EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 11 December 2012  
on the implementation of the Treaty on Stabilit y, Coordination and Governance in the Economic 
and Monetary Union 
(CON/2012/105) 
 
Introduction and legal basis 
On 9 November 2012, the European Central Bank (ECB)  received a request from the Lithuanian Ministry 
of Finance for an opinion on a draft constitutional la w on the sustainability of general government sector 
finances (hereinafter the ‘draft constitutional law’ ) and the draft law amending the Law on Lietuvos 
bankas (hereinafter the ‘draft amending law’) (coll ectively referred to as the ‘draft legislation’). 
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 (TFEU) and the th ird indent of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of  the European Central Bank by national authorities 
regarding draft legislative provisions1, as the draft legislation relates to Lietuvos bankas. In accordance 
with the first sentence of Article 17.5 of the Rule s of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion. 
 1.  Purpose of the draft legislation 
1.1 The draft legislation aims to implement certain  provisions of the Treaty on Stability, Coordination 
and Governance in the Economic and Monetary Union (TSCG)
2 to strengthen fiscal discipline by 
(a) establishing a ‘balanced budget rule’ and an  automatic correction mechanism, and (b) 
introducing a stricter surveillance mechanism, wh ich includes the designation of Lietuvos bankas 
as an institution responsible at national level fo r monitoring compliance with the balanced budget 
rule. 
1.2 The draft constitutional law set s a medium-term objective of ensu ring that the general government 
sector finances are in surplus, balanced or close to balance3. 
1.2.1 It aims to achieve this objective by improvi ng the structural balance of the general government 
                                                 
1  OJ L 189, 3.7.1998, p. 42.   
2  The TSCG was signed by 25 Member States on 2 March 2012  and will come into force on 1 January 2013, provided that 
twelve euro area Member States have deposited their instrument  of ratification, or on the fi rst day of the month following 
the deposit of the twelfth instrument of ratification by a euro area Member State, whichever is earlier http://european-
council.europa.eu/eurozone-governance/trea ty-on-stability. The Lithua nian Parliament ratified the TSCG on 28 June 
2012 and deposited the ratification inst rument with the Council of the European Union on 6 September 2012. 
3  This implements Article 3(1)(a) of the TSCG. 
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2 sector in the medium-term. 
1.2.2 The draft constitutional law sets two ratios for asse ssing the management of the structural balance 
of the general government sector: the planned stru ctural target, and the minimum executive target. 
Non-implementation of these ratios is intended to trigger automatic corrective measures. 
1.2.3  The draft constitutional law provides for several  escape clauses. For example, ‘the obligation under 
the TSCG’ does not have to be fulfilled and the au tomatic corrective measures will not be triggered 
if the expected public sector deficit is higher than  3% of GDP or if one of the following exceptional 
circumstances occurs: (a) actual production is or w ill be below the potential production for at least 
two consecutive calendar years ; (b) the GDP chain volume for the current quarter of the calendar 
year has continued to decrease, as compared to the respective quarter of the preceding calendar 
year, or (c) the GDP chain volume for the current  calendar year will continue to decrease, as 
compared to the preceding year. 
1.3 The draft legislation designates Lietuvos bank as as the institution responsible for budget policy 
control at national level. Its main task is to st rengthen the implementation and transparency of the 
correction mechanisms. This includes: (a) monito ring the preparation and implementation of the 
planned structural target; (b) assessing and ma king public communications about whether the 
planned structural target or the minimum execu tive target will be reached; (c) approving the 
expected economic developments scenario prepared by the Ministry of Finance; (d) delivering an 
opinion to the Parliament on whether the planned budgetary policy is appropriate to achieve the 
planned structural target. 
 2. General observations  2.1 The ECB welcomes the consultin g authority’s initiative and the objective of implementing the 
TSCG. This is particularly important for Lithuania,  since it has been subject  to the excessive deficit 
procedure since July 2009 in order to bring the government deficit below 3% of GDP, and the deadline for correction of the deficit has been exte nded to 2012. In addition, with a view to the 
introduction of the euro in Lithuania, it is important that the fiscal framework contributes to the prevention of renewed macr oeconomic imbalances.   
2.2 As regards the methodology for the national implementation of the TSCG, the ECB draws the 
consulting authority’s attention to the guidan ce provided by the European Commission and the 
Council, in particular, the Common principles on national fiscal correction mechanisms (hereinafter the ‘common principles’)
4 and the Specifications on the implementation of the Stability 
                                                 
