Masterthesis The incorporation of the Fiscal Compact in the legal system of the Netherlands

Jorick Straatman, ANR 383693

The incorporation of the Fiscal Compact in the legal system of the Netherlands

Masterthesis on the Europeanization of public finances

Author: Jorick Straatman

Administration number: 383693 Student number: 1254934

Study: Law Field of Study: Constitutional and Administrative Law Institution: Tilburg Law School, Tilburg University

Supervisors: Dr. Federico Fabbrini Dr. Gert-Jan Leenknegt

Date: 5th of July 2013

Jorick Straatman Tilburg University 2 ANR 383693 Preface This thesis is the conclusion of my one year Master program at Tilburg Law School, Tilburg University. After seven years studying at Utrecht University it was quite an experience to change Law Schools. Writing this thesis was a big challenge for me since writing in English caused me, especially in the beginning, some troubles. With help from my supervisors I was able to expand my vocabulary quickly and I am pleased with the result. Therefore, I would like to thank Federico Fabbrini and Gert-Jan Leenknegt of Tilburg Law School. They helped me writing this thesis and were always available to meet and give me instructions to improve my work. Second, I would like to extend my gratitude to Paul van Seters who helped me with the structure of my thesis and provided instructions on the content and layout of my work. Furthermore, I would also like to thank my parents for their support to let me finish my study on Constitutional and Administrative Law at Tilburg University. Last, but definitely not least, I would like to thank Marloes van Tergouw for her help and support during my last year of study. Thank you for reading my entire thesis and your recommendations during the finalizing stages of my writing process. I am looking forward to our holidays and future!

Jorick Straatman Tilburg University 3 ANR 383693 Table of contents

Preface ...... 3 Table of contents...... 4 1. Introduction ...... 5 2. Social and scientific relevance ...... 8 3. Legal framework...... 10 3.1 The Fiscal Compact...... 10 3.1.1 The Fiscal Compact, why?...... 10 3.1.2 Legislative content of the Fiscal Compact...... 12 3.1.3 Ratification of the Fiscal Compact ...... 14 3.2 The constitutional system of the Netherlands...... 17 3.2.1 The constitutional order of the Netherlands...... 17 3.2.2 The adoption of international law into the Dutch legal system ...... 19 3.2.3 Concluding of treaties ...... 20 3.2.4 Hierarchy of legal norms ...... 22 4. Incorporation of the Fiscal Compact ...... 24 4.1 What are the legal consequences of the ratification of the Fiscal Compact?...... 24 4.1.1 The bill of approval...... 24 4.1.2 Advice from the Council of State ...... 26 4.2 Which (legislative) developments can be found in the Netherlands to meet the provisions that are laid down in the Fiscal Compact?...... 27 4.2.1 Bill for sustainable public finances...... 27 4.2.2 Budget cuts...... 30 4.3 How has the role of the Dutch parliament developed during the financial crisis? 33 4.4 Does the “Dutch solution” for the implementation of the Fiscal Compact satisfy the requirements of the Fiscal Compact? ...... 37 5. Conclusion ...... 40 References...... 44

Jorick Straatman Tilburg University 4 ANR 383693 1. Introduction On the 2nd of March 2012, 25 out of 27 member states of the European Union (EU) agreed to sign the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. This treaty is generally referred to as the Fiscal Compact. The Fiscal Compact has been adopted following the turmoil on the financial markets and problems subsequently arising for the public finances and budgets of several member states. The Fiscal Compact aims to strengthen economic and budgetary surveillance of member states, which experience serious difficulties with respect to their financial stability. The Fiscal Compact is technically drafted as an international treaty. However, it is functionally connected to the legal framework of the EU.1 This development raises a number of new issues in the field of international law, EU law and constitutional law. In this thesis I will examine the provisions in the Fiscal Compact and what one of the EU member states, the Netherlands, has done to adopt these provisions into its own legal system. Also, I will examine how the Fiscal Compact influences the national economic and budgetary policies of the Netherlands and how the sovereignty of the government and parliament of the Netherlands with respect to these policies is affected. With the introduction of the Fiscal Compact the contracting parties wanted to ensure the sustainability of state budgets by monitoring and controlling their public deficit and debt. According to article 3, paragraph 1 sub a of the Fiscal Compact “the budgetary position of the general government of a contracting party shall be balanced or in surplus.” The framework to monitor and control the budgetary positions of the contracting parties are, according to the preface of the Fiscal Compact, the EMU-deficit and -debt criteria. These two criteria originated in the Maastricht Treaty (1992) and further specified in the Stability and Growth Pact (SGP). However, the Fiscal Compact goes further than reminding the parties of these provisions, it also introduces a measure to adopt the EMU-criteria into the legal systems of these parties. This is laid down in article 3.2 of the Fiscal Compact, which states: “The rules set out in paragraph 1 shall take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provision of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” Article 3.2 of the Fiscal Compact raises serious questions regarding the mandatory introduction of specific rules at the member state level. Hereby, the content of the Fiscal Compact goes beyond traditional

1 Fabbrini, 2012, p. 2.

Jorick Straatman Tilburg University 5 ANR 383693 international law. The budgetary rules need to be included into national constitutions or organic law or, if this is impossible, into another source of law with permanent character that is superior to regular statutes. The development of this new rule and the challenges that member states face with the adoption of the provisions into their national constitutions can possibly be related to the evolution of the EU. The influence of the EU is growing and it looks as if the EU is widening its current role regarding member states policies to include areas in which member states traditionally enjoyed wide autonomy. The Fiscal Compact is the latest instrument which forces member states to hand over further control to the EU regarding their state budgets and, furthermore, to change their constitutions. Bearing in mind the provisions in the Fiscal Compact, I will discuss these developments and their possible impact on the legal system of the Netherlands, one of the member states of the EU. To understand the Fiscal Compact in relation to the constitutions of the member states, it is necessary to analyse the constitution and examine how EU treaties are implemented by a member state. The focus will be on the Netherlands because of the fact that the Netherlands has a special system when it comes to certain aspects of its constitutional system and the adoption of international law. The Constitution of the Netherlands is rigid and vey hard to amend. Furthermore, there is no constitutional review by the judiciary of Acts of Parliament. EU and other international laws are directly applicable in the Dutch legal system and prevail over conflicting domestic laws. Moreover, scholars see the Constitution as a political document instead of a legal document as in, for example, Germany or the United States.2 The research question of this thesis is:

By which legal measures has the Fiscal Compact been adopted into the legal system of the Netherlands and do these measures satisfy the requirements of the Fiscal Compact?

To answer this question this thesis will be structured as follows. Chapter 2 describes the relevance of this paper and its subject. Chapter 3 provides an overview of the legal context of the Fiscal Compact and the constitutional system of the Netherlands. Chapter 4 will then raise four sub questions: 1. What are the legal consequences of the ratification of the Fiscal Compact? 2. Which (legislative) developments can be found in the Netherlands to meet the provisions that are laid down in the Fiscal Compact?

2 Schyff, van der, 2010, p. 276.

Jorick Straatman Tilburg University 6 ANR 383693 3. How has the role of the Dutch Parliament developed during the financial crisis? 4. Does the “Dutch solution” for the implementation of the Fiscal Compact satisfy the requirements thereof? Chapter 5, the conclusion, will answer the research question of the thesis.

Jorick Straatman Tilburg University 7 ANR 383693 2. Social and scientific relevance The social relevance of this thesis lies in the aim to describe how the governance and legislative capacity of the EU and its member states are changing and what this means for the legislature of the Netherlands. Originally, the legislature of the Netherlands enjoyed full sovereignty and was able to regulate all national policy terrains without European influence. This changed when the Treaty of Paris was signed in 1952 and the supranational European Coal and Steel Community (ECSC) was created and responsibilities were transferred to its institutions. It was the first step in the European integration process and other steps would follow. In 1957 the Treaties of Rome were signed and the European Economic Community (EEC) and the European Atomic Energy Community (EAEC) were established. These three European organisations were later combined in the European Community. When the Maastricht Treaty was signed in 1992 the European Union (EU) substituted the European Community. The Lisbon Treaty, signed in 2007, was the latest treaty to amend the founding treaties of the EU and renamed the Treaty of Rome that established the EEC and the Treaty of Maastricht. The Treaty of Paris and the Treaty of Maastricht together with the Treaties of Rome are considered to be the founding treaties of the EU.3 These four treaties were all steps in the process of ongoing European integration, foremost in the field of the free market and economic policies. European integration was supported by two famous rulings of the European Court of Justice. In its Van Gend & Loos- judgement of 1963 the Court made clear that the European legal order is a ‘new legal order’ and that EU-law has direct effect in the legal system of its member states. Hereafter in 1964, the Court ruled in its Costa/ENEL-judgement that European law prevails over the domestic laws of the member states. These two rulings underlie the system of the autonomous legal order of the EU.4 The Fiscal Compact is a new instrument in this order and it influences the national decision making-procedure regarding the budgetary policies and provides the governments of the contracting parties a framework for their national budgets. The question is how the legislature of the Netherlands will deal with the rules of the Fiscal Compact. These rules are likely to influence the sovereignty over their state budget and the yearly budget acts. The scientific relevance of this research is twofold. First, it will add knowledge to the ongoing debate about the development of the EU. As mentioned above European integration started in the early 1950’s. Hereafter, several steps have been taken in the process of

