Elimination, Compromise, and Compensation in the Six Drafts of the Fiscal Compact Treaty Name of the document 1 Goals specified; More binding 2 Goals added 3 see Article 3(3) below 1st draft 16 December 2011 International agreement on reinforced economic union 2nd draft 6 January 2012 International treaty on reinforced economic union 3rd draft 10 January 2012 Treaty on stability, co-ordination and governance in the economic and monetary union (no provision) (no provision) added: WELCOMING the legislative proposals made by the European Commission [ ] on 23 November 2011 NOTING in particular that, for the application of the budgetary "Balanced Budget Rule" [ ], this monitoring will be made through the setting up of country specific medium term objectives and of calendars ofconvergence, as appropriate, for each Contracting Party. (no change) see Article 3(3) below [ ], for each Contracting Party. Temporary deviation from the medium-term objective will only be allowed in cases of unusual event outside the control of the contracting party with a major impact on the financial position of the general government or in periods of severe economic downturn for the euro area, the EU or the concerned Contracting party as defined in the revised Stability and Growth Pact. 4th draft 19 January 2012 Treaty on stability, co-ordination and governance in the economic and monetary union WELCOMING the legislative proposals made by the European Commission [ ] on 23 November 2011 5th draft 27 January 2012 Treaty on stability, co-ordination and governance in the economic and monetary union added: [ ] for the euro area [ ] on the trengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability, and on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States. Final version 30 January 2012 Dropped but see Article 3(3) below Preamble NOT Enforceable 4 5 6 7 Means specified 8 9 Means specified; enhanced cooperation emphasized 10 Ratification condition added 11 (no provision) (no provision) added: NOTING that the medium term objectives should be updated regularly on the basis of a commonly agreed method, the main parameters of which are also to be reviewed regularly, reflecting appropriately the risks of explicit and implicit liabilities for public finance, as embodied in the aims of the Stability and Growth Pact, (no provision) (no provision) Added: NOTING that sufficient progress towards the medium term objectives should be evaluated on the basis of an overall assessment with the structural balance as a reference, including an analysis of expenditure net of discretionary revenue measures, in line with the provisions specified under the law of the Union, in particular Regulation (EC) No. 1466/97, as amended by Regulation (EC) No. 1175/2011 [ ], in line with the provisions specified under European Union law, in particular Council Regulation (EC) No. 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of budgetary policies, as amended by Regulation (EU) No. 1175/2011 of the European Parliament and of the Council of 16 November 2011 (hereinafter "the revised Stability and Growth Pact"), (no provision) (no provision) (no provision) (no provision) added: NOTING that the correction mechanism [ ] should aim at correcting deviations from the medium- term objective or the adjustment path including their cumulated impact on government debt dynamics (no provision) (no provision) (no provision) added: RECALLING that Article 260 of the Treaty on the Functioning of the European Union empowers the Court of Justice of the European Union to impose the payment of a lump sum or penalty on a Member State of the European Union having failed to comply with one of its judgments. (no provision) (no provision) (no provision) NOTING that the smooth functioning of the Economic and Monetary Union makes it necessary that the Contracting Parties work jointly towards an economic policy where, whilst building upon the mechanisms of economic policy coordination as defined in the European Union Treaties, they take the necessary actions and measures in all the domains which are essential to the good functioning of the euro area, (no provision) (no provision) (no provision) added: NOTING, in particular, the wish of the Contracting Parties to make more active use of enhanced cooperation [ ], without undermining the internal market, as well as to make full recourse to measures specific to the Member States whose currency is the euro pursuant to Article 136 STRESSING the importance of the Treaty establishing the European Stability Mechanism as an element of a global strategy to strengthen the Economic and Monetary Union, Added: and POINTING OUT that compliance with Article 3(2) shall be considered as a condition for the granting of assistance under the European Stability Mechanism as soon as the transposition period mentioned in Article 3(2) has expired, [TFEU] [ ] POINTING OUT that the granting of assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the Contracting Party concerned and, as soon as the transposition period mentioned in Article 3(2) has expired, on compliance with the requirements of this Article. (no provision) (no provision) (no provision) added: Reference to countries being bound by the treaty (Eurozone members and others) added: [ ] and that the European Commission has established criteria for the determination of the lump sum or penalty to be paid in the framework of that Article[.]
