22nd Feb 2024

EU countries ink legal procedures for new treaty

  • Bundestag: The Berlin-pushed treaty is due to come into force when 12 of the 17 eurozone countries ratify it (Photo: BriYYZ)

EU leaders have signed a text designed to stop any prevaricating when it comes to member states taking one another to court for not implementing a rule on balanced budgets - the cornerstone of the newly-signed fiscal discipline treaty.

The short annex to the treaty - given the go ahead at last week's European summit - is supposed to pre-empt any rather-you-than-me feet-shuffling when it comes to national governments taking legal action against their peers by depoliticising the process.

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Under the agreement, if a country is considered not to have properly implemented the so-called 'golden rule' then it will be up to the trio of EU presidency countries - currently Poland, Denmark and Cyprus - that conduct the day-to-day business of the Union to take the offending member state to court.

If none of the trio countries can do so, either because they are in the same boat or due to "justifiable grounds of an over-arching nature", it will fall to the previous trio of presidency countries.

"The trio of presidencies was used because it wouldn't be appropriate to have, for example, the UK or the Czech Republic [both of which refused to sign up to the treaty] do it," said one contact.

The cumbersome procedure is due to it being an intergovernmental treaty. A normal EU treaty would see such rules enforced by the European Commission.

Germany pushed for a specific "mechanism" to make sure its core feature is legally enforceable. Asked recently about whether she believed it likely that member states would bring each other to court, German Chancellor Angela Merkel suggested that such was media scrutiny that capitals would be falling over one another to do it.

However, the Berlin-pushed treaty is largely seen as a political lever to allow the German government to justify to disgruntled parliamentarians and a sceptical public why it is paying the lion's share of eurozone bail-outs and funds.

It is still open what implementation of the balanced budget rule will actually mean in practice, with the article containing a get out clause in the form of "exceptional circumstances".

"Like in all rules there is some element of political appreciation," said the contact explaining the text. "The rule is arguably stricter than in the past. It restricts countries to a structural deficit of 0.5 percent [of GDP]. But since the structural deficit is measured after the economic cycle, there is inevitably an element of judgement about when the economic cycle finishes."

Meanwhile, getting from the point of bringing a country to court and imposing the ultimate sanction of a 0.1 percent of GDP is a two-step process requiring the court to find the country in breach of the treaty and then another court ruling to find that the original judgement had been ignored.

"It wouldn't surprise me if there a referral to the court but I don't think they will ever get to the actual sanctions part," said another source.

This is partly due to simple politics but also due to some continued legal uncertainty over whether the European Court of Justice is actually allowed to impose sanctions under this intergovernmental set-up.

"It may be challenged on this point," said the source, "you ask two lawyers, you get two completely different answers."

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