Elimination, Compromise, and Compensation in the Six Drafts of the Fiscal Compact Treaty

Final 1st draft 2nd draft 3rd draft 4th draft 5th draft version 16 December 2011 6 January 2012 10 January 2012 19 January 2012 27 January 2012 30 January 2012 Name of 1 International agreement on International treaty on Treaty on stability, co-ordination and governance in the Treaty on stability, co-ordination and governance in the Treaty on stability, co-ordination and governance in (No change) the document Goals specified; reinforced economic union reinforced economic union economic and monetary union economic and monetary union the economic and monetary union IMPORTANT More binding (no provision) (no provision) added: “WELCOMING the legislative proposals made “WELCOMING the legislative proposals made by the added: “[…] for the area […] on the (No change) by the […] on 23 November European Commission […] on 23 November 2011” trengthening of economic and budgetary 2011” surveillance of Member States experiencing or threatened with serious difficulties with respect to 2 their financial stability, and on common provisions Goals added for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of

the Member States.”

NOTING in particular that, for the […], for each Contracting Party. Temporary deviation from the Dropped but see Article 3(3) below (No change) (No change) application of the budgetary (no change) medium-term objective will only be allowed in cases of 3 "Balanced Budget Rule" […], this unusual event outside the control of the contracting party monitoring will be made through the see Article 3(3) below with a major impact on the financial position of the general see Article 3(3) below setting up of country specific medium government or in periods of severe economic downturn for term objectives and of calendars the euro area, the EU or the concerned Contracting party as ofconvergence, as appropriate, for defined in the revised Stability and Growth Pact. each Contracting Party. (no provision) (no provision) added: NOTING that the medium term objectives should be (No change) (No change) (No change) updated regularly on the basis of a commonly agreed method, the main parameters of which are also to be 4 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, (no provision) (no provision) Added: NOTING that sufficient progress towards the medium […], in line with the provisions specified under European (No change) (No change) term objectives should be evaluated on the basis of an Union law, in particular Council Regulation (EC) No. 1466/97 overall assessment with the structural balance as a of 7 July 1997 on the strengthening of the surveillance of

reference, including an analysis of expenditure net of budgetary positions and the surveillance and coordination 5 discretionary revenue measures, in line with the provisions of budgetary policies, as amended by Regulation (EU) No. specified under the law of the Union, in particular Regulation 1175/2011 of the and of the Council (EC) No. 1466/97, as amended by Regulation (EC) No. of 16 November 2011 (hereinafter "the revised Stability 1175/2011 and Growth Pact"), (no provision) (no provision) (no provision) (no provision) added: “NOTING that the correction mechanism […] (No change) should aim at correcting deviations from the 6 medium- term objective or the adjustment path including their cumulated impact on government

debt dynamics” (no provision) (no provision) (no provision) added: “RECALLING that added: “[…] and that the (No change Article 260 of the Treaty on the European Commission has ) Functioning of the empowers the Court of established criteria for the determination of the 7 Justice of the European Union to impose the payment of a lump sum or penalty to be paid in the framework of Preamble Means specified lump sum or penalty on a Member State of the European that Article[.]” Union having failed to comply with one of its judgments.” NOT (no provision) (no provision) (no provision) NOTING that the smooth functioning of the Economic and (No change (No change Enforceable ) ) Monetary Union makes it necessary that the Contracting Parties work jointly towards an economic policy where, whilst building upon the mechanisms of economic policy 8 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, 9 (no provision) (no provision) (no provision) added: “NOTING, in particular, the wish of the Contracting (No changes) (No change) Means specified; Parties to make more active use of enhanced […], without undermining the internal market, as well as to make full recourse to measures specific to the Member cooperation States whose currency is the euro pursuant to Article 136 emphasized [TFEU] […]” STRESSING the importance of the (No changes) Added: “and POINTING OUT that compliance with Article “POINTING OUT that the granting of assistance in the (No changes) (No change) Treaty establishing the European 3(2) shall be considered as a condition for the granting of framework of new programmes under the European 10 Stability Mechanism as an element of a assistance under the European Stability Mechanism as soon Stability Mechanism will be conditional, as of 1 March 2013, Ratification global strategy to strengthen the as the transposition period mentioned in Article 3(2) has on the ratification of this Treaty by the Contracting Party condition added Economic and Monetary Union, expired, concerned and, as soon as the transposition period mentioned in Article 3(2) has expired, on compliance with the requirements of this Article.” (no provision) (no provision) (no provision) added: Reference to countries being bound by the treaty (No changes) (No change) 11 ( members and others)