4  Communication from the Commission: Commo n principles on national fiscal co rrection mechanisms (COM(2012) 342 
final, 20 June 2012). Available at: http://eur-
lex.europa.eu/LexUriSe rv/LexUriServ.do?uri=COM:2012:0342:FIN:EN:PDF  
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3 and Growth Pact and Guidelines on the formal  and content of Stability and Convergence 
Programmes5.  
 The ECB also notes that the Eu ropean Commission will present a report on the national provisions 
implementing the TSCG provisions adopted by the Member States which have signed and ratified 
the TSCG6 and will have the competence to assess compliance with Article 3(2) of the TSCG. 
2.3 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 Coordination and Convergence) of the TSCG
7 at an earlier 
date than that when the abrogation of the der ogation in accordance with Article 140(2) of the TFEU 
takes effect. The ECB notes that, the draft legisl ation 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. 
 3. Specific observations   
   The ECB notes several issues with regard to the draft legislation. 3.1   The concepts and definitions used in the dr aft constitutional law should be  fully consistent with 
existing Union legislation (such as the TSCG and the Stability and Growth Pact
8). 
3.1.1 Both definitions of ‘general government balan ce indicator’ and ‘general government sector debt’ in 
the draft constitutional law should refer to C ouncil Regulation (EC) No 479/2009 of 25 May 2009 
on the application of the Protocol on the exc essive deficit procedure annexed to the Treaty 
establishing the European Community9. In addition, the European Commission (Eurostat) validates 
and publishes deficit (surplus) and debt data for the general government sector pursuant to the 
excessive deficit procedure definition. 
3.1.2  Article 4 of the draft constitutional law cont ains concepts of ‘agreed bias’, ‘minimum executive 
target’, ‘planned structural target’ and ‘structu ral investment’, which are not contained in the 
TSCG. The draft legislation must be fully compa tible with the concepts and methodology used in 
the TSCG and the existing Stability an d Growth Pact legislation.  
3.2  The escape clauses provided for in Articles 3(3), 5(4), 6(2), and 7(3) of the draft constitutional law 
are broader than those in the TSCG. The ECB unde rlines that, in line with the common principles10, 
escape clauses should be based on Union agreed noti ons, in order to promote consistency and avoid 
                                                 
5  Code of conduct: Specifications on the implementation of the Stability and Grow th Pact and Guidelines on the format 
and content of Stability and Convergence Pr ogrammes (3 September 2012). Available at: 
http://ec.europa.eu/economy_fi nance/economic_governance/sgp/pdf /coc/code_of_conduct_en.pdf  
6  Article 8(1) of the TSCG. 
7  Titles III (Fiscal Compact ) and IV (Economic Policy C oordination and Convergence). 
8  The Stability and Growth Pact is  enshrined in two main Council Regulat ions: (1) the ‘preventive arm’, Council 
Regulation (EC) No 1466/97 of 7 July on the strengtheni ng of the surveillance of budgetary positions and the 
surveillance and coordination of econom ic policies (OJ L 209, 2.8.1997, p. 1); and (2) the ‘corrective arm’, Council 
Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit 
procedure (OJ L 209, 2.8.1997, p. 6). 
9  OJ L 145, 10.6.2009, p. 1. 
10  Principle 6 (escape clauses). 
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4 overly permissive definitions of exceptional ci rcumstances. The suspension of the correction 
mechanism should be limited in time, and a mini mum pace of adjustment should follow the exit 
from the escape clause.  
3.3  The ‘unjustified failure of execution of the minimum executive target’11 lacks sufficient automatic 
follow-up. The Prime Minister’s oral presentation in  the Lithuanian Parliament on the reasons to 
justify such failure of execution and on the gui delines for avoidance of such circumstances is 
insufficient in this regard.  
3.4  Article 11 of the draft constitutional law needs to be clarified in order to ensure that the method for 
calculating the cyclical position of the economy is c onsistent with the official method used in the 
European semester for economic policy coordination12. 
3.5  The draft constitutional law is complex and w ould benefit from greater clarity, which could be 
achieved by following more closely the provisions of the TSCG.  The ‘implementing legal act’ as 
referred to in Article 11 of the draft constitutional law is a more appropriate legal instrument for 
addressing not only the methodology for the calculation of the multi-annual growth average, but also other issues of a technical nature, including  a number of formulas, currently present in the 
draft constitutional law. In using this instrument, the national legislator will also be able to take into 
account any future technical developments at European level by incorporating these in the 
implementing legal act.  
 4. Lietuvos bankas’ role 4.1 Lietuvos bankas’ conclusions as regards the implem entation of the planned structural target and the 
minimum executive target will be crucial for activa ting corrective measures, i.e. amendments to the 
budgetary laws relating to the current year or upcoming years.  
4.2 Lietuvos bankas will also assess and approve the expected economic developments scenario 
prepared by the Ministry of Finance and will co nsider whether the planned budgetary policy is 
appropriate to reach the pl anned structural target. 
4.3  The ECB understands that Lietuvos bankas’ role as ‘budget policy control institution’ is intended to 
implement the role of the institution responsible in Lithuania for monitoring compliance with the 
rules set out in Article 3(1) of the TSCG. In this  respect, Lietuvos bankas’ role, as specified in the 
draft legislation, should not go beyond the role of a monitoring institution
13. The provisions of the 
draft constitutional law, which contain the obliga tion on Lietuvos bankas to approve the expected 
economic developments scenario prepared by the Mi nistry of Finance, raise particular concern in 
this respect. Ensuring compliance with the obligat ions under Article 3(1) of the TSCG is the 
responsibility of the Lithuanian government.  
                                                 
11  Article 9 of the draft constitutional law. 
12  Article 2a of Regulation (EC) No 1466/97. 
13  See also principle 7 (the role and independence of monitoring instit utions) of the common principles.  
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5  In addition, the powers of Lietuvos bankas under the draft constitutional law and the draft 
amending law should be aligned to avoid any inconsistencies between the two draft laws. 
4.4  The ECB also notes that any involvement of Lietuvos bankas in the application of the balanced 
budget rule must ensure that these functions will no t affect Lietuvos bankas’ ability to carry out its 
ESCB-related tasks from an operati onal and financial point of view . Financial independence, which 
is an element of the central bank independence refe rred to in Article 130 of the Treaty, requires an 
NCB to have sufficient means not only to perform its ESCB-related tasks but also its national tasks 
(e.g. financing its admini stration and own operations)14. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 11 December 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
14   See the ECB’s Convergence Report, 2012, p. 25.