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| Treaty on Stability, Coordination and Governance in the Economic and Monetary Union | |
|---|---|
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| Type | Intergovernmental agreement |
| Drafted | 30 January 2012 (treaty finalised) |
| Signed | 2 March 2012[1] |
| Location | Brussels, Belgium |
| Effective | 1 January 2013 |
| Condition | Ratified by twelve eurozone states |
| Signatories | 25 EU member states (all except Croatia and Czech Republic) including all eurozone states[1] |
| Parties | 27 states (all EU member states) [2] |
| Depositary | General Secretariat of the Council of the EU |
| Languages | 22 (All EU languages except Croatian & Czech) |
| Full text | |
 Treaty on Stability, Coordination and Governance in the Economic and Monetary Union at Wikisource | |
The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union; also referred to as TSCG, or more plainly the Fiscal Stability Treaty[3][4][5] is an intergovernmental treaty introduced as a new stricter version of the Stability and Growth Pact, signed on 2 March 2012 by all member states of the European Union (EU), except the Czech Republic and the United Kingdom.[1] The treaty entered into force on 1 January 2013 for the 16 states which completed ratification prior to this date.[6] As of 3 April 2019, it had been ratified and entered into force for all 25 signatories plus Croatia, which acceded to the EU in July 2013, and the Czech Republic.
The Fiscal Compact is the fiscal chapter of the Treaty (Title III). It binds 23 member states: the 20 member states of the eurozone, plus Bulgaria, Denmark and Romania, who have chosen to opt in. It is accompanied by a set of common principles.
Member states bound by the Fiscal Compact have to transpose into national legal order the provisions of the Fiscal Compact. In particular, national budget has to be in balance or surplus, under the treaty's definition. An automatic correction mechanism has to be established to correct potential significant deviations. A national independent monitoring institution is required to provide fiscal surveillance. The treaty defines a balanced budget as a general budget deficit not exceeding 3.0% of the gross domestic product (GDP), and a structural deficit not exceeding a country-specific Medium-Term budgetary Objective (MTO) which at most can be set to 0.5% of GDP for states with a debt‑to‑GDP ratio exceeding 60% – or at most 1.0% of GDP for states with debt levels within the 60%-limit.[7][8] The country-specific MTOs are recalculated every third year, and might be set at levels stricter than the greatest latitude permitted by the treaty. The treaty also contains a direct copy of the "debt brake" criteria outlined in the Stability and Growth Pact, which defines the rate at which debt levels above the limit of 60% of GDP shall decrease.[9]
If the budget or estimated fiscal account for any ratifying state is found to be noncompliant with the deficit or debt criteria, the state is obliged to rectify the issue. If a state is in breach at the time of the treaty's entry into force, the correction will be deemed to be sufficient if it delivers sufficiently large annual improvements to remain on a country specific predefined "adjustment path" towards the limits at a midterm horizon. Should a state suffer a significant recession, it will be exempted from the requirement to deliver a fiscal correction for as long as it lasts.[10][11]
Despite being an international treaty outside the EU legal framework, all treaty provisions function as an extension to existing EU regulations, utilising the same reporting instruments and organisational structures already created within the EU in the three areas: Budget discipline enforced by Stability and Growth Pact (extended by Title III), Coordination of economic policies (extended by Title IV), and Governance within the EMU (extended by Title V).[9] The treaty states that the signatories shall attempt to incorporate the Fiscal Compact into the EU's legal framework, on the basis of an assessment of the experience with its implementation, by 1 January 2018 at the latest.[10][needs update]
- ^ a b c "EU summit: All but two leaders sign fiscal treaty". BBC News. 2 March 2012. Retrieved 2 March 2012.
- ^ Cite error: The named reference
depositarywas invoked but never defined (see the help page). - ^ Nicholas Watt (31 January 2012). "Lib Dems praise David Cameron for EU U-turn". The Guardian. London. Retrieved 5 February 2012.
- ^ "The fiscal compact ready to be signed". European Commission. 31 January 2012. Archived from the original on 7 September 2014. Retrieved 5 February 2012.
- ^ "Referendum to be held on Fiscal Treaty". RTÉ News. 28 February 2012.
- ^ "Fiscal compact enters into force 21/12/2012 (Press: 551, Nr: 18019/12)" (PDF). European Council. 21 December 2012. Retrieved 21 December 2012.
- ^ Independent Fiscal Institutions at the Supranational Level: The European Fiscal Board. Social Science Research Network (SSRN). Retrieved 18 July 2017.
- ^ The European Fiscal Board: Challenges and Opportunities. Tax and Transfer Policy Institute (TTPI). Retrieved 18 July 2017.
- ^ a b "Summary of the Fiscal Stability Treaty". Ireland: Citizens Information Board. 17 April 2012. Archived from the original on 3 June 2012. Retrieved 14 August 2012.
- ^ a b "Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG)" (PDF). European Council. 2 March 2012. Archived from the original (PDF) on 23 March 2012. Retrieved 17 August 2012.
- ^ "Communication from the Commission: Common principles for national fiscal correction mechanisms (COM/2012/0342 final)" (PDF). EUR-Lex (European Commission). 20 June 2012. Retrieved 23 November 2012.