Article 1 (1): Purpose (withrespect to the internal market) Article 2 (2): Consistency and Relationship with the EU law Article 3 (1): balanced budget rule Article 3 (2): Transposition at the national level Article 3 (3): exceptional circumstances/ temporary deviation Article 4: debt reduction, debt brake rule, or 1/20 rule Article 5 (1): automatic correction mechanism... 12 deeper integration in the internal market dropped, which was interpreted as progress by the United Kingdom; Goals added, specified, and means specified agree to strengthen their budgetary discipline and to reinforce their economic policy coordination and governance. 13 In accordance with the case law of the Court of Justice of the European Union, European Union law has precedence over the provisions of this Treaty. 14 the country specific reference value shall not exceed 0.5% of nominal GDP. [ ] c. Where the debt level is significantly below the 60% reference value mentioned under Article 1 of Protocol No 12, the countryspecific reference value for the annual structural net deficit may take a higher value than specified under point b). 15 binding force and permanent character, preferably constitutional (3 rd ) vs. a constitutional or equivalent nature (1 st & 2 nd ) cf. Ireland & Denmark, obliged to hold a referendum on constiutional amendments 16 Largely, these exceptions kept being allowed; although definition dropped and reapeared Article 5 (2) 19 Newly added as 5(2) vs. originally article 5 without (1) or (2) The rules mentioned [ ] shall be introduced in national binding provisions of a constitutional or equivalent nature. The Contracting Parties shall in particular put in place a correction mechanism to be triggered automatically in the event of significant deviations from the reference value or the adjustment path towards it. This mechanism shall be defined at national level, on the basis of commonly agreed principles. It shall include the obligation of the Contracting Parties to present a programme to correct the deviations over a defined period of time. [ ] In addition, annual structural deficit of the general government means the cyclically-adjusted deficit net of one-off and temporary measures; exceptional economic circumstances means an unusual event outside the control of the Contracting Party concerned, which has a major impact on the financial position of the government. 17 When the ratio of their government debt to gross domestic product exceeds the 60 % reference value mentioned under Article 1 of Protocol No 12, the Contracting Parties undertake to reduce it at an average rate of one twentieth per year as a benchmark. 18 such programmes shall be submitted to the European Commission and the Council. agree on a fiscal compact and on a stronger coordination of economic policies, involving an enhanced governance to foster fiscal discipline and deeper integration in the internal market as well as stronger growth, enhanced competitiveness and social cohesion. Title I: PURPOSE AND SCOPE agree [ ] to strengthen the economic pillar of the Economic and Monetary Union by adopting a set of rules intended to foster budgetary discipline through a fiscal compact and to strengthen the coordination of economic policies and to improve the governance of the euro area, thereby supporting the achievement of the European Union's objectives for sustainable growth and employment. Title II: CONSISTENCY AND RELATIONSHIP WITH THE LAW OF THE UNION (Title changed from budgetary discipline into Fiscal Compact ) [ ]under point b), but in any case no more than 1.0% of nominal GDP. [ ] in the event of significant deviations from the reference value or the djustment path towards it, as specified under the law of the Union. [ ] (no exceptional economic circumstances provision) the ratio of their general government debt to gross domestic product [ ]shall reduce it at an average rate of one twentieth per year as a benchmark, as provided for in Article 2(1a) of Regulation (EC) No. 1467/97 as amended by Regulation (EC) No. 1177/2011. The content and format of these programmes shall be defined in the law of the Union. They shall be submitted to the European Commission and the Council for endorsement. (no provision) Added: The implementation of the programme, and the yearly budgetary plans consistent with it, will be monitored by the Commission and by the Council. (Dropped; No specific reference to the evident precedence of EU law) Title III: FISCAL COMPACT with a deficit not exceeding 0.5 % of the gross domestic product at market prices d. [ ] and where risks in terms of long-term sustainability of public finances are low [ ] under point b) can reach a deficit of maximum 1.0 % of the gross domestic product at market prices. The rules mentioned [ ] shall take effect in the national law of the Contracting Parties within one year of the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, that are guaranteed to be respected throughout the national budgetary processes. The Contracting Parties shall in particular put in place at national level, on the basis of principles agreed on a proposal from the European Commission, a correction mechanism to be triggered automatically in the event of significant deviations from the medium term objective or the adjustment path towards it, as specified in the revised Stability and Growth Pact. (The similar wording on temporary deviation as in the 4th draft can first be found in the preamble & Article 3 (1) c) of the 3rd draft) agree [ ] to strengthen the economic pillar of the Economic and Monetary Union [ ], thereby supporting the achievement of the European Union's objectives for sustainable growth, employment, competitiveness and social cohesion. with the annual structural deficit not exceeding 0.5 % of the gross domestic product at market prices b. The time frame for such convergence will be proposed by the Commission taking into consideration