3 Eijsbouts, 2010, p.9. 4 Eijsbouts, 2010, p. 11.

Jorick Straatman Tilburg University 8 ANR 383693 economic integration. These developments have been discussed widely and the question is if and which further steps will be taken in the future. The possible incorporation of European provisions in national constitutions is a new mechanism. If this new mechanism will be used more often in European legislation, this will change the relation between the European institutions and the national legislative branch. Scholars have discussed the possible emergence of European federalism; the rules of the Fiscal Compact will contribute to this discussion. Second, this thesis will contribute to the debate on the ongoing transfer of legislative capacity from the Dutch legal system towards the EU. Is the Fiscal Compact an exception in the jurisdiction of the EU or is it an example of a new way of regulation? This thesis will contribute to the debate that is concentrated around the possibility of the creation of a political union. The Fiscal Compact is part of these developments. Scholars are discussing the Fiscal Compact and it has already been considered as legally uncertain5, while, it has also been specified as a legal monster.6 We will explore what the legal character is of the Fiscal Compact and whether the Fiscal Compact has added value in the existing European legal framework.

5 Dehousse, 2012, p. 1. 6 Kochanov e.a., 2012, p. 1.

Jorick Straatman Tilburg University 9 ANR 383693 3. Legal framework To conduct this research it is necessary to understand the legal character of the Fiscal Compact and the constitutional system of the Netherlands. This chapter will draft the theoretical framework of this thesis. It starts with the Fiscal Compact, its legislative character and the ratification process that is still going on in some countries. Hereafter, we will focus on the constitutional system of the Netherland with respect to the character of the constitution, its monist system of adopting international law, the concluding of treaties and the existence of superior law.

3.1 The Fiscal Compact As already mentioned in the introduction the Fiscal Compact was finalized in March 2012 following the pressures on the financial markets and the problems these caused for the public finances and budgets of several EU member states. It is an international treaty concluded by most of the EU member states, with the exception of the United Kingdom and the Czech Republic, and it demands countries to amend their constitutions to adopt a balanced budget rule or otherwise permanently incorporate the rules in their legal system. To understand the legislative rules of the Fiscal Compact we will firstly focus on the origins of the crisis in the EU. Hereafter, we will examine the content of the Fiscal Compact. Finally, we will have a look at the ratification process and how other countries adopted the rules into their legal system.

3.1.1 The Fiscal Compact, why? At the end of 2009, only a few weeks after the Lisbon Treaty entered into force, signs of an upcoming financial crisis became apparent. Only a few financial market specialists signalled the public debt situation of a group of EU Member States in an earlier phase. After the successful ratification of the Lisbon Treaty, the EU was under serious pressure regarding the European Monetary Union (EMU) that had not been in the focus since the reform process of 2000. A few legal foundations were laid down in the Maastricht Treaty of 1993 and the SGP of 1997. Some scholars argue that the EU missed out on the creation of legal instruments in the Lisbon Treaty to overcome a crisis within the EMU.7 To understand the necessity of the legal instruments that were initiated to respond to the crisis, it has to be clear which problems occurred and where they have come from.

7 Ruffert, 2011, p. 1778.

Jorick Straatman Tilburg University 10 ANR 383693 It was the situation in Greece that was, and probably still is, in the centre of interest when we take a look at the financial crisis in Europe. In the years towards 2009 it became clear that Greece had manipulated its financial data to enter the eurozone. However, in late 2009 there were signs that Greece was still withholding its real financial data regarding the public debt and that the country was bankrupt for its practical purposes. After some political hesitation the first European rescue package was proposed on the 2nd of May 2010.8 The Ministers of Economics and Finance of the Eurogroup agreed on a loan agreement between Greece, the eurozone countries and the International Monetary Fund (IMF). In this loan 110 billion Euros were spread over three years with the eurozone member states contributing 80 billion and the IMF 30 billion Euros.9 A legal expert “troika” team supervises the implementation of the loan with members of the European Commission (EC), the European Central Bank (ECB) and the IMF. The bailout of Greece was just the first step into the direction of a big rescue operation by the European Council to help all the EU member states in need.10 The Greece bailout was a special case, because of the many specific problems in the country. The general bailout program for other EU members is more important when we look at legislative measures taken to solve the crisis because several other countries were troubled after the problems in Greece arose. The essentials of this wider rescue program were the European Financial Stabilization Mechanism (EFSM) that was based on section 122(2) TFEU and Regulation no. 407/2010 by the Council: the EFSM owned bonds to support member states in crisis. The member states founded the European Financial Stability Facility (EFSF), a Special Purpose Vehicle (SPV) under Luxembourg law. The EFSF could bundle securities of member states of the eurozone.11 Furthermore, the ECB purchased bonds of countries that were affected by the crisis. The EFSM and the EFSF were established in May 2010. After the establishment, Ireland, Portugal and again Greece applied the mechanism. The mechanism was part of a temporarily EU financing program and has been replaced by the European Stability Mechanism (ESM).12 The ESM Treaty was signed at the European Council meeting

8 Directorate-General for Economic and Financial Affairs, 2010, p. 11. 9 Directorate-General for Economic and Financial Affairs, 2010, p. 57. 10 Ruffert, 2011, p. 1779. 11 Ruffert, 2011, p. 1780. 12 Editorial Comment, Common Market Law Review 48, 2011, p. 1770.

Jorick Straatman Tilburg University 11 ANR 383693 on the 23rd and 24th of June 2011. It was later modified and signed again on the 2nd of February 2012.13 Several scholars have called the ESM the European Monetary Fund.14 The focus of these measures has constantly been on the financial aspects of the programmes in Europe to overcome the financial crisis. Simultaneously, steps have also been taken to improve the financial governance structure of the euro area. At the Euro Summit on the 26th of October 2011 the Euro leaders declared that ‘the governance structure of the euro area will be strengthened’ to deal more effectively with the budgetary challenges and to ensure closer integration.15 A legislative package on economic governance needs to ensure that the economy of the euro area is strengthened and that the control and surveillance structures are implemented to regain budgetary control. However, not only general economic governance needs to be strengthened but also the management of public budgets at the state level is of big importance to the eurozone and EMU as well. As mentioned before, the first legal surveillance procedures were part of the SGP. Apparently, these mechanisms failed with respect to the countries whose deficits rose excessively and ultimately led to the debt crisis and the intervention of the EU.16

3.1.2 Legislative content of the Fiscal Compact The first indications to ensure the sustainability of state budgets were laid down in the SGP of the European Monetary Union originally enacted in 1997. The general government deficit must not exceed 3% of the GDP and the public debt must not exceed 60% of the GDP. A limitation of this pact was the lack of an effective enforcement mechanism.17 On December 13th 2011, the reinforced SGP entered into force. The SGP prescribed a new set of rules for economic and fiscal surveillance and was approved by all EU member states and the European Parliament (EP) in October 2011. The five Regulations and one Directive proposed by the SGP were a major step towards economic stability, restoring confidence and preventing future crises in the euro area and the EU. This so-called ‘Six-Pack’ is secondary

13 Website Council of the European Union, European Stability Mechanism treaty signed, http://consilium.europa.eu/homepage/showfocus?lang=en&focusID=79757, last visit 07/03/2013. 14 Ruffert, 2011, p. 1788. 15 Euro Summit Statement, 26 October 2011, paragraph 31, p. 9. 16 Ruffert, 2011, p. 1798. 17 Fabbrini, 2012, p. 4.

