to include it. Secondly, it was argued that the economic environment should dictate the fiscal policy and not the other way around. Those fiscal indicators, it was argued, should be determined by the Government depending on the economic and social environment. These critiques were not commented on by the majority.

relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?

The relationship between the Balanced Budget Rule of Article 3(1)(b) of the Fiscal Compact and the MTO rule in the Six-Pack was not discussed at the National Assembly. While there were certain discussions on the Balanced Budget Rule and the soundness of its numerical expression in the Bulgarian legislation, there were no references to the MTO.

Case law
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Neither of the two has been litigated at the BCC.

Non-Eurozone and binding force       
IX.8
Has Bulgaria decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Bulgaria is not bound by Title IV of the Fiscal Compact until it joins the Eurozone. See the answers to Questions IX.1 and IX.2.

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

No other relevant information.

[1] National Assembly, Stenographic record of the 297th meeting, 14 December 2011.

[2] It appears from the verbatim record of the Council of Ministers’ meeting on 7 December 2011 that Bulgaria’s position on the point of economic policy was going to be ascertained at the European Council meeting itself, after being presented with an analysis of an intermediary report of President Van Rompuy and considering the proposals of France and Germany in the area of economic governance, strengthening of the fiscal control, harmonisation of the policies in the Eurozone framework and other elements.

[3] Council of Ministers, Decision № 964 on Approval of Draft International Agreement for Stronger Economic Union of 30 December 2011.

[4] Ibid.

[5] It is worth mentioning that on the very same day the Council of Ministers convened and adopted a Report concerning the approval of the position of the Republic of Bulgaria for participation in the European Council meeting on 30 January 2012, without waiting for the formal approval by the National Assembly of the Decision. The Report is not publicly available and the verbatim record of the meeting only states that the Report was adopted.

[6] Committee on European Affairs and Oversight of the European Funds, Report of 25 January 2012.

[7] The derogation in question is the one under Article 122 TEC, today Article 140 TFEU.

[8] Committee on European Affairs and Oversight of the European Funds, Protocol № 89 of 25 January 2012.

[9] 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 of 27 January 2012, SG 10 of 3 February 2012.

[10] In favour – GERB (101), the Blue Coalition (11), and independents (17); against ATAKA (1); abstaining Coalition for Bulgaria (27), DPS (18) and ATAKA (3).

[11] See the discussion on 10 February 2012 in the context of the Euro-Plus Pact.

[12] Council of Ministers, Protocol № 8 of 29 February 2012.

[13] When the procedure was started, from the Member States that signed the Compact, it was only Bulgaria and Belgium that had not ratified it.

[14] Council of Ministers, Decision № 692 for a proposal to the National Assembly to ratify the [Fiscal Compact] of 11 November 2013.

[15] Rules for the Organisation and the Activity of the National Assembly, SG 58 of 27 July 2009, as amended, SG 60 of 30 July 2009, SG 98 of 11 December 2009, SG 100 of 15 December 2009, SG 43 of 8 June 2010.

[16] Law for the ratification of the [Fiscal Compact], SG 106 of 10 December 2013.

[17] Presidential Decree № 240 of 3 December 2013, SG 106 of 10 December 2013.

[18] Council of Ministers, Stenographic record of the meeting on 6 November 2013.

[19] The constitutional bases are in principle not being mentioned in the ratification law itself (although one could wonder why). As such this cannot be crosschecked.

[20] In favour – GERB (30), Coalition for Bulgaria (63), DPS (21); abstaining GERB (2) and ATAKA (7). In the second vote the abstaining were only from ATAKA.

[21] The fact that the LPF can be changed with a simple majority was also pointed out by Qnaki Stoilov in the National Assembly session on 28 November 2013, when the Compact was ratified.

[22] Stenographic record of Committee on European Affairs and Oversight of the European Funds, Protocol № 89 of 25 January 2012.

[23] Ibid.

[24] National Assembly, Stenographic record of the 410th meeting, 15 November 2012.

Croatia

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).  
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.  
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Croatia encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

Croatia has not (yet) adopted the Fiscal Compact. No particular fiscal rules as required by the fiscal Compact exist in the Croatian Constitution. Croatia has only got its own Croatian Law on Fiscal Responsibility adopted in 2010 which entered into force on 1 January 2011,[1] but it is only an ordinary law since it is neither a part of the Croatian Constitution nor it is a law with constitutional legal strength.

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

The Fiscal Compact has not been ratified in Croatia since it is not a Member State. However, Croatian leaders have pointed out (such as current Croatian President of Government Zoran Milanovic) that Croatia will respect the rules of the Fiscal Compact even before 1 July 2013 when Croatia will join the European Union.[2] No evidence of this could be found in practice.

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

Croatia has not ratified the Fiscal Compact and it is not known whether at all, and if yes, when Croatia will accede to the Fiscal Compact.

Balanced Budget Rule          
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Croatia? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

In case Croatia becomes a member of the euro area and would decide to become a party to the Fiscal Compact, it would have to amend its Constitution or adopt a constitutional law.

Debate Balanced Budget Rule   
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

No discussions on that issue can be found.

The repeated question on the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process in case of Croatia can be only answered by pointing out that Croatia will be the new member as of 1 July 2013, and it will accept the rules as they have already been agreed by other Member States. On 1 July, Croatia became eligible to accede to the Fiscal Compact, but it is not known whether at all, and if yes, when Croatia will accede to the Fiscal Compact.

Relationship BBR and MTO     
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

No evidence on that issue.     

Case law          
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Not applicable.

Non-Eurozone and binding force    
IX.8
Has Croatia decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

No information on that for Croatia.

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

Not applicable.

[1] Official Gazette of Croatia No 139/2010

[2]  http://www.business.hr/ekonomija/hrvatsko-pristupanje-fiskalnom-paktu-eu-super-odluka-ili-vezanje-ruku

Cyprus

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).  
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.  
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Cyprus encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The government’s (at the time AKEL – leftish/communist party) agreement to the Fiscal Compact was often contradicted by AKEL’s sporadic criticism of the ‘Europe of austerity and fiscal discipline’ in the parliament of Cyprus and public speeches.[1] The Fiscal Compact was not brought for discussion before the Parliament as it was ratified through a governmental decree without the involvement of the Parliament.

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

The Fiscal Compact was approved and agreed under Article 169(1) of the Cypriot Constitution, by an Act of the Council of Ministers (governmental decree) on 20 April 2012, without a vote in the Parliament. It was later ratified and published in the Official Journal of the Republic of Cyprus (Official Journal of the Republic of Cyprus 4157/ 29 June 2012) upon the Cypriot Council of Ministers’ decision, in accordance with Article 169 (3) of the Constitution, in Greek and in English. The ratification was completed by the notification to the Council of the EU on 3 July 2012.

Article 169 of the Cypriot Constitution stipulates that :

Subject to the provisions of Article 50 and paragraph 3 of Article 57-(1) every international agreement with a foreign State or any International Organisation relating to commercial matters, economic co-operation (including payments and credit) and modus vivendi shall be concluded under a decision of the Council of Ministers; 

(2) any other treaty, convention or international agreement shall be negotiated and signed under a decision of the Council of Ministers and shall only be operative and binding on the Republic when approved by a law made by the House of Representatives whereupon it shall be concluded; 

(3) treaties, conventions and agreements concluded in accordance with the foregoing provisions of this Article shall have, as from their publication in the official Gazette of the Republic, superior force to any municipal law on condition that such treaties, conventions and agreements are applied by the other party thereto.[2]  

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

Neither political nor legal difficulties were encountered as the Fiscal Compact was agreed and approved by an Act of the Council of Ministers and was later ratified by the Cypriot Council of Ministers’ decision, and thus without the involvement of the Parliament in accordance with Art. 169 (1) of the Constitution of the Republic of Cyprus (see also questions VII.1 and VII.2).

Balanced Budget Rule          
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Cyprus? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The previous government, led by the AKEL party,[3] has been contemplating already since April 2012 a constitutional amendment in order to comply with the implementing ‘constitutional provision’ the Fiscal Compact prescribes.

Currently the balanced budget rule is incorporated in the Law 194 (I) of 2012 on the regulation of the Medium Budgetary Framework and Budgetary Rules, under Art. 13 (5) – (9) (see also under Question 57 on the discussion of the Constitutional amendment).

Debate Balanced Budget Rule   
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The main issue debated in the Parliament in relation to the Fiscal Compact and the Balanced Budget Rule was the need to proceed to a constitutional amendment in order to transpose the Balanced Budget Rule.

Before the discussion in the Parliament, in the Parliamentary Committee of Finance and Budget the same issue arose.[4] During the discussion of the Draft Bill (eventually Law 194(I) of 2012) in the Parliamentarian Committee on 11 December 2012 the president of the Committee, Nikolas Papadopoulos, and some members noted that the supremacy of the relevant law over any other laws should be safeguarded. For that reason it should be vested with constitutional power. Such a power would function, in these members of the Committee’s view, as a shield against any potential pressures to the Parliament that would be exercised before the examination and discussion of each Budget Bill. The delegate of the Ministry of Finance noted that he had been informed by the representative of the Republic’s Legal Service (also present at the discussion) that such an inclusion in the Constitution could result in constitutional problems.  The representative, following also the Legal Service representative’s suggestion, added that the Parliament maintains its alienable right to reject any budget (bill) that does not comply with the provisions and aims of the Draft Bill and as such prescribing constitutional status to the Bill not only would it create constitutional problems, but it would also be redundant.[5]

The representative of the Legal Service continued in the framework of the discussion on the Draft Bill before the Parliamentarian Committee that any immediate attempt to amend the Constitution in such a tight time framework might lead to mistakes, as has happened in the past. As such the plenary session concluded that any constitutional amendment remains a highly political issue that has to be preceded by serious and long discussion and should be left for the future.

In the plenary session of 12 December 2012, in the House of Parliament,[6] it was noted that the representative of the Legal Service of the Republic of Cyprus (whose opinion is not publically available, but was referred to during the discussion) suggested that the Troika gave more emphasis to the immediate enactment of the Draft Bill (i.e. eventually Law 194 (I) of 2012 transposing the Balanced Budget rule and the Fiscal Compact) – which was sent to both the European Commission and the IMF for observations, and not to an immediate constitutional amendment. A constitutional amendment, according to the Legal Service of the Republic of Cyprus, does not constitute a condition by the Troika for a (later) financial assistance to Cyprus.

The fact that the ratification of the Fiscal Compact was a prerequisite for a Member State to be considered eligible to apply for financial assistance from the European Stability Mechanism in conjunction with the fact that Cyprus was already contemplating such assistance from mid-2012, facilitated the implementation of the Fiscal Compact/Balanced Budget Rule.

Relationship BBR and MTO     
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question V.10)?

Not applicable.          

Case law          
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

No such judgment exists so far.

Non-Eurozone and binding force    
IX.8
Has Cyprus decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Cyprus is a Eurozone Member State.

 

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

Not applicable.

[1] See also G. Charalambous, European Integration and the Communist Dilemma: Communist Party Responses to Europe in Greece, Cyprus and Italy (Ashgate 2013), p. 110 ff.

[2] Translation from: http://www.presidency.gov.cy/presidency/presidency.nsf/all/1003AEDD83EED9C7C225756F0023C6AD/$file/CY_Constitution.pdf)

[3] AKEL was succeeded in government by the party ‘Democratic Rally/Democratikos Synagermos’ on 28 February 2013.

[4] For the report of the Parliamentarian Committee’s discussion see: http://www2.parliament.cy/parliamentgr/008_05e/008_05_3858.htm

[5] Free translation from the report of the Parliamentarian Committee’s discussion: http://www2.parliament.cy/parliamentgr/008_05e/008_05_3858.htm

[6] http://www2.parliament.cy/parliamentgr/008_01_01/008_01_IB.htm, under the plenary session of 12-12-12.

Czech Republic

IX      Fiscal Compact

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.  
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did the Czech Republic encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

When the U.K. vetoed the original Franco-German proposal to include a fiscal compact into the Treaties during the December 8-9, 2011 European Council, the Czech Republic alongside Sweden and Hungary appeared to initially back the UK. However, instead of supporting the U.K. veto, the Czech Republic and the two other countries only made a reservation to the summit results stating they would have to consult their parliaments first.[1] The Czech Republic continued in the negotiations and decided finally not to sign the Fiscal Compact early in February 2012. In a press release, the Government explained: “Prime Minister Petr Nečas clearly declared that he will not commit to signing the compact before he can be confident that he will be able to fulfill this commitment… According to the Czech Prime Minister there has also been a form of abuse in that [the text was modified] directly at the meeting of the heads of state or government of the EU Member States, which they then immediately afterwards bindingly vote on, without the possibility for proper reading, analysis and evaluation.”[2] Two content-based issues were raised at this stage: on Article 7 (the commitment to support proposals of the Commission was considered as “a massive change in the operation of the EU”, which must be refused in principle, although it applies to Eurozone members only) and on inadequate conditions for participation at the Eurozone summits.[3] Legal memorandum of the Government (prepared, however, later, in April 2012) raised concerns on the chosen form of international treaty (“highly problematic and unprecedented”), the use of EU institutions (Treaty that stays outside the EU framework cannot extend powers of the EU institutions), the transfers of sovereign powers (the government concluded that the Treaty transfers new powers to a special “international institutions” created by the Treaty; with a result that constitutional majority is needed for its ratification), and the extent in which the Treaty changes the original commitment of the CR given in the Accession Treaty of 2003 to join the Eurozone).[4]

The internal political dynamics was once again affected by a strong opposition from then President Klaus towards the Fiscal Compact. While TOP 09 (junior government party, represented by Foreign Minister Karel Schwarzenberg and Minister of Finance Miroslav Kalousek) backed the Fiscal Compact (almost unconditionally[5] ) already during the negotiations, the Civic Democrats (represented by then Prime Minister Petr Nečas) were rather sceptical towards the idea.[6] Eurosceptic fraction in the Civic Democrats (among others, MEP for the Civic Democrats and chairman of the European Conservatives and Reformists group in the European Parliament Jan Zahradil) connected to the founder of the party and then President Václav Klaus, exercised a strong influence over the Party in EU matters incited by strong announcement of President Klaus that he would block any such move. On Jan. 11, 2012, President Klaus sent an official letter to the Prime Minister “informing him that he will refuse to sign any legislation that would relinquish any Czech sovereign powers over budgetary and fiscal policy to the EU.”[7] While PM Nečas attempted to gain time, TOP 09 threatened to leave the government if the Czech Republic does not participate in the Fiscal Compact. A government crisis in April 2012 (see the overview of the Czech politics during the period this study covers in the answer to question I.1) pushed the disagreements on the Fiscal Compact on the side lines.

The major opposition party (Social Democrats) supported the Fiscal Compact and was furious that the Government did not discuss its intention not to sign it with the Parliament. The parliamentary rules of procedure adopted in connection with the Lisbon Treaty, however, requires the Government to ask for preliminary consent for its position at the European Council only, first, when the EC acts within the EU Treaties, and second when the Government aims to give consent to a measure (the rules do not provide for a situation when the Government intents to disagree with a proposal at the EC).[8]

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

CR is not a party to the Fiscal Compact. Before CR decided not to sign the Fiscal Compact, Civic Democrats supported ratification in a referendum, while TOP 09 would most probably urge for a Parliamentary ratification only. Then President Klaus clearly stated he would not ratify the Compact. In February 2014, PM Sobotka pledged to sign the Fiscal Compact with President Zeman supporting the move.

The Czech legal academic discussion focused on whether the Fiscal Compact means a (i) transfer of competences on (ii) an international organization or international institution. The Fiscal Compact has been found to create new competences, in particular the commitment of contracting parties to supporting the proposals and recommendations of the Commission prepared within the excessive deficit procedure (Article 7).[9] At this same time, the Fiscal Compact contains decision-making rules that as consequence create a specific international institution consisting in cooperation between the Commission and the contracting parties. The conclusion is that the Fiscal Compact creates some new competences to an international institution within the excessive deficit procedure that goes beyond the mandate of the TFEU, the Protocol on the Excessive Deficit, and the Stability and the Growth Pact[10] , rather than implementing competences already transferred to the EU by the Czech Republic by its ratification of the 2003 Accession Treaty and the Lisbon Treaty. As a consequence, the Fiscal Compact requires ratification by the three-fifth majority of both chambers of the Parliament or in a referendum.[11]

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

CR is not a party to the Fiscal Compact. For the discussion on constitutional basis for ratification see above.

Balanced Budget Rule      
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in the Czech Republic? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

CR is not a party to the Fiscal Compact. However, the Government agreed to a constitutional amendment on fiscal responsibility (Fiscal Constitution), the legislative process currently stayed.

Debate Balanced Budget Rule 
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

CR is not a party to the Fiscal Compact.

Relationship BBR and MTO     
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question V.10)?

CR is not a party to the Fiscal Compact. Based on the current MTO, the balanced budget shall be reached by 2017. However, recent debates suggest that this target is too ambitious and it will be revised. The predicted deficit for 2014-16 is 2.9, 2.8, and 2.8% GDP respectively and so to reach balanced budget in 2017 (that is to decrease the deficit from 2.8 to 0.5%) is improbable.

Case law  
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

No.

Non-Eurozone and binding force  
IX.8
Has the Czech Republic decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

No.

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

Not applicable            .

[1] Europe’s great divorce, Charlemagne, The Economist, Dec. 9, 2011, http://www.economist.com/blogs/charlemagne/2011/12/britain-and-eu-summit. David Cameron blocks EU treaty with veto, casting Britain adrift in Europe, The Guardian, Dec. 9, 2011, http://www.theguardian.com/world/2011/dec/09/david-cameron-blocks-eu-treaty.

[2] Government of the Czech Republic, The main arguments of Prime Minister Petr Nečas regarding why the Czech Republic has not committed to ratification of the fiscal compact, Press release, Feb. 6, 2012, http://www.vlada.cz/en/media-centrum/tiskove-zpravy/the-main-arguments-of-prime-minister-petr-necas-regarding-why-the-czech-republic-has-not-committed-to-ratification-of-the-fiscal-compact-92710/ (in English).

[3] The text only ensures restricted participation for non-eurozone members at summits on specific subjects. It of course does not say who will stipulate and interpret the subjects in advance. It is the opinion of the Prime Minister that all the countries that have committed to adopting the euro should, as standard, be invited as observers (of course without voting rights) to all summits if their commitment is to be valid.” Ibid.

[4] Memorandum of the Department for European Affairs of the Office of the Government of the Czech Republic, that is a leading analysis for the Government legal position, April 2012, http://www.vlada.cz/assets/evropske-zalezitosti/dokumenty/Analyza-UV-final.pdf.

[5] Given their strong support even before the final text emerged.

[6] TOP 09 leader Schwarzenberg declared “We will position ourselves as a clearly pro-European party, which adheres to deeper European integration, and will try to lead the country into the mainstream [of the integration process]. We are no EU-grovelers, but with our position towards Europe we are fundamentally different from the euro-hesitant go euroskeptic Civic Democrats (ODS).” Česká pozice (Czech Position), EU budgetary integration threatens to topple Czech coalition, Jan. 12, 2012, quoting Czech daily Lidové noviny, available at: http://www.ceskapozice.cz/en/news/politics-policy/eu-budgetary-integration-threatens-topple-czech-coalition.

[7] Ibid.

[8] Sec. 109i of the Act No. 90/1995 Coll. on the Rules of Procedure of the Chamber of Deputies of the Parliament. Available at: http://www.zakonyprolidi.cz/cs/1995-90#cast15A.

[9] Arts. 3, 4 and 5, on the other hand, do not create new competences beyond what is mandated by the existing EU Treaties. Gerloch, A., Povaha Smlouvy o stabilitě, koordinaci a správě v Hospodářské a měnové unii sjednávané mezi zeměmi Eurozóny z hlediska požadavků stanovených ústavním pořádkem České republiky na proces její ratifikace, Acta Universitatis Carolinae – Iuridica, 2012, 99-108,

[10] See the conclusions of the Memorandum of the Department for European Affairs of the Office of the Government of the Czech Republic, that is a leading analysis for the Government legal position, April 2012, http://www.vlada.cz/assets/evropske-zalezitosti/dokumenty/Analyza-UV-final.pdf.

[11] Gerloch, A., Povaha Smlouvy o stabilitě, koordinaci a správě v Hospodářské a měnové unii sjednávané mezi zeměmi Eurozóny z hlediska požadavků stanovených ústavním pořádkem České republiky na proces její ratifikace, Acta Universitatis Carolinae – Iuridica, 2012, 99-108, at 104.

Finland

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).        
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.   
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Finland encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The Finnish Government informed the Parliament about the Treaty on 22 December 2011 (E 122/2011 vp, memorandum, followed by four additional memoranda informing about the negotiations and possible alternatives). In principle, the Government positively welcomed the new Treaty even if (and because) it was considered that it included many provisions which were already part of Union legislation. The development of automatic mechanisms was deemed necessary. The Government underlined the need for new strengthened governance structures and the importance of greater supervision as regards the achievement of economic policy goals. These features, it was believed, would contribute to the introduction of a more credible coordination of the economic policies of the Member States. The Government stressed the importance of as many Member States as possible joining the new Treaty. It was also considered important that the Commission formed a part of the supervision system under the Treaty. The Government did however express concern relating to the relationship of the Treaty with the Union Treaty system and stressed that this relationship should be coherent.

In the debates concerning the Treaty, it was argued that the Fiscal Compact underlines the Member States’ own responsibility for their fiscal and budgetary politics within the EMU framework. Although the provisions of the Fiscal Compact limit the budgetary powers of the Parliament, and these limitations were considered significant as such by the Constitutional Law Committee of the Parliament (PeVL 37/2012 vp of 4 of December 2012), when comparing these obligations with those previously contained in the Treaties and the Growth and Stability Pact, the Fiscal Compact was not considered by the Committee to result in constitutionally significant, additional limitations to the budgetary powers of the Parliament. The argument was that the contribution of the Fiscal Compact is to provide greater guarantees for the implementation of the duties which already existed based on earlier commitments.