Title I: PURPOSE AND SCOPE Article 1 (1): “agree to strengthen their “agree on a ‘fiscal compact’ and on a “agree […] to strengthen the economic pillar “agree […] to strengthen the economic pillar of (No changes) (No change) 12 Purpose budgetary discipline and to reinforce their stronger coordination of economic of the Economic and Monetary Union by the Economic and Monetary Union […], thereby “deeper integration in (withrespect to the economic policy coordination and policies, involving an enhanced adopting a set of rules intended to foster supporting the achievement of the European the internal market” internal market) governance.” governance to foster fiscal discipline and budgetary discipline through a fiscal compact Union's objectives for sustainable growth, dropped, which was deeper integration in the internal market and to strengthen the coordination of employment, competitiveness and social interpreted as IMPORTANT as well as stronger growth, enhanced economic policies and to improve the cohesion.” “progress” by the competitiveness and social cohesion.” governance of the euro area, thereby ; supporting the achievement of the European Goals added, specified, Union's objectives for sustainable growth and means specified and employment.” Title II: CONSISTENCY AND RELATIONSHIP WITH THE LAW OF THE UNION Article 2 (2): 13 “In accordance with the case law of the Court (No change) (Dropped; No specific reference to the evident (No change) (No change) (No change) Consistency and of Justice of the European Union, European precedence of EU law) Relationship with Union law has precedence over the the EU law provisions of this Treaty.” Title III: FISCAL COMPACT Article 3 (1): 14 “the country specific reference value shall (Title changed from “budgetary “with a deficit not exceeding 0.5 % of the “with the annual structural deficit not exceeding “with a lower limit of a structural deficit of balanced budget not exceed 0.5% of nominal GDP.” […] “c. discipline” into “Fiscal Compact”) gross domestic product at market prices” 0.5 % of the gross domestic product at market 0.5 % […]” rule Where the debt level is significantly below prices” the 60% reference value mentioned under “[…]under point b), but in any case no “d. […] and where risks in terms of long-term b. The time frame for such convergence will be IMPORTANT Article 1 of Protocol No 12, the country- more than 1.0% of nominal GDP.” sustainability of public finances are low […] proposed by the Commission taking into specific reference value for the annual under point b) can reach a deficit of maximum consideration country-specific sustainability structural net deficit may take a higher 1.0 % of the gross domestic product at market risks. value than specified under point b).” prices.” “[…] can reach a structural deficit of at most 1.0 % of the gross domestic product …” Article 3 (2): 15 “The rules mentioned […] shall be […] in the event of significant “The rules mentioned […] shall take effect in “[…] preferably constitutional […]. The “[…] the time-frame of the corrective action (No change) Transposition at “binding force and introduced in national binding provisions deviations from the reference value the national law of the Contracting Parties Contracting Parties shall put in place at national to be undertaken, also in the case of the national level permanent character, of a constitutional or equivalent nature. or the djustment path towards it, as within one year of the entry into force of this level the correction mechanism mentioned in exceptional circumstances, and the role and preferably The Contracting Parties shall in particular specified under the law of the Union. Treaty through provisions of binding force paragraph 1.e) on the basis of common independence of the institutions responsible IMPORTANT constitutional” (3rd) put in place a correction mechanism to be […] and permanent character, preferably principles to be proposed by the European at national level for monitoring the vs. triggered automatically in the event of constitutional, that are guaranteed to be Commission, concerning in particular the observance of the rules. “a constitutional or significant deviations from the reference respected throughout the national budgetary nature, the size and the time-frame of the […]” equivalent nature” (1st value or the adjustment path towards it. processes. The Contracting Parties shall in corrective action to be undertaken and the role Significant & 2nd) This mechanism shall be defined at national particular put in place at national level, on the and independence of the institutions Change level, on the basis of commonly agreed basis of principles agreed on a proposal from responsible at national level for monitoring the cf. Ireland & principles. It shall include the obligation of the European Commission, a correction observance of the rules.” , obliged to the Contracting Parties to present a mechanism to be triggered automatically in hold a referendum on programme to correct the deviations over a the event of significant deviations from the constiutional defined period of time.” medium term objective or the adjustment path amendments towards it, as specified in the revised Stability and Growth Pact.” Article 3 (3): “[…] In addition, ‘annual structural deficit of Added (again): “Exceptional circumstances refer (No changes) (No changes) exceptional 16 the general government’ means the (no “exceptional economic to the case of an unusual event […] which has a circumstances/ Largely, these cyclically-adjusted deficit net of one-off and circumstances” provision) (The similar wording on “temporary major impact on the financial position of the temporary deviation exceptions kept being temporary measures; ‘exceptional deviation” as in the 4th draft can first be general government or to periods of severe allowed; although economic circumstances’ means an unusual found in the preamble & Article 3 (1) c) of the economic downturn as defined in the revised

