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The Budgetary Treaty: useful? new ? dangerous?

(BRUSSELS2) Approval of the budgetary treaty has burst onto the political scene. And the National Assembly is now beginning to debate it in France. To have followed the elaboration of this text in its intricacies, and to have read it (a little), it deserves an exercise... let's say clarification. Work very little facilitated by the text itself which shines neither by its clarity nor by its limpidity! Let's try all the same... Is the Budgetary Treaty useless or does it bring something new? Is it the sprawling hydra that will destroy national autonomy? What are the non-visible consequences of a few provisions that went unnoticed on first analysis?

A treaty of circumstance?

What is striking at first sight in this treatise is its conjunctural aspect. By its content and justification - particularly in its preamble - this treaty is more reminiscent of the conclusions of summits which obey a particular situation than a treaty inscribed in time. What will happen when the situation is completely different? In five, ten or twenty years for example, will we not have to profoundly modify the meaning or the aesthetics of this treatise? Nobody knows. And this is a first. This treaty also seems rigid enough to adapt to all circumstances. A deadline has been set - which is not a deadline - of 5 years after entry into force, i.e. 1 January 2018 normally, in order to integrate not the Treaty but its " contents in existing texts. Which promises a great rat race if the two non-signatory states (Czech Republic and United Kingdom) persist in their opinion. But also foreshadows a modification of the text or certain data to give it the stability and durability that European treaties generally have.

Has the Treaty been modified since the arrival of François Hollande?

No. Not one iota has been changed between its negotiation by the leaders (Merkel and Sarkozy) and the arrival of François Hollande. This is a fact that it seems difficult to contradict. The treaty was not renegotiated. However, the political climate has changed. The addition of a "growth pact" - the content of which was already implicit in several conclusions of the European Council - found more force. But the arrival of François Hollande in France, which followed that of Mario Monti in Italy and Elio di Rupo in Belgium, like the probable return of the social democrats to power in the Netherlands, just like the negative effect on continent's economy of austerity policies, has largely set the tone for a reorientation of European policy. It made it possible to counterbalance the preponderant weight of Germany and its historical monetary rigor (the fight against inflation being the top priority of monetary policy and the Central Bank and not economic growth, which is more the result of socio-economic players). -economic and federated authorities, the Länder). It is this political reorientation and not the legal change which places in a slightly different context the Treaty on “stability, coordination and convergence” whose very name has not changed since its adoption.

Does the treaty add anything? Is it new?

Overall, this treaty does not present anything really new in substance. Because all the quantified rules are already inscribed in texts already drawn up a long time ago (Maastricht Treaty) or in the process of being applied (Six Pack, Two Pack). This applies to the balanced budget rule, the limitation of the deficit to 3% or the maximum structural deficit of 0,5% per year, reduction of 1/20th of the debt per year (*). But never, and this is where the main strength (and novelty) of the text lies, had such legal force been achieved. Certain rules acquire, by virtue of the Treaty, a constitutional force either national, or European, or both at the same time. It is the "golden rule" (**) which obeys above all this last principle. Even the rule of 3% of the deficit, however intangible it may appear, was until now only fixed in a protocol annexed to the Treaty of Maastricht and could be modified by a simple unanimous decision of the Council (art. 126-14 of the TFEU Treaty), at the legislative level therefore... Singular difference.

The text also includes a number of denominations which may be subject to interpretation over time: structural deficit, correction for cyclical variations or for one-off and temporary measures (which are subtracted from or added to the deficit), the notion of exceptional circumstances, the medium-term objective...

(*) This reduction at the rate of 1/20th targets debt above 60%. Thus for a debt of 100%, the effort to produce is 2% of the amount of the debt per year (and not 5% as a hasty reading might suggest).