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

The Government proposal relating to the ratification and for the adoption of relevant legislation which was deemed necessary for its application (No 155/2012 vp, talous- ja rahaliiton vakaudesta, yhteensovittamisesta sekä ohjauksesta ja hallinnasta tehdyn sopimuksen hyväksymisestä sekä laiksi sopimuksen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta ja sopimuksen soveltamisesta sekä julkisen talouden monivuotisia kehyksiä koskevista vaatimuksista) was presented to the Parliament on 9 November 2012. It was announced in the Parliament on the same day and sent to the Committees of the Parliament on 13 November 2012. After the Committee consideration it was returned to the Plenary following the relevant procedures, and was discussed there on 13–14 and 17–18 December. The included acts were approved on 18 December 2012 (aye 139 – no 38). The President signed the laws Laki talous- ja rahaliiton vakaudesta, yhteensovittamisesta sekä ohjauksesta ja hallinnasta tehdyn sopimuksen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta ja sopimuksen soveltamisesta sekä julkisen talouden monivuotisia kehyksiä koskevista vaatimuksista (No. 869/2012 and Laki valtiontalouden tarkastusvirastosta annetun lain 1 §:n muuttamisesta No 870/2012) on 21 December 2012 and they entered into force on 1 January 2013 based on a Decree of the Government (No 1030/2012). The same legislative package also included amendments to the act on the National Audit Office (No 870/2012).

The Treaty was approved by the Parliament according to Section 94.1 of the Constitution of Finland. (Sec. 94.1, first sentence: “The acceptance of the Parliament is required for such treaties and other international obligations that contain provisions of a legislative nature, are otherwise significant, or otherwise require approval by the Parliament under this Constitution.) The provisions of the Treaty, in so far as they were considered to be of a legislative nature, were brought into force through an Act (Nos. 869/2012 and 870/2012) and the remaining parts through a Government Decree (No 1030/2012).

As the Treaty did not confer any significant new competences to the Union, it could be brought into force by a simple majority of votes.

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

As was anticipated, the True Finns opposed the Treaty categorically. However, they were also joined by voices on the Government side, most notably the Foreign Minister, who described the Treaty to be negotiated both as unnecessary and harmful and argued that the plans for a fiscal, economic and political union drafted by the heads of the Commission, Council, European Central Bank and Euro group were not to be trusted (see Euobserver, ‘Finland: We Have to Prepare for Euro Breakup’, 17 Aug. 2012, <http://euobserver.com/economic/117259>). This was major news in Finland.

Such opposition was linked to general anti-Union feelings, and concerns relating to the further integration and tightening of the EMU, in particular fears relating to budgetary discipline forced on the Member States from the outside. It is unclear to what extent such concerns were perceived as involving also Finland – in no way an unrealistic alternative – or whether they were seen to link exclusively to ‘other’ Member States namely those considered being under more severe distress.

Balanced Budget Rule     
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Finland? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The requirement included in some previous drafts of the Fiscal Compact to include the guarantees included in the Constitution would have caused serious difficulties in Finland: a provision in an international agreement specifically obligating a State to amend its constitution certainly appeared as an extremely foreign idea. Instead, in Finland, the aim of the Fiscal Compact was not seen to require an amendment to the Constitution. The balanced budget rules of the Treaty were introduced in a regular Act of the Parliament (Law on talous- ja rahaliiton vakaudesta, yhteensovittamisesta sekä ohjauksesta ja hallinnasta tehdyn sopimuksen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta ja sopimuksen soveltamisesta sekä julkisen talouden monivuotisia kehyksiä koskevista vaatimuksista, No. 869/2012), which is of course substantively linked to the international law governed Treaty relating to the European Union, which can be seen as offering it more importance.

Therefore, instead of a constitutional amendment, the correction mechanism was built on duties of reporting and informing between the Government and the Parliament (Section 4 in above mentioned Law), including a plan for how the deviations will be corrected by the end of the following year. The mechanism includes three stages. The Government first has the choice of adopting pre-emptive corrective measures at its own initiative. If the problem persists and Finland receives a recommendation by the Council, the Government needs to consider giving a report to the Parliament. If the Council establishes that Finland has not taken sufficient measures, a statement must be given to the Parliament. The procedure builds on Section 44 of the Constitution, which enables the Government to present a statement or report to the Parliament ’on a matter relating to the governance of the country or its international relations’. The consideration of the statement always ends with a vote of confidence in the Parliament. The Finnish version of the correction mechanism exceptionally limits the discretion of the Government to choose between a statement and a report. Since the constitutional system provided no relevant alternative, this was deemed possible, and was further justified by how the Section 44 procedure enables the participation of the Parliament in a significant debate and decision-making on economic politics.

Debate Balanced Budget Rule     
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

Since the obligation was deemed possible to fulfil through the adoption of an ordinary Act of Parliament and the prerogatives of the Parliament were supposedly not affected, the Parliament ultimately approved the adoption of a mechanism, chosen on the basis of considerations relating to the widening of the jurisdiction of the Court of Justice of the European Union, the supervision of the obligations in the Treaty and thus a slight widening of the Court’s competence in the area of economic policy. These were not deemed significant enough by the Constitutional Law Committee (PeVL 37/2012 vp) to affect the choice of national procedure for approving and bringing the agreement into force.

Relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

In the national debate, it was stressed that the Treaty builds on and contributes to the previously adopted six-pack legislation by making the supervision of budgetary commitments more effective. For the considerations relating to the Finnish ratification of the Treaty it was important that the European Union had already exercised competence by regulating these matters through the six-pack. There has been no public debate about the relationship between the balanced budget rule of the Fiscal Compact and the Medium term budgetary objective in the six-pack.

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

See in general about the absence of a constitutional court in Finland and about the ex ante consideration of crisis measures by the Constitutional Law Committee of parliament, question IV.5. For the Constitutional Law Committee’s findings on the Fiscal Compact, see questions IX.1.

Non-Eurozone and binding force 
IX.8
Has Finland decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable, since Finland is a member of the Eurozone.

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

Not applicable.

Estonia

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.  
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Estonia encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

No difficulties were encountered.

In the negotiations, the Estonian delegation proceeded from the Government’s political agenda for the years 2011-2015, as well as the mandate given for the European Council of December 2011 and the meetings of the Eurozone heads of states and governments. The position of the Government was presented in the Government White Book of January 2012.[1] The White Book was submitted to the Riigikogu for an opinion and approval under § 1521 subsection 2 of the Riigikogu Rules of Procedure and Internal Rules Act.

Pursuant to the White Book, the Conclusions of the European Council of December 2011 as regards strengthening the euro and concluding a new fiscal compact treaty, are in conformity with the EU policy principles and objectives of the Government as laid out in the framework document “Estonia’s European Union Policy 2011-2015”. According to the framework document, Estonia is open to the deepening of EU’s competences along with the strengthening of the Community method. A strong and well-functioning eurozone is necessary for securing Estonia’s economic development and economic security. Estonia supports a speedy introduction of the fiscal compact treaty into the EU legal framework, including primary law.

Estonia supports adopting a balanced budget rule in all EU Member States. Estonia wishes that the margin of allowed structural deficit of 5% of the GDP were interpreted as a maximum. In addition, Estonia supports fixing sovereign debt level to 60% and setting a more ambitious debt reduction rate to countries with a higher level of debt (faster than 1/20th of debt that exceeds the 60% margin). Estonia prefers the balanced budget requirement to be inserted in the base legislation on national budgets that is binding and of a stable nature (i.e. not an annual state budget act. The coalition party Pro Patria and Res Publica Union made a proposal in 2010 to include a budgetary balance requirement into the Constitution but the other coalition party, the Reform Party preferred a solution in which the balanced budget rule would be inserted into the State Budget Act.[2]

Estonia supports granting the Court of Justice competence to review whether the Member States have fulfilled the obligation of adopting in their legal orders the requirement of a balanced budget.

Already in the reform of the stability and growth pact, Estonia has supported (more) automatic decision-making in budgetary deficit and sovereign debt cases, and more severe surveillance procedures.

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

According to Foreign Relations Act § 20 clauses 2 and 6 and Constitution § 121 sub-subsections 2 and 5, if the implementation of the treaty requires the passage, amendment or repeal of Acts of the Republic of Estonia and if ratification is prescribed in the treaty the treaty needs to be ratified by the Riigikogu. The ratification of the Fiscal Compact requires amendments to be made to the State Budget Act and ratification is also foreseen in the Fiscal Compact Treaty. A simple majority of votes in the Riigikogu is required.

The Fiscal Compact was ratified by the Riigikogu on 17 October 2012 by 63 votes in favour, none against, no abstentions.

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

No political or legal difficulties were encountered during the ratification procedure in the Riigikogu.

Balanced Budget Rule      
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Estonia? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The provisions of the Fiscal Compact Treaty as concerns conditions on the state budget will be introduced into the State Budget Act rather than the Constitution.

The amendment is being prepared by the Ministry of Finance and is planned to be adopted in 2014.[3]

Debate Balanced Budget Rule 
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The principle of budgetary balance has been one of the foundations of Estonia’s economic policy already before joining the European Union. A deficit-free budget should be an objective of economic policy in itself and where necessary, future occurrences of a deficit should be hindered by legal means. At the beginning of 2012, Estonian laws did not provide for a balanced budget rule but the Government recognises the need for it in order to secure stability in economic growth and long-term budgetary balance with sufficient reserves.[4]

According to the chairman of the Finance Committee of the Riigikogu, the ESM Treaty is in compliance with the Constitution as a balanced budget requirement does not impede the functioning of sovereignty as a fundamental principle of the Constitution.[5] There was no debate in Parliament on whether an amendment of the Constitution would be more appropriate.

Relationship BBR and MTO     
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

 

No positions.

Case law  
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

No.

Non-Eurozone and binding force  
IX.8
Has Estonia decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable, Estonia is a member of the Eurozone.

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

Not applicable.

[1] White Book: Overview of the suggestions on strengthening the eurozone and the positions of Estonia, 19 January 2012.

[2] “Tasakaalunõue jõuab baasseadusesse”, ERR News, 13.09.2010.

[3] Riigikogu debate on 17 October 2012.

[4] White book, supra note 6, p. 10.

[5] Second reading of the Bill on Ratification of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (249 SE) Riigikogu, 17 October 2012.

France

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did France encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The Fiscal Compact was arguably the most controversial of the anti-crisis instruments in France.

The discussions linked to the negotiation and ratification of the Fiscal Compact have known two main lines of development in France, as Presidential elections and a change of majority in the Parliament modified the dynamics of adoption of this instrument in between the time of its signature and the time of its ratification. The fact appears to be of particular relevance to the discussions on the Fiscal Compact, as the ratification of this Treaty became an issue in the Presidential elections, taking place between April and May 2012. Left candidate and future President François Hollande (PS) promised to renegotiate the Fiscal Compact if elected against his right-wing opponent (UMP), then- President Nicolas Sarkozy (see also question I.1).  Thus, the discussions of the Treaty should be differentiated as to under which Presidency they took place. During the Sarkozy Presidency, the Fiscal Compact was presented by the government as one of the two pillars of a twofold approach combining, on the one hand, “solidarity” with the ESM, and on the other hand “discipline” and insurance that reforms are made for fiscal consolidation, with the Fiscal Compact[1]. The Fiscal Compact was also presented as a balanced instrument, as it included in its article 9 references to “growth”, “employment” and “competitiveness”.

The Sarkozy Presidency

The right-wing Government favoured the idea of amending the Constitution, in order to introduce the “golden rule” required by the Fiscal Compact, rather than writing it down in an organic law[2] (see also question IX.4). It was also stressed that France was the one that authored the proposition of a golden rule at national level[3]. However, it is likely that France’s endorsement of the idea of a national golden rule was also the result a compromise between, on the one hand, the German position in favour of facilitating sanctions to enforce fiscal discipline as well as a stronger role given to the CJEU; and, on the other hand, the position that President Sarkozy appears to have taken at the European Council, in favour of more intergovernmental solutions, favouring national modes of enforcement of budgetary discipline[4].

Thus, in the discussions and the presentation of the text by the right-wing majority, the emphasis was put on the national dimension of the golden rule: national constitutional courts should be able to review the balance of the national budgets; the European Court of Justice should only be able to review whether or not the golden rule had been introduced into national law[5].

Stricter measures against excessive structural deficit were presented by the right-wing majority as having been proven necessary by the past practices of both France and Germany, which overlooked their commitments under the Stability and Growth Pact[6].

However, the debates on the Fiscal Compact crystalized much of the criticism regarding the handling of the euro-zone crisis so far – especially on the point of the emphasis put on fiscal discipline (“austerity”) in comparison with concerns over growth and stimulation of the economy. In this regard, the refusal of the Fiscal Compact constituted one of the core elements of criticism towards the ESM Treaty as well, because of the “political link” existing between the two treaties (see also Section 5 on the ESM Treaty).

The main points of criticism from the centre-left (PS), when it was still in the opposition, followed these lines. They were set out, in particular, in a proposal for a Parliamentary resolution that was eventually rejected by the then-majority[7]. In the document, the Fiscal Compact was depicted as un-balanced, with insufficient reference to growth and no teeth regarding fiscal and social harmonisation.

The Fiscal Compact was also described as presenting a democratic deficit: an intergovernmental instrument, it was established outside the framework for EU Treaty revision, which provided defined roles to the EU institutions and the national parliaments. Moreover, national parliaments were said to be given an insufficient role as regards the budgetary competences to be governed by common rules. A threat was perceived that intergovernmental instruments constituted a regression, when compared to the existing safeguards to the role of both the European and national parliament(s) set out in the “Six-pack”[8].

Finally, the need for the Fiscal Compact was contested, as a golden rule already existed in the Stability and Growth Pact; and as a Constitutional revision in 2008 already equipped France with Programming Acts setting multiannual guidelines for public finances.

The Hollande Presidency

The election of centre-left-wing François Hollande to the Presidency led to a shift in the interpretation of the Fiscal Compact, which was shouldered by a decision of the Conseil Constitutionnel (Decision n° 2012-653 DC of 9 August 2012[9], see question IX.7) enabling a flexible reading of article 3 of the Fiscal Compact on the “golden rule” requiring balanced budgets. According to this reading, the option was open to write this requirement down in an organic law (“institutional law”), rather than through constitutional amendment (see also question IX.7). Overall, the new majority undertook to set out the elements of the Fiscal Compact allowing for a flexible reading of its requirements of fiscal discipline[10] (see also question IX.3).

Renegotiation of the Fiscal Compact was a promise made by candidate Hollande during the presidential elections. Once elected, he appears to have negotiated with his European partners that the Fiscal Compact be complemented and thus rebalanced with other instruments and measures.  Presented as the outcome of these discussions, four elements of the negotiations at the European Council on 28 and 29 June 2012 were brought forward by the new majority as a more acceptable overall normative setting, allowing for the ratification of the Fiscal Compact – under its new and more flexible interpretation. First, a Growth and Jobs Pact, focusing on stimulating the economy, in particular through the reallocation of unused European structural funds (55bn euros) and a raise of the lending capacity of the European Investment Bank (10bn euros). Second, steps were taken towards the creation of a tax on financial transactions, through an initiative for strengthened cooperation involving several European Member States. Third, progress was made towards the creation of a Banking Union, starting with banking supervision. Finally, President Hollande argued in favour of a more flexible use of the EFSF/EMS in order to aid States and European banks facing financing difficulties, with a view to deepen European solidarity[11].

If the right-wing opposition continued to support the adoption and ratification of the Fiscal Compact, praising especially the absence of competence for the European Court of Justice to control national budgets, it however deplored that the option was taken not to enshrine the “golden rule” in the Constitution, but in an organic law; it also considered as of little actual significance the new developments achieved by the new President at the European Council, considering the Growth and Jobs Pact as an insufficient instrument regarding the stimulation of the economy[12]. This last analysis was shared and held even more strongly by the ecologists and the far left, who voted eventually against the ratification of the Fiscal Compact (see question IX.3).

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

Signed on March 2, 2012 by former President Sarkozy, the Fiscal compact Treaty was submitted to the French Constitutional Council by new President François Hollande on July 13, 2012, on the basis of art.54 of the Constitution.

Art.54 disposes that “if the Constitutional Council, on a referral from the President of the Republic, from the Prime Minister, from the President of one or the other Houses, or from sixty Members of the National Assembly or sixty Senators, has held that an international undertaking contains a clause contrary to the Constitution, authorization to ratify or approve the international undertaking involved may be given only after amending the Constitution.”[13]

French Conseil Constitutionel decision n°2012-653 DC of 9 August 2012 recognises that the ratification of the Fiscal Compact, including the obligation to enshrine the balanced budget rule in national law, does not require the Constitution to be changed [14] (see also question IX.7)

The ratification of the Fiscal Compact was then submitted as an Act, through an “accelerated procedure”, by the President of the Republic to the vote of both Houses of the Parliament. Under article 53 of the Constitution, “Peace Treaties, Trade agreements, treaties or agreements relating to an international organization, those committing the finances of the State, those modifying provisions which are the preserve of statute law, those relating to the status of persons, and those involving the ceding, exchanging or acquiring of territory, may be ratified or approved only by an Act of Parliament”. As the Fiscal Compact modifies provisions “which are the preserve of statute law”, it has to be ratified through an Act of Parliament[15].

An “accelerated procedure” (see annex) was used, which shortens the procedure of adoption of the Act, in particular by limiting the number of readings of the Act to one in each House[16]. Adopted by both Houses after one reading, the Act authorising the ratification of the Fiscal Compact Treaty was published in the Official Journal on October 23, 2012[17].

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

The Fiscal Compact was ratified with a view to interpret it in a different way as compared to its initial understanding by former President Sarkozy – that is to say, as obliging France to amend its Constitution in order to constrain financial Acts with binding rules on budgetary balance[18].  As the text itself did not change between the time it was negotiated by the right-wing government and the time it was reinterpreted by the centre-left government, its ratification was adopted by a large majority including both UMP and PS votes.[19]
The interpretation made of the Fiscal Compact by the new government – according to which amending the Constitution was not necessary to comply with the requirements of the Fiscal Compact – was authorized by a judgement of the Conseil Constitutionnel in Decision n° 2012-653 DC of 9 August 2012[20] (see question IX.7) Overall, the new majority undertook a narrow reading of the obligations set by the Fiscal Compact, so as to see how they could be limited in scope (this concerned e.g. the theoretical nature of the risk of CJEU review and sanction, imprecision of the definition of “structural deficit”, a potential broad understanding of “exceptional circumstances”, and possibilities to be given extensions for the reduction of budget a deficit)[21].

Opposition to the ratification included the far left, for which this new interpretation of the Fiscal Compact was not sufficient and which preferred a clear rejection of crisis instruments focused on austerity[22]. The ecologists also voted, in majority, against the ratification, insisting that a more demanding vision of Europe was needed at a time of increasing risk of recession in Europe, and that austerity policies should be reconsidered[23].  Other opponents to the ratification invoked, in particular, the Fiscal Compact as infringing national sovereignty in budgetary matters[24], or as threatening the freedom of administration of local authorities[25].

It should be noted, however, that the centre-left majority started to stress more the merits of the Fiscal Compact once its new interpretation had set aside the idea of a constitutional “golden rule”. It was described as an “opportunity to be seized” to strengthen the powers of the French Parliament on budgetary matters. In particular, the creation of an independent body to assess the economic forecasts of the government, as well as the new duties of information and of justification for economic assessments and previsions in the Budget Acts and Programming Acts, were said to be likely to increase the quality and the independence of the information available to the Parliament to control governmental budget proposals[26].

Moreover, the Fiscal Compact, in line with the Two Pack and the European Semester, would open up a possibility for the French Parliament to expand its role in budgetary matters.  With the European Semester and the continuous production of analyses and recommendations on the public accounts, for the first time, the Parliament would be able to take part in debates preceding budget proposals, whereas its traditional role was to discuss these proposals only once they were formed by the Government[27]. According to the centre-left majority, these euro-crisis instruments’ main effect would be to oblige governments to always give justifications for their choices.

The far left was however sceptic regarding the democratic nature of these developments, arguing in favour of a greater role of the European Parliament in EU economic and political governance, and for a referendum on the Fiscal Compact, so that citizens would have a say on the developments of the EU[28].

Balanced Budget Rule        
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in France? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

As confirmed by the Decision n° 2012-653 DC of the Conseil Constitutionnel on August 9, 2012, amendment of the Constitution was not necessary to comply with article 3(2) of the Fiscal Compact[29] (see also question IX.7). The new French Government undertook to implement the Balanced Budget Rule in an Organic Law on the Programming and Governance of Public Finances[30]. Organic laws determine the modalities of application of ordinary laws in areas restrictively determined by the Constitution[31] (see also question II.1).

Following a constitutional amendment in 2008[32], Article 34 of the Constitutions already provided for an “objective of balanced budget”: “The multiannual guidelines for public finances shall be established by Programming Acts. They shall contribute to achieving the objective of balanced accounts for public administrations[33]”. The binding nature of such an objective may however have appeared limited[34].

As confirmed by Decision n° 2012-653 DC of the Conseil Constitutionnel on August 9, 2012, amending the Constitution was not necessary to comply with article 3(2) of the Fiscal Compact[35] (see also question IX.7). The new French Government undertook to implement the Balanced Budget Rule in the Organic law on the Programming and Governance of Public Finances (also hereafter “the Organic law”)[36], completing and leading to modifications to the Organic Law on Budget Acts (hereafter “the LOLF”)[37].

The Organic Law on the Programming and Governance of Public Finances was adopted through an accelerated procedure, which allows for only one reading in both Houses of the Parliament (see also Annex). However, as both Houses provided amendments (the National Assembly on 10 October 2012; the Senate on 30 October 2012), and according to the accelerated procedure, the final draft was transferred to a joint committee (“commission mixte paritaire” – CMP), a commission gathering MPs from both Houses with the objective to harmonise their positions and agree on a common text. Meeting on 8 November 2012[38], the CMP agreed on a final draft that was eventually voted by both Houses (Assemblée Nationale on 19 November 2012, Senate on 22 November 2012).