definition dropped and event outside the control of the Contracting 3rd draft) Stability and Growth Pact, provided that the reapeared Party concerned, which has a major impact temporary deviation of the Contracting Party on the financial position of the concerned does not endanger fiscal sustainability government.” in the medium term.” Article 4: debt 17 When the ratio of their government debt to “the ratio of their general government (No major changes) (No major changes) (No changes) added: “The existence of an reduction, debt brake gross domestic product exceeds the 60 % debt to gross domestic product” excessive deficit due to the rule, or 1/20 rule reference value mentioned under Article 1 of […]shall reduce it at an average rate of breach of the debt criterion Protocol No 12, the Contracting Parties one twentieth per year as a benchmark, will be decided according to undertake to reduce it at an average rate of as provided for in Article 2(1a) of the procedure set forth in one twentieth per year as a benchmark. Regulation (EC) No. 1467/97 as Article 126 [TFEU]” amended by Regulation (EC) No. 1177/2011. Article 5 (1): 18 “such programmes shall be submitted to The content and format of these such programmes shall be submitted to the (No major changes) (No changes) (No changes) automatic correction the European Commission and the Council.” programmes shall be defined in the European Commission and the Council for mechanism... law of the Union. “They shall be endorsement “and their monitoring will take IMPORTANT submitted to the European Commission place within the context of the existing and the Council for endorsement.” surveillance procedures of the stability and growth pact” Article 5 (2) 19 (no provision) Added: The implementation of the (No changes) (No changes) (No changes) (No changes) Newly added as 5(2) programme, and the yearly budgetary vs. originally article 5 plans consistent with it, will be monitored without (1) or (2) by the Commission and by the Council.