Jorick Straatman Tilburg University 12 ANR 383693 EU law, but it strengthened the enforcement mechanisms of the SGP towards member states that have infringed the deficit or debt criterion.18 Despite the introduction of the Six-Pack especially Germany was pushing hard to amend the TFEU to introduce more discipline in the eurozone countries; Finland and the Netherlands supported these calls. During the European Council of December 2011 amendments of the sections 126 and 136 of the TFEU and Protocol 12 on the excessive deficit procedure were up for discussion.19 During these Council meetings there was a serious push to amend the TFEU. However, since the United Kingdom opted out because they did not get the safeguards they wanted, the other member states chose to initiate an international treaty instead.20 A political agreement on the Fiscal Compact was reached at the informal European Council on January 30th 2012 by 25 EU member states. After political agreement on the Fiscal Compact five drafts were circulated until the final version was published.21 The first draft of a possible treaty had already been made in December 2011. The main issue for the contracting parties during the negotiations until the final adoption in January was the level of autonomy of these parties. Most of the parties wanted to commit to more budgetary discipline but especially Germany and the ECB pushed for hard line provisions.22 The mandatory language on amending the constitutions corresponds with the constitutionals amendments recently adopted in Germany. Since 2009 the Grundgesetz provides section 114 (2), this article states: “Revenues and expenditures shall in principle be balanced without revenue from credits. This principle shall be satisfied when revenue obtained by the borrowing of funds does not exceed 0,35 percent in relation to the nominal gross domestic product. In addition, when economic developments deviate from normal conditions, effects on the budget in periods of upswing and downswing must be taken into account symmetrically.” Since Germany amended their constitution, similar rules to amend the constitutions in other EU member states had been pending before the assumption of the Fiscal Compact.23

18 MEMO/11/898, EU Economic Governance “Six-Pack” enters into force, Brussels, 2011, p. 1. 19 Hyvärinen, 2012, p. 8. 20 Hyvärinen, 2012, p. 8. 21 Kreilinger, 2012, p. 1. 22 Kreilinger, 2012, p. 3. 23 LB and JHR, European Constitutional Law Review, 2012, p. 2.

Jorick Straatman Tilburg University 13 ANR 383693 The Fiscal Compact, as a treaty, complements and consolidates the SGP and the measures in the Six-Pack.24 The rules laid down in the treaty are not new concepts of law; they are adopted from the Six-Pack, laws of the Federal Republic of Germany, proposals for regulation of the EC and points of the European Council conclusions. Moreover, the Fiscal Compact redefines the balanced budget rules in stricter terms than was done in the Six-Pack, and requires the contracting parties to adopt them into their national law and create an automatic mechanism to take corrective action.25 If we have a look at the specific articles of the Fiscal Compact the most important rule, as already mentioned, is the adoption of the balanced budget rules into, preferably, the constitutions of the participating states. Scholars call this adoption the ‘golden rule’ of the Fiscal Compact.26 The rule to transport the provisions for budgetary control into the legal systems of the contracting parties is laid down in article 3.2. In the first two drafts of the Fiscal Compact the provision was even more demanding and stated “provisions of constitutional or equivalent nature”. However, they changed it into “provisions of binding force and permanent character, preferably constitutional” because in some countries a constitutional amendment needs to be checked by a referendum that would cost significant time.27 The provisions that the contracting parties have to transfer into their own legal system have been mentioned before and are laid down in the same article of the Fiscal Compact. Section 3.1 reads under point a. that “the budgetary position of the general government of a Contracting Party shall be balanced or in surplus” and under point b. that “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 SGP, with a lower limit of 0,5% of the GDP of market prices” and furthermore under point d. “where the ratio of the general government debt to GDP at market prices is significantly below 60% and where risks in terms of long-term sustainability of public finances are low”. We will look at how other contracting parties have adopted these rules in the next paragraph.

3.1.3 Ratification of the Fiscal Compact The Fiscal Compact entered into force on the 1st of January 2013. Finland was the twelfth country of the euro area that deposited its instrumentation of ratification on December 21st

24 LB and JHR, European Constitutional Law Review, 2012, p. 2. 25 Kochanov, 2012, p. 24-25. 26 Fabbrini, 2012, p. 5. 27 Kreilinger, 2012, p. 3.

Jorick Straatman Tilburg University 14 ANR 383693 2012.28 Section 14(2) of the Fiscal Compact states that twelve countries of the euro area have to deposit their instrument of ratification before the end of 2012 to let it enter into force on the 1st of January 2013. Or, it will enter into force on the first day of the next month following the deposit of the instrument of ratification by the twelfth contracting country which currency is the euro. The General Secretariat of the Council of the European Union is the place where the countries have to deposit their instruments of ratification (section 14(1) of the Fiscal Compact). The table below shows which of the contracting parties have ratified the Fiscal Compact, how they have done so and in which countries the procedure is still going on.

Table 1: Ratification of the Fiscal Compact, last updated on the 5th of July 201329

Country Institution Date Deposition date Law to enact the (d/m/y) balanced budget rules Austria* National Council 04/07/2012 30/07/2012 Ordinary law by simple Federal Council** 06/07/2012 majority Belgium* Seven parliaments T.B.D. T.B.D. T.B.D. Bulgaria Parliament T.B.D. T.B.D. T.B.D. Cyprus Council of Ministers** 20/04/2012 26/07/2012 T.B.D. Denmark* Parliament** 31/05/2012 19/07/2012 Ordinary law by simple majority, with interpretive declaration. Estonia* Parliament** 17/10/2012 05/12/2012 Ordinary law by simple majority Finland* Parliament** 18/12/2012 21/12/2012 Ordinary law by simple majority France* Senate 09/10/2012 26/11/2012 Ordinary law by simple National Assembly** 11/10/2012 majority Germany* Bundesrat 29/06/2012 27/09/2012 Balanced budget rule Bundestag** 29/06/2012 was already in the Constitution. Greece* Parliament 28/03/2012 10/05/2012 T.B.D. Hungary Parliament** 25/03/2013 15/05/2013 Balanced budget rule was already in the Constitution. Ireland* House of 20/04/2012 14/12/2012 Ordinary law by simple Representatives majority Senate** 24/04/2012 Referendum 31/05/2012 Italy* Senate 12/07/2012 14/09/2012 Constitutional Chamber of 19/07/212 amendment Deputies** Latvia Parliament** 31/05/2012 22/06/2012 Ordinary law by simple

28 Fiscal Compact enters into force, Pressroom Council of the European Union, p. 1. 29 Table is based on the Agreements database on the website of the Council of the European Union and the monthly report of the Directorate-General for Internal Policies, this directorate oversees the ratification of the Fiscal.

Jorick Straatman Tilburg University 15 ANR 383693 majority Lithuania Parliament** 28/06/2012 06/09/2012 Ordinary law by simple majority Luxembourg* Parliament 27/02/2013 08/05/2013 Will be implemented by organic law that needs a two-third majority. Malta Parliament 12/06/2013 28/06/2013 T.B.D. Netherlands* House of 26/03/2013 T.B.D. Ordinary law by simple Representatives majority Senate 25/06/2013 Poland Parliament 20/02/2013 T.B.D. Balanced budget rule Senate** 21/02/2013 was already in the Challenge at the T.B.D. Constitution, might Constitutional Court require modifications. Portugal* Parliament** 13/04/2012 25/07/2012 Will be implemented in a separate organic law. Romania* House of 08/05/2012 06/11/2012 No, only commitment Representatives until it joins the eurozone Senate** 21/05/2012 in 2015. Slovakia* Parliament** 18/12/2012 17/01/2013 Constitutional amendment. Slovenia* Parliament** 19/04/2012 30/05/2012 Constitutional amendment. Spain* House of 21/06/2012 27/09/2012 Balanced budget rule Representatives was already in the Senate** 18/07/2012 Constitution. Sweden Parliament** 07/03/2013 03/05/2013 Ordinary law by simple majority * = Eurozone member state ** = Presidential or Royal assent granted

If we take a look at how the contracting parties have ratified the Fiscal Compact, most striking is the fact that only seven countries have or already had incorporated the rules in their constitution. Article 3.2 of the Fiscal Compact states that it is preferred to transfer the provisions into the national legal systems by “a provision that is preferred to be constitutional”. The other countries have implemented SGP-provisions into their legal system by passing an organic or ordinary law. There are several countries in which the implementation procedure is still going on, or countries where the procedure is still going but they have already chosen the type of law to implement the provisions of the Fiscal Compact into their legal system.

Jorick Straatman Tilburg University 16 ANR 383693 3.2 The constitutional system of the Netherlands The constitutional system of the Netherlands is, compared to other Western European countries, a peculiar legal system. An example is the monist system for the adoption of international law into the Dutch legal system. Furthermore, there is no constitutional review of legislation by the judiciary. Thirdly, the constitutional order is based on two legal documents. In this paragraph we will look at four aspects of the constitutional system of the Netherlands. First, we will look at the constitutional order of the Netherlands. Second, we will look at the adoption of international law. Third, we will examine the concluding of treaties and fourth and finally we will examine the hierarchy of legal norms in the Netherlands.

