19.01.2012-16:00
DRAFT

TREATY ON STABILITY, COORDINATION AND GOVERNANCE
IN THE ECONOMIC AND MONETARY UNION

THE CONTRACTING PARTIES.

CONSCIOUS of the obligation of the Contracting Parties, as Member States of the European
Union, to regard their economic policies as a matter of common concern,
DESIRING to promote conditions for stronger economic growth in the European Union and, to that
end, to develop ever-closer coordination of economic policies within the euro area,
BEARING IN MIND that the need for governments to maintain sound and sustainable public
finances and to prevent a government deficit becoming excessive is of an essential importance to
safeguard the stability of the euro area as a whole, and accordingly requires the introduction of
specific rules to address this need, including a balanced budget rule and an automatic mechanism to
take corrective action,
CONSCIOUS of the need to ensure that their deficits do not exceed 3 % of their gross domestic
product at market prices and that government debt does not exceed, or is sufficiently declining
towards, 60 % of their gross domestic product at market prices,
RECALLING that the Contracting Parties, as Member States of the European Union, should refrain
from adopting any measure which could jeopardise the attainment of the Union's objectives in the
framework of the economic union, notably the practice of accumulating debt outside the general
government accounts,
BEARING IN MIND that the Heads of State or Government of the euro area Member States agreed
on 9 December 2011 on a reinforced architecture for Economic and Monetary Union, building upon
the European Union Treaties and facilitating the implementation of measures taken on the basis of
Articles 121,126 and 136 of the Treaty on the Functioning of the European Union,
BEARING IN MIND that the objective of the Heads of State or Government of the euro area
Member States and of other Member States of the European Union is to incorporate the provisions
of this Treaty as soon as possible into the Treaties on which the European Union is founded,

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WELCOMING the legislative proposals made by the European Commission within the framework
of the European Union Treaties on 23 November 2011 and TAKING NOTE of its intention to
present further legislative proposals concerning, in particular, ex ante reporting of debt issuance
plans of the Member States of the European Union, economie partnership programmes detailing
structural reforms for euro area Member States in excessive deficit procedure as well as
coordination of major economie policy reform plans for euro area Member States,
EXPRESSING their readiness to support proposals which the Commission might present to further
strengthen the Stability and Growth Pact by introducing, for Member States whose currency is the
euro, a new range for medium term objectives in line with the limits established in this Treaty,
TAKING NOTE that, when reviewing and monitoring the budgetary commitments under this
Treaty, the European Commission will act within the framework of its powers as provided by the
Treaty on the functioning of the European Union, in particular Articles 121, 126 and 136 thereof,
NOTING in particular that, for the application of the budgetary "Balanced Budget Rule" described
in Article 3 of this Treaty, this monitoring will be made through the setting up of country specifie
medium term objectives and of calendars of convergence, as appropriate, for each Contracting
Party,
NOTING that the medium term objectives should be updated regularly on the basis of a commonly
agreed method, the main parameters of which are also to be reviewed regularly, reflecting
appropriately the risks of explicit and implicit liabilities for public finance, as embodied in the aims
of the Stability and Growth Pact,
NOTING that sufficient progress towards the medium term objectives should be evaluated on the
basis of an overall assessment with the structural balance as a reference, including an analysis of
expenditure net of discretionary revenue measures, in line with the provisions specifïed under
European Union law, in particular Council Regulation (EC) No. 1466/97 of 7 July 1997 on the
strengthening of the surveillance of budgetary positions and the surveillance and coordination of
budgetary policies, as amended by Regulation (EU) No. 1175/2011 of the European Parliament and
of the Council of 16 November 2011 (hereinafter "the revised Stability and Growth Pact"),
NOTING that compliance with the obligation to transpose the "Balanced Budget Rule" into national
legal systems through binding and permanent provisions, preferably constitutional, should be
subject to the jurisdiction of the Court of Justice of the European Union, in accordance with Article
273 of the Treaty on the Functioning of the European Union,
RECALLING that Article 260 of the Treaty on the Functioning of the European Union empowers
the Court of Justice of the European Union to impose the payment of a lump sum or penalty on a
Member State of the European Union having failed to comply with one of its judgments,

