Leaders from 25 European Union (EU) [official website] countries on Friday signed [press release, PDF] the Treaty on Stability, Coordination and Governance [text, PDF] which is directed at improving fiscal discipline and promoting greater financial information disclosure between member states. The central tenet of the treaty is a balanced budget requirement. Of the 27 EU member states, only the UK and the Czech Republic did not sign the measure. The treaty comes as a new method to bring stability and coordination between the countries impacted by the European debt crisis. The EU said:
The main elements of the so-called fiscal compact include a requirement for national budgets to be in balance or in surplus, a criterion that would be met if the annual structural government deficit does not exceed 0.5% of GDP at market prices. This balanced budget rule must be incorporated into the member states' national legal systems, preferably at constitutional level, within one year after the entry into force of the treaty. In the event of deviation from this rule, an automatic correction mechanism will be triggered. It will be defined by each member state on the basis of principles proposed by the European Commission.The treaty will become legally binding to all Eurozone countries after it is ratified by 12 member states. Although named a treaty, the UK's decision to withhold signature means that the measure is considered an inter-governmental agreement [BBC backgrounder] that is not integrated directly into EU treaties.
EU governments have grappled with the proper methods to coordinate their responses to the region's fiscal instability. Some have commented that certain countries may need to leave the Eurozone [JURIST op-ed] in order to achieve greater stability. Last week, Germany's Federal Constitutional Court [official website, in German] ruled [JURIST report] that use of a parliamentary subcommittee to fast-track decisions related to eurozone bailouts is unconstitutional. In September, the German constitutional court rejected as unfounded [JURIST report] three constitutional complaints against German and European legal instruments and other measures in connection with both the European Monetary Union rescue package and the financial aid package for Greece. The high court ruled [press release] that by voting through national acts that implement the broader European measures, the Bundestag did not unconstitutionally impair its own ability to adopt and control the nation's budget, nor did it infringe on the budget autonomy of future parliaments. In May 2010, the court refused to issue a temporary injunction [JURIST report] against the German government's 22.4 billion ($28.5 billion) contribution to the bailout package for Greece, which has been gripped by a dire debt crisis [BBC backgrounder] and faced severe austerity measures [JURIST report] as it confronted its debt concerns. The court held that the complainants seeking the injunction did not produce any concrete evidence that their rights under Germany's Basic Law could be "seriously and irreversibly" affected as a result of the guaranteed loan. The court's press release also noted that potential liability risk as a result of the contribution is outweighed by reducing the risks of damaging Germany's national economy as a result of instability of the European Monetary Union.