3.2.1 The constitutional order of the Netherlands The constitutional order of the Netherlands consists of two written legal documents. There is the Charter for the Kingdom of the Netherlands and the Constitution of the Kingdom of the Netherlands. The Charter has not only been adopted by the Netherlands but also by the other countries in the Kingdom of the Netherlands in the Caribbean. These countries are Aruba, Curacao and Sint Maarten. The Charter prescribes the structure of the entire Kingdom and the relation between the four countries. The Charter was amended and the constitutional relationships were reshaped in 2010 because the previous structure was not satisfactory.30 The specific constitutions of the four countries are in practice subordinate to the Charter. Our focus will be on the Constitution of the Netherlands because this is the principal constitutional document for the territory in Europe.31 The Constitution was adopted in 1814 and has been revised on a number of occasions since then. One of the most important revisions was the one of 1848. It introduced the ministerial responsibility for the government’s policies and directly elected representatives.32 There are no ideological statements in the Constitution and it does not contain a preamble or founding statements. In the Constitution there is a range of rights, from classic rights to socio-economic rights of the people, references to the system of parliamentary democracy and the separation of powers (trias politica) in the Netherlands. It is believed that these concepts underlie the Constitution. The three different branches of the government have their own chapter. Power is centralised in parliament that decides how power can be channelled or exercised. The diffusion of the Monarch’ power towards

30 Website Eerste Kamer, Rijkswet wijziging Statuut in verband met de opheffing van de Nederlandse Antillen, http://www.eerstekamer.nl/wetsvoorstel/32213_rijkswet_wijziging_statuut, last visit 11/06/2013. 31 Claes and Van der Schyff, 2008, p. 124. 32 Adams and Van der Schyff, 2006, p. 400.

Jorick Straatman Tilburg University 17 ANR 383693 parliament was established during the revision in 1848 with the introduction of ministerial responsibility. Another aspect of the Constitution is that the formation procedure for the government is not laid down in constitutional provisions, but remains largely unwritten constitutional law.33 The Constitution can be seen as quite an open document towards other legal systems. There is a lot of trust in the legislative branch. Moreover, when we look at the role of the judiciary in the review of the Constitution, their role is underdeveloped. The judiciary is not allowed to review the compatibility of Acts of Parliament with the Constitution. The State Commission in 1848, headed by J.R. Thorbecke, introduced the prohibition of constitutional review in section 115 of the Constitution of 1848 while the Commission itself was opposed to the idea. The government insisted on the idea while the Commission favoured review by the judiciary.34 The Constitution can be seen as a political document that can be interpreted by parliament. The implementation of the Constitution lies with politicians and not with the judiciary. It is a general map or guideline of power and cannot be enforced to limit state power. The legislature reviews the compatibility of primary legislation with the Constitution. The ban on constitutional review is based on, what is today, section 120 of the Constitution. This section makes clear that it is the task of the legislature to ensure that no legislation is passed that is not compatible with the Constitution.35 However, this does not imply that the courts are completely excluded from law making. The courts fill in the gaps that have been left open by the legislative branch. They clarify the law and during this process they complement it. They also do this when it comes to highly sensitive issues, but also ordinary courts can deal with cases in, for example, wrongful birth, abortion and euthanasia. In other systems constitutional courts deal mostly with these kinds of subjects. The courts have a rather conservative conception when it comes to legislature’s responsibility. When choices may cause conflict, the courts take a step back and leave the decision to the legislature.36 The last remarkable feature of the Dutch Constitution is that a constitutional amendment is quite complicated. First, a bill to amend a constitutional provision must be accepted by both houses of parliament by a simple majority. A second reading must follow

33 Claes and Van der Schyff, 2008, p. 124. 34 Schyff, van der, 2010, p. 276. 35 Website Supreme Court of the Netherlands, The ban on constitutional review, http://www.rechtspraak.nl/Organisatie/Hoge-Raad/Supreme-court/Pages/The-ban-on-constitutional-review.aspx, last visit 15/03/2013. 36 Claes and Van der Schyff, 2008, p. 125.

Jorick Straatman Tilburg University 18 ANR 383693 after the first approval. During the second reading both houses must adopt the bill again, this time with a two-thirds majority in both houses. Furthermore, the second reading may only occur after a general election for the lower house of parliament (i.e. the House of Representatives). The idea is that two parliaments must consider whether a constitutional amendment is necessary and the Constitution should be changed. Even if there is a widespread agreement on an amendment, the approval can only be granted by a new parliament. A constitutional amendment bill is almost always taken into consideration during several years before it possibly succeeds in amending the Constitution.37

3.2.2 The adoption of international law into the Dutch legal system There are two doctrines on the relationship between international and national or domestic law. These two doctrines are the dualism and monism doctrines. According to the dualism doctrine international and national law are seen as two separate and different systems of law. They operate on different levels and different subjects. International rules of law need to be transformed and adopted by a form of a statute into the national legal system to have any legal effect in this domestic system. This transformation makes the international rules part of the domestic system.38 The difference with monism is that the monist doctrine supposes that the systems of international and national law are united. International law is adopted into the national legal system without any form of transformation. International law becomes part of the domestic legal order when the Netherlands binds itself at the international level. The ratification of an international treaty incorporates the international law automatically into the national legal system. The rules are automatically adopted into the domestic legal order unless they are excluded.39 In the Netherlands the monist system of the adoption of international law is deeply rooted into the countries legal culture. All national law, including the Constitution, is seen as hierarchically inferior to international law. The legal order is open to external influences. Binding provisions of international law automatically become part of the Dutch legal system without any further implementation.40 Section 93 of the Constitution states that treaties and decisions by international organizations become binding after publication if these provisions “are binding for all people”. This means that people can rely on international law when it

37 Schyff, van der, 2010, p. 283 38 Boczek, 2005, p. 6. 39 Dixon, 2007, p. 95. 40 Schyff, van der and Meuwese, 2013, p. 1.

Jorick Straatman Tilburg University 19 ANR 383693 meets the standard that it is “binding for all people” and it therefore has priority over other national legal standards. This attachment towards monism may explain why there have not been any constitutional problems regarding the relationship between European Union law and the Dutch constitutional order like in other European jurisdictions. Especially the active role of the German Constitutional Court has made headlines. However, in the Netherlands there is a prohibition of constitutional review by the judiciary. This is regulated in the Constitution and also the doctrine of monism has constitutional foundations.41 This does not imply that when international law is not “binding for all people” it can be overlooked. The government still has to respect the standards but the citizens cannot directly rely on the standards. In addition to this provision, section 94 of the Constitution states that national legislation must be disregarded when it is in conflict with binding international law. When international law that is “binding for all people” is in conflict with national legislation the national legal norm will not be applied. The character of the legal norm does not matter. The international norm will overrule norms of the Charter, the Constitution, statutes, a general administrative order, a ministerial regulation or a local regulation when they are in conflict with each other.42 When the national legislative norm is not compatible with the binding international norm but cannot be disregarded, the legislative branch has to decide whether there is another way to deal with this legal deficit. If there are several solutions and the right choice depends on government policies or political rights, the legislative branch has to decide how to deal with the situation. If the legislator knows about the deficit and is not willing to take action, then the decision may be different. However, the judicial branch is not allowed to disregard legislative norms. This goes beyond the functions of the judiciary according to the separation of powers.43

3.2.3 Concluding of treaties In the standard procedure for the approval of treaties, the treaty is agreed and signed by the government. Hereafter, the text is published in the official journal for international treaties, Het Tractactenblad (Treaty Series). After this publication the treaty is submitted to parliament for its approval. Parliament has to approve the treaty by signing the bill of approval. The bill can only concern a treaty that has been signed by the government and it approves the

41 Schyff, van der and Meuwese, 2013, p. 1. 42 Tekst & Commentaar Grondwet, Artikel 94, p. 1. 43 Tekst & Commentaar Grondwet, Artikel 94, p. 2.

Jorick Straatman Tilburg University 20 ANR 383693 ratification of the treaty by the government. Parliamentary approval for a treaty is given in the form of a statute or in silence. When a treaty is presented to the national parliament and neither the Tweede Kamer (House of Representatives or Lower House) nor the Eerste Kamer (Senate or Upper House) asks for the treaty to be approved explicitly within 30 days, the treaty is considered to be approved tacitly. There is no legal review on the concluding of treaties according to section 120 of the Constitution.44 Sections 81 to 88 of the Constitution of the Netherlands describe the standard legislative procedure according to which the bill of approval is treated. For the Dutch parliament it is not possible to change the content of a treaty but it is possible for the members of the House of Representatives to amend the bill of approval. Section 84 gives the Representatives the opportunity to amend the bill while members of the Senate can only approve or disapprove the bill. They cannot change it. After possible amendments a simple majority in both houses of parliament is sufficient to explicitly approve the treaty. Perhaps, because of the monist doctrine in the Netherlands the transfer of power towards an international organisation is not a specific issue under the Dutch Constitution. Section 92 of the Constitution allows the transfer of power to international organisations like the EU. However, no international organisation is mentioned specifically.45 The Raad van State (Council of State) always gives its advice on the approval of international treaties. This procedure is laid down in the Constitution.46 The only restriction with regard to the approval of an international treaty is laid down in section 91 (3) of the Constitution. Treaties that differ from the Constitution need a two- thirds majority in both houses of parliament for their approval. There is a special procedure according to section 6 of the Rijkswet Goedkeuring en Bekendmaking Verdragen (Act on the Approval and Publication of Treaties). Parliament needs to notify this explicitly in the bill of approval. It is accepted that the deviation of the Constitution should concern one or more specific rights or sections of the written Constitution. However, none of the treaties in the context of the EU have been found in conflict with the Constitution by government and parliament. These are the only two branches that can rule on this question because as already

44 Claes e.a., 2008, p. 244. 45 Claes e.a., 2008, p. 244. 46 The Council of State has two primary tasks, carried out by two separate divisions. The Advisory Division, as its name implies, advises the government and Parliament on legislation and governance, while the Administrative Jurisdiction Division is the country’s highest general administrative court. The basis for these responsibilities can be found in articles 73 and 75 of the Constitution.