country-specific sustainability risks. [ ] can reach a structural deficit of at most 1.0 % of the gross domestic product [ ] preferably constitutional [ ]. The Contracting Parties shall put in place at national level the correction mechanism mentioned in paragraph 1.e) on the basis of common principles to be proposed by the European Commission, concerning in particular the nature, the size and the time-frame of the corrective action to be undertaken and the role and independence of the institutions responsible at national level for monitoring the observance of the rules. Added (again): Exceptional circumstances refer to the case of an unusual event [ ] which has a major impact on the financial position of the general government or to periods of severe economic downturn as defined in the revised Stability and Growth Pact, provided that the temporary deviation of the Contracting Party concerned does not endanger fiscal sustainability in the medium term. with a lower limit of a structural deficit of 0.5 % [ ] [ ] the time-frame of the corrective action to be undertaken, also in the case of exceptional circumstances, and the role and independence of the institutions responsible at national level for monitoring the observance of the rules. [ ] (No major changes) (No major changes) added: The existence of an excessive deficit due to the breach of the debt criterion will be decided according to the procedure set forth in Article 126 [TFEU] such programmes shall be submitted to the European Commission and the Council for endorsement and their monitoring will take place within the context of the existing surveillance procedures of the stability and growth pact (No major changes)
Article 6: debt issuance Article 7: reverse qualified majority Article 8 (1): Member states which consider that another member state has failed to comply... [EC]] Article 8 (2): Noncompliance [New in fourth Article 8 (3) [New in fourth Article 9 20 The Contracting Parties shall improve the reporting of their national debt issuance. For that purpose they shall report ex-ante on their national debt issuance plans tothe European Commission and the Council. 21 3 rd draft: Limiting its scope to national deficits and not to include national debt (Italy s demand) 22 The Commission acting on behalf of the Contracting Parties (2 nd draft) to bring non-compliance before the ECJ, was downgraded to a reporting role with some kind of peer review between the Contracting Parties the Contracting Parties whose currency is the euro undertake to support proposals or recommend-dation put forward by the Commission where a Member State whose currency is the euro is recognized by the Commission to be in breach of the 3% ceiling in the framework of an excessive deficit procedure, unless a qualified majority of them is of another view. Any Contracting Party which considers that another Contracting Party has failed to comply with Article 3(2) may bring the matter before the Court of Justice of the European Union. The Contracting Parties shall coordinate their national debt issuance. [ ] the Contracting Parties whose currency is the euro undertake to support proposals or recommendation put forward by the Commission where a Member State [ ] is recognized by the Commission to be in breach of the deficit or debt criterion in the framework of an excessive deficit procedure, unless a qualified majority of them is of another view. [but no specific reference such as 3%] Any Contracting Party which considers that another Contracting Party has failed to comply with Title III may bring the matter before the Court of Justice of the European Union. The Commission may, on behalf of the Contracting Parties, bring an action for an alleged infringement of Title III before the Court of Justice. With a view to better coordinating the planning of their national debt issuance, the Contracting Parties shall [ ] the Contracting Parties whose currency is the euro commit to support proposals or recommendation submitted by the Commission where a Member State [ ] is considered by the Commission to be in breach of the deficit criterion in the framework of an excessive deficit procedure. This obligation shall not apply where it is apparent among the Contracting Parties whose currency is the euro that a qualified majority of them [ ] is of another view. Any Contracting Party which considers that another Contracting Party has failed to comply with Article 3(2) may bring the matter before the Court of Justice of the European Union or invite the European Commission to issue a report into the matter. In the latter case, if the European Commission, after the Contracting Parties whose currency is the euro commit to support the proposals or recommendations submitted by the Commission where it considers that a Member State of the European Union whose currency is the euro is in breach of the deficit criterion in the framework of an excessive deficit procedure. This obligation shall not apply where it is established among the Contracting Parties [ ] Contracting Party concerned, is opposed to the decision proposed or recommended. The European Commission is invited to present in due time to the Contracting Parties a report on the provisions adopted by each of them in compliance with Article 3(2). If the European Commission [ ] concludes in its report that a Contracting Party has failed to comply with Article 3(2), the matter will be brought to the having given the Contracting Party concerned Court of Justice [ ]. In addition, where a the opportunity to submit its observations, confirms non compliance in its report, the Contracting Party considers, independently of the ommission's report, that another Contracting matter will be brought to the Court of Justice Party has failed to comply with Article 3(2), it may by the Contracting Parties. also bring the matter to the Court of Justice. [ ] 23 (No provision) (No provision) (No provision) [ ] If the Court finds that the Contracting Party concerned has not complied with its judgment, it may impose on it a lump sum or a penalty payment appropriate in the circumstances and that shall not exceed 0.1% of its gross domestic product. The amounts imposed shall be payable to the European Stability Mechanism. 