RECALLING the need to facilitate the adoption of measures under the excessive deficit procedure
of the European Union for euro area Contracting Parties whose planned or actual government
deficit to gross domestic product exceeds 3%, whilst strongly reinforcing the objective of that
procedure, namely to encourage and, if necessary, compel the Member State concerned to reduce a
deficit which might be identified,
RECALLING the need for those Contracting Parties whose government debt exceeds the 60 %
reference value to reduce it at an average rate of one twentieth per year as a benchmark,
BEARING IN MIND the need to respect, in the implementation of this Treaty, the specific role of
the social partners, as it is recognized in the laws or national systems of each of the Contracting
Parties,
STRESSING that none of the provisions of this Treaty is to be interpreted as altering in any way
the economie policy conditions under which financial assistance has been granted to a Contracting
Party in a stabilisation programme involving the European Union, its Member States and the
International Monetary Fund,
NOTING that the smooth functioning of the Economie and Monetary Union makes it necessary that
the Contracting Parties work jointly towards an economie policy where, whilst building upon the
mechanisms of economie policy coordination as defined in the European Union Treaties, they take
the necessary actions and measures in all the domains which are essential to the good functioning of
the euro area,
NOTING, in particular, the wish of the Contracting Parties to make more active use of enhanced
cooperation, as provided for in Article 20 of the Treaty on European Union and in Articles 326 to
334 of the Treaty on the Functioning of the European Union, without undermining the internal
market, as well as to make full recourse to measures specific to the Member States whose currency
is the euro pursuant to Article 136 of the Treaty on the Functioning of the European Union, and to a
procedure for the ex ante discussion and coordination among the Contracting Parties whose
currency is the euro of all major economie policy reforms planned by them, with a view to
benchmarking best practices,
RECALLING the agreement of the Heads of State or Government of the euro area Member States
on 26 October 2011 to improve the governance of the euro area, including the holding of at least
two Euro Summit meetings per year, as well as the endorsement by the Heads of State or
Government of the euro area Member States and of other Member States of the European Union on
25 March 2011 of the Euro Plus Pact which identifies the issues that are essential to fostering
competitiveness in the euro area,
STRESSING the importance of the Treaty establishing the European Stability Mechanism as an
element of a global strategy to strengthen the Economie and Monetary Union and POINTING OUT
that the granting of assistance in the framework of new programmes under the European Stability
Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the
Contracting Party concerned and, as soon as the transposition period mentioned in Article 3(2) has
expired, on compliance with the requirements of this Article,

NOTING that... are Contracting Parties whose currency is the euro and that, as such, they will be
bound by the provisions of this Treaty from the first day of the month following the deposit of their
instrument of ratification if the Treaty is in force at that date; NOTING ALSO that all other
Contracting Parties are, at the date of signature of this Treaty, Member States of the European
Union with a derogation or an exemption from participation in the single currency and may be
bound, as long as this derogation or exemption is not abrogated, only by those provisions of
Titles III and IV by which they declare, on depositing their instrument of ratification or at a later
date, that they intend to be bound,

HAVE AGREED UPON the following provisions:

TITLEI
PURPOSE AND SCOPE
Article 1
1.
By this Treaty, the Contracting Parties agree, as Member States of the European Union, to
strengthen the economie pillar of the Economie and Monetary Union by adopting a set of rules
intended to foster budgetary discipline through a fiscal compact, to strengthen the coordination of
economie policies and to improve the governance of the euro area, thereby supporting the
achievement of the European Union's objectives for sustainable growth, employment,
competitiveness and social cohesion.
2.
The provisions of this Treaty shall apply in full to the Contracting Parties whose currency is
the euro. They shall also apply to the other Contracting Parties to the extent and under the
conditions set out in Article 14.