In accordance with article 46-5 and article 61-1 of the French Constitution, the Constitutional Council reviews the conformity of organic laws before they are given effect, which led the Constitutional Council to issue Decision 2012-658 DC on 13 December 2012[39], recognising the partial conformity of the organic law to the Constitution (see also question IX.7).

In light of the organic law and of this Decision, the role of the Constitutional Council in the control of Budget Acts and Social Security Financing Acts regarding the Balanced Budget Rule could appear as limited.

First, continuous case law of the Constitutional Council indicated that it would not review the conformity of the Budget Acts and Programming Acts with the Fiscal Compact, as it did not view as its task to control the conformity of a French law with the international commitments of the State[40]. Only the conformity of Budget Acts and Programming Acts with organic laws and with the Constitution would be subject to review[41].

Moreover, the Organic Law on the Programming and Governance of Public Finances essentially made Programming Acts the main vehicle in French law of the requirements of fiscal discipline contained in the Fiscal Compact.. Programming Acts were created by the 2008 Constitutional modification, and were made to set multiannual guidelines for public finances, aiming at balanced accounts for public administrations. The Organic law on the Programming and Governance of Public Finances constrained and specified these Programming Acts in accordance to the Fiscal Compact.

 However, Programming Acts were not by themselves binding on Budget Acts and Social Security Financing Acts. This was confirmed by the Constitutional Council in Decision 2012-658 DC, restating that Programming Acts were not positioned higher in the hierarchy of norms than Budget Acts or Social Security Financing Acts. Therefore, the latter could not be reviewed on the basis of the commitments of fiscal discipline made in the Programming Acts, themselves implementing the commitments made in the Fiscal Compact.

In addition, for Programming Acts to be binding on Budget Acts would be contrary to article 20 of the Constitution according to which “the Government shall determine and conduct the policy of the Nation[42]”, granting freedom of appreciation and adaptation to the government; also it would be contrary to the budgetary prerogatives of the Parliament (§12 of the Decision[43]). This position appears to be in line with the principle according to which the legislator cannot bind itself for the future and can always undo a law previously passed[44].

The Constitutional Council could intervene on the basis of the new Organic Law in the event where the Government would set in a Programming Act a Medium Term Budgetary Objective clearly at odds with the requirements of the Organic Law (an event which seemed more theoretical than plausible in the political context of the discussions)[45] ; or in the event where the Government would stay silent, within the mechanism of correction of public deficit, on the gaps existing between its prevision of deficit reduction and public spending, pointed out by an independent authority, the High Council of Public Finance (“Haut Conseil des Finances Publiques”)[46].

Another route for constitutional review of Budget Acts would be through the control of the respect, in the Programming Acts, of the principle of “faithfulness of public accounts” (“principe de sincérité des comptes publics”) by the Government. Thus, a Government that would deliberately publish unrealistic economic assessments and forecasts in order to appear to fulfil its requirements under the Organic Law could see its Programming Acts annulled by the Conseil Constitutionnel[47]. However, it was underlined during the discussions that such control had been exercised loosely until then[48], no Budget Acts having been ever cancelled on this basis, and a strict criterion of “manifest error of appreciation” having been set by the Council to assess it[49].

Nevertheless, a new element that may hypothetically change this case law appeared in Decision n°2012-658 DC of 13 December 2012: faithfulness of public accounts may be assessed in light (but, as noted by the centre-left-wing majority, not exclusively[50]) of the advice of the High Council of Public Finance[51] (§19 of the Decision)[52].

Debate Balanced Budget Rule
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The national debate on the implementation of the Fiscal Compact shared many features with the debate on its ratification (see also question IX.3). The laws launching both processes were proposed to the Parliament by the centre-left-wing government on the same day, 19 September 2012.

In particular, the arguments over the need for a reorientation of the euro-crisis measures could be found in both cases. Discussions over the extent to which the election to the Presidency of socialist François Hollande, who campaigned for a renegotiation of the Fiscal Compact, brought about significant or sufficient change, were also a common feature of both debates.

The main point of opposition, in both cases, consisted in the former right-wing majority and the centre being in favour of a Constitutional amendment for the implementation of the Balanced Budget Rule, whereas the new centre-left-wing majority chose an interpretation of the Fiscal Compact allowing for its ratification without Constitutional modification and a more flexible understanding of its constraints, through organic legislation, as allowed by the Constitutional Council (Decision n° 2012-653 DC of 9 August 2012).

 Regardless of the interpretation of the Treaty, as the text that was open to ratification was the same as the text that was signed, both former and new majorities agreed on the ratification, while the far left and the ecologists voted against, both seeking a clearer disruption with the line of anti-crisis measures adopted so far. The point of disapproval between the new and the former majority thus appears to have rather born on the implementation of the Treaty through an organic law, together with the degree of flexibility with which the new majority interpreted the instrument. In particular, the right wing former majority did not accept easily that the new majority did not entail in the Organic Law implementing the fiscal compact the numbered objectives of deficit reduction provided for by article 4 of the Fiscal Compact. The position of the centre-left-wing new majority was however that a document of constitutional (or, on the matter, organic) norm should not integrate detailed policy aims, but only principles[53].

It should be noted that once the Treaty was ratified, the ecologists rallied the new centre-left-wing majority for the vote of the Organic Law, arguing that the implementing Organic Law was acceptable as far as it did not implement a golden rule; one additional explaining factor being that they were likely to increase their weight in the discussion of the precise content of the law if they were willing to vote in favour of it in the end[54].

Two different assessments of the constraining qualities of the Organic Law were made during the debates. For the new center-left majority and the ecologists, the text was presented as a flexible and useful tool, for rather informational purposes, helping the Government and the Parliament in the process of drafting and adopting the budget. In the same perspective, the newly created independent body in charge of assessing budget proposals under article 3(2) of the Fiscal Compact, the “Haut conseil des finances publiques” (High Council of Public Finance) would only provide analyses and advice that could not bind the decisions made by democratically elected institutions. The Constitutional Council would not be able to annul a budget on the basis of the objectives of budgetary balance of the Organic Law[55]. Indeed, the Organic Law was perceived as constraining the procedures of budgetary legislation rather than its content (see also question IX.4). In particular, the calculation in structural terms of the deficit was said to be such an uncertain economic assessment that it was very unlikely to give ground firm enough for any constitutional review[56]. The looseness of the review exerted until then on the Budget Acts, Social Security Financing Acts and Programming Acts by the Constitutional Council regarding the principle of faithfulness of public accounts, a principle that was recalled in the Organic Law and in both Decisions n° 2012-653 DC and n°2012-658 DC (see also questions IX.4 and IX.7), was also underlined by the majority[57].

However, this last argument seemed to be less definite within the ranks of the majority, as a report authored by this very majority had elsewhere[58] left open the question of whether the Constitutional Council taking into account the advice of the High Council of Public Finance, for the review of the principle of faithfulness of public accounts, would lead to a change in the case-law towards stricter control.

This question had to do with the second, competing assessment of the constraints arising from the Organic Law, defended essentially by the right-wing former majority, the centre, and the far left. In this other perspective, the review of the principle of faithfulness could be interpreted as being part of a constraining system, binding on the budgetary process in a significant manner. The centre thus held that the Conseil Constitutionnel could, on the basis of the principle of faithfulness of public accounts, annul the macroeconomic forecasts of the government[59]. The former right-wing majority added that if the Organic Law was really without effect on the budgetary process, this would constitute a breach of the Treaty and not a mere interpretation of it; therefore, the mechanism of correction of the public deficit should be taken seriously[60]. The far left shared this analysis, but as a reason to vote against the Organic Law, as it was perceived as constraining the budgetary process. To the far left, the main failure of the Organic Law was that the flexibility it sought was only a flexibility of means to achieve an objective that was itself dogmatic, unchallenged and economically dangerous: reducing public deficit without taking into account the specificities of the various public administrations and of the broader economic and social context[61].

Relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

 


The only position found focusing on this relationship was set out in a report[62] from the centre-left-wing majority pertaining to the ratification of the Fiscal Compact. Otherwise, the Organic law on the Programming and Governance of Public Finances could be said as completing the fulfilment of both the requirements of the Fiscal Compact and of the MTO rule of the Six-Pack. The report stated essentially that the main difference between the Fiscal Compact and the Six-Pack as regards the MTO rule relates to the tightening of the Balanced Budget Rule, setting a MTO of 0.5% GDP of structural deficit instead of 1% deficit in the Six-Pack. With the Fiscal Compact, a 1% GDP deficit would only be acceptable for States achieving to have less than 60% of GDP of debt and when risks pertaining to the sustainability of the debt are low.

The centre-left-wing majority praised in this regard two elements of flexibility regarding the MTO: that the debt be understood in “structural” terms allows for taking into account cyclical factors (“variations conjoncturelles”) in the assessment of debt sustainability; and that “exceptional circumstances” may legitimise deviating from the MTO, the Fiscal Compact giving more precision on the matter than the Six-pack[63].

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

There are four relevant cases, see below for an analysis of each case:       

Decision n° 2012-653 DC of the Constitutional Council, August 9, 2012[64]
(see also under question IX.4).

1.     Name of the Court

Conseil Constitutionnel de la République Française (Constitutional Council of the French Republic)

2.     Parties

N/A.

3.     Type of action/procedure

Review of conformity with the Constitution of a Treaty before ratification, triggered by the President of the Republic under article 54 of the Constitution, in order to decide whether the Constitution must be amended before ratification of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (thereafter “Fiscal Compact”). Article 54 reads:  “If the Constitutional Council, on a referral from the President of the Republic, from the Prime Minister, from the President of one or the other Houses, or from sixty Members of the National Assembly or sixty Senators, has held that an international undertaking contains a clause contrary to the Constitution, authorization to ratify or approve the international undertaking involved may be given only after amending the Constitution”[65]

4.     Admissibility issues

The President is entitled under article 54 of the Constitution to refer to the Constitutional Council in order to determine whether “an international undertaking contains a clause contrary to the Constitution,[in which case] authorization to ratify or approve the international undertaking involved may be given only after amending the Constitution”. The international undertaking at stake is the Fiscal Compact Treaty.

5.     Legally relevant factual situation

France signed the Fiscal Compact Treaty on March 2, 2012. Under article 54 of the French Constitution, the Conseil Constitutionnel decides whether the Constitution must be amended before ratification of the Treaty (see point 3 above).

Article 3(1) and (2) of the Fiscal Compact, in particular, are crucial in the Constitutional Council’s assessment of conformity of the Fiscal Compact with the Constitution.

Article 3(1) of the Fiscal Compact provides that the budget of the States’ public administrations be balanced or positive.

Article 3(2) of the Fiscal Compact provides that the rules for balanced budgets provided for in article 3(1) “take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.

At the time of the decision, and as recalled by the Conseil Constitutionnel, France is already bound by rules for fiscal discipline under EU law (especially article 126 TFEU and Protocol n°12 to the EU Treaties; European regulation of July 7, 1997, modified by two European regulations on June 27, 2005 and November 16, 2011).

6.     Legal questions

The Conseil Constitutionel must determine whether the Fiscal Compact “includes any provision which is anticonstitutional” (§1 of the decision). The CC has to determine in particular whether article 3(2) of the Treaty creates the need for an amendment of the Constitution prior to ratification. The main angle of enquiry consists in deciding whether the Fiscal Compact encroaches upon “essential conditions for the exercise of national sovereignty”.

7.     Arguments of the parties

N/A.

8.     Answer by the Court to the legal questions and legal reasoning of the Court

The Constitutional Council (CC) uses throughout the decision what looks like a form of reservation of interpretation[66] on an international document, to the effect that the provisions of the Fiscal Compact do not run contrary to the Constitution, as long as one out of two options for the fulfilment of its article 3(2) is chosen. The other option is said to encroach upon “essential conditions for the exercise of national sovereignty”. The CC organises its reasoning in five parts.

The first part of the decision (§§1 – 3) states the legal question – whether the Treaty provides a disposition contrary to the Constitution (§1) –, while recalling the commitments of the State in the European construction process (§3). The mention later in §10 of commitments made to that purpose “or which are closely related to this goal” (“ou en étroite coordination avec cette fin”) appears to echo with this reminder, and to imply that while the Fiscal Compact is an international document, the CC considers it in the light of its role in the European legal framework. Moreover, the CC does notice that the Fiscal Compact, under its article 16, is to be integrated in European Law five years after its entry into force (§3 of the decision). 

The second part of the decision (§§4 – 11) deals with the law applicable to the case (“Sur les normes de reference”). France’s commitment towards human rights in its internal order is restated (§4), in particular the principle of national (people’s) sovereignty in article 3 of the French Declaration of the Rights of Man and of the Citizen (DRMC), and the exercise of this sovereignty through representation and referendum, as stated in article 3 of the 1958 French Constitution (§5 of the decision). After mentioning the relationship between French law and international law (§§6 – 7), the CC recalls article 88-1 of the Constitution following which the EU legal order is integrated into the national legal order, and distinct from the international legal order (§8). However, §10 underlines that, in order to ratify commitments signed to the effect of pursuing the goal of European integration and that would “call into question the rights and freedoms guaranteed by the Constitution or run contrary to the essential conditions for the exercise of national sovereignty”, prior amendment of the Constitution is required. Yet, the parts of the Fiscal Compact that are only restating European commitments already made by France are exempt from constitutional review (§11). Commentators of the decision have pointed out, however, that the CC does review “in passing” (§31) the conformity with the Constitution of Regulation 1177/2011 of 8 November 2011, when it assesses that article 4 of the Fiscal Compact (which reproduces in substance the requirements of the Regulation) is not contrary to the Constitution[67].

The third part of the decision (§§12-34, “Sur les stipulations relatives au Pacte Budgétaire”) is the most substantial, and deals with the provisions under Title III of the Treaty on the “Fiscal Compact” – the title that gave the Treaty its common name. The CC starts by stating the provisions of French constitutional and human rights law providing for the prerogatives of the Government and the Parliament in legislative and more specifically budgetary matters (§§12-13). The following question then appears to be whether or not the rules on balanced public finances, especially article 3(1) of the Fiscal Compact, run counter to essential conditions for the exercise of national sovereignty. After taking stock of the already existing EU rules on balanced public finances in §§14-16 (art.120 and 126 TFEU and the annexed Protocol n°12; Regulation of 7 July 1997, amended by Regulations of 27 June 2005 and of 16 November 2011), the CC concludes that the provisions of art.3(1) of the Fiscal Compact only reassert and strengthen commitments already made, that “they do not result in the transfer of any powers over economic or fiscal policy and do not authorise any such transfers”, to the effect that they do not infringe upon these essential conditions (§§14-16).

What is arguably the most complex development of the decision pertains to the scrutiny by the CC of the means by which the rules on balanced public finances of art.3(1) would take effect in French law, through the interpretation of article 3(2) of the Fiscal Compact. After recalling the obligation for the State to abide by the Treaty once ratified, the CC interprets article 3(2) as stipulating an alternative (§19), whereby the rules laid down in article 3(1) “take effect under national law either ‘through provisions of binding force and permanent character, preferably constitutional’ or through provisions ‘otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes’”. On the one hand, the CC recognises that the first option would require introduction in the national legal order of rules that would be binding on Budget Acts and Social Security Financing Acts (§20); such rules would in turn require constitutional amendment, as they would introduce changes to the prerogatives of the Government and Parliament in budgetary matters, as well as to the principle that Budget Acts are to be enacted annually, as derived from art.34 and 47 of the Constitution (§21). On the other hand, the CC considers that the second option offered by article 3(2) of the Fiscal Compact does not require the introduction of binding provisions within the national legal order, the Member States remaining free to determine the provisions sought to have the effects required in article 3(2), while the rules of article 3(1) would not require a guarantee in the national legal order of a higher force than ordinary legislation (§22). Yet, even under the second option offered by the Fiscal Compact, article 3(1) requires that the rules on balanced public finances must have a permanent character and apply to all government services (§23). Moreover, the CC recalls its own continuing role in the review of the respect of the principle of faithfulness in public accounting (§27, also alluded to in §13), and that it would “tak[e] account”, in doing so, “of the opinions of independent institutions established in advance” – such institutions as referred to  under art.3(2) of the Fiscal Compact[68].

The CC then hints at which norm of the national legal order would fit the purpose of fulfilling the requirements of article 3(2) of the Fiscal Compact if the second option set out above were chosen: Programming Acts (§24 and already mentioned by the CC in §13), which have no binding force over Budget Acts or Social Security Financing Acts, may be used to that end. However, The Conseil Constitutionnel still recognizes the need for these norms to be of a “permanent character” (§23), as art.3(2) of the Fiscal Compact states that mechanisms of deficit control are “guaranteed to be fully respected and adhered to throughout the national budgetary processes”. Thus, the Fiscal Compact requirement for a Medium Term Objective, reduction deficit Trajectory, automatic correction mechanism and independent body may be enshrined in an organic law, providing a permanent framework for the Programming Acts that would in turn set the objectives of the Budget Acts and Social Security Financing Acts.

As such a solution allows for the implementation of the Fiscal Compact without constitutional amendment, the CC does not see a reason under article 8 of the Fiscal Compact to allow for the European Court of Justice to review the correct implementation of the Treaty in French Constitutional law (§30) – which would be a control of conformity of the Constitution with a Treaty by the Court of Justice.

After recognizing in the fourth part of the decision that “the other provisions of the Treaty” are not contrary to the Constitution, the CC concludes in the fifth part that the Treaty does not run counter to the Constitution, under the conditions defined in §§21, 28 and 30.

9.     Legal effects of the judgment/decision

The Constitutional Council decided that the Fiscal Compact can be ratified without need of prior change the French Constitution.

10.  Shortly describe the main outcome of the judgment/decision and its broader political implications.

This Decision enabled the new center-left Government to choose to ratify the Fiscal Compact with an interpretation of its fiscal discipline requirements that was flexible than was originally understood by the previous Government, which signed the Treaty. It thus enabled a political change in France, away from tougher understandings of fiscal discipline as a solution to the crisis.

Decision n° 2012-658 DC of the Constitutional Council, December 13, 2012[69]

1.     Name of the Court

 Constitutional Council of the French Republic (Conseil Constitutionnel de la République Française)

2.     Parties

N/A

3.     Type of action/procedure

Obligatory review of conformity with the Constitution of an organic law (“Institutional Act”), triggered by the Prime Minister under articles 46 and 61 of the Constitution.

Article 46: “Acts of Parliament which are defined by the Constitution as being Institutional Acts shall be enacted and amended as provided for hereinafter […]. Institutional Acts shall not be promulgated until the Constitutional Council has declared their conformity with the Constitution”.

Article 61: “Institutional Acts, before their promulgation, Private Members’ Bills mentioned in article 11 before they are submitted to referendum, and the rules of procedure of the Houses of Parliament shall, before coming into force, be referred to the Constitutional Council, which shall rule on their conformity with the Constitution.

To the same end, Acts of Parliament may be referred to the Constitutional Council, before their promulgation, by the President of the Republic, the Prime Minister, the President of the National Assembly, the President of the Senate, sixty Members of the National Assembly or sixty Senators.

In the cases provided for in the two foregoing paragraphs, the Constitutional Council must deliver its ruling within one month. However, at the request of the Government, in cases of urgency, this period shall be reduced to eight days.

In these same cases, referral to the Constitutional Council shall suspend the time allotted for promulgation.[70]

4.     Admissibility issues

Organic laws are to be reviewed by the Constitutional Council before promulgation, under articles 46 and 61 of the Constitution (see point 3 above).

5.     Legally relevant factual situation

The Organic Law on the Programming and Governance of Public Finances followed the ratification by France of the Fiscal Compact. It was meant to implement in French law most of its requirements (see also questions IX.4 and IX.5).

6.     Legal questions

The Constitutional Council had to determine whether the Organic Law was compatible with the Constitution.

7.     Arguments of the parties

N/A.

8.     Answer by the Court to the legal questions and legal reasoning of the Court

The Constitutional Council essentially validated the Organic Law, except for three of its provisions that were ruled unconstitutional, and two others on which the Constitutional Council issued a reservation of interpretation[71].

The core of the decision consisted arguably in its reaffirmation of the prerogatives of the Government and of Parliament in budgetary matters. Therefore, the pluri-annual orientations for public finances defined in Programming Acts  – as defined themselves according to the Organic Law – shall not impair the “freedom of appreciation and adaptation [of the Government…] in the determination and conduct of the policy of the Nation”, nor “the prerogatives of Parliament when it examines and votes the proposals of Budget Acts and the proposals of Social Security Financing Acts […][72]”.

Another particularly important aspect of the decision pertained to the respect of the principle of “faithfulness” in public accounts. The Constitutional Council reaffirmed its power to control whether financial Acts comply with this principle of faithfulness, and declared that in this control it would take into account the works of the newly created High Council of Public Finance. However, the High Council would be but one of the sources used by the Constitutional Council as the basis for this control[73]. The doctrine noted that the principle of faithfulness had never led the Constitutional Council to declare a proposal of financial Act unconstitutional so far[74]; it remains to be seen if the new Organic Law and the Constitutional Council Decision will change this practice.

Two of the provisions ruled unconstitutional in Decision n°2012-658 DC regarded the process of nomination of the members of the High Council of Public Finance, the independence of which had to be reinforced in respect to the executive and legislative branches of the State. The third provision ruled unconstitutional pertained to the order in which the advice of the High Council of Public Finance was to be issued, in respect of the moment of issuance of advice by the Council of State, and in respect of the beginning of Parliamentary examination of proposals of financial Acts. The first reservation of interpretation expressed by the Constitutional Council also deals with this last point. The second reservation of interpretation made clear that Parliament would be able to start discussing the texts of the proposals of financial Acts, even when elements of the information required of these proposals by the new Organic Law would be missing. Thus, refusal to put a proposal of financial Act on the agenda of the Parliament, on the sole motive that it does not fulfil such a requirement of the Organic Law, would not be admissible.

9.     Legal effects of the judgment/decision

 

The decision allowed the Organic Law to be promulgated – except for the parts ruled unconstitutional, and under reservation of interpretation for two provisions.

