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The Budgetary Treaty: useful? new ? dangerous?

(BRUSSELS2) The approval of the budgetary treaty has burst onto the political scene. And the national assembly is starting to debate it today in France. Having followed the development of this text in its twists and turns, and having read it (a little), this deserves an exercise... let's say clarification. Work not made much easier by the text itself which shines neither for its clarity nor its limpidity! Let's try anyway... Is the Budgetary Treaty useless or does it bring something new? Is this the tentacled hydra that will reduce national autonomy to nothing? What are the non-visible consequences of a few provisions that go unnoticed at first analysis?

A treaty of circumstance?

What is striking at first glance in this treatise is its conjunctural aspect. By its content and its justification – particularly in its preamble – this treaty is more reminiscent of summit conclusions which respond to a particular situation than of a treaty set 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 treaty? Nobody knows. And this is a first. This treaty also seems very rigid to adapt to all circumstances. A deadline has been set – which is not a deadline – of 5 years after entry into force, or normally on January 1, 2018, in order to integrate not the Treaty but its “ contents » in existing texts. Which promises a great free-for-all if the two non-signatory states (Czech Republic and United Kingdom) persist in their opinion. But also prefigures 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 was changed between its negotiation by the leaders (Merkel and Sarkozy) and the arrival of François Hollande. This is a fact that seems difficult to contradict. The treaty has not been renegotiated. On the other hand, 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 strength. But the arrival of François Hollande in France, which followed that of Mario Monti in Italy and Elio di Rupo in Belgium, as well as the probable return of the social democrats to power in the Netherlands, as well as the negative effect on the 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 priority of the priorities of monetary policy and the Central Bank and not economic growth which emerges more from socio-economic actors). -economic and federal 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 nothing? Is it new?

Overall, this treaty does not present anything really new in substance. Because all the numerical rules are already included in texts already developed for a long time (Maastricht Treaty) or currently being applied (Six Pack, Two Pack). This is the rule of balanced budget, 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, has 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 mainly obeys this last principle. Even the rule of 3% of the deficit, however intangible it may seem, was until now only fixed in a protocol annexed to the Maastricht Treaty 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, the correction for cyclical variations or for one-off and temporary measures (which subtract from or add to the deficit), the notion of exceptional circumstances, the medium-term objective...

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

(**) The golden rule includes: 1) the budgetary balance 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 modalities interpreted differently in the States. Nb: the word structural 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”. We can see it – like the Robert Schuman Foundation – as a innovation; I would say that it is rather the consecration of a practice. For the moment, both the Commission and the Council were only issuing recommendations on the economic and social policy to follow - sometimes very precise (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 new thing if there is anything 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 infringement against the State which not only has not upheld the “golden rule” as a constitutional principle but also for those who have not not ensured the establishment of the correction 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, 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 infringement action within the framework of the excessive deficit procedure. The judicial verification of deficits is thus reserved at the national level.

The irruption of constitutional courts into the economic sphere 

This is one of the discreet issues, the consequences of which remain to be clarified, at the level of the interpretation of the golden rule. Indeed, a golden rule enshrined in each national constitution now firstly implies control at the political level by each parliament – ​​and no longer just each government. Above all, it entails the possibility of control by constitutional or equivalent authorities. Until now, the control of these macroeconomic data has been “nice”. The pattern was as follows: the European Commission rolled its eyes, warned, even stormed. And the State concerned (the States concerned often) sought a more or less adequate response depending on the balance of forces at the internal level (coalition or not, electoral rhythm, relationship with the Commission. Either they applied, or they circumvented – even if it meant rigging the figures (see Greece), or they made a “arm of honor” by changing the rule (case of France and Germany in 2005 But overall this pressure from peers and the Commission to be effective sometimes). did not prevent some States from slipping... Today there is no longer just the truncheon, there can be forced execution. This analysis is carried out at the national level beforehand or. a posteriori.

Paradoxically, a loss of monopoly for the Commission

Indeed, nothing anymore prevents the Constitutional Council in France - and its counterparts in other countries - from ruling on budgetary questions, whereas until now in certain countries, judges only verified the form of the budget and the respect for certain principles (equality, legality, sincerity, etc.). Which, in fact, projects the socio-economic debate into the constitutional sphere. He will have to recruit economists... With a risk of notable 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 ideologue - a part of its monopoly. We understand why the European executive is not very enthusiastic about this text. This keeps control of the correction mechanism. But it may also have to be held accountable and justify its position in a more substantiated way than until now...

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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