TITLE II
CONSISTENCY AND RELATIONSHIP WITH THE LAW OF THE UNION
Article 2
1.
This Treaty shall be applied and interpreted by the Contracting Parties in conformity with
the Treaties on which the European Union is founded, in particular Article 4(3) of the Treaty on
European Union, and with European Union law, including procedural law whenever the adoption of
secondary legislation is required.
2.
The provisions of this Treaty shall apply insofar as they are compatible with the Treaties on
which the Union is founded and with European Union law. They shall not encroach upon the
competences of the Union to act in the area of the economie union.

TITLE III
FISCAL COMPACT
Article 3
1.
The Contracting Parties shall apply the folio wing rules, in addition and without prejudice to
the obligations derived from European Union law:
a)

The budgetary position of the general government shall be balanced or in surplus.

b)

The rule under point a) shall be deemed to be respected if the annual structural balance of
the general government is at its country-specific medium-term objective as defined in the
revised Stability and Growth Pact with the annual structural deficit not exceeding 0.5 % of
the gross domestic product at market prices. The Contracting Parties shall ensure rapid
convergence towards their respective medium-term objective. The time frame for such
convergence will be proposed by the Commission taking into consideration country-specific
sustainability risks. Progress towards and respect of the medium-term objective shall be
evaluated on the basis of an overall assessment with the structural balance as a reference,
including an analysis of expenditure net of discretionary revenue measures, in line with the
provisions of the revised Stability and Growth Pact.

c)

The Contracting Parties may temporarily deviate from their medium-term objective or the
adjustment path towards it only in exceptional circumstances as defined in paragraph 3.

d)

Where the ratio of government debt to gross domestic product at market prices is
significantly below 60 % and where risks in terms of long-term sustainability of public
finances are low, the lower limit of the medium-term objective specified under point b) can
reach a structural deficit of at most 1.0 % of the gross domestic product at market prices.

e)

In the event of significant observed deviations from the medium-term objective or the
adjustment path towards it, a correction mechanism shall be triggered automatically. The
mechanism shall include the obligation of the Contracting Party concerned to implement
measures to correct the deviations over a defined period of time.

2.
The rules mentioned under paragraph 1 shall take effect in the national law of the
Contracting Parties within one year of the entry into force of this Treaty through provisions of
binding force and permanent character, preferably constitutional, or otherwise guaranteed to be
respected throughout the national budgetary processes. The Contracting Parties shall put in place at
national level the correction mechanism mentioned in paragraph l.e) on the basis of common
principles to be proposed by the European Commission, concerning in particular the nature, the size
and the time-frame of the corrective action to be undertaken and the role and independence of the
institutions responsible at national level for monitoring the observance of the rules. This mechanism
shall fully respect the prerogatives of national Parliaments.
3.
For the purposes of this Article, definitions set out in Article 2 of Protocol (No 12) on the
excessive deficit procedure annexed to the European Union Treaties shall apply. In addition,
"annual structural balance of the general government" refers to the annual cyclically-adjusted
balance net of one-off and temporary measures. "Exceptional circumstances" refer to the case of an
unusual event outside the control of the Contracting Party concerned which has a major impact on
the financial position of the general government or to periods of severe economie downturn as
defined in the revised Stability and Growth Pact, provided that the temporary deviation of the
Contracting Party concerned does not endanger fiscal sustainability in the medium term.

Article 4
When the ratio of their general government debt to gross domestic product exceeds the 60 %
reference value mentioned under Article 1 of Protocol (No 12), the Contracting Parties shall reduce
it at an average rate of one twentieth per year as a benchmark, as provided for in Article 2 of
Council Regulation (EC) No. 1467/97 of 7 July 1997 on speeding up and clarifying the
implementation of the excessive deficit procedure, as amended by Council Regulation (EU)
No. 1177/2011 of 8 November 2011.

Article 5
1.
The Contracting Parties that are subject to an excessive deficit procedure under the
European Union Treaties shall put in place a budgetary and economie partnership programme
including a detailed description of the structural reforms which must be put in place and
implemented to ensure an effective and durable correction of their excessive deficits. The content
and format of these programmes shall be defined in European Union law. Their submission to the
European Commission and the Council for endorsement and their monitoring will take place within
the context of the existing surveillance procedures of the Stability and Growth Pact.
2.
The implementation of the programme, and the yearly budgetary plans consistent with it,
will be monitored by the Commission and by the Council.