Article 6: debt 20 The Contracting Parties shall improve the The Contracting Parties shall coordinate With a view to better coordinating the (No changes) (No changes) (No changes) issuance reporting of their national debt issuance. their national debt issuance. […] planning of their national debt issuance, the For that purpose they shall report ex-ante Contracting Parties shall […] on their national debt issuance plans tothe European Commission and the Council. Article 7: reverse “the Contracting Parties whose currency is “the Contracting Parties whose currency “the Contracting Parties whose currency is “the Contracting Parties whose currency is the (No changes) (No changes) qualified majority the euro undertake to support proposals or is the euro undertake to support the euro commit to support proposals or euro commit to support the proposals or 21 recommend-dation put forward by the proposals or recommendation put recommendation submitted by the recommendations submitted by the Commission Commission where a Member State whose forward by the Commission where a Commission where a Member State […] is where it considers that a Member State of the IMPORTANT rd 3 draft: Limiting its currency is the euro is recognized by the Member State […] is recognized by the considered by the Commission to be in European Union whose currency is the euro is in scope to national Commission to be in breach of the 3% ceiling Commission to be in breach of the deficit breach of the deficit criterion in the breach of the deficit criterion in the framework deficits and not to in the framework of an excessive deficit or debt criterion in the framework of an framework of an excessive deficit procedure. of an excessive deficit procedure. This obligation include national debt procedure, unless a qualified majority of excessive deficit procedure, unless a This obligation shall not apply where it is shall not apply where it is established among the (’s demand) them is of another view.” qualified majority of them is of another apparent among the Contracting Parties Contracting Parties […] Contracting Party view.” [but no specific reference such as whose currency is the euro that a qualified concerned, is opposed to the decision proposed 3%] majority of them […] is of another view.” or recommended. Article 8 (1): 22 “Any Contracting Party which considers that “Any Contracting Party which considers “Any Contracting Party which considers that “The European Commission is invited to present (No major changes) (No changes) Member states The Commission another Contracting Party has failed to that another Contracting Party has another Contracting Party has failed to in due time to the Contracting Parties a report on which consider that acting “on behalf of comply with Article 3(2) may bring the matter failed to comply with Title III may comply with Article 3(2) may bring the matter the provisions adopted by each of them in another member the Contracting before the Court of Justice of the European bring the matter before the Court of before the Court of Justice of the European compliance with Article 3(2). If the European Parties” (2nd draft) to Union.” Justice of the European Union. The Union or invite the European Commission to Commission […] concludes in its report that a state has failed to bring non-compliance Commission may, on behalf of the issue a report into the matter. In the latter Contracting Party has failed to comply with comply... [EC]] before the ECJ, was Contracting Parties, bring an action for case, if the European Commission, after Article 3(2), the matter will be brought to the IMPORTANT downgraded to a an alleged infringement of Title III having given the Contracting Party concerned Court of Justice […]. In addition, where a reporting role with before the Court of Justice.” the opportunity to submit its observations, Contracting Party considers, independently of the Significant some kind of peer confirms non compliance in its report, the ommission's report, that another Contracting Change review between the matter will be brought to the Court of Justice Party has failed to comply with Article 3(2), it may Contracting Parties by the Contracting Parties.” also bring the matter to the Court of Justice. […]” Article 8 (2): Non- 23 (No provision) (No provision) (No provision) “[…] If the Court finds that the Contracting added: “[…] it may bring on the case before the (No changes) compliance Party concerned has not complied with its Court of Justice and request the imposition of [New in fourth judgment, it may impose on it a lump sum or a financial sanctions following criteria draft] penalty payment appropriate in the established by the Commission in the circumstances and that shall not exceed 0.1% framework of Article 260 [TFEU]” (5th) “The

of its gross domestic product. The amounts amounts imposed on a Contracting Party IMPORTANT imposed shall be payable to the European whose currency is the euro shall be payable to

Stability Mechanism.” the European Stability Mechanism. In other Significant cases, payments shall be made to the general Change budget of the European Union.” Article 8 (3) 24 (No provision) (No provision) (No provision) “This Article constitutes a special agreement (No changes) (No changes) [New in fourth between the Contracting Parties within the draft] meaning of Article 273 of the Treaty on the Functioning of the European Union.” Title IV: ECONOMIC POLICY COORDINATION AND COVERGENCE Article 9 “Without prejudice to the economic policy [Title changed from “Economic “[…] the Contracting Parties “[…] essential to the good functioning of the (No changes) (No changes) coordination as defined in the Treaty on the Convergence” to “Economic shall take all the necessary actions and euro area in pursuit of the objectives of 25 Functioning of the European Union, the Coordination”] measures in all the domains which are fostering competitiveness, promoting Since the 4th draft, the Contracting Parties undertake to work jointly “Building upon the economic policy essential to the good functioning of the euro employment, contributing further to the Euro Plus Pactis not towards an economic policy fostering growth coordination […] towards an economic area, as mentioned in the .” sustainability of public finances and reinforcing explicitly mentioned through enhanced convergence and policy fostering the smooth functioning financial stability.” any longer competitiveness and improving the of the Economic and Monetary Union functioning of the Economic and Monetary and economic growth through enhanced cf. See Adelina Marini Union. To this aim, they will take all convergence and competitiveness. In this on the softening necessary action, including through the Euro context, particular attention shall be change from 1st to 2nd Plus Pact.” paid to all developments which, if draft. allowed to persist, might threaten stability, competitiveness and future growth and job creation. […].” Article 10 26 “[…] Contracting Parties undertake to make “[…] to measures specific to those “[…] to the enhanced cooperation as provided (No changes) (No changes) “the Contracting Parties stand recourse, whenever appropriate and Member States whose currency is the for in Article 20 of the Treaty on European ready to make active use, necessary, to the enhanced cooperation on euro as provided for in article 136 Union and in Articles 326 to 334 of the treaty whenever appropriate and matters that are essential for the smooth TFEU and to the enhanced cooperation on the Functioning of the European Union on necessary, of measures specific functioning of the euro area, without on matters […]” matters […]” to those Member States whose undermining the internal market.” currency is the euro […]”

