Brussels, 16/12/2011 (Agence Europe) - European countries could in future be authorised to take one another to court if they do not correctly include a “golden rule” on budgetary balance in their constitutions, according to a draft “fiscal compact” circulated on Friday 16 December. At the last European Council, it was agreed that, having learnt the lessons from the debt crisis, fiscal discipline had to be sharply tightened up in the countries of the eurozone and, in particular, that binding rules on returning to fiscal balance should be put in place everywhere, with an automatic correction mechanism in the event of any slippage: a “golden rule”.
The eurozone countries agreed to work to produce an intergovernmental treaty by the end of March. Ultimately nine other member states, which are not part of the euro area, signed up to the principle. Only the United Kingdom chose to stay on the sidelines.
The draft intergovernmental agreement, drafted by lawyers, was sent on Friday to the various European governments, who will now begin discussion of it. It states, in particular, that legally binding golden rules must be included in national constitutions or equivalent documents. And any country that signs up to the compact which considers that another party signatory has failed to abide by the arrangements on implementing the fiscal golden rule will be able to refer that country to the Court of Justice of the European Union. For the remainder, the draft text sets out in legal terms the key points of the political decisions agreed at the last summit.
Signatory countries will be required to work to achieve fiscal balance over the course of an economic cycle. This balance is defined as a structural deficit (excluding debt servicing and economic effects) of a maximum of 0.5% of gross domestic product (GDP).
Over the course of this cycle, the authorised annual public deficit remains limited to 3% of GDP and the overall public debt ceiling at 60% of GDP. It is also planned that sanctions against countries that fail to stick to the agreed terms should become more automatic than at present. (LC/transl.rt)