European Fiscal Compact

European Fiscal Compact
Name	European Fiscal Compact
Type	Fiscal compact
Date signed	2012
Date effective	2013
Location signed	Brussels
Parties	European Union member states

European Fiscal Compact. The European Union (EU) introduced the European Fiscal Compact to strengthen fiscal discipline and economic governance among its member states, particularly in the Eurozone. This compact aims to prevent excessive budget deficits and promote fiscal responsibility, as emphasized by Angela Merkel, Nicolas Sarkozy, and Herman Van Rompuy. The European Fiscal Compact is closely related to the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) and the Six-Pack (European Union) legislation, which were also designed to enhance economic stability in the EU, with support from International Monetary Fund (IMF) and European Central Bank (ECB).

Introduction

The European Fiscal Compact is a key component of the EU's efforts to address the European sovereign-debt crisis, which affected several member states, including Greece, Ireland, Portugal, and Spain. The compact is based on the principles of sound public finances, fiscal sustainability, and macroeconomic stability, as outlined by European Commission President José Manuel Barroso and European Council President Herman Van Rompuy. The European Fiscal Compact is also closely linked to the Euro Plus Pact, which aims to promote economic competitiveness and employment in the EU, with the support of Organisation for Economic Co-operation and Development (OECD) and World Trade Organization (WTO). The compact has been endorsed by European Parliament President Martin Schulz and European Investment Bank (EIB) President Werner Hoyer.

History

The European Fiscal Compact was signed on March 2, 2012, by 25 EU member states, including Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain. The compact entered into force on January 1, 2013, after being ratified by Parliament of Italy, Bundestag, Assemblée nationale (France), and other national parliaments, with the support of Council of the European Union and European Court of Justice. The European Fiscal Compact has been influenced by the Maastricht Treaty, Lisbon Treaty, and Treaty of Rome, which have shaped the EU's economic and monetary policies, with input from European Economic and Social Committee (EESC) and Committee of the Regions (CoR).

Provisions

The European Fiscal Compact sets out several key provisions, including the requirement for member states to maintain a structural budget balance of less than 0.5% of GDP and to reduce their public debt to below 60% of GDP, as recommended by European Commission and European Central Bank. The compact also establishes an automatic correction mechanism to prevent excessive budget deficits, which will be monitored by European Commission and Eurogroup. Additionally, the compact promotes economic coordination and policy cooperation among member states, with the support of Organisation for Economic Co-operation and Development (OECD) and International Labour Organization (ILO). The provisions of the European Fiscal Compact are closely linked to the Stability and Growth Pact (SGP) and the European Semester, which provide a framework for economic policy coordination and fiscal surveillance in the EU, with input from European Parliament and European Court of Auditors.

Implementation

The implementation of the European Fiscal Compact is being coordinated by the European Commission, which is responsible for monitoring member states' compliance with the compact's provisions, with the support of European Central Bank and European Investment Bank. The compact is also being implemented in conjunction with other EU policies, such as the Europe 2020 strategy and the European Fund for Strategic Investments (EFSI), which aim to promote economic growth and job creation in the EU, with the support of World Bank and International Monetary Fund. The European Fiscal Compact has been endorsed by G20, G7, and G8, which have recognized the importance of fiscal discipline and economic stability in promoting global economic growth, with input from International Labour Organization (ILO) and Organisation for Economic Co-operation and Development (OECD).

Member States

All 27 EU member states are eligible to participate in the European Fiscal Compact, although some member states, such as United Kingdom and Czech Republic, have opted out of the compact, with the support of House of Commons and Senate of the Czech Republic. The compact has been ratified by Parliament of Italy, Bundestag, Assemblée nationale (France), and other national parliaments, with the support of Council of the European Union and European Court of Justice. The European Fiscal Compact has been influenced by the Maastricht Treaty, Lisbon Treaty, and Treaty of Rome, which have shaped the EU's economic and monetary policies, with input from European Economic and Social Committee (EESC) and Committee of the Regions (CoR). The compact is also closely linked to the Eurozone and the European Central Bank, which play a crucial role in promoting economic stability and monetary policy in the EU, with the support of International Monetary Fund (IMF) and World Bank.

Criticisms

The European Fiscal Compact has been criticized by some for being too restrictive and for failing to address the underlying causes of the European sovereign-debt crisis, with concerns raised by European Trade Union Confederation (ETUC) and European Anti-Poverty Network (EAPN). Some have argued that the compact's focus on fiscal austerity and budget cuts may exacerbate unemployment and social inequality in the EU, with warnings from International Labour Organization (ILO) and Organisation for Economic Co-operation and Development (OECD). Others have criticized the compact for lacking democratic accountability and for being imposed on member states without sufficient consultation, with concerns raised by European Parliament and European Ombudsman. Despite these criticisms, the European Fiscal Compact remains a key component of the EU's efforts to promote economic stability and fiscal discipline among its member states, with the support of G20, G7, and G8, and the input of World Bank, International Monetary Fund, and European Investment Bank.

Category:European Union