Article 11 27 “With a view to benchmarking best practices, “[…] be discussed ex-ante and, where “[…]benchmarking best practices and “working towards a more closely coordinated (No changes) the Contracting Parties ensure that all major appropriate, coordinated among working towards a common economic economic policy […]” economic policy reforms that they plan to themselves.” policy […]be discussed ex-ante and, where undertake will be discussed and coordinated appropriate, coordinated among among themselves.” themselves.”

Title V: GOVERNANCE OF THE EURO AREA Article 12 (1): 28 “The Heads of State or Government of the “The Heads of State or Government of “The Heads of State or Government of the (No changes) (No changes) (No changes) Participants in Euro Contracting Parties whose currency is the the Contracting Parties whose Contracting Parties whose currency is the summit meetings euro, together with the President of the currency is the euro, the president of euro, together with the President of the European Commission shall meet the European Commission, the European Commission shall meet informally in meetings. The president of the Euro Group and the informally in Euro Summit meetings. […]” [Article 13 in the 1st President of the Commissioner responsible for draft] shall be invited to take part in such Economic and Monetary Affairs shall meetings.” meet informally in Euro Summit A rticle 12 (2): 29 Euro Summit meetings shall take place, meetings. […]”(N o changes) (No changes) [minor wording change] (No changes) Euro Summit meetings shall take place, when Number of Euro when necessary, and at least twice a year, Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss summit meetings to discuss questions related to the specific necessary, and at least twice a year, to discuss questions related to the specific responsibilities those Member States questions related to the specific responsibilities responsibilities which the Contracting Parties share with regard to the single currency, which the Contracting Parties whose currency whose currency is the euro share with regard [Article 13 in the st other issues concerning the governance of is the euro share with regard to the single to the single currency, other issues concerning 1 draft] the euro area and the rules that apply to it, currency, […] the governance of the euro area and the rules and in particular strategic orientations for that apply to it, and strategic orientations for

