EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 30 April 2014  
on public finances 
(CON/2014/30) 
 
Introduction and legal basis 
On 27 March 2014, the European Central Bank (ECB) re ceived a request from the Lithuanian Ministry of 
Finance for an opinion on the draft constitutional law on the implementation of the fiscal treaty (hereinafter the ‘draft constitutional law’). 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third inde nt of Article 2(1) of Council Decision 98/415/EC
1, 
as the draft constitutional law relates to Lietuvos ba nkas. In accordance with  the first sentence of 
Article 17.5 of the Rules of Procedure of the Eur opean Central Bank, the Governing Council has adopted 
this opinion. 
 1.  Purpose of the draft constitutional law 
1.1 The purpose of the draft constitutional law is to ensure the sustainability of the general government 
sector finances and a stable development of th e economy. The draft constitutional law aims to 
implement the Treaty on Stability, Coordination and Governance in the Economic and Monetary 
Union (TSCG)
2, and takes into account the earlier ECB opinion on the implementation of the 
TSCG in Lithuania3. 
1.2 The objectives of the TSCG are to be achieved by  managing the structural balance of the general 
government sector in order to ensure that the gene ral government sector finances are in surplus or 
balanced. 
1.3 The draft constitutional law sets two ratios for asse ssing the management of the structural balance 
of the general government sector: (i) the medium-term objective and (ii) the structural impetus target. The medium-term objective sets a structural  general government sector balance indicator. 
This must be reached within four successive y ears, excluding years when an unusual event occurs. 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2  The TSCG was signed by 25 Member St ates on 2 March 2012. It entered into fo rce on 1 January 2013, on the basis that 
12 euro area Member States had deposited their ratification in struments by that date. The Lithuanian Parliament ratified 
the TSCG on 28 June 2012 and deposited the ratification in strument with the Council of the European Union on 
6 September 2012.  
3  Opinion CON/2012/105. All ECB opinions are publis hed on the ECB’s website at www.ecb.europa.eu. 
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2 The structural impetus target sets a targeted a nnual change (impetus) in the structural general 
government sector balance indicator towards the me dium-term objective, and is measured in GDP 
percentage.  
1.4 The draft constitutional law also lays down rul es limiting the increase in the general government 
sector expenditure4. More particularly, if the average of the general government sector’s balance 
indicators during the last five years is in defi cit, the average increase in expenditure of any 
individual general government sector budget that exceeds 3 % of GDP cannot exceed half of the 
average multi-annual potential GDP growth.  
1.5 The draft constitutional law provides for sever al exemptions. First, the rules governing the 
structural balance of the general government sect or do not apply in the case of an unusual event as 
defined in Council Regulation (EC) No 1466/975. Second, the draft constitutional law provides for 
five exceptions to the rules on the li mits on growth in public expenditure6. Third, the State Social 
Insurance Fund budget and the budgets of governme nt sectors whose planned expenditure does not 
exceed 0.3 % of GDP are not subject to the requi rement to have a surplus or balanced budget7. The 
rules and requirements applying to them are instead set out in Article 4(2) and (3) of the draft constitutional law.  
1.6  Article 8 of the draft constitutional law lays down  the procedures to be followed in the event of a 
failure to implement the ‘structural impetus target ’ defined in Article 2. These procedures shall 
start after the submission, no later than 1 May, of  the report of the Government or its authorised 
institution to the Parliament for the preceding year  on the implementation of the structural impetus 
target and on the indicator of the structural balance of the general government sector. The Prime 
Minister is required to provide to the Parliame nt and the control institution information on the 
reasons for such failure and ‘guidelines on the m easures for implementation’ of the target, and to 
make an oral presentation in the Parliament. Moreove r, within 30 working days of receipt of this 
information, the control institution is required to provide the Parliament with a conclusion on the 
validity of the reasons for failure  to implement the target and the appropriateness of the guidelines 
on the measures to be taken. Finally, within one m onth after receipt of the conclusion of the control 
institution, the Prime Minister is required to pr ovide the Parliament with the information on the 
final reasons for failure and guidelines on the measures to be taken to meet the target. 
1.7 The State Audit Office is designated as a budget policy control institution (hereinafter ‘control 
institution’) responsible for monitoring the implemen tation of the structural impetus target and the 
achievement of the medium-term objective
8. 
                                                 