10.  Shortly describe the main outcome of the judgment/decision and its broader political implications.

The decision stood in the continuity of Decision n° 2012-653 DC of 9 August 2012 on the Fiscal Compact, and accepted the changes introduced by the Organic Law in the budgetary process, while reaffirming the prerogatives of the Government and Parliament in budgetary matters.

Decision n°2012-659 DC of the Constitutional Council, December 13, 2012[75]

1.     Name of the Court

Constitutional Council of the French Republic (Conseil Constitutionnel de la République Française)

2.     Parties

N/A.

3.     Type of action/procedure

Prior Reference to the Constitutional Council over the compatibility of the Social Security Financing Act for 2013 with the Constitution, before its promulgation, as provided for under article 61 of the Constitution: “[…] Acts of Parliament may be referred to the Constitutional Council, before their promulgation, by the President of the Republic, the Prime Minister, the President of the National Assembly, the President of the Senate, sixty Members of the National Assembly or sixty Senators. […]”

4.     Admissibility issues

Reference to the Constitutional Council was made by at least sixty deputies and sixty senators – it was therefore admissible under article 61 of the Constitution (see point 3).

5.     Legally relevant factual situation

Decision n°2012-659 DC was adopted a few days after Decision n° 2012-658 DC of 13 December 2012[76] (see above) on the Organic Law on the Programming and Governance of Public Finances (“the Organic Law”)[77], implementing the Fiscal Compact.

On 9 August 2012, the Constitutional Council had authorised the ratification of the Fiscal Compact without amendment of the Constitution, in Decision n°2012-653 DC[78] (see above).  One of the elements developed by the Constitutional Council in this Decision was the reaffirmation of its power to review financial Acts on the basis of the principle of faithfulness.

6.     Legal questions           

The first point made by the referring (centre and right-wing) deputies pertained to what they considered a breach of the principle of faithfulness in public accounts by the new (centre-left-wing) government[79]. The question was thus to determine whether there had been a breach of the principle of faithfulness in the Social Security Financing Act for 2013, in which case it would have to be declared unconstitutional.

7.     Arguments of the parties       

The referring deputies contested in particular the macroeconomic assessment and forecast made by the government in the Social Security Financing Act for 2013, and compared it with other assessments, such as that of the IMF or of the French Court of Auditors (Cour des Comptes). They also reminded the Constitutional Council of its Decision n°2012-653 DC, as a factor in favour of their interpretation regarding the principle of faithfulness. They contended in particular that Decision n°2012-653 DC should lead to a less restrictive definition of the principle of faithfulness. They however acknowledged the long-standing case-law of the Constitutional Council, according to which it does not review the conformity of French law with international treaties such as the Fiscal Compact.

8.     Answer by the Court to the legal questions and legal reasoning of the Court

On the question of the principle of faithfulness, the Constitutional Council first noted that the provisions of the Organic Law had not entered into force yet (§3).

Then, the Constitutional Council reaffirmed its definition of the principle of faithfulness, which would only be breached if there had been the intent to give a wrong assessment of its previsions of budgetary balance (§4)[80].

Yet, the elements brought to the Constitutional Council did not show an intent to give such a wrong assessment (§5). There was therefore no violation of the principle of faithfulness.

9.     Legal effects of the judgment/decision

The Social Security Financing Act did not breach the principle of faithfulness of public accounts.

10.  Shortly describe the main outcome of the judgment/decision and its broader political implications.

The reference showed the readiness of a part of the Members of Parliament to use the new instruments and decisions that followed the ratification of the Fiscal Compact, in order to constitutionally constrain the budgetary process. However, the Constitutional Council did not yet show a change in its interpretation of the tools available to it for review of financial acts – in this case, the principle of faithfulness of public accounts (see also Décision n° 2013-682 below for further developments).

Decision n°2013-682 DC of the Constitutional Council, December 19, 2013[81]

1.       Name of the Court

Constitutional Council of the French Republic (Conseil Constitutionnel de la République Française)

2.       Parties

N/A.

3.       Type of action/procedure

Prior Reference to the Constitutional Council over the compatibility of the Social Security Financing Act for 2014 to the Constitution, before its promulgation, as provided for under article 61 of the Constitution: “[…] Acts of Parliament may be referred to the Constitutional Council, before their promulgation, by the President of the Republic, the Prime Minister, the President of the National Assembly, the President of the Senate, sixty Members of the National Assembly or sixty Senators. […]”

4.       Admissibility issues

Reference to the Constitutional Council was made by at least sixty deputies or sixty senators (in this case both) – it was therefore admissible under article 61 of the Constitution (see point 3).

5.       Legally relevant factual situation

On 9 August 2012, the Constitutional Council had authorised the ratification of the Fiscal Compact without amendment of the Constitution, in Decision n°2012-653 DC[82] (see above).  One of the elements developed by the Constitutional Council in this Decision was the reaffirmation of its power to review financial Acts on the basis of the principle of faithfulness.

In Decision n° 2012-658 DC of 13 December 2012[83] (see above) on the Organic Law on the Programming and Governance of Public Finances (“the Organic Law”)[84], which implemented the Fiscal Compact, the Constitutional Council reaffirmed its power to control financial Acts on the basis of the principle of faithfulness of public accounts.

The use of this principle of faithfulness had been tested by referring MPs on the Social Security Financing Act for 2013. They were however unsuccessful, in Decision n°2012-659 DC, in having the Constitutional Council declare that the principle of faithfulness had been breached. At the time, the Organic Law had not yet entered into force  – but at the time of the new referral, it had.

6.       Legal questions

The first point made by the referring (centre and right-wing) deputies pertained to what they considered a breach of the principle of faithfulness in public accounts by the (centre-left-wing) government[85]. The question was thus to determine whether there had been a breach of the principle of faithfulness in the Social Security Financing Act for 2014, in which case it would have to be declared unconstitutional.

This question could have a different answer than in Decision n°2012-659 DC, now that the provisions of the Organic Law had entered into force and that the High Council of Public Finance (HCPF) had been set up. Indeed, the Constitutional Council had stated in Decision n°2012-653 DC of 9 August 2012 that, in its review of financial Acts on the basis of the principle of faithfulness, it would take into account the works of this institution.

7.       Arguments of the parties

The referring MPs considered generally that the Social Security Financing Act for 2014 breached France’s commitments on budgetary balance, especially in the Fiscal Compact. They however acknowledged the long-standing case-law of the Constitutional Council, according to which it does not review the conformity of French law with international treaties.

However, they stressed a publication of the HCPF according to which the forecasts of the government for economic growth were “plausible”, yet showing “weaknesses”. Moreover, the referring MPs argued that the latest measures added by the government to the proposal of Social Security Financing Act (measures evaluated at 0,6 billion euros) had not been transmitted to the HCPF, which impeded its ability to issue a fully informed opinion on the previsions of the government regarding budgetary balance[86].

8.       Answer by the Court to the legal questions and legal reasoning of the Court    

The decision issued by the Constitutional Council was very similar to the one reached in Decision n°2012-659 DC: it did not appear from the elements put forward that there had been intention on the part of the government to provide a wrong economic and budgetary assessment in the Social Security Financing Act for 2014 (§5). On the point of the new measures not transmitted to the HCPF, the Constitutional Council observed that the government had proceeded to adequate modifications in the documents of information associated with the Social Security Financing Act (§6). Therefore, there was no breach of the principle of faithfulness.

9.        Legal effects of the judgment/decision    

The Social Security Financing Act for 2014 did not breach the principle of faithfulness of public accounts.

10.    Shortly describe the main outcome of the judgment/decision and its broader political implications

This new reference confirmed the readiness of a part of the Members of Parliament to use the new instruments and decisions that followed the ratification of the Fiscal Compact, in order to constitutionally constrain the budgetary process. However, the Constitutional Council still did not show a change in its interpretation of the tools available to it for review of financial acts – in this case, the principle of faithfulness of public accounts.

Non-Eurozone and binding force   
IX.8
Has France decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable, since France is a member of the Euro Area

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

The Fiscal Compact was not the first attempt at introducing a “Golden Rule” in French constitutional law. In March 2011, the right-wing government tried and failed to have the Parliament adopt a law amending the Constitution for the purposes of budgetary balance[87]. A report by Michel Camdessus[88] had been issued in June 2010[89], and argued for a constitutional change, including (but not limited to) the institution of a “Framework Pluriannual Programming Act for Public Finances” (loi-cadre de programmation pluriannuelle des finances publiques), binding on financial Acts[90]  (which is currently not the case for Programming Act set up by the new Organic Law on the Programming and Governance of Public Finances).

On 16 March 2011, the right-wing government presented to Parliament a proposal for constitutional amendment[91], inspired on several accounts from the Camdessus report. Its main features included importantly a “Framework Act for a Balanced Budget” (lois-cadres d’équilibre des finances publiques), with a pluriannual perspective and binding on financial Acts. Two other modifications of the Constitution were proposed: to ensure a monopoly for financial Acts in matters of mandatory levy (prélèvements obligatoires); and to enshrine in the Constitution the principle of systematic transmission of the Stability programmes to the Parliament before their transmission to the European Commission.

One argument in particular, found in the first Report on the project of constitutional amendment at the National Assembly, justified primarily the adoption of constitutional measures of budgetary control because it was not any more possible to use monetary devaluations – because of the common currency –  to help solve budgetary difficulties[92].

The right-wing and its allies from the centre however could not find the qualified majority required by Article 89 of the Constitution for any vote of a Constitutional amendment by the Parliament gathered in Congress[93], especially not when the majority in the Senate had shifted to the left (see also question I.1).  

The Socialist Party, in particular, refused what it called a manoeuvre aiming at presenting the left as lacking a sense of budgetary responsibility. Instead, democratic elections should take place and give to the people the choice of alternative visions of economic and budgetary policies.

The far left considered the “golden rule” presented by the right-wing government as a constitutionalisation of an “austerity straightjacket”, based on an economic orthodoxy shared by the European institutions[94].

[1] Compte rendu de la Commission des Affaires européennes de l’AN, 7 février 2012 : http://www.assemblee-nationale.fr/13/europe/c-rendus/c0239.asp#P20_1253

[2] Idem. The following centre-left-wing Government, however, decided to take the option of an organic law for its implementation.

[3] Idem.

[4] http://www.assemblee-nationale.fr/14/rapports/r0205.asp

[5] http://www.assemblee-nationale.fr/13/europe/c-rendus/c0239.asp#P20_1253.

[6] Idem.

[7] AN, Commission for European Affairs,  « Proposition de resolution europeenne (no 4196) de M. Jean-Marc Ayrault, Mme Elisabeth Guigou et M. Christophe Caresche et les membres du groupe Socialiste, Radical, Citoyen et Divers Gauche et apparentés, sur la relance européenne et le renforcement du contrôle démocratique », 7 February 2012 – http://www.assemblee-nationale.fr/13/rapports/r4328.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/rapports/r4328.pdf)

[8] Idem. Regulation no 1175 of 16 November 2011 is mentioned.

[9] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-653-dc/decision-n-2012-653-dc-du-09-aout-2012.115444.html

[10] http://www.assemblee-nationale.fr/14/rapports/r0205.asp ; http://www.senat.fr/rap/l12-022/l12-022.html

[11] http://www.assemblee-nationale.fr/14/rapports/r0205.asp; see also Conclusions du Conseil européen des 28 et 29 juin 2012 (EUCO 76/12) : http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/fr/ec/131408.pdf; see also in the newspapers : http://www.lejdd.fr/International/UE/Actualite/Le-Memorandum-de-Francois-Hollande-a-destination-des-pays-de-l-UE-519938; http://www.lemonde.fr/economie/article/2012/06/28/accord-europeen-pour-un-pacte-croissance-de-120-milliards-d-euros_1726687_3234.html

[12] http://www.assemblee-nationale.fr/14/rapports/r0205.asp

[13] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank_mm/anglais/constiution_anglais_oct2009.pdf

[14] http://www.legifrance.gouv.fr/affichJuriConst.do?oldAction=rechJuriConst&idTexte=CONSTEXT000026345630&fastReqId=995021034&fastPos=1

[15] http://www.assemblee-nationale.fr/14/projets/pl0197.asp

[16] http://www.assemblee-nationale.fr/connaissance/fiches_synthese/septembre2012/fiche_32.asp

[17] http://www.legifrance.gouv.fr/affichTexte.do;jsessionid=?cidTexte=JORFTEXT000026526229&dateTexte=&oldAction=rechJO&categorieLien=id

[18] http://www.senat.fr/rap/l12-022/l12-022.html

[19] Votes at the AN:  http://www.assemblee-nationale.fr/14/scrutins/jo0030.asp ; votes at the Senate: http://www.senat.fr/scrutin-public/2012/scr2012-3.html

[20] Rapport for the Finances Commission of the Senate, 9 October 2012: http://www.senat.fr/rap/l12-022/l12-0222.html#toc52

[21]Idem. http://www.senat.fr/rap/l12-022/l12-022.html

[22] http://www.assemblee-nationale.fr/14/cri/2012-2013/20130012.asp#P365_75152

[23] Idem.

[24] http://www.senat.fr/amendements/2012-2013/23/Amdt_1.html; http://www.senat.fr/amendements/2012-2013/23/Amdt_2.html

[25] http://www.senat.fr/amendements/2012-2013/23/Amdt_3.html

[26] http://www.assemblee-nationale.fr/14/rapports/r0205.asp#P1210_179797

[27] Idem.

[28] Idem.

[29] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html

[30] http://www.senat.fr/dossier-legislatif/pjl12-043.html

[31] http://www.senat.fr/role/fiche/loi.html

[32] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/la-constitution/les-revisions-constitutionnelles/revision-constitutionnelle-du-23-juillet-2008.16312.html

[33] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank_mm/anglais/constiution_anglais_oct2009.pdf

[34] Guy Carcassonne, La Constitution, Editions du Seuil, onzième édition (2013), pp.177-178 : « Apparaissent, enfin, des orientations pluriannuelles des finances publiques, définies par des lois de programmation auxquelles est recommandée la vertu : s’inscrire dans le nouvel objectif de valeur constitutionnelle d’équilibre des comptes des administrations publiques. Etrange conception, étrange rédaction. L’on pouvait souhaiter la constitutionnalisation d’une ‘règle d’or budgétaire’ (…). On préféra une formule édulcorée – un simple objectif, non une obligation – et limitée – aux seules administrations publiques plutôt qu’à l’ensemble des charges collectives ».

[35] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-653-dc/decision-n-2012-653-dc-du-09-aout-2012.115444.html

[36] http://www.senat.fr/dossier-legislatif/pjl12-043.html; http://legifrance.gouv.fr/affichTexte.do;jsessionid=880EA47A857F3711785949A673404337.tpdjo13v_2?cidTexte=JORFTEXT000026785259&dateTexte=&oldAction=rechJO&categorieLien=id (pdf : http://legifrance.gouv.fr/jopdf/common/jo_pdf.jsp?numJO=0&dateJO=20121218&numTexte=1&pageDebut=19816&pageFin=19820 )

[37] http://www.legifrance.gouv.fr/affichTexte.do;jsessionid=A66320193C5E585C67BBCC5544239979.tpdjo14v_1?cidTexte=JORFTEXT000000394028&dateTexte=20130616

[38] http://www.senat.fr/rap/l12-115/l12-115.html

[39] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-135388.pdf )

[40] See in particular Decision 54-74 DC of  15 January 1975.

[41] Michel Lascombe, « La nouvelle gouvernance financière », AJDA 2013 p.228, 2013, pp.5-6.

[42] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/constitution/constitution-of-4-october-1958.25742.html

[43] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html ; see also Michel Lascombe, op.cit. p.5.

[44] Conseil Constitutionnel Decision 82-142 DC of 27  July 1982, Loi portant réforme de la planification,  §8, cited in Romain Bourrel, « La validation par le Conseil constitutionnel de la « nouvelle Constitution financière » de la France», AJDA 2013 p.478,  2013, p.2.

[45] http://www.assemblee-nationale.fr/14/rapports/r0244.asp

[46] Michel Lascombe, op.cit., p.10

[47] Loi organique TSCG Rapport Com spéciale AN

[48] Idem.

[49] Romain Bourrel, op.cit. pp.2-3.

[50] Rapport AN loi organique, p.39.

[51] Romain Bourreil, idem.

[52] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html

[53] http://www.assemblee-nationale.fr/14/cri/2012-2013/20130014.asp#P465_92105. See in particular the intervention from Pierre-Alain Muet for the position of the new majority. 

[54] http://www.assemblee-nationale.fr/14/scrutins/jo0032.asp#Groupe%C3%A9cologiste ; http://www.senat.fr/scrutin-public/2012/scr2012-12.html

[55] http://www.assemblee-nationale.fr/14/rapports/r0244.asp

[56] Idem.

[57] Idem.

[58] www.assemblee-nationale.fr/14/rapports/r0244.asp

[59] http://www.assemblee-nationale.fr/14/cri/2012-2013/20130014.asp#P465_92105

[60] Idem.

[61] Idem.                                                                                                                         

[62] http://www.assemblee-nationale.fr/14/rapports/r0205.asp#P1210_179797

[63] Idem.

[64] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-653-dc/decision-n-2012-653-dc-du-09-aout-2012.115444.html ; (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-115444.pdf ) (english version : http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/case-law/decision/decision-no-2012-653-dc-of-9-august-2012.115501.html )

[65] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/constitution/constitution-of-4-october-1958.25742.html

[66] The point is made in particular by Jérôme Roux, « Le Conseil constitutionnel et le traité sur la stabilité, la coordination et la gouvernance au sein de l’Union économique et monétaire : Busiris, Rue de Montpensier. Commentaire de la décision n° 2012-653 DC du 9 août 2012 », in Revue trimestrielle de droit européen (2013), pp. 855-876, §24.

[67] Jérôme Roux, op.cit., §9.

[68] Commentators have recognised that the judicial review of the principle of sincerity in public accounting could thus be strengthened – noting, however, that the principle of sincerity was never used by the CC to annul a Budget Act or Social Security Financing Act. See Eric Oliva, « Le pacte de stabilité devant les juridictions constitutionnelles – Décision du Conseil constitutionnel, n° 2012-653 DC, 9 août 2012, Traité sur la stabilité, la coordination et la gouvernance au sein de l’Union économique et monétaire », RFDA, AJDA (2012), pp.1073 and following : « Le juge constitutionnel confère une normativité renforcée aux règles d’équilibre en les liant au principe de sincérité budgétaire lui-même renforcé par l’avis des institutions indépendantes mises en place par la loi organique. Il est ainsi probable qu’à l’avenir les lois de programmation pluriannuelle, les lois de finances et les lois de financement de la sécurité sociale, feront en matière de sincérité l’objet d’un contrôle plus poussé qu’auparavant » ; also footnote (89): « jusqu’à présent le principe de sincérité n’a jamais donné lieu à une annulation ».

[69] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-135388.pdf ).

[70] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/constitution/constitution-of-4-october-1958.25742.html

[71] See also Romain Bourrel, “La validation par le Conseil constitutionnel de la « nouvelle Constitution financière» de la France”, AJDA 2013, p.478

[72] Decision n°2012-658 DC, §12 : « Considérant que les orientations pluriannuelles ainsi définies par la loi de programmation des finances publiques n’ont pas pour effet de porter atteinte à la liberté d’appréciation et d’adaptation que le Gouvernement tient de l’article 20 de la Constitution dans la détermination et la conduite de la politique de la Nation ; qu’elles n’ont pas davantage pour effet de porter atteinte aux prérogatives du Parlement lors de l’examen et du vote des projets de loi de finances et des projets de loi de financement de la sécurité sociale ou de tout autre projet ou proposition de loi […] ».

[73] Ibid, §19 : « Considérant que l’article 6 de la loi organique énonce le principe de sincérité des lois de programmation des finances publiques, en précisant : « Sa sincérité s’apprécie compte tenu des informations disponibles et des prévisions qui peuvent raisonnablement en découler » ; qu’il est notamment prévu à l’article 13 que le Haut Conseil des finances publiques rend un avis sur les prévisions macroéconomiques sur lesquelles repose le projet de loi de programmation des finances publiques ; que la sincérité de la loi de programmation devra être appréciée notamment en prenant en compte cet avis » (emphasis by us).

[74] Romain Bourrel, op. cit.

[75] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-659-dc/decision-n-2012-659-dc-du-13-decembre-2012.135375.html ; (pdf: www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-135375.pdf )

[76] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-135388.pdf ). See also: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/communique-de-presse.135389.html

[77] http://www.senat.fr/dossier-legislatif/pjl12-043.html; http://legifrance.gouv.fr/affichTexte.do;jsessionid=880EA47A857F3711785949A673404337.tpdjo13v_2?cidTexte=JORFTEXT000026785259&dateTexte=&oldAction=rechJO&categorieLien=id (pdf : http://legifrance.gouv.fr/jopdf/common/jo_pdf.jsp?numJO=0&dateJO=20121218&numTexte=1&pageDebut=19816&pageFin=19820 )

[78] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-653-dc/decision-n-2012-653-dc-du-09-aout-2012.115444.html ; (english version : http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/case-law/decision/decision-no-2012-653-dc-of-9-august-2012.115501.html )

[79] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-659-dc/saisine-par-60-deputes.135380.html

[80] §4 of the Decision : « Considérant, en second lieu, qu’aux termes de la première phrase du 2° du C du paragraphe I de l’article L.O. 111-3 du code de la sécurité sociale, la loi de financement de la sécurité sociale « détermine, pour l’année à venir, de manière sincère, les conditions générales de l’équilibre financier de la sécurité sociale compte tenu notamment des conditions économiques générales et de leur évolution prévisible » ; qu’il en résulte que la sincérité de la loi de financement de la sécurité sociale de l’année se caractérise par l’absence d’intention de fausser les grandes lignes de l’équilibre qu’elle détermine»  (we emphasize).

