CYIL 2014

204

EMIL RUFFER

CYIL 5 ȍ2014Ȏ

lending capacity of € 500 billion. The Eurozone got its ‘firewall’, but it was built

from the outside and with public international law instruments. Nevertheless, such

approach seemed to be fit for its purpose and was complemented and interlinked

with another treaty outside the EU framework which was designed to secure fiscal

stability and balanced public budgets of its Contracting Parties.

3. Treaty on Stability, Cooperation and Governance – intergovernmental

method by default?

The TSCG was signed on 2 March 2012 by the leaders of (then) all 17 euro area

members and 8 other EU Member States,

and entered into force on 1 January 2013.

The TSCG builds on the budgetary rules outlined in the Stability and Growth Pact

but adds one further important element. The signatory Member States agreed, pursuant

to Art. 3(2) TSCG, to implement a balanced budget rule in their national legislation

through permanent and binding provisions, preferably of a constitutional nature.

The Fiscal Treaty was negotiated at the turn of 2011 and 2012, during the peak

of the ‘sovereign debt crisis’ and economic recession, when the interest rates for states’

borrowing on the financial markets reached unacceptable levels and some of the

Member States faced difficulty in financing their public finance debt. The purpose

of the TSCG was to calm the financial markets as swiftly as possible and to present

a binding instrument for fiscal discipline and budgetary stabilisation (mainly) in the

Eurozone. The main elements of the TSCG are as follows.

Title III of the TSCG, entitled ‘Fiscal Compact’, aims at limiting deficits of public

finances. Under the rule in Art. 3(1) TFEU, annual structural government deficit

must not exceed 0.5% of GDP. The deficit must also be in line with the country-

specific minimum benchmark figure for long-term sustainability, which is set by the

preventive arm of the Stability and Growth Pact. Further, according to Art. 3(1)

(e), the Contracting Parties must implement an automatic correction mechanism,

i.e. to introduce measures

reduce the budget deficit

in the event of a significant

deviation from the agreed benchmark figure for long-term sustainability. The deadline

for implementation of this mechanism was, according to Art. 3(2) TSCG, set by the

end of 2013: “

The rules [on limiting the public deficit] set out in paragraph 1 shall

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.

”

Only the Czech Republic and the United Kingdom declined to sign the Fiscal Treaty, but each for

different reasons. However, both the Czech and UK governments had a rather difficult time in conveying

their specific reasons to their EU partners and the general public. In the case of the Czech Republic, not

only the ‘innocent bystanders’ had to struggle to comprehend the conflicting statements which the then

prime minister, Mr. Petr Nečas (member of the Civic Democratic Party – ODS), was making, but even

the major coalition partner in the government, the TOP 09 party and its foreign minister, Mr. Karel

Schwarzenberg, apparently disagreed with the implausible reasons given in official statements (such as

difficulties with “unclear ratification procedure”).