Jorick Straatman Tilburg University 21 ANR 383693 mentioned there is no constitutional review possible by the judiciary. The question whether international treaties are in accordance with the Constitution has to be answered by government and parliament.47 The approval of treaties that deviate from the Constitution is possible without a constitutional amendment. When such a treaty has been ratified, section 94 of the Constitution makes clear that this treaty has a higher status than the country’s Constitution. In June 2005 experimental procedure was used in the process to approve a treaty of the European Union. A national referendum was held on the matter whether the Netherlands should accept the Treaty Establishing a Constitution for Europe (TECE). Three Members of parliament asked for a national referendum to strengthen the legitimacy of the parliamentary ratification. They thought this was needed because of the constitutional nature of the TECE and the possible impact of its ratification.48 61,5% of the voters voted ‘no’ and on the 1st of July 2005 the government had to withdraw the bill of approval that was submitted to parliament in front of the referendum.49 It is assumed that the majority of the Dutch population favours the European integration process but seems to be more critical about the direction and pace of this process. After the ratification of the TECE was declined in the Netherlands (and in France) the EU-wide ratification process collapsed. However, the main reforms that were introduced in the TECE were adopted later when the member states leaders signed the Lisbon Treaty in December 2007.50

3.2.4 Hierarchy of legal norms The legal system of the Netherlands can be described as an open system as we look at the implementation of international law. Moreover, section 93 of the Constitution states that treaties and decisions by international organizations become binding after publication if these provisions “are binding for all people”. There is no protection for the constitutional system by the Dutch legislature and the courts because of the fact that the Constitution can be overruled by international law. In Germany there is the Federal Constitutional Court to protect the German Constitution whereas there are organic laws in France and Spain to form the foundations of the governments and state structure. In France these organic laws overrule normal statutes and have constitutional force. In Portugal there is a variety of different

47 Claes e.a., 2008, p. 245. 48 Claes e.a. 2008, p. 247. 49 Claes e.a. 2008, p. 244. 50 Búrca, de, 2008, p. 4.

Jorick Straatman Tilburg University 22 ANR 383693 legislative acts and the organic laws have a special place. The organic law is less demanding on the parliamentary will than a constitutional amendment, but it has the same legislative force.51 In Luxembourg and Portugal the balanced budget rules have been laid down in separate organic laws. In the Netherlands, there are several national legal norms that differ in status. The two written documents that form the constitutional order have the highest status. These determine the organization of the Kingdom and the legislative, judicial and administrative authorities of the government. According to section 81 of the Constitution the government and both houses of parliament combined have the right to initiate legislation in the form of an Act of Parliament. Furthermore, according to the Constitution a statue can delegate certain powers. This delegation has to be prescribed by an Act of Parliament. Besides the Acts of Parliament there are two types of legal norms that parliament can delegate by a statute. These are general administrative orders that can be made by the government without help and support from parliament and a ministerial regulation that can be made by the Minister of a department. For both norms there is the possibility of a filing procedure to inform parliament. However, this procedure is not required.52 Regional and local governments have their own right to exercise powers. Statues made by the national parliament define which powers are attributed and delegated to these governments. The attribution of these powers is named decentralization and gives these governments its own responsibilities.53

51 Bacelar Gouveia, 2011, p. 63. 52 Pot, van der, C.W. ea. 2006, p. 675. 53 Pot, van der, C.W. ea. 2006, p. 834.

Jorick Straatman Tilburg University 23 ANR 383693 4. Incorporation of the Fiscal Compact In this chapter the sub questions of this thesis will be answered. First, the ratification of the Fiscal Compact by the Netherlands will be discussed. Hereafter, we will discuss the legal developments in the Netherlands to meet the provisions that are laid down in the Fiscal Compact. Furthermore, the question is how the budget right of the national parliament has developed during crisis and finally, whether the Netherlands are complying with the requirements in the Fiscal Compact. The sub questions that were introduced in the first chapter are: 1. What are the legal consequences of the ratification of the Fiscal Compact? 2. Which (legislative) developments can be found in the Netherlands to meet the provisions that are laid down in the Fiscal Compact? 3. How has the role of the Dutch parliament developed during the financial crisis? 4. Does the “Dutch situation” for the implementation of the Fiscal Compact satisfy the requirements of the Fiscal Compact?

4.1 What are the legal consequences of the ratification of the Fiscal Compact? On the 25th of June 2013 the parliament of the Netherlands officially approved the bill for the ratification of the Fiscal Compact since the Senate tacitly approved it. The House of Representatives already did this in March 2013. Now, the Dutch government is able to ratify the Fiscal Compact by laying down its ratification mechanism at the Council of the European Union in Brussels. In this paragraph we will look at the bill of approval for the ratification and the advice of the Council of State regarding this bill.

4.1.1 The bill of approval The bill of approval to ratify the Fiscal Compact is a simple and clear bill that contains only two sections. Section 1 approves the Fiscal Compact and section 2 states that the bill will have effect after it is published in the Staatsblad (Statue Book) after both chambers of parliament have approved the bill by a simple majority.54 The House of Representatives of the Netherlands approved the bill ratifying the Fiscal Compact on the 26th of March 2013. After the Minister’s response on its preliminary report the Senate Committee on Finance published its final report on June 18th 2013. In this report there were no further questions or comments,

54 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 2, p. 2.

Jorick Straatman Tilburg University 24 ANR 383693 implying that the parties in the Senate approved the bill tacitly. The bill was formally approved on the 25th of June 2013.55 According to the explanatory memorandum of the bill proposed by the government the Fiscal Compact contains innovations on three areas to support the EMU. The first and most important innovation is the golden rule for the contracting parties to adopt the budgetary rules regarding the deficit and debt in their national legal system, including its enforcement mechanism. In the Netherlands a special bill for Sustainable Public Finances has been made to fulfil this appointment. This bill will be discussed in the next sub question. The Court of Justice can enforce contracting parties to adopt the rules for sustainable public finances in their legal systems.56 The structural goal for state budget of the Netherlands is a margin for the deficit between a surplus and a maximum EMU-deficit of 0,5% and maximum debt of 60% of the GDP. At this moment the government is eliminating the deficit with cuts and other measures. The EMU-deficit can rise to 1% when the debt of state is far below the criterion of 60%.57 Furthermore, the states that concluded the Fiscal Compact need to support all the propositions and recommendations of the EC when a country breaches the 3% EMU-deficit criterion. When, in the future, countries have an EMU-deficit bigger than 3% they enter the excessive deficit procedure. In this procedure, the EC-proposal to eliminate these possible excessive deficits can only be stopped by a reversed qualified majority voting. This implies that only when a qualified majority is against the proposal the proposal of the EC will not be approved. When there is no such qualified majority against the proposal, it will be approved automatically.58 The second innovation is the use of the TFEU to improve the cooperation in the field of economic policies to facilitate the EMU and support the economic growth in the euro area. The third and final innovation is the obligation for the heads of states and governments to meet at least two times a year to discuss affairs concerning the common currency.59

55 Website Eerste Kamer, Goedkeuring Verdrag inzake stabiliteit, coördinatie en bestuur in de economische en monetaire unie, http://www.eerstekamer.nl/wetsvoorstel/33319_goedkeuring_verdrag_inzake, last visit 01/07/2013. 56 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 2, p. 8. 57 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 3, p. 7. 58 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 3, p. 9. 59 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 3, p. 2.