[81] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2013/2013-682-dc/decision-n-2013-682-dc-du-19-decembre-2013.138972.html  ; (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2013/2013-682-dc/decision-n-2013-682-dc-du-19-decembre-2013.138972.html )

[82] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-653-dc/decision-n-2012-653-dc-du-09-aout-2012.115444.html ; (english version : http://www.conseil-constitutionnel.fr/conseil-constitutionnel/english/case-law/decision/decision-no-2012-653-dc-of-9-august-2012.115501.html )

[83] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/decision-n-2012-658-dc-du-13-decembre-2012.135388.html (pdf: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank/pdf/conseil-constitutionnel-135388.pdf ). See also: http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-658-dc/communique-de-presse.135389.html

[84] http://www.senat.fr/dossier-legislatif/pjl12-043.html; http://legifrance.gouv.fr/affichTexte.do;jsessionid=880EA47A857F3711785949A673404337.tpdjo13v_2?cidTexte=JORFTEXT000026785259&dateTexte=&oldAction=rechJO&categorieLien=id (pdf : http://legifrance.gouv.fr/jopdf/common/jo_pdf.jsp?numJO=0&dateJO=20121218&numTexte=1&pageDebut=19816&pageFin=19820 )

[85] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2012/2012-659-dc/saisine-par-60-deputes.135380.html

[86] http://www.conseil-constitutionnel.fr/conseil-constitutionnel/francais/les-decisions/acces-par-date/decisions-depuis-1959/2013/2013-682-dc/saisine-par-60-deputes.138979.html : « (…) se prononçant sur les hypothèses macroéconomiques pour 2014 retenues par le gouvernement, le Haut Conseil a considéré que si « les prévisions de croissance sont plausibles (. . .) le scénario macroéconomique présente des éléments de fragilité ». Il a, en outre, spécialement noté que « les mesures nouvelles inscrites dans le projet de loi de financement de la sécurité sociale (0,6 Md€) » n’avaient pas été portées à sa connaissance, ne lui permettant ainsi pas de rendre un avis parfaitement éclairé. »

 

[87] http://www.senat.fr/dossier-legislatif/pjl10-499.html

[88] While his report was discussed in Parliament, MPs from the far left criticised Michel Camdessus’ past role as Director of the IMF between 1987 and 2000, in particular the way he dealt with the Argentinian crisis. He is now honorary governor of Bank of France.  http://www.assemblee-nationale.fr/13/cri/2009-2010/20100206.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100206.pdf )

[89] http://www.ladocumentationfrancaise.fr/rapports-publics/104000330/index.shtml

[90] Idem.

[91] http://www.senat.fr/dossier-legislatif/pjl10-499.html

[92] http://www.assemblee-nationale.fr/13/rapports/r3333.asp

[93] http://www.assemblee-nationale.fr/connaissance/fiches_synthese/septembre2012/fiche_43.asp

[94] http://www.senat.fr/seances/s201106/s20110615/s20110615011.html#section1675

Germany

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).  
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.   
(http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Germany encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

Since the German Constitution already contained a balanced budget rule (see question IX.4), the introduction of such a rule was not seen as a difficulty per se. However, there was some criticism regarding the ratification of the treaty outside the EU law framework. At the negotiation stage, this was rather a discussion about the conformity of this Treaty with EU law but not about national (constitutional) law. Nonetheless, the way in which the German parliament ratified the Fiscal Compact raised some constitutional concerns (see question IX.3).

The Social Democrats (SPD) from the opposition criticized that the government had failed to let the German Bundestag participate early enough and in a comprehensive manner in the negotiations of the Fiscal Compact.[1] They accused the government of breaching the German Constitution because the negatiations of the Fiscal Compact have led to rules which are partly contradictory to the rules of the debt brake on the national level which would have made the participation of the parliament mandatory at the negotiation stage. Since this had not been made possible by the Federal government, the constitutionally guaranteed participation rights of the Bundestag had been infringed.

In the view of the parliamentary group the Left (Die Linke), the ratification of the Fiscal Compact had been a violation of the principle of democracy as laid down in Article 20 (2) GG.[2] The parliament was not allowed to adopt the law approving the German participation in the Fiscal Compact because Article 79 (3) GG prohibits that the principle of democracy is eliminated, even by the parliament. Binding the Federal Republic of Germany by treaties of international public law to a contract which contains strict rules about the new indebtedness limits the decision-making authority of the Bundestag and as a consequence its role as a democratically elected institution. In addition, the social state principle had been infringed by the parliamentary approval to the Fiscal Compact because the consequences resulting from the Fiscal Compact will have negative consequences for the social system in Germany.

 

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

On 29 June 2012 the Bundestag adopted the ‘Law to the Contract on March 2, 2012 on Stability, Coordination and Governance in the Economic and Monetary Union’ (Fiscal Compact Law)[3] in order to ratify the Fiscal Compact.

 

The German ratification is based on two provisions of the German Constitition. First, Article 59 (2) sentence 1 GG is applied which requires that the competent authorities of the federal legislature (Bundestag and Bundesrat) have to adopt a federal law approving the German participation in the Fiscal Compact. Second, Article 23 (1) sentence 3 GG in conjunction with Article 79 (2) GG was applied which further requires the approval by a two-third majority of the Bundestag and the Bundesrat. From the point of view of the Bundestag, the reason for this was that the Fiscal Compact modifies the contractual foundations of the European Union which obliges the Federal Republic of Germany under international law not to change the German Constitution (in particular Article 109, Article 115 and Article 143d GG) that could conflict with the Fiscal Compact.[4] This leads to the application of Article 23 (1) sentence 3 GG.

 

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

In addition to the difficulties already mentioned in question V.3 above, there was a discussion about the appropriate legal basis in the German constitution for the ratification. The Fiscal Compact was adopted on the basis of Article 59 (2) GG and Article 23 GG. In general, these two constitutional provisions contain procedures for different types of ratification. Article 59 (2) GG is the appropriate legal basis for contracts of public international law while Article 23 GG determines specific obligations for the amendment of Treaties of the European Union. The parliament decided to base the ratification on both norms because of the ambiguous nature of the Fiscal Compact located somewhere in between EU law and public international law. The combination of both norms was seen as a practical approach of the parliament which safeguarded that there is a two-third majority to approve the ratification, but it raised some legal questions resulting from the parallel application of both norms.[5]

The second parliamentary chamber (Bundesrat) which represents the German Länder on the federal level mentioned that proposals of the European Commission implementing the Fiscal Compact (Article 3 (1), (2) TSCG) are not known at the time of the German ratification. It declares it necessary that the Federal Government undertakes every effort on the European level to make sure that the balanced budget rule in the German constitution and the budget autonomy of the Länder is not affected by future Commission proposals.[6] In addition, the Bundesrat highlights that it acts on the assumption that the Federal government will make sure that the automatic correction mechanism (Article 3 (1) letter e) TSCG) is concretised in a way that the budget autonomy of the Länder is respected.[7]

 

Balanced Budget Rule     
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Germany? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

At the point of time of the adoption of the Fiscal Compact, the German Constitution already contained a balanced budget rule which had been incorporated in 2009. Article 109 (3) GG states that the budgets of the Federation and of the Länder shall in principle be balanced without revenue from credits. Article 115 GG adds the limits of borrowing which are not completely identical with the one defined in the Fiscal Compact. The balanced budget rule of the Fiscal Compact and the one of the German Grundgesetz contain further differences. In contrast to the Fiscal Compact, the German balanced budget rule is limited to the budgets of the Federal Republic and the Länder and does not include the budgets of the municipalities and the social security system. This is why it had been seen necessary to amend several federal laws in order to implement the balanced budget rule.

This was realized by the adoption of the ‘Law on the domestic implementation of the Fiscal Compact’ from 15 July 2013.[8] Therewith, Article 51 (2) of the German Law on the principles of the budget (“Haushaltsgrundsätzegesetz”) got a new formulation which transposed the Fiscal Compact balanced budget rule into German law, however, on the level of a federal law and not on the constitutional level. The Fiscal Compact implementation law also changed the German Law on the Stability Council (“Stabilitätsratsgesetz”). The Stability Council was given the competence to control whether the upper limit of the structural budgetary deficit laid down in Article 51 (2) of the “Haushaltsgrundsätzegesetz” is respected. The Stability Council only has the competence to make proposals in case of a breach of the upper limit of the structural budgetary deficit. The third important amendment caused by the Fiscal Compact implementation law concerned the distribution of payments of the Federal Republic of Germany relating to an infringement of the budgetary rules of the Growth and Stability Pact.

 

Debate Balanced Budget Rule       
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

A difference between the German constitution and the Fiscal compact regarding the implementation procedure of the balanced budget rule was discussed. Article 143d GG contains rules on how to implement the national balanced budget rule. In its first paragraph the provision lays down the following: Articles 109 and 115 GG in the version in force as from 1 August 2009 shall apply for the first time to the 2011 budget; debt authorisations existing on 31 December 2010 for special trusts already established shall remain untouched. In the period from 1 January 2011 to 31 December 2019, the Länder may, in accordance with their applicable legal regulations, deviate from the provisions of paragraph (3) of Article 109 GG. The budgets of the Länder are to be planned in such a way that the 2020 budget fulfils the requirements of the fifth sentence of paragraph (3) of Article 109 GG. In the period from 1 January 2011 to 31 December 2015, the Federation may deviate from the provisions of the second sentence of paragraph (2) of Article 115 GG. The reduction of the existing deficits should begin with the 2011 budget. The annual budgets are to be planned in such a way that the 2016 budget satisfies the requirement of the second sentence of paragraph 2 of Article 115 GG; details shall be regulated by federal law.

This provision is complemented by the second paragraph of Article 143d GG which states: As assistance for compliance with the provisions of paragraph 3 of Article 109 GG after 1 January 2020, the Länder of Berlin, Bremen, Saarland, Saxony-Anhalt, and Schleswig-Holstein may receive, for the period 2011 to 2019, consolidation assistance from the federal budget in the global amount of Euro 800 million annually. The respective amounts are Euro 300 million for Bremen, Euro 260 million for Saarland, and Euro 80 million each for Berlin, Saxony-Anhalt, and Schleswig-Holstein. The assistance payments shall be allocated on the basis of an administrative agreement under the terms of a federal law requiring the consent of the Bundesrat. These grants require a complete reduction of financial deficits by the end of 2020. The details, especially the annual steps to be taken to reduce financial deficits, the supervision of the reduction of financial deficits by the Stability Council, along with the consequences entailed in case of failure to carry out the step-by-step reduction, shall be regulated by a federal law requiring the consent of the Bundesrat and by an administrative agreement. There shall be no simultaneous granting of consolidation assistance and redevelopment assistance on the grounds of an extreme budgetary emergency. In contrast, the Fiscal Compact cedes the competence to decide about the implementation of the balanced budget rule to the Commission.

Furthermore, it was emphasized that the participation of the German Bundestag must also be guaranteed in relation to the Fiscal Compact. Even if the Fiscal Compact was concluded outside the EU institutional framework, its close relation with EU law makes it necessary to apply Article 23 GG which is important regarding the participation of the German parliament. It has to be safeguarded that the so-called “integration responsibility” of the Parliament is respected. This could make a participation in Article 7 TSCG-procedures necessary.

 

Relationship BBR and MTO  
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?

There is no debate known concerning the relationship between the Medium-term budgetary objective (MTO) in the Six-Pack and the balanced budget rule of the Fiscal Compact.

Case law           
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

See question V.4.

 

Non-Eurozone and binding force       
IX.8
Has Germany decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable.

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

The amendments to the Fiscal Compact Law implementing the Fiscal Compact mainly concerned the involvement of the Bundestag. In reference to the Judgment of the Bundesverfassungsgericht from 19 June 2012 (see also question V.3), the Bundestag parties decided that the ‘Law on the Cooperation between the Federal Government and the German Bundestag in Matters concerning the European Union’ (EUZBBG) has to be adapted to the Fiscal Compact Law. The original version of the EUZBBG was adopted in 1993 with the ratification of the Maastricht Treaty. In the end, all parliamentary groups in the Budget Committee (except the parliamentary group the Left (Die Linke)) agreed to amend the Fiscal Compact Law through an adaption of the EUZBBG.

 

[1] Bundestag, 17/10171, p. 4, http://dipbt.bundestag.de/dip21/btd/17/101/1710171.pdf

[2] Bundestag, 17/10171, p. 5, http://dipbt.bundestag.de/dip21/btd/17/101/1710171.pdf

[3] http://www.bgbl.de/xaver/bgbl/stArticlexav?start=%2F%2F*[%40attr_id%3D%27bgbl212s1006.pdf%27]#__bgbl__%2F%2F*[%40attr_id%3D%27bgbl212s1006.pdf%27]__1444167259156

[4] See Deutscher Bundestag. Gesetzesentwurf der Fraktionen der CDU/CSU und FDP. Entwurf eines Gesetzes zu dem Vertrag vom 2. März 2012 über Stabilität  Koordinierung und Steuerung in der Wirtschafts- und Währungsunion . Drucksache 17/9046. 20.03.2012. p. 6.

[5] Möllers/Reinhardt, Verfassungsrechtliche Probleme bei der Umsetzung des Europäischen Fiskalvertrages, Juristenzeitung 2012, p. 693 et seq.

[6] Bundesrat, Stellungnahme, 11 May 2012, 130/12, p. 2, http://dipbt.bundestag.de/dip21/brd/2012/0130-12B.pdf

[7] Bundesrat, Stellungnahme, 11 May 2012, 130/12, p. 2, http://dipbt.bundestag.de/dip21/brd/2012/0130-12B.pdf

[8] http://www.bgbl.de/xaver/bgbl/stArticlexav?start=%2F%2F*[%40attr_id%3D%27bgbl113s2398.pdf%27]#__bgbl__%2F%2F*[%40attr_id%3D%27bgbl113s2398.pdf%27]__1444162600202

 

Greece

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties did Greece encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

No legal and political difficulties concerning the negotiation of the Fiscal Compact were encountered in Greece. The signing of this international treaty was practically debated in Parliament only during the ratification procedure.[1] Indeed, the signing of the Fiscal Compact coincided with discussions at the European level on the conditions of the agreement on the restructuring of the Greek debt with the participation of the private sector (P.S.I.) and of the new loan agreement for Greece. Thus, debates were focused on these matters, as well as the proposition of the German Minister of Finance for the setting of an economic commissioner for Greece. The signing of the Fiscal Compact by Greece was perceived and presented as necessary in order for the Greek State to avoid bankruptcy.[2] In the meeting they had the day before the agreement of the European leaders on the Fiscal Compact, the three political leaders supporting the technocrat government during the negotiations (PA.SO.K., N.D. and LA.O.S.) declared “absolute convergence” concerning the additional obligations and conditions set by the European partners. Thus, the Prime Minister participated in the negotiations following this position.[3] The former PA.SO.K. minister and independent deputy at the time of the ratification, Mariliza Xenogiannakopoulou, said that the Government has made a systematic effort to promote the interests of Greece, through propositions of amendments of the treaty. According to her, it is a success of the negotiations by the Government that in the Preamble of the Treaty there is a special provision concerning the respect of the role of social partners, even though some days later Commission and “troika” imposed the abdication of labor negotiations and labor law in Greece. Furthermore, the Government obtained the restriction of the role of ECJ to the implementation of the Fiscal Compact and not to its application. Finally, it is a success as well the fact that the Fiscal Compact does not alter the economic policy conditions of countries receiving financial assistance.[4]

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

Things have been complicated as far as the ratification procedure is concerned, the debates for which took place during the campaign for the elections of the 6th May 2012. Greece was the first country to ratify the Fiscal Compact. The ratification of the Fiscal Compact was part of a more general draft bill, which also contained the amendment of the TFEU and the ratification of the ESM treaty. The bill ratifying the ESM treaty was drafted on March 15th, 2012 and was debated and voted in Parliament on March 28th, 2012.[5] It was voted in one day, with a majority of 194 deputies out of the 253 present voting in favor (total of deputies is 300). The deputies of PA.SO.K. and N.D., the two parties of the government coalition at the time, voted in favor. The members of SY.RIZ.A., DIM.AR., LA.O.S., and DI.SY. voted against. It is interesting to note that LA.O.S. had participated in the government at the time of the decision of 9 December 2011 (the political decision leading to the 136 TFEU amendment and the Fiscal Compact).[6]

The statute was voted according to the regular parliamentary procedure of articles 70 f. of the Constitution. The constitutional basis invoked by the Government for the following of this procedure was article 28 paragraph 1 of the Constitution, which states that “The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.[7] An interpretive statement added with the constitutional reform of 2001 declares that “Article 28 is the basis for the participation of the Country in the procedures of European integration.” The status of the Fiscal Compact has not been discussed concretely. However, the discussions during the parliamentary debates, give the impression that all the treaties ratified are considered as part of EU primary law, albeit binding only for the contracting Member-States. The article invoked by the Government as a basis for the ratification, however, does not specify the majority required for the vote of the statute ratifying the treaty.[8]

During the parliamentary debates, the deputies of the opposition accused the Government of hiding these treaties from Greek people, through the concise parliamentary procedure mobilized for their ratification. In general, especially the deputies of SY.RIZ.A. and LA.O.S., repeatedly criticized the functioning of the Parliament and the negligence to the parliamentary procedure and monitoring by the Government. In response, the deputies of PA.SO.K. claimed that they were “not acting in absentia of the Greek people because, by voting these treaties, [they were] supporting the basic choice of the Greek people, which is that the country remains in the Eurozone.”

More precisely, deputies from LA.O.S. objected that the statute in question, because of its crucial importance for Greece and for Europe in general, and because of the fact that it attributes constitutional competences concerning fiscal and budgetary policy to organs of international organizations, should be voted according to the procedure defined in paragraph 2 of article 28. According to this paragraph, “Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement.[9] (180/300). The members of LA.O.S. argued that it was the Fiscal Compact that imposed a qualified majority for ratification in order to enter into force. They argued that the treaties under ratification change the structure and the decision-making procedure inside the Eurozone, and thus they constitute a concession of constitutional competences to the Eurozone organs.[10] In any case, according to them, the Fiscal Compact and the ESM entail the concession of national sovereignty to international organizations. Thus, in order to preserve the validity of the voting procedure and to prove that the statute had been voted with the qualified majority required, they demanded the procedure of nominal vote, which was followed at the end.[11]

The members of SY.RIZ.A. rejected the competence of Parliament to amend the treaties of the European Union. Reiterating objections already raised during the negotiation of the amendment of article 136 TFEU (see question V.3),[12] they argued that the treaty amendment, the ESM, and especially the Fiscal Compact, because of the commitment for many decades of the national economic and fiscal policy –through the balanced budget rule- that it contained, entailed an amendment of the Constitution. Thus, a constitutional reform or a referendum was required, following the example of other European countries, like Ireland. In order to support the argument, the deputies invoked article 3 paragraph 2 of the Fiscal Compact. Thus, they invited the government to proceed to a referendum for the ratification of these provisions, or, at least, to wait for the elections, which were scheduled for the 6th of May. In any case, they argued that the government did not want to follow the special procedure of article 28 paragraph 2, even though it possessed the qualified majority needed, because it did not want to create a precedent for future voting procedures.[13] Mobilizing these arguments, the deputies of SY.RIZ.A. raised an objection of unconstitutionality before the Parliament, which was rejected by a raising vote, according to article 100 paragraph 2 of the Standing Orders of Parliament.[14]

Finally, the deputies of DIM.AR. emphasized the fact that the majority required was the absolute majority of the total number of deputies (151/300), according to paragraph 3 of article 28. According to this paragraph, “Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.[15] The deputies of DIM.AR. alleged that the paragraph 1, invoked by the government, was only concerning the place of international treaties in relation to domestic law and did not require a specific procedure for the ratification of European treaties, which have been always voted according to the third paragraph of this article. Indeed, according to them, the European Union is not an international organization but a union which they would like to be federal.[16]

The deputies of the governing parties (PA.SO.K. and N.D.) argued, however, that the Treaty amendment, the Fiscal Compact and the ESM do not expand the competences of the European Union. To support their argument they invoked the simplified procedure of Treaty revision followed.[17] In addition, the deputies of N.D. argued that European Union is not an international organization, according to the terms of article 28 paragraph 2 of the Greek Constitution, but a sui generis state organization.[18]

The Greek constitutional scholarship has been divided on the subject.[19] Most scholars, however, before the Eurozone crisis, considered that for the ratification of European Treaties and their amendments in general (and not with the simplified procedure followed), the Constitution requires a combined application of the procedural conditions of paragraph 2 and the substantial conditions of paragraph 3. Nevertheless, they emphasized that “the solution will not become definitive, until the broad until now parliamentary majority for the support of the European course of the country breaks.”[20]

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

Despite the virulent criticism that the Fiscal Compact provoked from the part of the opposition, there were no major difficulties during its ratification, because of the broad parliamentary majority that supported the Government at the time. The legal statute ratifying the Compact, as well as the amendment of article 136 TFEU and the ESM Treaty, was voted in one day, with a majority of 194 deputies out of the 253 present voting in favor (total of deputies is 300). The deputies of PA.SO.K. and N.D., the two parties of the government coalition at the time, voted in favor. The members of K.K.E., SY.RIZ.A., DIM.AR., LA.O.S., and DI.SY. (a center-right party, which was principally formed by seceded members of N.D. and  which supported the latter in the elections of June 2012) voted against.[21] It is interesting to note that LA.O.S. had participated in the Government at the time of the decision of 9 December 2011 (the political decision leading to the 136 TFEU amendment and the Fiscal Compact).

According to the deputies of PA.SO.K. and N.D., the institutionalization of the ESM is an extremely positive development for Greece, even though the conditionality of the application of the ESM Treaty, which presupposes the ratification of the Fiscal Compact, is very strict. The deputies supporting the Government defend that there is a need for economic stability in Europe. Moreover, claiming that Greece will be autonomous only if it does not need to borrow money, they maintain that there is no other way but to ratify the Fiscal Compact. Finally, they admit that Europe is oriented to neoliberal policies and they express hopes that, in case the socialist Hollande wins the French elections, together with other politicians, they will work in order to change this. They emphasize the need for growth in the EU and especially in countries struck by the financial crisis and they criticize the one-sided character of the treaty ratified, focused only on competitiveness.