4  Article 3 of the draft constitutional law. 
5  Article 3(1) and Article 7 of the draft constitutional law and Council Regulation (EC) No 1466/97 of 7 July 1997 on the 
strengthening of the surveillance of budgetary positions a nd the surveillance and coordination of economic policies 
(OJ L 209, 2.8.1997, p. 1). 
6  Article 3(3) of the draft constitutional law. 
7  Article 4(1) of the draft constitutional law. 
8  Article 2(1) and Article 9 of the draft constitutional law. 
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3 1.8 Lietuvos bankas is required to submit its macroec onomic projections to the control institution each 
time these projections are updated, and at least twice per calendar year9.  
 2. General observations 2.1 The ECB welcomes the consultin g authority’s initiative and the objective of implementing the 
TSCG
10. Although Lithuania is no longer subject to an excessive deficit procedure, enactment of 
the draft constitutional law is important in modern ising the Lithuanian legal framework in relation 
to the budgetary process11.  
2.2 Article 14(5) of the TSCG provides Lithuania, as a Member State with a derogation, with the 
opportunity to declare its intention to be bound by all or part of the provisions in Titles III (Fiscal Compact) and IV (Economic Policy Coor dination and Convergence) of the TSCG
12 at an earlier 
date than that when the abrogation of the der ogation in accordance with Article 140(2) of the TFEU 
takes effect. Lithuania has not made such a declaration and the ECB notes that the draft constitutional law will only enter into force as from the date when the abrogation of the derogation 
takes effect, i.e. once the euro  is introduced in Lithuania
13. 
 3. Form of implementation of the balanc ed budget rule and correction mechanism 
3.1 Article 3(2) of the TSCG provides that the ‘bal anced budget rule’ shall take effect in national law 
through ‘provisions of binding force and perman ent character, preferably constitutional, or 
otherwise guaranteed to be fully respected a nd adhered to throughout the national budgetary 
processes’. In accordance with the Communication from the Commission on Common principles on national fiscal correction mechanisms adopted in accordance with Article 3(2) of the TSCG 
(hereinafter the ‘Common Principles’)
14, the legal status of the correction mechanisms to be 
triggered in case of significant observed deviations ‘should be such that their provisions cannot be simply altered by the ordinary budgetary law’. 
3.2 The ECB welcomes that the draft law has been designed as a constitutional law, which represents a 
ranking in the Lithuanian hierarchy of laws in line with the requirements of the TSCG
15. 
  
4. The nature of the correction mechanisms 
4.1 Article 3(1)(e) of the TSCG requires the automa tic triggering of a correction mechanism in the 
event of significant observed deviations from the medium-term objective or the adjustment path 
                                                 
9  Article 9(3) of the draft constitutional law. 
10  See paragraph 2.1 of Opinion CON/2012/105. 
11  See paragraph 2.2 of Opinion CON/2013/91. 
12  Titles III (Fiscal Compact ) and IV (Economic Policy C oordination and Convergence). 
13  See paragraph 2.3 of Opinion CON/2012/105. 
14 COM (2012) 342 final. 
15  See paragraph 3.2 of Opinion CON/2013/91. 
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4 towards it. This mechanism shall include the obligation to implement measures to correct 
deviations over a defined period of time. Common Principle 4 further provides that the size and timeline of the correction shall be framed by pred etermined rules, thereby limiting, though not 
entirely ruling out, the scope for discretion in devising a response to a significant budgetary deviation. In addition, a Member State is expected to restore the medium-term objective as fast as is reasonably possible, which generally means ei ther in the year immediately following the 
occurrence of the deviation or the subsequent year. 
4.2 The draft constitutional law
16 specifies procedural steps in three layers of reporting, as described in 
paragraph 1.6 above. However, it does not stipulate the automatic triggering of the measures to be 
taken, but leaves it to the Government’s and the Parl iament’s discretion. This is not in line with the 
above-mentioned provisions of the TSCG and Common Principle 417. In particular, a correction 
mechanism that implements consolidation measu res automatically, e.g. unless the Parliament 
vetoed them with a qualified majority, would prov ide a better guarantee of future fiscal stability. 
4.3  Article 3(1)(c) of the TSCG provides that in  exceptional circumstances there may be temporary 
deviations from the medium-term objective or the ad justment path towards it. This would include 
an unusual event outside the control of the concer ned Member State that has a major impact on the 
government’s financial position, or  periods of severe economic downturn as defined in the Stability 
and Growth Pact, including at euro area level.  Common Principle 6 makes it clear that any 
suspension of the correction mechanism due to the use of an escape clause may only be temporary. 
Once the escape clause no longer applies, the corr ection mechanism may provide for a minimum of 
structural adjustment, with the requirement of th e Stability and Growth Pact being the lower limit. 
In addition, once the escape clause no longer app lies, the Member State shall adopt a corrective 
plan in respect of the budget that must be adhered to during the correction period.  
4.4 The escape clauses provided for in the draft constitu tional law, as described in paragraph 1.5 above, 
go beyond the temporary deviati ons permitted by the TSCG ‘in exceptional circumstances’. In 
finalising the draft constitutional la w, it should be ensured that escap e clauses adhere to the concept 
of ‘exceptional circumstances’ laid down in Article  3(3)(b) of the TSCG and to the requirements of 
Common Principle 6. 
 5. Medium-term objective The ECB notes that Article 3(1)(b) of the TSCG requi res Lithuania to ensure rapid convergence towards 
its medium-term objective. The ti meframe for such convergence w ill be proposed by the Commission 
taking into consideration sustainability risks specific to Lithuania.  
 