Jorick Straatman Tilburg University 25 ANR 383693 4.1.2 Advice from the Council of State The Advisory Division of the Council of State advises, according to section 73 of the Constitution, the government on bills, draft orders as well as on proposals for the approval of treaties by the States General (the House of Representatives and the Senate combined). In its advice concerning the bill to approve the Fiscal Compact it states that the Fiscal Compact is an essential tool to control the crisis in the eurozone. Moreover, it helps to prevent the possibility for a future crisis.60 However, the Council also expressed some comments concerning the Fiscal Compact. The main comment is the enactment of the Fiscal Compact outside the existing institutional and legal frameworks of the EU. The Fiscal Compact creates a legal structure parallel to the legal framework of the EU and has significant overlaps with EU law, namely the Six-Pack. The new rule of the Fiscal Compact is that these budgetary rules have to be adopted in the member states’ legal system. An overlap with the TFEU is signalled in the light of section 121 TFEU. Section 121(1) TFEU states that member states consider the economic policies a matter of common interest and coordination of the Council. When the provisions of the Fiscal Compact are fulfilled outside the legal framework of the EU, these provisions will conflict with the competence of the EU-institutions and thereby go against the commitments of the TFEU.61 Another overlap is the decision-making procedure in article 7 of the Fiscal Compact. It seems that this section differs from section 126 TFEU concerning the excessive deficit procedure. The reversed qualified majority decision-making procedure in the Fiscal Compact is the opposite of the procedure in the section in the TFEU. In the TFEU the qualified majority needs to approve the proposals of the EC whereas in the Fiscal Compact the qualified majority needs to vote against the proposals, otherwise they will be approved automatically.62 However, the Dutch government argues that the member states can discuss the desirability of the proposals before they are dealt with in the Council. If there is no qualified majority against the proposal, then the member states will approve the proposal in the Council. The decision-making procedure in the Council is thereby respected.63 This reasoning of the government is quite curious. The reversed qualified majority decision- making procedure in the Fiscal Compact to deal with member states that violate the deficit criterion is introduced, whereas the Council also needs to make a decision afterwards

60 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 4, p. 1. 61 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 4, p. 3. 62 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 4, p. 4. 63 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 33 319, no. 4, p. 6.

Jorick Straatman Tilburg University 26 ANR 383693 according to section 126 TFEU. The decision-making in the Council is respected but the Fiscal Compact introduces changes in the voting rules for the excessive deficit procedure. The Council concludes that the Fiscal Compact is an essential element in the stabilization of the euro area and that the Netherlands should ratify it. However, the need for the Fiscal Compact is not without doubt because of the overlap with the TFEU and the SGP.

4.2 Which (legislative) developments can be found in the Netherlands to meet the provisions that are laid down in the Fiscal Compact? As we have seen in the previous sub question, the Senate approved the bill of approval for the ratification of the Fiscal Compact on the 25th of June 2013. Hereby the internal ratification procedure has been completed and the government can ratify the Fiscal Compact in Brussels. Furthermore, there are also legislative developments to incorporate the balanced budget rules into the legal system of the Netherlands to meet the requirements of the Six-Pack to which the Fiscal Compact refers. The most important rule is the adoption of the balanced budget rules into the legal system of the Netherlands. This is the first development that will be discussed in this paragraph. The approval of the bill for Sustainable Public Finances attempts to incorporate the golden rule of article 3.2 of the Fiscal Compact into the Dutch legal system. The second development focuses on the budget cuts that were made to meet the restrictions regarding the EMU-deficit and EMU-debt rules before the contracting parties had to adopt these rules in their national legal system.

4.2.1 Bill for sustainable public finances On September 21st 2012 the (at that moment) Minister of Finance De Jager sent the bill for sustainable public finances (Wet Houdbare Overheidsfinanciën (Wet HOF)) to the national parliament in order to control and regulate the public finances. According to the explanatory memorandum of the law there were two reasons for the proposal of this law. The first reason to introduce a national balanced budget law was based on two European decisions. The first decision was the governance package that was introduced on the Euro Summit on October 26th 2011. This summit has also been referred to above in the passage regarding the European Legal Framework. The second decision was the decision of the EMU- and other EU-leaders to anchor the provisions of the SGP in national legislation. This decision was laid down in the Fiscal Compact.64 The second reason was that sustainable state finances are an important

64 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 6.

Jorick Straatman Tilburg University 27 ANR 383693 condition for the welfare in the Netherlands and this law introduces the enforcement mechanism to achieve and maintain the balanced budget rules for the national and local governments. These local governments are the provinces, municipalities and the water boards. Furthermore, sustainable state budgets stretch over more than one government term.65 The proposal on the 21st of September 2012 was not the first bill for a national law for balanced budgets for the national and local governments. In February 2010 the Council of State published its advice on a law to reduce the deficits of the national and local governments. This law was the predecessor of the one that Minister De Jager sent to the Dutch parliament in September 2012. The new bill replaces the older one that was withdrawn simultaneously.66 According to the Council of State the new proposal focuses on two aspects. The first aspect of the law is that it sets rules to determine the national budget. The main aspects are a trend-based budgetary policy and the European obligation to the balanced budget rules. However, there are no specific, substantial criteria specified in the bill. According to the medium-term objective (MTO) in the future the deficit must not exceed 0,5% of the GDP. The bill does not specify the criteria that are mentioned in article 3 of the Fiscal Compact and the SGP regarding the deficit and debt position of the member states that have the euro as their currency. These percentages are mentioned in the Explanatory Memorandum as “the applicable standard in the European Union” but in the bill they are ignored.67 The second aspect are the rules for local governments in the light of their share in the EMU-balanced budget rules and their share for the debt and deficit rules for the state of the Netherlands. The proposal introduces the obligation for local governments to contribute on a ‘similar basis’ to reach and maintain the budgetary rules that have been set in the SGP. With the adoption of this bill the final responsibility for the budgetary policy is transferred towards the national government in the light of the EMU-balanced budgetary rules. The decisions will be made in the Council of Ministers but there will be an intense governmental consultation between this Council and the local governments. The budgets of the local governments need to be completely balanced in the future.68 In the bill there are two sanctions that can be

65 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 2. 66 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 4, p. 1. 67 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 4, p. 4. 68 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 4, p. 6.

Jorick Straatman Tilburg University 28 ANR 383693 applied when local governments cannot meet the standards for their budgets. There is a national sanction in article 6 of the law and a EU-sanction in article 7 of the law.69 The local governments need to contribute on a similar basis to meet the standards in the SGP. The Minister of Finance defines the scope of this effort. When the deficit is above the standard for local governments article 6 of the bill will be triggered. At this moment they are not allowed to contribute for more than 0,5% to the total EMU-deficit (local governments- criterion).70 Every year the local governments have to send their budgets for the next year to the Centraal Bureau voor de Statistiek (Bureau for Statistics) and the Centraal Planbureau (Bureau for Economical Policy Analysis, hereafter CPB)71 before the 15th of November. They also have to make a forecast for the following two years. If it is expected that the deficit of the local governments is higher than the criterion of 0,5%, the governments are informed and they have to take measures. If, after revision, the deficit is still too high the national government will start consultation with the concerned local governments. If this consultation is insufficient, the government can cut their funding. The government can withhold a part of the funding and put it in a depot. The height of these restrained funds is at the same level as the deficit. If, after three years, the improvements are sufficient the restrained funding will be returned. If there are no improvements, the restrained funding is transferred back to the public treasury and seen as a penalty for the local governments.72 The EU-sanction in article 7 can be passed to the local governments when the EMU-deficit and -debt of the Netherlands are bigger than the standards and the local governments have contributed to this sanction by jointly exceeding their collective share in the EMU-deficit. The height of the penalty or lost of interest will be determined by budgetary or supplemental budgetary law. For the municipalities this will be determined in their specific budgetary bill. Their share in the penalty will determine the cuts of their regular funding.73 On April 23rd 2013 the House of Representatives approved the bill for Sustainable Public Finances and implementation of the provisions in article 3.2 of the Fiscal Compact. 109 Representatives voted in favour of the statue and 41 members voted against the statue.

69 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 12. 70 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 14. 71 The Bureau for Economical Policy Analysis is part of the Dutch Ministry of Economic Affairs; it is the executor of economical and political research. It works on the crossroads of economic science and public policies, it analysis the effects of current and future government policies. 72 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 35. 73 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 36.