The Government has also been accused by the opposition parties of hiding the conventions ratified from the Greek people, through the mobilization of opaque procedures. A deputy of the majority responded that “[they] are not acting in absentia of the Greek people because, by voting these treaties, we are supporting the basic choice of the Greek people, which is that the country remains in the Eurozone.”[22]

The Communist Party (K.K.E.) claimed that the treaties under ratification showed the real face of the EU, which is an imperialist organization, against labor and social rights. In response to other parties’ claims on the unconstitutionality of the parliamentary procedure, they defended that the matter is not procedural and that inside the EU there is no possibility of democracy. They emphasized that the treaties ratified are limiting national sovereignty for the benefit of an imperialist organization and that there is no possibility of renegotiation of the Euro-crisis measures; instead, there is a need to exit the Eurozone and the EU, because the crisis is a crisis of capitalism. Concerning the Fiscal Compact in particular, they see it as a continuation of the Maastricht Treaty. They claimed that, at the end, the Fiscal Compact, because of the asymmetry in the EU, benefits strong Germany and serves the capital against the working class. Indeed, the balanced budget rule will lead to the cut of expenses for salaries and pensions, health, education, social security, and infrastructures, in order to save money, which will be used for the profit of business groups and monopolies. The growth for which the Government parties are fighting cannot undo the infringement of labor rights. The Fiscal Compact focuses on competitiveness, and even imposes sanctions to countries with financial difficulties. Thus, it leads to a multi-speed European Union, according to the economic power and interests of each Member State.

The deputies of LA.O.S criticized the time-consuming action of the EU, and expressed their hope that the socialist François Hollande will renegotiate the treaties under ratification, in order for them to contain growth provisions. Concerning the Fiscal Compact in particular, they observe that it is closely connected to the ESM, but that it is impossible for the Greek State to comply with its provisions. Moreover, using a terminology evoking the Second World War, they claim that the Fiscal Compact raises sovereignty problems and provokes an “abdication of the Ministry of Economics”, [23] in the profit of Germany.

According to SY.RIZ.A., the ESM Treaty, together with the Fiscal Compact, demonstrate the commitment of the Greek Government to the neoliberal policy of Germany, which leads inevitably to economic decline. The Fiscal Compact and the ESM are equivalent to the submission of the country to a controlled default, under conditions which benefit only the creditors and Germany. Indeed, an eventual uncontrolled default would have an immense cost for the European North. SY.RIZ.A. observes that the Fiscal Compact sets asphyxiating, unrealistic goals, which demonstrate the focus of the EU on competitiveness through austerity. They emphasize that, if Europe does not change its policy in order to obtain growth, it will be divided. Finally, they criticize the incoherence of the position of the Government, who is voting a treaty that it would like to see changed some time later, under the influence of the French socialists.

The deputies of DIM.AR. hold a rather moderate position, accepting the ESM and the amendment of article 136 TFEU, but not the conditionality which complements it, that is, austerity and budgetary discipline. They accuse the Government of not negotiating for the profit of Greek people. They criticize the unrealistic character of the goals set by the Fiscal Compact, observing that even Germany was not respecting them under the previous treaties. They emphasize the need for a change of policy in the EU, with the complementation of the provisions concerning fiscal discipline, which they consider necessary, with provisions for growth, given that the Greek people cannot stand any more austerity. They express the hope that things will change after François Hollande wins the elections in France. Moreover, they express their hopes for a political and social union.

Balanced Budget Rule    
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Greece? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

The Fiscal Compact and the Balanced Budget Rule that it contains have been ratified by a legal statute, which entered into force the 30th of March 2012 and implements them into the Greek legal order.[24] Even though there is a conversation and many propositions by almost all parties for a constitutional amendment in Greece, none of these discussions mentions the inclusion of the Balanced Budget Rule in the Constitution. According to article 28 paragraph 1 of the Greek Constitution, The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.[25] An interpretive statement added with the constitutional reform of 2001 declares that “Article 28 is the basis for the participation of the Country in the procedures of European integration.” The status of the Fiscal Compact has not been discussed concretely during the parliamentary debates. However, the discussions give the impression that all the treaties ratified with the legal statute under consideration were considered as part of EU primary law, albeit binding only for the contracting Member-States. Thus, the relationship between the law implementing the Fiscal Compact and the Balanced Budget Rule and the Constitution raises the well-known debate in the Greek legal doctrine on the possibility of “tacit” or “opaque” constitutional amendment via the provisions of article 28 of the Constitution, deviating from the formal procedure required by article 110. The majority of scholars accepts the possibility of such an amendment, contrary to the traditional dualist doctrine.[26] However, the subject was not discussed during the parliamentary debates on the ratification of the Fiscal Compact.

Nevertheless, things are even more complicated as far as the concrete legal statute is concerned. That is because, even if we accept that a “tacit” amendment of the Constitution is possible, this amendment should be normally done according to the procedure of paragraphs 2 and 3 of article 28, as it is only these paragraphs that are conferred a function of amendment of the Constitution.[27] These paragraphs declare: “2. Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement. 3. Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.”[28] However, the Government, in the ratification procedure of Legal Statute 4063/2012 invoked only the first paragraph of article 28, which does not prescribe any parliamentary majority. The statute was finally voted under the normal parliamentary procedure of articles 70 f. of the Constitution.[29]

According to Petros Stagkos, Professor of European Law, with the ratification of the Fiscal Compact, Parliament has not amended tacitly the Constitution, because it did not follow the required procedure. Instead, the State has assumed the supra-national responsibility to amend the Constitution, in order to comply with the Balanced Budget Rule and the concession to the ECJ of the constitutional competency of scrutinizing its implementation. The author defends that the Greek State does not have the possibility to implement the Balanced Budget Rule via a normal legal statute, as this possibility is only open to States that recognize a supra-legislative force to the law approving the national budget.[30] In the same order of thought are the observations of Panagiotis Mantzoufas, Professor of Constitutional Law, who, nevertheless, raises the question of the compatibility with the Constitution of a legal statute that imposes the obligation to amend it.[31]

In any case, it is important to note that there is no constitutional court, and even more, no constitutional court with the competency to monitor the constitutionality of the procedure of constitutional amendments in Greece. Thus, as Lina Papadopoulou neatly put it, it is the “normative power of the facts themselves” that prevails.[32]  The supranational obligations of Greece to respect the Balanced Budget Rule and the tight fiscal surveillance by the European partners prove more effective than any formal amendment of the Constitution would be, even if we accept that it is politically possible.[33]

Statute 4270/2014 established the obligation to set MTO, according to the rules set out in the consolidated Regulation No 1466/97 and according to article 3 of the Fiscal Compact.[34] This statute has the status of ordinary law.

Debate Balanced Budget Rule   
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The Balanced Budget Rule and, in general, fiscal discipline and austerity, have been presented from the beginning by the press as an obsession of the German Government. Debates on the substantial legal problems raised by the implementation of the Balanced Budget Rule and the Fiscal Compact at a supra-legislative level, mainly took place during the parliamentary session of the ratification of the Fiscal Compact, on the 28th of March 2012. During this procedure, the parties of the opposition (mainly LA.O.S., SY.RIZ.A., DIM.AR., and K.K.E.) objected that the Fiscal Compact binds the economic policy of the Government for decades, and puts at stake the national sovereignty. This was one of the reasons for which they demanded the following of a special procedure with a qualified majority for the ratification of the Treaty. The parties of the opposition also alleged that, by imposing balanced and exceeding budgets and sanctions in case of noncompliance, the Fiscal Compact was imposing neoliberal policies which entail austerity, infringement of labor and social rights, and cuts on public services, for the profit of business groups and the capital in general. The Government, invoking the employment of the simplified procedure of Treaty revision at the European level (which proves that the competences of the Union are not extended) responded that the Fiscal Compact does not further restrict national sovereignty and that it does not extend the competences of the European institutions.[35]

The implementation of the Fiscal Compact and of the Balanced Budget Rule has not been further discussed in following parliamentary debates. This can be explained by the fact that Greece had already assumed the international obligation of fiscal discipline before the signing of the Fiscal Compact, in the Memoranda of Understanding determining the conditions of the loan agreements to Greece, as well as in the Medium term budgetary frameworks required according to the Stability and Growth Pact. Besides, the Preamble of the Fiscal Compact stipulates that the Treaty does not alter the obligations of countries receiving financial assistance, according to the stabilization programs of each.[36] The only additional element brought by the Fiscal Compact provisions, and criticized by the opposition, is the fact that it imposes policies of balanced or exceeding budgets at a constitutional level, thus binding future parliamentary majorities on the long term.[37] Therefore, in the parliamentary debates, but also in the public discussions, it is usually the Memoranda of Understanding and implementing laws that are perceived as imposing fiscal discipline and restricting the economic sovereignty of the Greek State.

As far as it concerns fiscal discipline and stability in general, Government officials and deputies supporting the Government emphasize that it is the only solution in order for the State to remain in the Eurozone and to respect its international obligations, to preserve its sovereignty and to obtain competitiveness and economic growth.[38]

Despite the lack of interest by the political world, the implementation of the Balanced Budget Rule at a constitutional level has provoked an interesting academic debate.[39] There are some members of the doctrine who defend the implementation of the “golden rule” in the Greek Constitution as the only way for Greece to respect its international obligations and to obtain a “fiscal civilization” that would counter populist and clientelist practices of the political world.[40] Nevertheless, most scholars reject the inclusion of such a rule in the Greek Constitution in particular, even though they do not reject its opportunity in general. The main arguments advanced are that the adoption of the Balanced Budget Rule is a purely political choice of economic governance that neglects the asymmetries and inequalities within the Eurozone and the European Union, and limits the sovereignty of the Member States and the margin of manoeuver of the democratically elected parliamentary majorities. Most scholars stress that the rigid respect of such a rule is difficult and sometimes even inopportune, especially in times of economic crises, and would thus undermine the normative power of the Constitution. The Balanced Budget Rule is equivalent to the imposition of a specific model of economic governance and symbolizes the prevalence of economics over politics. Moreover, scholars express their fear that such a rule would constitute a constitutional base for the restriction of fundamental rights, and especially social rights, and would excessively extend the powers of the technocrat executive. Some scholars defend that the insertion of this rule in the Constitution would thus lead to an amendment of principles concerning the foundations and the form of the polity, which is forbidden by article 110 paragraph 1 of the Constitution.[41] Finally, certain members of the doctrine underline that the adoption of such a rule via constitutional amendment would be impossible under the current political situation in Greece, provided that a qualified majority in parliament is required for such an amendment.[42] It would be unnecessary as well, given that fiscal discipline is de facto imposed, without a constitutional change. Besides, such a change would add nothing to the justiciability of the Balanced Budget Rule, because of the absence of constitutional court in Greece.[43]

Relationship BBR and MTO  
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

There is no important national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97).[44] Actually, article 14 of statute 4270/2014, implementing the “six-pack” rules, defines the MTO as synonymous to the rules set out in article 3 paragraph 1 of the Fiscal Compact.[45] During the debates for the implementation of the MTO, however, Tsakalotos, an MP of SY.RIZ.A. (at the time in the opposition) implied that the “golden rule” implemented in Spain, Portugal or Italy was less restrictive than the MTO: contrary to the MTO, the “golden rule” allows the states in question to spend in investments and education, which will later lead to the growth of the GDP, whereas the MTO does not take this factor into account.[46] 

Case law        
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

No, there is no court judgment on the Fiscal Compact. Indeed, in Greece there is no general possibility to directly attack legal statutes before the court.[47] Instead, judicial review of the legislator is diffused among all jurisdictions of the civil and administrative order, and is finally concentrated in the Supreme Administrative and Judiciary Courts (Council of State – “Symvoulio tis Epikrateias” and Areios Pagos respectively). Each justiciable possessing a legitimate interest, in the occasion of a litigation before a judge, can raise an objection of unconstitutionality of a legal statute applied in the case, both in case this statute is applied directly, and in case it is the legal basis of another act. According to article 93 paragraph 4 of the Constitution, “The courts shall be bound not to apply a statute whose content is contrary to the Constitution.[48] Courts apply the same constitutional basis, in combination with article 28 paragraph 1, in order to monitor the compatibility with international conventions of ordinary law. Indeed, article 28 paragraph 1 declares: “The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.[49] The result of unconstitutionality/unconventionality is the non-application of the statute in the concrete case before the judge. Courts in general refuse to examine the respect of the rules of parliamentary procedure, which is considered interna corporis of the legislator.[50] In any case, given that the Fiscal Compact was ratified in 2012 and given the time-consuming character of Greek judicial procedures, there is no court judgment on the Fiscal Compact.

Non-Eurozone and binding force       
IX.8
Has Greece decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable, since Greece is a Euro area member state.

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

It is interesting to note that, according to the Preamble of the Fiscal Compact, “no provision of this Treaty is to be interpreted as altering in any way the economic policy conditions under which financial assistance has been granted to a Contracting Party in a stabilisation programme involving the European Union, its Member States or the International Monetary Fund;”

Concerning the European Commission proposal on the coordination of major economic policy reforms, it was discussed in the Greek Parliament together with the evolutions concerning the Banking Union, and the Convergence and Competitiveness Instrument. The Minister of Finance, on the 15th of May 2013, informed the Permanent Commission of Financial Affairs of the Parliament on the Eurogroup meeting where the Commission proposal was discussed.[51]

In this information meeting, the matters discussed concerned essentially the structural deficiencies of the EMU and of the EU. Namely, the parties of the opposition (SY.RIZ.A. and AN.EL.), as well as certain deputies of parties supporting the Government (N.D., PA.SO.K., and DIM.AR.) emphasized that the extended competences of the European Commission on the economic policy of Member States raise the problem of its democratic deficit. Many deputies of the opposition exercised general criticism to the structure and the inertia of EU and EMU institutions. They emphasized that the new propositions, together with the strict financial policy imposed by the Eurozone partners in general, degraded the role of national parliaments. According to them, this lack of political union makes any effort of coordination ineffective. Moreover, they claimed that further convergence in economic policy would be in contrast with the important economic and social differences characterizing the various Member States. They objected that any further union between Eurozone Member States would be one-dimensional, and would undermine the equality between States, as it would neglect the needs of countries facing economic difficulties. They also criticized the focus on competitiveness and the absence of provisions on social cohesion and the environment.

The Minister of Finance admitted that EMU has important structural disadvantages, and that there is a need to change the one-sided emphasis of European leaders on competitiveness, in order to obtain a political union. He emphasized that in the discussions at the European level concerning this subject, the opinion of Greek officials is heard. [52]

[1] See the relevant question.

[2] See the blog http://tvxs.gr/news/ellada/dimosionomiko-symfono-kai-esm-sto-epikentro-tis-synodoy-koryfis

[3] See the blog http://tvxs.gr/news/ellada/mprosta-stis-prosthetes-desmeyseis

[4] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030, esp. 8047.

[5] Legal Statute 4063/2012, ΦΕΚ Α’ 71, published on 30 March 2012.

[6] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030.

[7] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[8] Ibid. 8030.

[9] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[10] See the parliamentary debates, 8020, 8030, 8037, 8057.

[11] Ibid, 8063.

[12] See the question of Alexis Tsipras in the parliamentary debates of the 10th of December 2010,  in Πρακτικά Βουλής, Συνεδρίαση ΛΘ’, Παρασκευή 10 Δεκεμβρίου 2010, 2732 available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101210.pdf

[13] See the parliamentary debates of the 28th of March 2012, cited above, 8020, 8032, 8050, 8058, 8063.

[14] Ibid, 8035. Traditionally there is no judicial review of the procedure followed by the Parliament, which is considered interna corporis. However, especially concerning the application of article 28 of the Constitution, the Supreme Administrative Court (Council of State), in its decision 668/2012 accepted to review the ratification of the Memorandum of Understanding by the Parliament. Cf. the relevant question.

[15] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[16] Ibid., 8033, 8038, 8060, 8063.

[17] See the parliamentary debates.

[18] Ibid. 8037. See also the parliamentary debates of the 25th of October 2006, in the Commission for the Constitutional Reform, in Πρακτικά Επιτροπής Αναθεώρησης του Συντάγματος, Συνεδρίαση ΣΤ’, Τετάρτη 25 Οκτωβρίου 2006, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/25102006.pdf. In fact, the vagueness of article 28 concerning the European Treaties has led to discussions on its amendment in 2006. However, also because of the disagreement between parties, the amendment was abandoned.

[19] It is interesting to note that constitutional lawyers are very often political personalities in Greece. For example, the president of PA.SO.K. is Professor of Constitutional Law in the University of Athens. Similarly, the Minister of Administrative Reform and Electronic Governance is Professor of Constitutional Law in the University of Thessaloniki.

[20] Cf. Antonis Manitakis and Lina Papadopoulou (eds.), Η προοπτική ενός συντάγματος για την Ευρώπη, [The Perspective of A Constitution For Europe] (2003 Athina-Thessaloniki: Ant. N. Sakkoulas) 160 ff., esp. 173. See also citations for the relevant literature. In the same direction are the arguments of Theodora Antoniou, especially as far as the TFEU amendment is concerned, in

«Η απόφαση της Ολομελείας του Συμβουλίου της Επικρατείας για το ΜνημόνιοΜια ευρωπαϊκή υπόθεση χωρίς ευρωπαϊκή προσέγγιση [The Decision by the Plenum of the Council of State on the Memorandum – A European Affair Without A European Approach]», ToΣ, 1/2012, 197.

[21] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030.

[22] See the parliamentary debates cited above, 8043.

[23] See the speech of the leader of LA.O.S., Georgios Karatzaferis, in the parliamentary debates cited, 8039.

[24] Legal Statute 4063/2012, ΦΕΚ Α’ 71, published on 30 March 2012.Concerning the procedure followed for the ratification see question IX.2.

[25] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[26] For this debate cf. Antonis Manitakis and Lina Papadopoulou (eds.), Η προοπτική ενός συντάγματος για την Ευρώπη, [The Perspective of A Constitution For Europe]  (2003 Athina-Thessaloniki: Ant. N. Sakkoulas), 175 ff. and relevant citations.

[27] Ibid.

[28] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[29] See question IX.2.

[30] Petros Stagkos, “Constitution and “golden rule”” [in Greek], Ta Nea, 19 February 2013, http://www.tanea.gr/opinions/all-opinions/article/5001990/syntagma-kai-xrysos-kanonas/.

[31] “The “golden” fiscal rule in the Constituion” [in Greek], http://www.constitutionalism.gr/html/ent/598/ent.2598.asp. The author however observes that the scrutiny of the implementation of the Balanced Budget Rule will be a competency of the European institutions, and thus, the question does not have much practical importance. The author is contrary to the constitutionalization of the Balanced Budget Rule.

[32] Lina Papadopoulou,“Can Constitutional Rules, Even if ‘Golden’, Tame Greek Public Debt?”, in Maurice Adams, Federico Fabbrini and Pierre Larouche (eds), The Constitutionalization of European Budgetary Constraints, Oxford: Hart Publishing, 2014, 223.

[33] The Memoranda of Understanding, concerning the conditions of the loan agreements to Greece, as well as the Medium term budgetary frameworks impose similar rules of fiscal discipline.

[34] ΦΕΚ Α’ 143/28-6-2014, principles of fiscal management and supervision (incorporation of Directive 1176/2011), public accounting and other provisions; articles 14 and 35 f.

[35] See questions IX.2 and IX.3. See the parliamentary debates of the 28th of March 2012, 8022.

[36] According to the Preamble of the Fiscal Compact, “no provision of this Treaty is to be interpreted as altering in any way the economic policy conditions under which financial assistance has been granted to a Contracting Party in a stabilisation programme involving the European Union, its Member States or the International Monetary Fund;”

[37] 18 April

[38] See the debates on the national budget of 2013: cf. debates on the 7th of November 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΞE’, Τετάρτη, 7 Νοεμβρίου 2012, 4027, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20121107.pdf. Also, the parliamentary debates on the 8th of November 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΞΣΤ’, Πέμπτη, 8 Νοεμβρίου 2012, 4272, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20121108.pdf. Also, the debates on the 10th of November 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΞH’, Σάββατο, 10 Νοεμβρίου 2012, , available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20121110_1.pdf. Also, the debates on the 11th of November 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΞΘ’, Κυριακή, 10 Νοεμβρίου 2012, 4467, available at Finally cf. the parliamentary debates on the 7th of July 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση E’, Σάββατο, 7 Ιουλίου 2012, 50, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120707.pdf. As to Governmnet officials, cf. for example, the interview of the Minister of Finance at the time, Giorgos Papakonstantinou (now implicated in a scandal of tax evasion), Ta Nea, 31 January 2011, http://www.gpapak.gr/enimerosi/media/interviews/sinentefxi-stin-efimerida-%C2%ABta-nea%C2%BB-ke-sti-dimosiografo-irini-chrisolora-gia-ti-stili-%C2%ABi-anagnostes-rotoun%C2%BB-2/. See also the article of a member of the General Counting house of the State, Stavros Karvounis, “The “golden rule” and the national particularities”, To Vima, 10 September 2011, http://www.tovima.gr/opinions/article/?aid=418854; the author defends that fiscal discipline is the only solution, in order for Greece to respect its international obligations and brings as an example other States that have implemented the Balanced Budget Rule. He also t is a precondition of healthy growth, sustainable fiscal policy, in periods of crisis there will be deficits which will be counterbalanced during periods of economic growth.

[39] It is interesting to note that constitutional lawyers are very often political personalities in Greece. For example, the president of PA.SO.K. is Professor of Constitutional Law in the University of Athens. Similarly, the Minister of Administrative Reform and Electronic Governance is Professor of Constitutional Law in the University of Thessaloniki.

[40] Petros Stagkos, “The “golden” fiscal rule in the Constituion” [in Greek], http://www.constitutionalism.gr/html/ent/598/ent.2598.asp.

[41] Article 110 paragraph 1 of the Constitution: “The provisions of the Constitution shall be subject to revision with the exception of those which determine the form of government as a Parliamentary Republic and those of articles 2 paragraph 1, 4 paragraphs 1, 4 and 7 , 5 paragraphs 1 and 3, 13 paragraph 1, and 26.” Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[42] Article 110 imposes a majority of 3/5 of the members of Parliament in two voting procedures with a time interval of 1 month between them.