                                                 
16  Article 8 of the draft constitutional law. 
17  See paragraph 4.2 of Opinion CON/2013/90 and paragraph 3.3 of Opinion CON/2012/105. 
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5 6. Control institution  
6.1 The State Audit Office is designated as a contro l institution responsible for monitoring compliance 
with the rules laid down in the draft constitutional law. In this regard, the ECB notes that a control 
institution has to comply with criteria laid down in the Common Principles18. 
6.2 The ECB understands that fulfilment of the criteria under the Common Principles will be 
facilitated, inter alia, by recruiting independent experts both from Lithuania and abroad as provided 
for in the draft constitutional law19. It should be ensured that the State Audit Office complies with 
all criteria laid down under the Common Principles, in  order for it to effectively carry out the tasks 
of a control institution. 
 7. Lietuvos bankas’ role  7.1 As indicated by the ECB in recent opinions, the role of a national central bank (NCB) should not 
go beyond monitoring activities that result from or are linked – directly or indirectly – to the discharge of their monetary policy mandate
20. Ensuring compliance with the obligations under 
Article 3(1) of the TSCG is the res ponsibility of the Lithuanian government21. 
7.2 Lietuvos bankas is already producing macroeconomi c projections as provided for in Article 9(3) of 
the draft constitutional law. These are made publicly available22. The ECB understands that the 
draft constitutional law provides that Lietuvos bank as will merely forward its existing projections 
produced for monetary policy purposes to the c ontrol institution. Consequently, the draft 
constitutional law raises no concerns relating to  compliance with the prohibition on monetary 
financing, to the principle of central bank indepe ndence or to interference with monetary policy. 
7.3 In any event, even outside the scope of the draft constitutional law, Lietuvos bankas should retain 
its existing role regarding the production and qua lity control of government finance statistics23 in  
                                                 
18  Principle 7 (the role and independence of monitoring instituti ons). These criteria include; (i) a statutory regime grounded 
in law; (ii) freedom from interference, whereby such institutions  should not take  instructions, and should be in a capacity 
to communicate publicly in a timely manner; (iii)  nomina tion procedures based on expe rience and competence; (iv) 
adequacy of resources and appropriate access to  information to carry out the given mandate. 
19  Article 9(4) of the draft constitutional law. 
20 See paragraph 4.3 of Opinion CON/2012/105, paragraph 5. 5 of Opinion CON/2013/90 and paragraph 5.5 of Opinion 
CON/2013/91. 
21  See paragraph 4.3 of Opinion CON/2012/105. 
22  Available on Lietuvos bankas’ website at http://www.lb.lt/m acroeconomic_forecast 
23  See paragraph 5.4 of Opinion CON/2013/90. 
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6 accordance with Council Regulation (EC) No 479/200924, Guideline ECB/2013/23 on government 
finance statistics, and the memorandum of understa nding on the cooperation between the members of the 
European Statistical System (ESS) and th e members of the ESCB, dated 24 April 201325.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 30 April 2014. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
24 Council Regulation (EC) No 479/2009 of 25 May 2009 on the app lication of the Protocol on the excessive deficit 
procedure annexed to the Treaty establishing th e European Community (OJ L 145, 10.06.2009, p. 1). 
25 Available on www.ecb.europa.eu