Jorick Straatman Tilburg University 29 ANR 383693 The coalition parties, the labour party (PvdA) and the liberal-conservative party (VVD), already gave the statue its simple majority of 79 votes to be approved but also the members of four other parties voted in favour of the statue.74 The Senate’ permanent Committee on Finance published its preliminary report on the 25th of June 2013 and is currently waiting for a reply of the Minister.75

4.2.2 Budget cuts Besides the legislative developments there are also financial developments in the Netherlands. The aim of these developments is to meet the SGP-criteria on the deficit- and debt-position of the country. After the beginning of the eurozone crisis at the end of 2008, the state of the Netherlands has struggled to meet the balanced budgetary rules of the SGP. The EC monitors whether the member states can comply with the standards regarding their deficit and debt. Yet, besides the adoption of the balanced budgetary rules into the legal system there have been several efforts thus far to comply with these rules. The most important measures that have been taken are the budget cuts to meet the provisions regarding the deficit and debt position of the Netherlands. From 2008 onwards the deficit of the state budget has been between 4% and 6% of the Dutch GDP. In its Policy Brief published in June 2013 the CPB foresees a deficit of 3,5% for 2013 and 3,7% for 2014 and they calculated that the debt will rise to 74,6% in 2013 and 76,3% in 2014.76 This paragraph focuses on the budget cuts and the developments in this field to meet the SGP-standards. The table below shows how the EMU-deficit (i.e. the income of the national and regional governments combined minus all the governments’ expenditures and social funds) and the EMU-debt percentage (i.e. the debt of the national and local governments and social funds minus their mutual debts) has developed and is expected to develop over the years between 2008 and 2014. The figures of recent years show that the EMU-provisions, that are referred to in the Fiscal Compact and originate of the SGP about the deficit and the debt, were not met in the last four years. Moreover, also in 2013 and 2014 the public finances of the Netherlands will not meet these criteria.

74 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, p. 1. 75 Website Eerste Kamer, Wet Houdbare Overheidsfinanciën, http://www.eerstekamer.nl/wetsvoorstel/33416_wet_houdbare, last visit 01/07/2013. 76 Bureau for Economic Policy Analysis, 2013/06 Policy Brief on Economical Prospects for 2013 and 2014, Juniraming 2013, p. 6.

Jorick Straatman Tilburg University 30 ANR 383693 Table 2: EMU-figures for the Netherlands 2008-201477, percentages referred to GDP

Year EMU-deficit % Contribution of local governments EMU-debt % to EMU-balance % 2008 -1,0% 0,5% 58,2% 2009 5,6% 0,6% 60,9% 2010 5,4% 0,8% 62,7% 2011 4,7% 0,7% 65,2% 2012 4,1% 0,4% 71,2% 2013* 3,5% 0,7% 74,6% 2014* 3,7% - 76,3% * = Expected by the CPB

In an attempt to meet the provisions the budget of the national government has been cut significantly. This occurred already before the Fiscal Compact was signed and can be seen as a measure to meet the provisions that are laid down in the Six-Pack. Since the start of the financial crisis three different cabinets have been in office. The first cabinet that had to deal with the crisis was the Balkenende IV-administration that was in office from February 22nd 2007 to February 20th 2010. The expectations about the recovery of the economy were quite optimistic in 2008 and 2009 and when the crisis started. They certainly did not expect that the figures of the following years would be as unfortunate as would be experienced in the forthcoming years. When the Balkenende IV-administration left the office their Miljoenennota 2010 (Financial Memorandum 2010) showed that they wanted to cut the entire budget on structural basis by € 3,2 billion from 2015 onwards. Because this cabinet left office in 2010 it was later guessed by the Algemene Rekenkamer (Court of Audit) in their Bezuinigingsmonitor 2011 (Budget Cuts Memorandum 2011) that they expected that the intended structural cuts, who would start € 1,4 billion in 2011 to finally reach € 3,2 billion in 2015, would do the trick.78 However, as seen not only in the Netherlands but also across Europe, governments had to cut much more than expected in the early years of the crisis to restore their public finances at a sustainable level.

77 Based on the EMU-deficit and EMU-debt published by the Ministry of Finance in their yearly Financial Report of the State Finances 2008-2012 and the 2013/06 Policy Brief of the CPB on the economical prospects for 2013 and 2014. 78 Kamerstukken II (Dutch Parliamentary Papers) 2010-2011, 32 758, no. 2, p. 16.

Jorick Straatman Tilburg University 31 ANR 383693 The next administration in office was the Rutte I-administration. This coalition was headed by Prime Minister Mark Rutte and consisted of ministers of the liberal-conservative party (VVD) and the Christian-democratic party (CDA). A combination of both parties did not have a majority in parliament, so the right-wing party of Geert Wilders (PVV) gave them parliamentary support to give them a majority; this was a majority by just one seat. After the coalition was established on the 14th of October 2010, in their coalition agreement it was made clear that they wanted to cut the budget by a total of € 18 billion in 2015. Their first measures of € 2,9 billion of budget cuts were approved by parliament during the approval of the Budget Act for 2011.79 In 2012 the budget was cut by a further € 6,5 billion, these cuts were also approved by parliament in the bill to determine the budget for 2012. These budget cuts were in line with the intended structural cuts towards € 18 billion in 2015.80 However, in March 2012 predictions of the CPB made clear that the EMU-deficit would be 4,5% if no further cuts were initiated. On the 1st of March 2012 the Bureau stated that further budget cuts worth € 16 billion were needed for the year 2013 to not exceed the EMU-deficit of 3% of GDP again.81 These figures meant the start for negotiations (known as Het Catshuisoverleg) between the two party-leaders of the coalition partners, Mark Rutte (VVD) and Maxime Verhagen (CDA) and the party-leader of the party that gave them parliamentary support, Geert Wilders (PVV), fur further budget cuts in 2013. The negotiations for the State Budget for 2013 started on the 5th of March 2012 and lasted for more than one month. Finally, on April 21st 2012 Geert Wilders announced that he would no longer be negotiating and that his party would no longer support the coalition. At that moment plans were made for a total of € 14 billion of additional budget cuts towards 2015.82 Two days after Wilders pulled out of the negotiations, Prime Minister Rutte announced that his administration would resign and that new elections would be scheduled. On April 26th 2012 the outgoing Rutte I-cabinet was still able to make a plan for further budget cuts with support of other political parties in their

79 Kamerstukken II (Dutch Parliamentary Papers) 2010-2011, 32 758, no. 2, p. 19. 80 Website Government of the Netherlands, Miljoenennota 2012: Koersvast in onzekere tijden, http://www.rijksoverheid.nl/nieuws/2011/09/20/miljoenennota-2012-koersvast-in-onzekere-tijden.html, last visit 22/05/2013. 81 Bureau for Economic Policy Analysis, 2012, Uitgebreide kerngegevens: meest recente ramingen 2011-2015, publication date 01/03/2012, P. 2. 82 Website Volkskrant, Hoe Wilders onverwacht de gedoogconstructie opblies, http://www.volkskrant.nl/vk/nl/9824/De-zoektocht-naar-miljarden/article/detail/3241382/2012/04/21/Hoe- Wilders-onverwacht-de-gedoogconstructie-opblies.dhtml, last visit 14/06/2013.

Jorick Straatman Tilburg University 32 ANR 383693 attempt to reach the 3% criterion of the EMU-deficit in 2013. The social-liberal (D66), the green (GroenLinks) and the Christian-social (ChristenUnie) parties supported the VVD and CDA in their aim to cut a total of € 12,2 billion. The EMU-deficit criterion was expected to drop to 3,0% of the GDP with support of the new measures.83 After the elections in September 2012 the second Rutte-cabinet (Rutte II) was installed on November 5th 2012. Two parties are part of this coalition: Rutte’s own party the VVD and the labour party (PvdA). In their coalition-agreement they stated that they want structural cuts worth € 16 billion, which need to be implemented by the end of 2016 when their time of office ends. The cuts that were agreed on by the outgoing administration in April 2012 were respected and they added another (almost) € 4 billion of cuts. With these cuts they expected to have an EMU-deficit between 0,5 and 1% by 2017.84 On the 29th of May 2013 the EC made clear that they expected the Netherlands to meet the EMU-deficit criterion by the end of 2014. The requirement was postponed for the year 2013. According to the EC it seems that further cuts and reforms worth € 6 billion need to be scheduled to meet this standard. There are other European countries that have time until the end of 2015 to meet the EMU-deficit standard of 3%; these countries are Spain, France, Poland and Slovenia.85 In June 2013 the CPB published a new evaluation with new economical and financial predictions. These figures showed that the expected economic growth in 2013 is not at the level as they expected in the coalition-agreement of late 2012. To meet the 3% EMU-deficit they also stated that a new round of budget cuts is needed. Furthermore, it is questionable whether the € 6 billion of cuts are enough to meet the deficit criterion in 2014.86

4.3 How has the role of the Dutch parliament developed during the financial crisis? Above we have seen the impact of the Fiscal Compact on the national legal order and the extensive budget cuts to meet the EMU-provisions. In this paragraph we will look at the role of the Dutch parliament regarding its budget right. Before the Fiscal Compact was signed and

83 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, 21 501-07, no. 901, p. 12. 84 Regeerakkoord VVD-PvdA, Bruggen Slaan, 2012, published 29/10/2012. 85 European Commission, Commission takes steps under the Excessive Deficit Procedure, MEMO/13/463, date 29/05/2013, Brussels. 86 Website Government of the Netherlands, Geen extra bezuinigingen in 2013, wel aanvullende maatregelen in 2014, http://www.rijksoverheid.nl/nieuws/2013/03/01/geen-extra-bezuinigingen-in-2013-wel-aanvullend-pakket- voor-2014.html, last visit 24/05/2013.