[43] On the academic debate on this subject, cf. mainly to the contributions by Lina Papadopoulou,“Can Constitutional Rules, Even if ‘Golden’, Tame Greek Public Debt?”, in Maurice Adams, Federico Fabbrini and Pierre Larouche (eds), The Constitutionalization of European Budgetary Constraints, Oxford: Hart Publishing, 2014, 223. Panagiotis Mantzoufas, “The “golden” fiscal rule in the Constituion” [in Greek], http://www.constitutionalism.gr/html/ent/598/ent.2598.asp. Vasilis Tzemos, “Democratic Etat de droit, difficult economic situations, and the constitutional clause of the “debt-hold”” [in Greek], http://constitutionalism.gr/html/ent/978/ent.1978.asp.

[44] This conclusion is based on a keyword search in the proceedings of the Plenum of the Greek Parliament.

[45] ΦΕΚ Α’ 143/28-6-2014.

[46] See Minutes of the Greek Parliament on the 26th of June 2014, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20140626.pdf at 295.

[47] There is, however, the High Special Court, instituted according to article 100 of the Constitution, which can monitor the constitutionality of a statute, in the case of contrary decisions on the matter by the two supreme courts, Council of State (administrative) and Areios Pagos (judiciary).

[48] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[49] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[50] However, in the case concerning the ratification of the Memorandum of Understanding, the judge accepted to enter into the examination of the procedure of ratification. See the relevant question.

[51] See the speech of the Minister of Finance, available in the official site of the Ministry of Finance http://www.minfin.gr/portal/el/resource/contentObject/id/d3e83fa2-041c-41d8-9959-7b7834af5591

[52] See the video of the session, the only official document available, http://www.hellenicparliament.gr/Vouli-ton-Ellinon/ToKtirio/Fotografiko-Archeio/#3b32b0de-43dd-41f2-b7f6-5a489117fa6a

Hungary

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties did Hungary encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

At first, the Hungarian Government was against the Fiscal Compactbecause of their understanding of the Compactaiming to harmonize taxing in the European Union. Prime Minister Viktor Orbán said on 9 December 2011 that the decision about the Compacthas to be made by the Parliament, because its provisions would restrict sovereignty.[1]

During the parliamentary debate on 13 February 2012[2], the position of the Hungarian Government was that accepting the Fiscal Compact is in the interest of the whole European Union, and therefore of Hungary. The vast majority of Hungarian export goes to the Eurozone and everything increasing the security and productivity in the Eurozone is important for Hungary.

However, most of the Compact is not yet binding for Hungary[3], but it will be once Hungary joins the Eurozone. Hungary currently would not be able to fulfill the conditions of the Fiscal Compact but the Government will work for a strong Hungary that is able to meet these conditions at the time of joining the Eurozone. The Minister of Foreign Affairs speaking on behalf of the Government reminded that signing[4] the Fiscal Compact is in the power of the Hungarian Government, according to Hungarian law[5], because it does not deliver sovereignty to the European Union (see also question IX.2). This statement was overruled by the 22/2012. (V.11.) Constitutional Court decision of 11 May 2012. (see question IX.4) But because of the importance of the issue, the Government requested the approval of the Parliament, before signing the Fiscal Compact.[6]

An MP from the governing party Fidesz pointed out that there is no real alternative to the approval of the Fiscal Compact for Hungary. He emphasized that the Fiscal Compact widens the powers of national parliaments, because it opens the opportunity for them to hold joined debates and conferences on budgetary policies and questions resulting from the Compact.[7]

The eurosceptic, far right party Jobbik argued that there were legal problems in the context of the approval. The translation of the text of the treaty is incorrect and uses definitions that are not clear (e.g. general government debt). During the parliamentary debate, the Jobbik recommended a referendum on the issue but it was rather a rhetorical sentence than a real issue. This recommendation was not welcomed by the Government, which has not argued for a referendum. According to Jobbik, the sovereignty of the Parliament will be restricted on deciding on key issues like the deficit, the reduction of public debt after joining the Eurozone, because the conditions of the Fiscal Compact will restrict the freedom of the Parliament to decide on these issues.[8]

Opposition left wing party MSZP (Hungarian Socialist Party) supported the Fiscal Compact and encouraged the Government to act accordingly to it in the future, even though it will not be binding on Hungary until it joins the Eurozone.[9] 

The Hungarian Government had two priorities during the negotiation of the Fiscal Compact. The first was that the Compact shall be binding only for Eurozone Member States. This was important because the Government pursues a so-called unorthodox economic policy[10], that is based on rapid decisions and which leaves a wide margin of appreciation for the Government. This would be limited by the provisions of the Fiscal Compact. The second point was that the Compact shall not refer to the Euro-Plus-Pact and not contain any provisions concerning tax harmonization that is not supported by Hungary.[11]

During the negotiation process Hungary supported the Polish standpoint arguing that in some cases the non Eurozone member states should have the opportunity to join the Euro summits.[12]

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

As followed from a case decided by the Hungarian Constitutional Court (see question IX.4), the Fiscal Compact was required to be transposed in an act voted by a two-third majority of the Parliament, according to Article E Paragraphs 2 and 4 of the Hungarian Fundamental Law. This transposition into the domestic legal order of the Compact was carried out by Act XXXII of 2013 on 25 March 2013, which had been accepted with the votes of the two-third majority of the Parliament. The text of the act is equivalent of the Hungarian translation of the Treaty.  Since the Fiscal Compact is an international treaty according to Article E Paragraphs 2 and 4 that delivers parts of the Hungarian sovereignty to the European Union the Compact had to be ratified by a cardinal act.[13]

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

During the parliamentary debate on 19 March 2013, the Minister of Foreign Affairs on behalf of the Government basically repeated the arguments that have arisen during the negotiation of the Fiscal Compact. He emphasized again that Titles III and IV are not going to be binding on Hungary.[14] The Government also argued that Article 13 will strengthen democratic control over the fiscal and economical policies of the European Union.[15]An MP from the governing party Fidesz pointed out that the fiscal provisions of the Hungarian Fundamental Act – Articles 37 and 38[16] – prescribe stricter policies than the Fiscal Compact. He also pointed out that only Article 12 will be binding on Hungary while not being a member of Eurozone, which provides the right to the Prime Minister to attend meetings of the Eurozone member states.[17]

The far right eurosceptic Jobbik reminded that David Cameron, Prime Minister of the United Kingdom said after 2015 a referendum will decide whether the UK should remain a member state of the European Union, and Hungary should also consider this option.[18]

Left wing MSZP (Hungarian Socialist Party) welcomed the position of the Government on the issue and supported the ratification.[19]

An independent MP from the former green left fraction LMP (Politics Can Be Different) opposed the Fiscal Compact and argued that an eco-social Europe can be an alternative choice to the Compact.[20]

Since most provisions of the Fiscal Compact are not binding on Hungary yet, and the legal approval of the Treaty was a simple process, the debate did not affect the ratification of the Fiscal Compact.


Balanced Budget Rule    
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Hungary? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

Interestingly considering the fact that Hungary is not yet bound by this part of the Fiscal Compact, the government is already considering the introduction of a correction mechanism: ‘The development of a medium-term budgetary framework aimed at meeting the provisions of Stability and Growth Pact is in progress. There are plans to define rules for the budget balance to ensure compliance with the provisions for improvement of the structural balance, the adjustment path to the MTO, and debt reduction. With a view to complying with the Intergovernmental Treaty (Fiscal Compact), a correction mechanism in the event of non-compliance will also be considered. Consequently, the authorities aim to define rules for the structural balance and the medium-term budgetary objective in Hungarian legislation and, to this end, a methodology to calculate the potential GDP and the output gap. Compliance with such fiscal rules will be monitored by the Fiscal Council. In addition, the authorities plan to set up mandatory mid-year corrective mechanisms if the deficit or debt figures fail to comply with the rules. Ex post reputational or financial sanctions could also be applied. Such sanctions would be based on statistical data that can be properly measured (e.g. spring-autumn EDP notification) and can actually be influenced by the entity against which the sanction would be applied. Also, the application of sanctions would be subject to the principle of progressivity.’[21]

Hungary is not planning to amend its Constitution, since the Fundamental Law of Hungary already contains some provisions concerning the balanced budget. Article M rules that Hungary shall enforce the principle of balanced, transparent and sustainable management of the budget, Parliament and the Government shall have the primary responsibility for fulfillment of this principle and the Constitutional Court, the courts, local governments and other state organs shall respect this principle in the performance of their duties.

According to Paragraph 5 of Article 34 ‘in order to preserve the balance of their budget, an Act of Parliament may prescribe that if a local government plans to contract a debt above a level defined by an Act of Parliament or to undertake any other commitment, it shall obtain the approval of the Metropolitan or County Office of the Government.’

Paragraphs 4 and 6 of Article 36 read as follows ‘the Parliament may only adopt an Act on the central Budget which will not result in an increase in the state debt compared to gross domestic product’ and ‘one may only derogate from the provisions contained in Paragraph (4) during a special legal order and to the extent necessary to mitigate the consequences of circumstances triggering the special legal order, or, if there is a significant and enduring national economic recession, to the extent necessary to restore the balance of the national economy.’

Debate Balanced Budget Rule   
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

See the answers to questions IX.1 and IX.2. No additional reasoning emerged compared to those discussed earlier.

Relationship BBR and MTO  
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question VII.10)?

Not relevant for Hungary.

 

Case law        
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

There is a Constitutional Court decision in relation with the Fiscal Compact, the 22/2012. (V.11.) CC decision of 11 May 2012.[22]

1.         Name of the Court

Constitutional Court of Hungary

2.         Parties

The minister of public administration and justice on behalf of the Government, as petitioner

3.         Type of action/procedure

Interpretation of the provisions of the Fundamental Law regarding a certain constitutional issue, provided that the interpretation can be directly deduced from the Fundamental Law.[23]

4.         Admissibility issues

The Constitutional Court can interpret the Fundamental Law on the petition of the Parliament or its standing committee, the President of the Republic or the Government.[24] Here, the member of the Government was the petitioner, and the petition regarded a certain constitutional issue, so it was admissible. (Decision paras 29-31)

5.         Legally relevant factual situation

‘The Treaty – as pointed out in the petition – regulates in many different contexts the application of certain legal and institutional mechanisms of the European Union, and the role of the institutions of the European Union in monitoring, supervising and enforcing the implementation of the Treaty, and in the consultation and the coordination with the Member States. Although the subject of the Treaty is not about Hungary being a Member State of the European Union or not, and neither is it a founding treaty, a question emerges concerning the interpretation of paragraph (2) of Article E) of the Fundamental Law and the application of paragraph (4) thereof, with regard to the authorization given in the respect of acknowledging the mandatory force of it (paragraph 33).’

The decision was about interpreting Article E Paragraph 2 and 4 of the Hungarian Fundamental Law:

‘(2) In order to participate in the European Union as a Member State, and on the basis of an international treaty, Hungary may, to the extent necessary to exercise the rights and fulfill the obligations set out in the founding treaties, exercise some of its competences deriving from the Fundamental Law jointly with other Member States, through the institutions of the European Union.

(4) The authorisation for expressing consent to be bound by an international treaty referred to in paragraph (2) shall require the votes of two-thirds of all Members of Parliament.’

6.         Legal questions

‘Would an international treaty be regarded as an international treaty under Article E) para. (2) of the Fundamental Law if

a) it is not one of the founding treaties of the European Union, and it is not a legal act of the Union, but

b) all of its states parties are member states of the European Union,

c) which regulates subjects that are also regulated by the founding treaties of the European Union and by the legal acts of the Union,

d) which is aimed at the further development of the European Union and strengthening the economy of the European Union in a subject matter, which is an essential element of the European Union’s founding treaties, and

e) according to which certain institutions of the European Union can act in implementing and supervising the implementation of the international treaty?’ (paragraphs 3 to 9)

The main question is that whether the Fiscal Compact is an international treaty in which case it shall be promulgated in a cardinal act, an act requiring the two thirds of the votes of the MP’s. (see on cardinal acts in general question III.1)

7.         Arguments of the parties

In the procedure of interpreting the Constitution, no argumentation is required from the petitioner. On the contrary, the petitioner is in the position of asking the Constitutional Court to interpret the Constitution from a specific aspect that is defined in a question proposed by the petitioner.

8.         Answer by the Court to the legal questions and legal reasoning of the Court

‘The votes of two-thirds of the Members of the Parliament is required for the consent to be bound by an international treaty aimed at modifying or amending the rights and obligations originating from the founding treaties, provided that the treaty is aimed at jointly exercising further competences originating from the Fundamental Law. An international treaty can be, in particular, regarded as such, if Hungary is a party to it as the Member State of the European Union together with other Member States, and the treaty regulates subjects contained in the founding treaties, or it is aimed at implementing or supervising the founding treaties.’ (para 1)

‘The votes of two-thirds of the Members of the Parliament is not required for the consent to be bound by an international treaty, if the treaty would not result in exercising, jointly with the institutions of the European Union or with other member states, new competences originating from the Fundamental Law.’ (paragraph 2)

9.         Legal effects of the judgment/decision

According to the decision, the Fiscal Compact is required to be ratified by an act voted by a two-third majority of the Parliament, which is the requirement linked to a cardinal act. This domestic legal recognition of the Compact was carried out by the Act XXXII of 2013 on 25 March 2013 that had been accepted with the votes of the two-third majority of the Parliament.

10        Shortly describe the main outcome of the judgment/decision and its broader political implications.

The Constitutional Court decision was not subject of any major debate on the basis of the implementation of European Union legislation. There was major citation and examination of the decision because it was the first that stated that the decisions of the Constitutional Court that had been delivered on the basis of the former Constitution are still binding when interpreting the new Fundamental Act in case no major textual changes happened comparing the text of the former and latter[25].

According to the decision ‘Article E) para. (4) regulates clearly that two-thirds of the Members of the Parliament is required for acknowledging the mandatory force of treaties that contain a transfer of sovereignty’and the Fiscal Compact is an international treaty that contains a transfer of Hungary’s national competences to the European Union. The understanding of the decision is that the Constitutional Court did not draw a line that marked the border of the transfer of national competences to the European Union. Therefore there is no clear line that indicates the borders of national sovereignty and sovereignty that is transferred to the European Union.

Non-Eurozone and binding force       
IX.8
Has Hungary decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

No.

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

No other relevant information.

[1]http://hvg.hu/vilag/20111209_orban_eu

[2]http://www.parlament.hu/orszaggyulesi-naplo-elozo-ciklusbeli-adatai?p_auth=ao0cIcl1&p_p_id=pairproxy_WAR_pairproxyportlet_INSTANCE_9xd2Wc9jP4z8&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&_pairproxy_WAR_pairproxyportlet_INSTANCE_9xd2Wc9jP4z8_pairAction=%2Finternet%2Fcplsql%2Fogy_naplo.naplo_fadat_aktus%3Fp_ckl%3D39%26p_uln%3D162%26p_felsz%3D10%26p_felszig%3D22%26p_aktus%3D6

[3]Prime Minister Orbán Viktor said that this option – joining the Fiscal Compact as a non Euromember state without its provisions being binding on Hungary – became the part of the Compact because of him during the negotiation process, while in fact, it is thanks to the strong standpoint of the Polish Government. (See for example: http://www.origo.hu/itthon/20120213-orban-viktor-eu-penzugyi-paktum-lengyelorszag-es-bulgaria.html, ’The succes of Poland is the sucess of Viktor Orbán’

[4] ’According to Article 7 paragraph 1 b of the Act L of 2005 on the Procedure Related to International Treaties, in cases when the international treaty does not fall under the authority of the Parliament, the Government is entitled to authorize either the Prime Minister or the Minister of Foreign Affairs – in a governmental statute – to recognize the binding validity of an international agreement.’

[5] Act L of 2005 on the Procedure related to International Treaties, Article 7 paragraph 1 b). The text of the act is available here: http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A0500050.TV

[6]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=162&p_felsz=245&p_szoveg=&p_felszig=245

[7]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=162&p_felsz=247&p_szoveg=&p_felszig=247

[8]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=162&p_felsz=251&p_szoveg=136&p_felszig=251

[9]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=162&p_felsz=259&p_szoveg=&p_felszig=259

[10]See for example: http://online.wsj.com/news/articles/SB10001424127887324263404578613861507944932

[11]For the reasons, see the answer to question VI.1.

[12] Based on a statement announced by the Government: http://eu.kormany.hu/uj-kormanykozi-szerzodes

[13]For a detailed reasoning, see answer 59.

[14]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=474&p_szoveg=&p_felszig=474

[15]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=476&p_szoveg=&p_felszig=476

[16]The text of the Hungarian Fundamental Act is available here: http://njt.hu/cgi_bin/njt_doc.cgi?docid=140968.248458

[17]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=478&p_szoveg=&p_felszig=478

[18]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=480&p_szoveg=&p_felszig=480

[19]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=486&p_szoveg=&p_felszig=486

[20]http://parlament.hu/internet/plsql/ogy_naplo.naplo_fadat?p_ckl=39&p_uln=263&p_felsz=492&p_szoveg=&p_felszig=492

[21]Commission Staff Working Document Accompanying the document Report from the Commission to the European Parliament and the Council Interim Progress Report on the implementation of Council Directive 2011/85/EU on requirements for budgetary frameworks of the Member States

[22] The text of the decision is available here: http://www.mkab.hu/letoltesek/en_0022_2012.pdf

[23]Section 38, paragraph 1 of Act CLI. of 2011on the Constitutional Court, the text of the act is available here: http://mkab.hu/rules/act-on-the-cc

[24]Section 38, paragraph 1 of Act CLI. of 2011on the Constitutional Court, the text of the act is available here: http://mkab.hu/rules/act-on-the-cc

 

[25]See for example Antal Attila: Az Alkotmánybíróság határozata korábbi gyakorlatának érvényességéről. Megdönthető vélelem az Alkotmányon alapuló gyakorlat mellett, Jogesetek Magyarázata 2013/2.

 

Ireland

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).        
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.   
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Ireland encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

In Parliamentary debates it was stated that a key concern for Ireland was that the TSGC mirror Union law as closely as possible.[1] Ireland sought, and obtained, a provision that the parameters of the existing EU/IMF programme would not be affected by the TSGC.[2] Finally while the Irish government did not seek the insertion of recital 5, making ratification and implementation of the TSGC a condition for accessing the ESM it did view it as a reasonable provision.[3]

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

The Fiscal Compact has been ratified by a combination of constitutional amendment and legislation. 

In April of 2012 following advice from the Attorney General Máire Whelan the government decided to hold a referendum on the ‘Treaty on Stability, Coordination and Governance in the Economic and Monetary Union’ (Fiscal Compact).[4]

Amendment of the Irish constitution is only possible by popular referendum initiated as a Bill in the Dáil and passed by both houses of Parliament in accordance with Article 46 and 47 Bunracht na hÉireann (the Irish Constitution). Upon approval by a majority of electors the Bill is to be signed by the President and the constitution is deemed to be amended. Thus, while amendment is only possible with approval of the people, any such amendment must be passed by a majority in the Dáil, which in effect means with Government support.

According to statements of the Taoiseach in the Dáil the opinion of the Attorney General was based on the fact that the Fiscal Compact Treaty did not form part of the framework of the European Treaties and hence required a referendum. Presumably this comment referred to the fact that the Fiscal Treaty could not be considered a measure necessitated by EU membership within the meaning of Article 29 of the Irish Constitution and therefore did not enjoy automatic compatibility with the constitution. The opinion of the Attorney General is not made public. On 31 May 2012 the referendum was passed by a majority of 60% of the votes cast.[5]

The Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Act 2012 was enacted on 27 July 2012 and inserted the new section 10 into Article 29 of the Irish constitution:

10 The State may ratify the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union done at Brussels on the 2nd day of March 2012. No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State’

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

The Fiscal Compact was implemented by a constitutional amendment requiring a popular referendum and an act of parliament. The Act initiating the referendum was debated in the Oireachtas (Parliament) prior to the referendum.

Oireachtas Debates

In parliament the Government parties (Fine Gael and Labour) and the largest opposition party (Fianna Fáil) supported the Treaty while Sinn Féin, the United Left Alliance (ULA) and a number of independent politicians opposed it.

Those in favour of the Treaty presented two main arguments; that it would facilitate budgetary discipline and that it would allow access to ESM funding. The latter was said to be important for generating confidence in the Irish position on the international bond markets thereby helping in a successful exit from the programme of financial assistance and secondly, in the event that market funding was not possible, an alternative source of financing the state.[6]  Some politicians noted that the Treaty would put an end to ‘auction politics’ whereby politicians sought to essentially buy the votes of electors through expansive budgetary policies and electoral promises.[7] A further argument that was frequently raised related to the likely impact of ratification on the investment policies of multinational corporations.[8]

Those opposed to the Treaty in Parliament based their arguments on two principal grounds; a general opposition to a policy of austerity (that they saw as being ‘locked in’ by the TSGC) and anti-democratic elements of the TSGC.[9] The latter argument was best expressed by Clare Daly of the ULA who described the TSCG as ‘a fundamental attack on the basic democratic right to elect a Government and have that Government decide on budgetary and economic strategy.’[10] In particular she pointed to the balanced budget rule, ‘which effectively ties the hands of future Governments to the same economic policies as this one. In principle we are being wedded to neoliberalism and austerity’ and Article 5 of the TSGC, described by Deputy Daly as a ‘mechanism for countries to be effectively placed into administration.’[11] In response the Minister for Foreign Affairs and Trade, Eamon Gilmore pointed to Articles 12 and 13 of the TSGC providing for involvement of the European Parliament and national parliaments.[12] These provisions were however described by Richard Boyd Barrett TD, a colleague of Deputy Daly in the ULA, as ‘a democratic fig leaf.’[13]

When discussing the text of the provision to be inserted into the constitution to allow for ratification of the TSGC one Member of Parliament sought to remove the so-called ‘necessitated’ clause, providing that:

No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State.’

