Brussels, 25/03/2014 (Agence Europe) - On Monday 24 March, the Czech Republic's Centre-Left government started to prepare to sign the budget pact on budget stability.
Czech Prime Minister Bohulsav Subotka told the Wall Street Journal that the government had taken a unanimous decision to sign the budget pact and it will work toward eventually joining the euro. Along with Croatia and the United Kingdom, the Czech Republic is one of a small number of member states do not subscribe to the budget pact (see EUROPE 10758).
The budget pact intergovernmental treaty came into force in early 2013 and introduces a budget balance rule whereby parties to the deal must keep their budget either in equilibrium or in surplus. The Czech Republic meets this requirement, because its annual structural deficit does not exceed 0.5% of nominal GDP. If a member state deviates from this budget rule, it will have to introduce an automatic correction mechanism. When a country's debt is well below 60% of GDP, the budget deficit cap can be set at 1% of GDP. In exceptional circumstances, like a serious recession, the golden budget rule does not apply. The treaty requires member states whose public debt is above 60% of GDP to reduce the amount above 60% by a twentieth a year, calculated over the preceding three years. This rule is relaxed for three years for countries against which an excessive deficit proceeding is running. The treaty is due to come within the Community remit after five years.
Of the 25 budget pact countries, only Belgium has yet to submit its ratification instruments. (MB)