Article 6
With a view to better coordinating the planning of their national debt issuance, the Contracting
Parties shall report ex-ante on their public debt issuance plans to the European Commission and to
the Council.

Article 7
While fully respecting the procedural requirements of the European Union Treaties, the Contracting
Parties whose currency is the euro commit to support the proposals or recommendations submitted
by the European Commission where it considers that a Member State of the European Union whose
currency is the euro is in breach of the deficit criterion in the framework of an excessive deficit
procedure. This obligation shall not apply where it is established among the Contracting Parties
whose currency is the euro that a qualified majority of them, calculated by analogy with the relevant
provisions of the European Union Treaties without taking into account the position of the
Contracting Party concerned, is opposed to the decision proposed or recommended.

Article 8
1.
The European Commission is invited to present in due time to the Contracting Parties a
report on the provisions adopted by each of them in compliance with Article 3(2). If the European
Commission, after having given the Contracting Party concerned the opportunity to submit its
observations, concludes in its report that a Contracting Party has failed to comply with Article 3(2),
the matter will be brought to the Court of Justice of the European Union by one or more of the
Contracting Parties. In addition, where a Contracting Party considers, independently of the
Commission's report, that another Contracting Party has failed to comply with Article 3 (2), it may
also bring the matter to the Court of Justice. In both cases, the judgment of the Court of Justice shall
be binding on the parties in the procedure, which shall take the necessary measures to comply with
the judgment within a period to be decided by the Court.

2.
If, on the basis of its own assessment or of an assessment by the European Commission, a
Contracting Party considers that another Contracting Party has not taken the necessary measures to
comply with the judgment of the Court of Justice referred to in paragraph 1, it may bring the case
before the Court of Justice. If the Court finds that the Contracting Party concerned has not complied
with its judgment, it may impose on it a lump sum or a penalty payment appropriate in the
circumstances and that shall not exceed 0,1 % of its gross domestic product. The amounts imposed
shall be payable to the European Stability Mechanism.
3.
This Article constitutes a special agreement between the Contracting Parties within the
meaning of Article 273 of the Treaty on the Functioning of the European Union

TITLEIV
ECONOMIC POLICY COORDINATION AND CONVERGENCE
Article 9
Building upon the economie policy coordination as defined in the Treaty on the Functioning of the
European Union, the Contracting Parties undertake to work jointly towards an economie policy
fostering the smooth functioning of the Economie and Monetary Union and economie growth
through enhanced convergence and competitiveness. To that end, the Contracting Parties shall take
the necessary actions and measures in all the domains which are essential to the good functioning of
the euro area in pursuit of the objectives of fostering competitiveness, promoting employment,
contributing further to the sustainability of public finances and reinforcing fmancial stability.

Article 10
In accordance with the requirements of the European Union Treaties, the Contracting Parties
undertake to make recourse, whenever appropriate and necessary, to measures specific to those
Member States whose currency is the euro as provided for in Article 136 of the Treaty on the
Functioning of the European Union and to the enhanced cooperation as provided for in Article 20 of
the Treaty on European Union and in Articles 326 to 334 of the Treaty on the Functioning of the
European Union on marters that are essential for the smooth functioning of the euro area, without
undermining the internal market.

Article 11
With a view to benchmarking best practices and working towards a more closely coordinated
economie policy, the Contracting Parties ensure that all major economie policy reforms that they
plan to undertake will be discussed ex-ante and, where appropriate, coordinated among themselves.
This coordination shall involve the institutions of the European Union as required by European
Union law.