Such a clause is commonly used to provide for constitutional immunity for Union based legislation.[14] Catherine Murphy argued that the TSGC was an ordinary international agreement that did not warrant such constitutional immunity. Deputy Body Barrett appeared to fear that that provision would protect any measures adopted on foot of advice from the European Commission in the context of the TSGC from constitutional challenge.[15] While this provision was not elaborated upon at length by the government, bar statements that it was on foot of advice of the Attorney General, Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD did suggest that it would cover the Fiscal Responsibility Bill (now the Fiscal Responsibility Act 2012 see section II. 4 above).[16]

Referendum Campaign

While opponents of the TSCG did seek to raise questions of democratic accountability the main focus of the referendum campaign was on the funding question and in particular whether Ireland would have access to the ESM in the absence of ratification. The ‘No’ side provided no satisfactory answer to this question. Sinn Féin disputed the premise of the question and asserted that in practice, in the self-interest of ESM members, Ireland would in fact be given access to the fund. The United Left Alliance argued that funds could be raised from internal taxation by targeting corporations, wealthy individuals and high earners. Despite some fluctuations in polling data support for the Treaty remained relatively high at 60%.[17] Concerns regarding the potential social implications of the Treaty, in particular by locking austerity in as a general economic policy, were also raised by commentators during the campaign.[18] In May the referendum was passed by a majority of 60.3% to 39.7% of the votes cast.

Balanced Budget Rule     
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Ireland? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

It is important to note that the 30th amendment to the constitution that resulted in the new Article 29.10 of the Irish constitution firstly allows the state to ratify the TSGC and secondly provides any piece of legislation necessitated by that Treaty with immunity from constitutional challenge (‘the necessitated clause’).[19] It does not incorporate either the TSGC or the balanced budget rule into the Irish constitution.

Rather the balanced budget rule contained in Article 3(2) TSGC is implemented in Ireland through the Fiscal Responsibility Act 2012 and in particular its sections 3 and 4.[20] It is an ordinary piece of legislation and can be repealed or amended by the Oireachtas (Parliament) at any time according to the ordinary legislative process. However, it will enjoy immunity from constitutional challenge per the second clause of Article 29.10 of the constitution.[21] There is no provision in the Irish constitution for quasi-constitutional legislative measures. One attempt has been made to give a specific piece of legislation a constitutional status through the adoption of a constitutional amendment to that effect. While the technique itself was ruled compatible with the constitution[22] the associated constitutional amendment was rejected at referendum.

Debate Balanced Budget Rule       
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The provisions of the fiscal compact, including the balanced budget rule were implemented in Ireland by the Fiscal Responsibility Act 2012. This also served to implement Directive 2011/85/EU and the relevant debate is covered in the answer to question VII.2 above. As mentioned above comments by Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD before the Seanad (upper house) suggested that at least in the view of the government that act would be protected from constitutional challenge by virtue of the second clause of Article 29.10of the constitution (see answer to question IX.3 above).

Relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?

There has been no public debate about the relationship between the balanced budget rule of the Fiscal Compact and the Medium term budgetary objective in the six-pack.

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Yes, see question V.4.

Non-Eurozone and binding force 
IX.8
Has Ireland decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable.

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

No other relevant information.

[1]               Minister for Foreign Affairs and Trade Eamonn Gilmore, Dáil Debates, 20 April 2012, Vol 762 No 2, 247.

[2]               Minister for State at the Department of Foreign Affairs and Trade Joe Costello, Seanad Debates, 23 April 2012, Vol 214 No 14, 884.

[3]               Some opponents of this treaty try to argue that linking the ESM to the treaty is some form of blackmail. This is fundamentally disingenuous in my view. Let me be very clear about this. Ireland did not seek this link in the negotiations but, if I am asked if its unreasonable, I say that it is not. It is logical that those who are prepared to offer financial support in time of difficulty should be assured that those receiving it are prepared to run sound and sensible policies. ‘ Minister for State at the Department of Health Róisín Shorthall, ibid, 913.

[4]               ‘Referendum to be held on Fiscal Treaty’ (RTE News, 2 March 2012)  <http://www.rte.ie/news/2012/0228/referendum.html> accessed 21 October 2012.

[5]               ‘Ireland passes fiscal treaty referendum by 60.3% to 39.7%’ (RTE News, 26 July 2012)  <http://www.rte.ie/news/2012/0601/fiscal-treaty-referendum-count-to-begin.html> accessed 1 November 2012.

[6]               See comments of Minister for Foreign Affairs and Trade, Dáil Debates, 18 April 2012, Vol 761 No 3, 470 ff.

[7]               See Mary Mitchell O’Connor, Dáil Debates, 19 April 2012, Vol 762 No 1, 101.

[8]               Mr. O’Neill the managing director of IBM Ireland, speaking on behalf of the US multinationals in Ireland said a “Yes” vote will promote stability, investment and growth in the economy. By voting “Yes” we will maintain our position as an attractive location for investment, continue to put in place the necessary economic and budgetary reforms and preserve our strategically important place in Europe’, Senator Mary White, Seanad Debates, 23 April 2012, Vol 214 No 14, 886. Similarly see the contribution of Dan Neville TD, ‘This is a treaty on stability and is about ensuring a stable currency for Ireland; ensuring a stable euro. It is about confidence abroad and maintaining and enhancing the influence which we have built up with many investors. We have seen progress in that area in recent weeks and month in international companies looking to invest in the country…’, Dáil Debates, 19 April 2012, Vol 762 No 1, 107.  

[9]               See in particular the contribution of the Sinn Féin spokesperson Padraig Mac Lochlain TD, Dáil Debates, 19 April 2012, Vol 762 No 1, 101 ff.

[10]             ibid, 109.

[11]             ibid, 109-110.

[12]             Dáil Debates, 20 April 2012, Vol 762 No 2, 250.

[13]             ibid, 251.

[14]             See Article 29.4 Bunreacht na hÉireann (the Irish Constitution).

[15]             Dáil Debates, 20 April 2012, Vol 762 No 2, 252.

[16]             The second sentence of the amendment is intended simply to facilitate the introduction of legislation in accordance with the treaty, namely the laws we will design such as the fiscal responsibility Bill.’ Minister of State, Joe Costello TD, Seanad Debates, 24 April 2012, Vol 214 No 15, 960.

[17]             See ‘How the Yes was Won’ Sunday Business Post (Dublin, 3 June 2012).  Thus ‘[i]n the long contest between fear and anger, fear was the winner. Fear of the consequences of a No vote won the day for the Yes campaign – fear for the future of the euro, fear about voters’ own circumstances and fear – above all – that the country would be cut off from future funding proved decisive in the end.’ ‘When fear outgunned anger’ Sunday Business Post (Dublin, 3 June 2012). 

[18]             See Vincent Browne, ‘Fiscal Treaty will increase gap between rich and poor’ Irish Times (Dublin, 4 April 2012) 14 and Patrick Kinsella, ‘Treaty is a social, political and economic threat’ Irish Times (Dublin, 24 May 2012) 14.

[19]             For a discussion on the interpretation of the analogous clause contained in Article 29.4.6° relating to EU treaties see Gavin Barrett, ‘The Evolving door to Europe: Reflections on an eventful forty years for Article 29.4 of the Irish Constitution’ (2012) 48 Irish Jurist 132

[20]             For a detailed discussion on the parliamentary debates of the Fiscal Responsibility Act 2012 see the answer to question IX.3 above.

[21]             See comments by Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD, Seanad Debates, 24 April 2012, Vol 214 No 15, 960.

[22]             Morris v Minister for the Environment and Local Government [2002] 1 IR 326. See also Hogan and Whyte, JM Kelly: The Irish Constitution (n 43) paras 8.1.11 – 8.1.13.

Italy

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).       
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.     
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Italy encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

There is no clear evidence of particular obstacles encountered by Italy at the time of the negotiations, for the traditional bi-partisan support for European measures, especially after the change in the government after the resignation of the President Berlusconi in November 2011, and also for the critical situation the country was already experiencing in terms of budget.

The Government in charge, therefore, supported the Treaty, with a clear positive approach for stronger economic governance.

In the discussion on the 19th July 2012 in the lower house, the Minister for European Affairs Enzo Moavero Milanesi emphasized the following requests of the Government in charge during the negotiation of the Fiscal Compact:[1]

·         in front of the commitment to the onerous reduction of one-twentieth for every year of the public debt, the Italian Government asked – as recognized in the relevant article of the Treaty – that other factors «including elements such as the relationship between private debt and public debt, the business cycle and so on» were to be taken into account in this assessment, in coherence with the peculiarities of the Italian economy

·         an involvement of the European Parliament not only as an observer in the negotiations on the Compact, but also later with an active role in its implementation[2]

·         a clear revision clause in the text of the Compact, to assess at a later stage its «full traceability to the ordinary system of the Treaty».

In the same context, the Minister also stressed the parallel position of the Government for a more robust approach and more focus on economic growth, and emphasized the parallel negotiation in the Council of other European (ordinary) legislation on matters «such as the completion of the digital single market for energy, or interventions to have a real European labor market, for instance the stimulus and the acceleration of the recognition of professional qualifications and diplomas (…) and project bonds, European bonds guaranteed at European Union level, the first of this kind, related to the implementation of European projects, infrastructure, also co-financed from European funds».[3]

Probably because of the direct impact on the text of the Constitution, in Italy there were in any case relevant general debates on the Fiscal Compact, in particular pertaining to:

1. the legitimacy of a “forced”, or somehow imposed, constitutional reform[4]

2. the desirability of similar impositions, in macroeconomic terms (Italy has a long, bi-partisan tradition also in terms of high public expenditure)

3.  

in academic terms, on the coherence of the new Balanced budget rule with the previous text of Art. 81 of the Constitution, which already dictated a formally strict rule on the coverage of the financial burden (art. 81.4, previous text: «all other laws implying new or additional expenditures must set out the means to cover them»), but was then relaxed by subsequent interpretations of the Constitutional Court.[5]

It is also relevant to highlight that one can observe, in the context of the new European elections campaign of 2014, a late emergence of critical positions even by the early informal negotiators of the Compact (in particular some representatives of the Berlusconi IV government, in charge until November 2011, and including former PM Silvio Berlusconi). These include the statement of a first opposition of Italy in the Fiscal Compact negotiations (see under Questions IV.1 and VIII.1 for similar notations).

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

It is probably relevant to highlight that, in both the Chambers, and for both the initial part in front of the competent Parliamentary Committees and the discussion in the Chamber, the procedure of authorization by law of the Fiscal Compact was joined with the other procedures related to the Treaty amendment article 136(3) TFEU and the European Stability Mechanism (ESM).

The ratification process through which the Fiscal Compact has been ratified in Italy was the typical process dictated by articles 80 and 87(8) of the Constitution.

According to art. 80, the two Chambers of the Parliament (Camera dei Deputati and Senato della Repubblica) «authorize by law the ratification of international treaties which are of a political nature, or which call for arbitration or legal settlements, or which entail changes to the national territory or financial burdens or changes to legislation». So, having no doubts about the «political nature» of the Fiscal Compact and the «financial burdens» entailed, both the Chambers had to authorize its ratification, through the regular legislative procedure (since art. 72, last paragraph, Constitution dictates that «The regular procedure for consideration and direct approval by the House is always followed in the case of bills on constitutional and electoral matters, enabling legislation, the ratification of international treaties and the approval of budgets and accounts»).

Art. 87(8) Const. reads: «The President shall: authorize the introduction to the Houses of bills initiated by the Government, promulgate the laws and issue decrees having the force of law as well as regulations, call popular referenda in the cases provided for by the Constitution, appoint State officials in the cases provided for by law, accredit and receive diplomatic representatives, and ratify international treaties which have, where required, been authorized by the Houses». So the final step of the ratification procedure – and, formally speaking, the ratification itself – is an act of the President of the Republic. In any case, it is important to highlight that this is a typical act that, in the categorization of the President’s acts, is normally qualified as “formally but not substantially” presidential: this means that the act involves the formal role of the President as the highest representative of the Republic, especially in international relations, but this does not imply his substantive role, nor his liability, for the related political choices, which are in the sphere of the Government in terms of negotiation, and of the Parliament for the authorization, as already seen.

No referendum was held on the Fiscal Compact (or the 136 Treaty amendment, or the ESM Treaty. In fact, art. 75(2) Constitution excludes this possibility for the ratification of international treaties as it «Referenda are not admissible in the case of tax, budget, amnesty and pardon laws, or laws authorizing the ratification of international treaties».

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

At the time of the negotiation of the Treaty, Italy was already experiencing clear problems in its budgetary situation. Therefore, also the subsequent ratification was influenced by this factor, as well as by the already mentioned, typical bi-partisan support to pro-European measures, especially with the ‘technical’ government led by President Monti and officially supported by both center-left and center-right main parties.

In terms of Parliamentary debates, (see also question V.3), it is relevant here to highlight, talking about general political/legal difficulties and related debates, that, in both the parliamentary Chambers, and in their Committees in charge of the first review, the procedure of authorization by law of the Fiscal Compact was joined with the other procedures related to the ESM and the 136 TFEU Treaty amendment.

The parliamentary debates were obviously influenced by this joint discussion on the three different ratification procedures: the rapporteurs emphasized the difference with the old times in which the ratification of the EU-related bills were seen as a only “technical” debate, with no political echo nor particular resistance, but the discussion seems to be a general treatment of the typical, historical problems of the so called democratic deficit in the European Union, with strong arguments, from both the centre right and the centre left, for the need of a more “political” federal Union.[6]

But probably the Fiscal Compact, considered as the more austerity-oriented measure in discussion,[7] was also the one receiving the clearer critical remarks, by both representatives of the majority and the opposition (the large majority of votes notwithstanding), in the awareness of its nature of possibly «most important act of all the legislature» for its sovereign implications.[8]

Some MPs raised clear concerns about the insufficient democratic nature of such an important move: both in terms of doubts of the transparency of «European bureaucrats»’ decisions,[9] and in terms of the not obvious will of the citizens to participate in the hard process of reduction of the debt,[10] and the desirability of new efforts to engage and inform citizens about the choices made.[11]

Moreover, in a more substantive way, Senator Morando (PD), in his capacity of rapporteur and already during the examination in the III Permanent Committee on 17 April (http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=SommComm&leg=16&id=657917), focused in particular on «the absence, in the fiscal compact, of rules and policies for the growth, of equal strength and capacity for innovation of those aimed at stability», blaming for this the «still too strong doctrine that claims that stability, as the coin, is a common good, while that would not be the case of growth, which continues to be a national asset», also a very important issue for the Government (see Question IX.1).

However, real, strong and formal resistance to the approval of the bill came only from the relatively small parties of the new opposition under the Monti government (Lega Nord and Italia dei Valori). Some of the representatives of these parties openly talked of «a fiscal unification introduced surreptitiously, almost secretly, without much debate, possibly without making it known to the country because the price of this deal is not heavy for the next few years, but for generations to come»,[12] and, in quantitative terms, a «suicidal act for Italy»[13] that goes beyond an even reasonable turn of austerity[14] (see in fact Question IX.5 on the position of Lega Nord on the reform of Art. 81).

A discussion was vaguely introduced on the issue of a possible referendum on the new European measures,[15] but it is important to highlight in this respect that no “consultative referendum” of this kind is foreseen in the Italian Constitution, and the only way to establish it would be through a special “constitutional law” (legge costituzionale), used only once in history (but precisely on EU-related issues, in 1989).

Balanced Budget Rule    
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Italy? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

Constitutional Law n. 1/2012, of April 20th 2012, has introduced the “balanced budget” principle into the text of the Constitution itself, modifying the central art. 81 and, additionally, other three provisions of our basic law: articles 97, 117 and 119.

The label given to the reform was actually “balanced budget”, therefore reminiscent of the Fiscal Compact wording, but this expression has not been explicitly adopted in the Constitution. The new article 81 Constitution introduces in fact a so called “equilibrium principle”: according to this, the State shall ensure that revenues and expenditures will be in “equilibrium” having regard to the economic cycle. The new paragraph 2 of the article introduces a “debt-break” clause, which can be derogated from only in two cases: in order to counteract the effect of the economic cycle and, by a law adopted by an absolute-majority, to cope with exceptional events. According to the new text, the detailed discipline will be provided by a specific ‘reinforced’ law, again adopted by an absolute-majority (art. 5, Constitutional Law n. 1/2012). The reform has also repealed the third paragraph of article 81 Constitution, which prescribed that the balance act cannot introduce new taxes or new expenditures.
In its amended text, the new third paragraph, which is a new version of the old fourth one, dictates that any law involving new or increased charges must provide the means to face these measures. The fourth and the fifth paragraphs prescribe that each year the Parliament must approve the balance acts and, whenever a delay will occur, that a temporary interim budget exercise cannot be granted save by law and for no longer than four months. The sixth paragraph provides for the absolute majority law which should determine the contents of the new balance act, «the basic standards and criteria to ensure the balance between revenue and expenditure budgets and the debt sustainability of all the public administrations».

Furthermore, the new text of article 97 Constitution introduces the principle according to which the public administration (or better, again, all the public administrations, i.e. provinces, municipalities and above all regions, which are often considered as the real problem in terms of sustainability of public accounts) has to take into account the European Union system for purposes of ensuring balance and debt-sustainability.

Art. 117 Constitution, as amended by the reform, mandates a shift in the legislative competences over “harmonization of public accounts” from the State-Regions concurrence competence list (Article 117, paragraph 3) to the State exclusive competence list (Article 117, paragraph 2).

The new Article 119 Constitution prescribes that municipalities, provinces, metropolitan cities and regions have financial autonomy in respect of the equilibrium of their budget and their cooperation in ensuring compliance with the economic and financial constraints deriving from the European Union standards. The last paragraphs impose that, in coherence with the so called “golden rule”, a loan repayment plan must be determined, with the exclusion of any guarantee issued by the State. Art. 5 of Constitutional Law n. 1/2012 determines the necessary contents that shall be regulated by the specific law prescribed by the new sixth paragraph of Article 81 Constitution, and empowers the Houses of the Italian Parliament to monitor the respect on the public finance equilibrium. Art. 5, s. 3, f) prescribes that an independent authority on budget control shall be established within the Parliament (see Question VII.5).

Debate Balanced Budget Rule      
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

In terms of parliamentary procedures, the rarity should firstly be emphasized of formal amendments to the Italian Constitution for both broad cultural reasons and because of the complexity of the process of constitutional amendment established by the Constitution itself (Art. 138 of the Constitution asks for a double reading by each of the two chambers of the Parliament of the constitutional bill, with a required majority of deputies or senators at the first reading for the approval, and a qualified majority of two thirds of the components in the second reading. If only an absolute majority, and not this last qualified one, is reached at the second deliberation, Art. 138 provides for the possibility to call for a referendum).

In the case of the Balanced Budget Rule amendment, after the approval of the Euro-plus agreement on 11 March 2011, several constitutional bills were filed in both Chambers, by the majority as well as by members of the opposition;[16] but only after the letter sent by the European Central Bank to the Italian Government on 5 August 2011 (as well known, asking, among other things, for a constitutional reform tightening fiscal rules; see Questions X.10 and X.11 for details), the Government announced the presentation of a constitutional bill, filed on 15 September 2011 to the Lower House (Camera dei Deputati). All these were then discussed together,[17] and led to the approval of Constitutional Law n. 1/2012.

This was finally approved by the Lower House (Senato) on 17 April 2012, and soon after promulgated by the President of the Republic, thereby concluding a procedure considered as «unique in the entire history of constitutional amendments in Italy»:[18] in fact, not only revisions brought about through Government initiatives are themselves very rare, but the process has been relatively fast, and the majorities obtained have been very large (Camera dei Deputati: 489 yes, 3 no, 19 abstentions;[19] Senato: 235 yes, 11 no, 34 abstentions[20] ; i.e. more than two thirds of each Chamber, thus avoiding the possibility of a referendum).

During the parliamentary process, already in the first date of plenary examination (23 November 2011, at the Camera dei Deputati) the Government (represented by the Minister for the Relationship with the Parliament, Prof. Giarda, http://leg16.camera.it/410?idSeduta=0553&tipo=stenografico#sed0553.stenografico.tit00050.sub00010) expressed the importance for the government of the bill’s approval: «I hope that the discussion, and then the completion of the work on this bill, can be reasonably quick so that we can proceed to the examination and approval by the Senate of the Republic, in order to show to all the world, which is observing us, the first concrete steps, of particular importance, because they modify the text of our Constitution to show that this government is working with the cooperation, assistance, aid of Parliament, implementing the commitments that characterized the settlement itself of this Government».

In the same context, the problem of (budgetary and general) sovereignty was actually raised by some of the few political parties at the time in the opposition (e.g. the “Italia dei Valori”, MP Cambursano: «We are not deprived of sovereignty when some decisions made by Europe replacing those of Member States are based on commonly agreed rules and democratically controlled by the European Parliament. But we are defraud when the sacrifices asked to Greeks and Italians are decided in Berlin or Frankfurt, without control of the institutions of the European Union»); but some other opposition parties, such as the “Lega Nord”, approved the Bill because it was originally presented by the Berlusconi IV government (whom they supported), and they simply argued against the traditional policies of high public expenditure of the past decades.

Some other MPs, also supporting the government, stressed the critical points of the choice of an implementation in the form of a Constitutional Law, also for problems of timing in the approval (MP Tassone, UDC[21] : «was it really necessary to undertake an amendment of Article 81 and constitutionalize, therefore, a balanced budget? Times are tight but I think we are pointing more to an announcement than to anything else, because if times are so tight to adopt such a complex measure relating to the budget, maybe it was fairer and easier to provide by ordinary law, considering that a law of constitutional revision obviously leads necessarily to a time dilation»), as well as the desirability of similar strict budgetary constraints («And then there are also the stories of the past, because in a moment of crisis and difficulty we also need debt to face critical situations of economic nature, and I refer to the occurrence of exceptional events») and the problematic imposition made, through this, by the State on the local authorities and the other levels of government («how can we think of a revival of Article 81 of the Constitution just starting from the state? A constitutional principle should refer to the Republic which is made by the State, regions, municipalities and metropolitan areas pursuant of Title V and Article 114 amended by the Constitutional Law of 18 October 2001, n. 3 … so can one just consider the state, only the state?»).

In the assembly of 30 Novemb