(**) The golden rule includes: 1) the balanced budget rule, 2) the limitation of the deficit structural at 0,5% per year (1% if the country is not too indebted, debt < 60% of GDP), 3) the correction mechanism. It does not include the obligation to reduce the deficit by 1/20th. This is however very present in this text which has the value of an international treaty and is therefore incorporated into the internal legal order, according to methods interpreted differently in the States. Nb: the structural word is important because it leads to a complex calculation: we deduce the

The correction mechanism: codified, reinforced

The correction mechanism will be carried out "at national level (...) on the basis of common principles proposed by the European Commission". One can see in it - like the Robert Schuman Foundation - an innovation; I would say that it is rather the consecration of a practice. For the time being, both the Commission and the Council were only issuing recommendations on the economic and social policy to be followed - sometimes very specific (increase in hourly work, reduction in labor costs, etc.) that each Member State was more or less free to apply or not. It was political pressure. This is now codified. The novelty if there is is the judicialization of the deficit procedure.

The role of the European Court of Justice?

The Commission - like the other Member States - can introduce what closely resembles an action for failure to fulfill obligations against the State, not only which has not hoisted the "golden rule" as a constitutional principle, but also for those which have not not ensured the establishment of the corrections mechanism (requested by the Commission) or the independent authority responsible for verifying compliance with these rules (two rules which were previously contained only in the 'six pack'). On the other hand, it cannot normally initiate proceedings before the Court for excessive deficit. Article 8 which provides for the intervention of the European Court of Justice indeed refers to Article 3-2 and not to Article 3-1 (which is the expression of the golden rule). And the Treaty still prohibits (Article 126-9) the introduction of an action for failure to act within the framework of the excessive deficit procedure. The judicial verification of deficits is thus reserved for the national level.

The irruption of constitutional courts in the economic sphere 

This is one of the issues, discreet, and whose consequences remain to be specified, is at the level of the interpretation of the golden rule. Indeed, a golden rule inscribed in each national constitution henceforth implies first of all control at the political level by each parliament - and no longer only by each government. Above all, it entails the possibility of control by constitutional authorities or the like. Until now, the control of these macro-economic data was "nice". The pattern was as follows: the European Commission glared, warned, even stormed. And the State concerned (often the States concerned) sought a more or less adequate response depending on the balance of power at the internal level (coalition or not, electoral rhythm, relation to the Commission. Either they applied, or they circumvented - even if it meant rigging the figures (cf. Greece), or they made a "brain of honor" by changing the rule (case of France and Germany in 2005). But overall this pressure from peers and from the Commission to be effective sometimes did not prevent some States from slipping... Today there is no longer only the truncheon, there can be forced execution.This analysis being done at the national level beforehand or a posteriori.

Paradoxically, a loss of monopoly for the Commission

Indeed, nothing prevents the Constitutional Council in France - and its counterparts in other countries - from ruling on budgetary issues, whereas hitherto in certain countries, the judges only checked the form of the budget and the compliance with certain principles (equality, legality, sincerity, etc.). Which, in fact, projects the socio-economic debate into the constitutional sphere. This will have to recruit economists... With a risk of significant divergence in the more or less long term between the different countries. There is a chance that the interpretation of exceptional circumstances will be different in Hungary, Greece or Germany... It also means taking away from the European Commission and its DG Ecfin (Economy and Finance) — all powerful and very ideological - part of its monopoly. We understand why the European executive is not very enthusiastic about this text. This one keeps the hand on the correction mechanism. But it may also have to be accountable and justify its position in a more substantiated way than hitherto...

Read also: The draft euro zone treaty is written. Text and some comments

Nicolas Gros Verheyde

Chief editor of the B2 site. Graduated in European law from the University of Paris I Pantheon Sorbonne and listener to the 65th session of the IHEDN (Institut des Hautes Etudes de la Défense Nationale. Journalist since 1989, founded B2 - Bruxelles2 in 2008. EU/NATO correspondent in Brussels for Sud-Ouest (previously West-France and France-Soir).

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