IMPORTANT the conduct of economic policies and for the conduct of economic policies to increase improved competitiveness and increased convergence in the euro area. convergence in the euro area. Article 12 (3): 30 (No provision) (No provision) (No provision) “In order to discuss specific issues concerning (No changes) “The Heads of State or Government […] shall Contracting parties 4th draft: the implementation of this Treaty, the participate in discussions of Euro Summit whose currency is obtained a first President of the Euro Summit will invite, when meetings concerning competitiveness for not the euro [New in concession (vs. appropriate and at least once a year, the the Contracting Parties, the modification of fourth draft] ’s exclusive Heads of State or Government of Contracting the global architecture of the euro area and [Article 12(6) in 4t position); 5th draft; Parties whose currency is not the euro who the fundamental rules that will apply to it in and 5th draft] further compromise; have ratified this Treaty and have declared the future, as well as, when appropriate and with the cooperation their intention to be bound by some of its at least once a year, in discussions on specific Significant of the , provisions in accordance with Article 14(5) to a issues of implementation of this Treaty on Change and meeting of the Euro Summit.” Stability, Coordination and Governance in the Article 12 (4): 31 “Euro Summit meetings shall be prepared (No changes) (No changes) “The President of the Euro Summit shall ensure (No changes) Economic and Mo(Nnoe tcahanry Ugnesio) n.” Relation to the The role of Euro Group by the President of the Euro Summit, in close the preparation and continuity of Euro Summit Euro Group (and its president) is cooperation with the President of the meetings, in close cooperation with the [Article 12(3) in decreased European Commission and by the Euro President of the European Commission. The Group. The follow-up shall be ensured in the Euro Group shall contribute to the preparation other drafts] same manner.” and follow up of the Euro Summit meetings and its president may be invited to attend the Participants Euro Summit meetings for that purpose.” Article 13: National 32 “Representatives of the “Representatives of the competent “Representatives of the Parliaments of the “As foreseen in Title II of Protocol (No 1) on the “[…] a conference of representatives (No changes) parliaments Committees in charge of economy and Committees within the Parliaments of Contracting Parties will be invited to meet role of national Parliaments in the European of the relevant committees of the finance within the Parliaments of the the Contracting Parties will be invited regularly to discuss in particular the conduct Union annexed to the European Union Treaties, national Parliaments and [Article 12 in the 1st Contracting Parties will be invited to meet to meet regularly to discuss in of economic and budgetary policies, in close the European Parliament and the national representatives of the relevant regularly to discuss in particular the particular the conduct of economic and association with representatives of the Parliaments of the Contracting Parties will committees of the European draft] conduct of economic and budgetary budgetary policies, in close association European Parliament.” together determine the organization and Parliament in order to discuss policies, in close association with with representatives of the relevant promotion of a conference of the chairs of the budgetary policies and other issues representatives of the relevant Committee Committee of the European budget committees of the national Parliaments covered by of the European Parliament.” Parliament.” and the chairs of the relevant committees of this Treaty.” the European Parliament.” Title VI: GENERAL AND FINAL PROVISIONS Article 14 (2): 33 “This Agreement shall enter into force on “This Agreement shall enter into force on 1 January 2013, provided that 12 (No changes) (No changes) (No changes) Treaty will enter the first day of the month following the on the first day of the month following eurozone member states have ratified it, or into force... deposit of the ninth instrument of the deposit of the fifteenth instrument after 12 have ratified it, “whichever is the IMPORTANT ratification by a Contracting Party whose of ratification by a Contracting Party earlier”. Significant Change currency is the euro.” whose currency is the euro. ” Article 15: Open to 34 (No provision) (No provision) This Treaty shall be open to accession by (No changes) (Provision on approval of accession (No changes) accession Member States of the European Union other deleted) than the Contracting Parties upon This Treaty shall be open to accession application that any such Member State may by Member States of the European file with the Depositary. The Contracting Union other than the Contracting parties shall approve the application by Parties upon application that any such common agreement. Following such Member State may file with the approval, the applicant Member State shall Depositary, who shall notify the other accede upon the deposit of the instruments Contracting Parties thereof. of accession with the Depositary, who shall notify the other Contracting Parties thereof. Article 16: To be 35 (No reference) “Within five years at most following the “Within five years at most following the (No changes) (No changes) incorporated 2nd draft: the intention entry into force, […], an initiative shall entry into force […] the necessary steps (No changes) into EU treaties… to incorporate the be launched, […] with the aim of shall be taken […] with the aim of [former Article 14] treaty into EU law incorporating the substance of this incorporating the substance of this Treaty included Treaty into the legal framework [..].” […].” IMPORTANT

Sources: Kreilinger, V. 2012. ”The Making of a New Treaty: Six Rounds of Political Bargaining” Policy Brief 32, February. For the individual drafts, please refer to: 1 st draft, 16/12/2011, http://tinyurl.com/fiscaltreaty1 ; 2nd draft, 06/01/2012, http://tinyurl.com/fiscaltreaty2 ; 3rd draft, 10/01/2012, http://tinyurl.com/fiscaltreaty3 ; 4th draft, 19/01/2012, http://tinyurl.com/fiscaltreaty4 ; 5th draft, 27/01/2012, http://tinyurl.com/fiscaltreaty5; and final version, 30/01/2012, http://www.europeancouncil.europa.eu/media/579087/treaty.pdf. For the Council’s press release (December 21, 2012) used in categorizing the importance of the provisions, see http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/134543.pdf