24 (No provision) (No provision) (No provision) This Article constitutes a special agreement between the Contracting Parties within the meaning of Article 273 of the Treaty on the Functioning of the European Union. 25 Since the 4 th draft, the Euro Plus Pactis not explicitly mentioned any longer cf. See Adelina Marini on the softening change from 1 st to 2 nd draft. Without prejudice to the economic policy coordination as defined in the Treaty on the Functioning of the European Union, the Contracting Parties undertake to work jointly towards an economic policy fostering growth through enhanced convergence and competitiveness and improving the functioning of the Economic and Monetary Union. To this aim, they will take all necessary action, including through the Euro Plus Pact. Article 10 26 [ ] Contracting Parties undertake to make recourse, whenever appropriate and necessary, to the enhanced cooperation on matters that are essential for the smooth functioning of the euro area, without undermining the internal market. Title IV: ECONOMIC POLICY COORDINATION AND COVERGENCE [Title changed from Economic Convergence to Economic Coordination ] Building upon the economic policy coordination [ ] towards an economic policy fostering the smooth functioning of the Economic and Monetary Union and economic growth through enhanced convergence and competitiveness. In this context, particular attention shall be paid to all developments which, if allowed to persist, might threaten stability, competitiveness and future growth and job creation. [ ]. [ ] to measures specific to those Member States whose currency is the euro as provided for in article 136 TFEU and to the enhanced cooperation on matters [ ] [ ] the Contracting Parties shall take all the necessary actions and measures in all the domains which are essential to the good functioning of the euro area, as mentioned in the Euro Plus Pact. [ ] to the enhanced cooperation as provided for in Article 20 of the Treaty on European Union and in Articles 326 to 334 of the treaty on the Functioning of the European Union on matters [ ] [ ] essential to the good functioning of the euro area in pursuit of the objectives of fostering competitiveness, promoting employment, contributing further to the sustainability of public finances and reinforcing financial stability. (No major changes) added: [ ] it may bring on the case before the Court of Justice and request the imposition of financial sanctions following criteria established by the Commission in the framework of Article 260 [TFEU] (5 th ) The amounts imposed on a Contracting Party whose currency is the euro shall be payable to the European Stability Mechanism. In other cases, payments shall be made to the general budget of the European Union. the Contracting Parties stand ready to make active use, whenever appropriate and necessary, of measures specific to those Member States whose currency is the euro [ ] Article 11 27 With a view to benchmarking best practices, the Contracting Parties ensure that all major economic policy reforms that they plan to undertake will be discussed and coordinated among themselves. [ ] be discussed ex-ante and, where appropriate, coordinated among themselves. [ ]benchmarking best practices and working towards a common economic policy [ ]be discussed ex-ante and, where appropriate, coordinated among themselves. working towards a more closely coordinated economic policy [ ]
Article 12 (1): Participants in Euro summit meetings [Article 13 in the 1 st Article 12 (2): Number of Euro summit meetings [Article 13 in the 1 st Article 12 (3): Contracting parties whose currency is not the euro [New in fourth [Article 12(6) in 4 t and 5 th Article 12 (4): Relation to the Euro Group [Article 12(3) in other drafts] Participants Article 13: National parliaments [Article 12 in the 1 st Article 14 (2): Treaty will enter into force... Article 15: Open to accession Article 16: To be incorporated into EU treaties [former Article 14] 28 The Heads of State or Government of the Contracting Parties whose currency is the euro, together with the President of the European Commission shall meet informally in Euro Summit meetings. The President of the European Central Bank shall be invited to take part in such meetings. 29 Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss questions related to the specific responsibilities those Member States share with regard to the single currency, other issues concerning the governance of the euro area and the rules that apply to it, and in particular strategic orientations for the conduct of economic policies and for improved competitiveness and increased 30 4 th draft: Poland obtained a first concession (vs. France s exclusive position); 5 th draft; further compromise; with the cooperation of the Czech Republic, Hungary and Slovakia 31 The role of Euro Group (and its president) is decreased convergence in the euro area. Title V: GOVERNANCE OF THE EURO AREA The Heads of State or Government of the Contracting Parties whose currency is the euro, the president of the European Commission, the president of the Euro Group and the Commissioner responsible for Economic and Monetary Affairs shall meet informally in Euro Summit The Heads of State or Government of the Contracting Parties whose currency is the euro, together with the President of the European Commission shall meet informally in Euro Summit meetings. [ ] [minor wording change] Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss questions related to the specific responsibilities which the Contracting Parties whose currency is the euro share with regard to the single currency, [ ] (No provision) (No provision) (No provision) In order to discuss specific issues concerning the implementation of this Treaty, the President of the Euro Summit will invite, when appropriate and at least once a year, the Heads of State or Government of Contracting Parties whose currency is not the euro who have ratified this Treaty and have declared their intention to be bound by some of its provisions in accordance with Article 14(5) to a meeting of the Euro Summit. Euro Summit meetings shall be prepared by the President of the Euro Summit, in close cooperation with the President of the European Commission and by the Euro Group. The follow-up shall be ensured in the same manner. 