CYIL 2014

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, 15 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 to 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. ” 15 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”).

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