Fiscal Compact Treaty: Scorecard for 2015

29-06-2016

The European Council Oversight Unit within the European Parliamentary Research Service (EPRS) has undertaken a detailed analysis that seeks to assess how far participating EU Member States have met their commitments within the framework of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). This intergovernmental treaty was agreed and signed by 25 Heads of State or Government in early 2012 and entered into force on 1 January 2013.  As part of a reformed economic governance framework, the TSCG has sought to introduce more effective and stricter fiscal rules, including further automaticity of sanctions and the transposition of a balanced budget rule into national legislation (under the 'Fiscal Compact'). It has also aimed to enhance economic policy coordination and convergence and improve the governance of the euro area. This study reviews the main elements of the Treaty and seeks to evaluate how far the Contracting Parties have met their commitments. It shows that, three years after its entry into force, against the backdrop of a modest economic recovery across the euro area and the EU, the implementation of the TSCG has delivered mixed results. Most notably, efforts to comply with the terms of the Fiscal Compact – including the set of rules aiming to strengthen budgetary discipline – varied from one country to another. Admittedly, the increasing complexity of the EU fiscal framework, following a series of reforms that took place after the onset of the sovereign debt crisis, did not help foster compliance and monitoring. In addition, the Contracting Parties made some progress on enhancing economic policy coordination and convergence; however, there is still room for improvement. Lastly, the analysis reveals that compliance with the TSCG provisions on the governance of the euro area has not been complete.

The European Council Oversight Unit within the European Parliamentary Research Service (EPRS) has undertaken a detailed analysis that seeks to assess how far participating EU Member States have met their commitments within the framework of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). This intergovernmental treaty was agreed and signed by 25 Heads of State or Government in early 2012 and entered into force on 1 January 2013.  As part of a reformed economic governance framework, the TSCG has sought to introduce more effective and stricter fiscal rules, including further automaticity of sanctions and the transposition of a balanced budget rule into national legislation (under the 'Fiscal Compact'). It has also aimed to enhance economic policy coordination and convergence and improve the governance of the euro area. This study reviews the main elements of the Treaty and seeks to evaluate how far the Contracting Parties have met their commitments. It shows that, three years after its entry into force, against the backdrop of a modest economic recovery across the euro area and the EU, the implementation of the TSCG has delivered mixed results. Most notably, efforts to comply with the terms of the Fiscal Compact – including the set of rules aiming to strengthen budgetary discipline – varied from one country to another. Admittedly, the increasing complexity of the EU fiscal framework, following a series of reforms that took place after the onset of the sovereign debt crisis, did not help foster compliance and monitoring. In addition, the Contracting Parties made some progress on enhancing economic policy coordination and convergence; however, there is still room for improvement. Lastly, the analysis reveals that compliance with the TSCG provisions on the governance of the euro area has not been complete.