32 Representatives of the Committees in charge of economy and finance within the Parliaments of the Contracting Parties will be invited to meet regularly to discuss in particular the conduct of economic and budgetary policies, in close association with representatives of the relevant Committee of the European Parliament. 33 This Agreement shall enter into force on the first day of the month following the deposit of the ninth instrument of ratification by a Contracting Party whose currency is the euro. The President of the Euro Summit shall ensure the preparation and continuity of Euro Summit meetings, in close cooperation with the President of the European Commission. The Euro Group shall contribute to the preparation and follow up of the Euro Summit meetings and its president may be invited to attend the Euro Summit meetings for that purpose. Representatives of the competent Committees within the Parliaments of the Contracting Parties will be invited to meet regularly to discuss in particular the conduct of economic and budgetary policies, in close association with representatives of the relevant Committee of the European Parliament. Representatives of the Parliaments of the Contracting Parties will be invited to meet regularly to discuss in particular the conduct of economic and budgetary policies, in close association with representatives of the European Parliament. Title VI: GENERAL AND FINAL PROVISIONS This Agreement shall enter into force on the first day of the month following the deposit of the fifteenth instrument of ratification by a Contracting Party whose currency is the euro. on 1 January 2013, provided that 12 eurozone member states have ratified it, or after 12 have ratified it, whichever is the earlier. 34 (No provision) (No provision) This Treaty shall be open to accession by Member States of the European Union other than the Contracting Parties upon application that any such Member State may file with the Depositary. The Contracting parties shall approve the application by common agreement. Following such approval, the applicant Member State shall accede upon the deposit of the instruments of accession with the Depositary, who shall notify the other Contracting Parties thereof. 35 2 nd draft: the intention to incorporate the treaty into EU law included (No reference) Within five years at most following the entry into force, [ ], an initiative shall be launched, [ ] with the aim of incorporating the substance of this Treaty into the legal framework [..]. Within five years at most following the entry into force [ ] the necessary steps shall be taken [ ] with the aim of incorporating the substance of this Treaty [ ]. As foreseen in Title II of Protocol (No 1) on the role of national Parliaments in the European Union annexed to the European Union Treaties, the European Parliament and the national Parliaments of the Contracting Parties will together determine the organization and promotion of a conference of the chairs of the budget committees of the national Parliaments and the chairs of the relevant committees of the European Parliament. [ ] a conference of representatives of the relevant committees of the national Parliaments and representatives of the relevant committees of the European Parliament in order to discuss budgetary policies and other issues covered by this Treaty. Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss questions related to the specific responsibilities which the Contracting Parties whose currency is the euro share with regard to the single currency, other issues concerning the governance of the euro area and the rules that apply to it, and strategic orientations for the conduct of economic policies to increase convergence in the euro area. The Heads of State or Government [ ] shall participate in discussions of Euro Summit meetings concerning competitiveness for the Contracting Parties, the modification of the global architecture of the euro area and the fundamental rules that will apply to it in the future, as well as, when appropriate and at least once a year, in discussions on specific issues of implementation of this Treaty on Stability, Coordination and Governance in the (Provision on approval of accession deleted) This Treaty shall be open to accession by Member States of the European Union other than the Contracting Parties upon application that any such Member State may file with the Depositary, who shall notify the other Contracting Parties thereof.
Sources: Kreilinger, V. 2012. The Making of a New Treaty: Six Rounds of Political Bargaining Policy Brief 32, February. For the individual drafts, please refer to: 1 st draft, 16/12/2011, http://tinyurl.com/fiscaltreaty1 ; 2nd draft, 06/01/2012, http://tinyurl.com/fiscaltreaty2 ; 3rd draft, 10/01/2012, http://tinyurl.com/fiscaltreaty3 ; 4th draft, 19/01/2012, http://tinyurl.com/fiscaltreaty4 ; 5th draft, 27/01/2012, http://tinyurl.com/fiscaltreaty5; and final version, 30/01/2012, http://www.europeancouncil.europa.eu/media/579087/treaty.pdf. For the Council s press release (December 21, 2012) used in categorizing the importance of the provisions, see http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/134543.pdf