TITLE V
GOVERNANCE OF THE EURO AREA
Article 12
1.
The Heads of State or Government of the Contracting Parties whose currency is the euro
shall meet informally in Euro Summit meetings, together with the President of the European
Commission. The President of the European Central Bank shall be invited to take part in the
meetings. The President of the Euro Summit shall be appointed by the Heads of State or
Government of the Contracting Parties whose currency is the euro by simple majority at the same
time the European Council elects its President and for the same term of office.
t

2.
Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss
questions related to the specific responsibilities which the Contracting Parties whose currency is the
euro share with regard to the single currency, other issues concerning the governance of the euro
area and the rules that apply to it, and in particular strategie orientations for the conduct of
economie policies and for improved competitiveness and increased convergence in the euro area.
3.
The President of the Euro Summit shall ensure the preparation and continuity of Euro
Summit meetings, in close cooperation with the President of the European Commission. The Euro
Group shall contribute to the preparation and folio w up of the Euro Summit meetings and its
president may be invited to attend the Euro Summit meetings for that purpose.
4.
The President of the European Parliament may be invited to be heard. The President of the
Euro Summit shall present a report to the European Parliament after each of the meetings of the
Euro Summit.
5.
The President of the Euro Summit shall keep the Contracting Parties whose currency is not
the euro and the other Member States of the European Union closely informed of the preparation
and outcome of the Euro Summit meetings.

6.
In order to discuss specific issues concerning the implementation of this Treaty, the
President of the Euro Summit will invite, when appropriate and at least once a year, the Heads of
State or Government of Contracting Parties whose currency is not the euro who have ratifïed this
Treaty and have declared their intention to be bound by some of its provisions in accordance with
Article 14(5) to a meeting of the Euro Summit.

Article 13
As foreseen in Title II of Protocol (No 1) on the role of national Parliaments in the European Union
annexed to the European Union Treaties, the European Parliament and the national Parliaments of
the Contracting Parties will together determine the organisation and promotion of a conference of
the chairs of the budget committees of the national Parliaments and the chairs of the relevant
committees of the European Parliament.

TITLE VI
GENERAL AND FINAL PROVISIONS
Article 14
1.
This Treaty shall be ratified by the Contracting Parties in accordance with their respective
constitutional requirements. The instruments of ratification shall be deposited with the General
Secretariat of the Council of the European Union.
2.
This Treaty shall enter into force on 1 January 2013, provided that twelve Contracting
Parties whose currency is the euro have deposited their instrument of ratification, or on the first day
of the month foliowing the deposit of the twelfth instrument of ratification by a Contracting Party
whose currency is the euro, whichever is the earlier.
3.
This Treaty shall apply as from the day of entry into force amongst the Contracting Parties
whose currency is the euro and which have ratified it. It shall apply to the other Contracting Parties
whose currency is the euro as from the first day of the month following the deposit of their
respective instrument of ratification.
4.
By derogation to paragraph 3, Article 12 shall apply to all Contracting Parties whose
currency is the euro as from the date of the entry into force of this Treaty.

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5.
This Treaty shall apply to the Contracting Parties with a derogation as defined in
Article 139(1) of the Treaty on the Functioning of the European Union, or with an exemption as
defined in Protocol No 16 on certain provisions related to Denmark annexed to the European Union
Treaties, which have ratified it, as from the day when the decision abrogating that derogation or
exemption takes effect, unless the Contracting Party concerned declares its intention to be bound at
an earlier date by all or part of the provisions in Titles III and IV of this Treaty.

Article 15
This Treaty shall be open to accession by Member States of the European Union other than the
Contracting Parties upon application that any such Member State may file with the Depositary.
The Contracting parties shall approve the application by common agreement. Following such
approval, the applicant Member State shall accede upon the deposit of the instruments of accession
with the Depositary, who shall notify the other Contracting Parties thereof.

Article 16
Within five years at most following the entry into force of this Treaty, on the basis of an assessment
of the experience with its implementation, the necessary steps shall be taken, in compliance with the
provisions of the Treaty on the European Union and the Treaty on the Functioning of the European
Union, with the aim of incorporating the substance of this Treaty into the legal framework of the
European Union.

Done at Brussels on the ... of... in the year two thousand and twelve in a single original whose
Bulgarian, Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian,
Irish, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovenian,
Spanish and Swedish texts are equally authentic, which shall be deposited in the archives of the
Depositary which will transmit a certified copy to each of the Contracting Parties.

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