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The Fiscal Pact and the ECJ

As Merkozy said today negotiations on the so-called Fiscal Pact (really: International Treaty on a Reinforced Economic Union) are advancing and it is expected to be signed by March at the latest. A second draft of said treaty has been leaked meanwhile. Open Europe has put forward a discussion of the revisions between the first and second draft treaties circulating. I believe that the most important change between the two versions lies in the expanded role of the European Court of Justice (ECJ) in the second draft. As Open Europe puts it:

Article 8 stipulates that the ECJ would have jurisdiction over any violation of the entire Title III, i.e. on all the provisions of the so-called “fiscal compact”. In the previous draft, the ECJ only had a say on Article 3(2), i.e. on whether national governments have correctly transposed the balanced budget rule into their national legislation;

Furthermore, according the revised text the Commission “may, on behalf of Contracting Parties, bring an action for an alleged infringement of Title III” before the ECJ.

In the previous draft the ECJ effectively only would have had the power to judge the validity of the national implementation of a debt brake or golden rule of ‘constitutional or equivalent nature.’ This time around it has additionally been be given a de facto veto over national budgets! Signatories of the Fiscal Pact will have to ‘apply the following […]: The budgetary position of the general government shall be balanced or in surplus.’

In other words any country having signed the pact (including non-Eurozone states in my understanding) or the Commission may take any other signatory in front of the ECJ if that first country’s budget is not ‘balanced or in surplus.’ The ECJ will have to allow for ‘the budgetary impact of the economic cycle […] and […] exceptional economic circumstances, or […] periods of a severe economic downturn,’ but in principle it will have the power to declare a sovereign country’s budget invalid. Think about this for a second.

Obviously the vague definitions and circumstances laid out above hardly make this kind of judicial enforcement fool proof and for normative reason that is probably for the better. Still, the symbolism of the heart of national parliamentary sovereignty to undergo supra-national control represents another step towards increased integration.

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