Jorick Straatman Tilburg University 33 ANR 383693 the provisions of the Six-Pack got their enforcement mechanism in the Fiscal Compact, other developments had already started in the Netherlands to deal with the euro crisis and to meet the EMU-deficit and -debt rules. These developments affected this budget right. In the decades before the crisis the national parliament was the constitutional safeguard to determine the budgetary policies of the government. It was the democratic warranty for the sustainability of the budgets and the public finances.87 According to section 105 of the Constitution the government is not allowed to spend without permission of parliament. According to section 105 (1) of the Constitution the budget for the national government is set by the provisions in the budgetary law. This special budgetary law is called the Comptabiliteitswet (Government Accounts Act). The Accounts Act sets out the complete budget procedure in detail. It sets up a framework for the specific budgetary bill that is passed every year. This budgetary bill has the status of a statute after it is approved and the members of the House of Representatives have full powers to amend the bill. According to the Government Accounts Act, the government has the right to spend money after parliamentary approval. The Court of Audit is the institution to examine afterwards whether the budget has been used for the designated policy fields. Every year on the third Tuesday of September, on Prinsjesdag (Prince’s Day), the Minister of Finance presents the budget for the next year. This ceremony is laid down in section 65 of the Constitution. After this ceremony, according to section 105 (3) of the Constitution, the members of parliament need to approve the budget before the 31st of December. The procedure to approve the budget-bill takes considerable time and is called the Algemene Politieke Beschouwingen (General Political Considerations). It often occurs that it takes the House of Representatives several months to approve the bill. As a result, the Senate has barely time to discuss it because of the deadline at the end of December. In these cases, the influence of the Senate on the approval of the budget is minimal. After the approval of the bill the budget often needs some revisions because allocated money is insufficient. When this occurs the government needs to receive supplemental budgets. This is laid down in sections 14 and 15 of the Accounts Act. The parliament is informed that the budget is likely to be increased and they can approve this new budget tacitly or they can reject it. With their approval they execute their budget rights.88

87 Diamant and Van Emmerik, 2011, p. 1943. 88 Diamant and Van Emmerik, 2011, p. 1943.

Jorick Straatman Tilburg University 34 ANR 383693 There are two developments that influence the budget right of the national parliament. The first is that during the euro crisis the role of the Dutch parliament regarding their budget right changed because of the growing influence of the EU. This has already been described in the legal framework. The Fiscal Compact was, for the time being, the last step in the process but since the introduction of the Fiscal Compact other developments have occurred on the Europeanization of the national budgets of the member states. Developments for European control of the national budgets has intensified by the introduction of the Two-Pack that entered into force on the 30th of May 2013. This reform package contains two Regulations that are based on section 136 TFEU. According to the Memo of the EC, the Regulations complete the budgetary surveillance cycle and improve further economic governance in the euro area. The Two-Pack introduces a common budgetary timeline for the euro area member states. Member states need to publish their medium-term fiscal terms together with their policies for growth and employment for the next year before the 30th of April; before the 15th of October their draft budgets must be published; and, before December 31st they need to adopt their budgets for the following year.89 This means that already in April the EC wants to know what the member states are doing to meet the provisions of the SGP in the following year. This implies that the legislative procedure to determine the budgets in the Netherlands should probably change to fulfil the demands of the EC. The Netherlands does not only have to adopt the rules for sustainable public finances into their legal system, but there is also the possibility that the legislative procedure for the budget bill needs changes to meet the timeline of the Two-Pack on the budgetary process. The other development is the role of the Minister of Finance in the decision-making procedure regarding the budget. During the crisis some national banks were in trouble and had to be saved since otherwise they would have caused systemic damage to vital parts of the economy of the Netherlands. During the second half of 2008 serious problems in the banking sector made it necessary for the government to make some crucial decisions to cope with the erupted national banking problems.90 On the 4th of October 2008 the government made the decision to save the Dutch part of the Fortis/ABN AMRO-bank from bankruptcy and buy all its shares for € 16,8 billion. They did this after the first bailout worth € 4 billion failed.91 The decisions for the bailout and eventually nationalisation of the bank were never submitted to

89 MEMO/13/457, ‘Two-Pack’ enters into force, completing budgetary surveillance cycle and further improving economic governance for the euro area, 27/05/2013, p. 2. 90 Diamant and Van Emmerik, 2011, p. 1945. 91 Haan, de, 2009, p. 105.

Jorick Straatman Tilburg University 35 ANR 383693 the national parliament. The (at that time) Minister of Finance Wouter Bos thought it was legitimate to buy the bank because it would otherwise cause substantial problems to the economy of the Netherlands. Parliament was informed after the decision to nationalize the bank and their role was minimal. Moreover, the possibility to inform parliament to ask for tacit permission before the transaction was not used. An intern filing procedure can be used to inform parliament about the intended changes in the previously approved budget policies.92 This procedure is laid down in section 34 of the Accounts Act. However, during the crisis, the Dutch parliament accepted the exceptional circumstances and a majority indicated that they understood the immediate Minister’s response to save the bank during these times of crisis. It was not possible to enforce the budget right that is originally laid down by the members of parliament, due to the confidentiality and the sensitivity of the information and the time span in which important decisions have to be made. The same construction was used again in 2013 when the successor of Wouter Bos as the Minister of Finance, Jeroen Dijsselbloem, decided to buy another Dutch bank SNS Reaal after earlier bailouts did hardly affect the credibility. On the 1st of February 2013 the bank was saved and nationalised93 by the government for € 4,8 billion.94 After the transactions it would have been possible for parliament to cast a no-confidence vote against the Minister following the principle of ministerial responsibility. However, this would possibly lead to the downfall of the entire cabinet and in times of crisis this would have been an undesirable development.95 To cope with the developments in the Netherlands new procedures can be helpful to respect parliamentary budget right. As we have seen above this right has been affected following the expanding role of the EU and the decisions by the Minister of Finance to save two troubled banks that were crucial to ensure the stability of the Dutch financial system. First, a procedure should be introduced to inform parliament with confidential information, especially in times of crisis. Whenever it is not possible to inform parliament about these developments, the parliament’s constitutional rights to approve the budget are disregarded. With this proposal, parliament will have knowledge about the developments. During the recent crisis parliament was completely ignored in the decision-making procedure and

92 Diamant and Van Emmerik, 2011, p. 1945. 93 The nationalization of SNS Real contributed to the increase of the EMU-deficit by 0,6% and an increase of the EMU-debt by 1,6%. 94 Government of the Netherlands, Nationalisation of SNS Reaal, letter to parliament, 10/02/2013. 95 Diamant and Van Emmerik, 2011, p. 1949.

Jorick Straatman Tilburg University 36 ANR 383693 informed only afterwards. Second, a possible law for emergency situations will make it possible to ignore the Accounts Act in times of financial crisis. This would give the government the right to spend money without parliamentary approval. Normally parliament needs to approve the budget. In times of crisis, as we have seen, the government may need to spend money outside the budget-lines. With the introduction of a law parliamentary approval can be waived. However, it is hard to predict where, when and how a financial crisis will erupt and such a law will be very hard to define. A possible criterion to determine a crisis is the threat of adverse developments that will have a vital effect on the financial market and economical state interests of the Netherlands.96

4.4 Does the “Dutch solution” for the implementation of the Fiscal Compact satisfy the requirements of the Fiscal Compact? In the answers on the previous sub questions we have seen the legal consequences of the ratification of the Fiscal Compact in the Netherlands, the legislative developments to adopt the golden rule into the national legal system, the budgets cuts to meet the provisions of the SGP and the changing role of the national parliament regarding their budget right. The question remains whether the Dutch measures for the implementation of the Fiscal Compact satisfies its requirements. In this paragraph this question will be answered by examining the way the golden rule has been adopted and whether the adoption is a sustainable safeguard for the future to keep these rules incorporated in the legal system of the Netherlands. According to article 3.2 of the Fiscal Compact, the rules (on sustainable public finances) shall “take effect in the national law of the Contracting Parties through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary process.” The measures in the bill on Sustainable Public Finances (Wet HOF) will incorporate the European requirements for budgetary discipline into the legal system of the Netherlands. When this bill is adopted by parliament it has the same status as the yearly budget acts. The framework for the public finances is normally laid down in the coalition agreement for the next cabinet period for (normally) a four-year term. The bill takes the framework for the public finances to a new level where European norms are included for the deficit- and debt-position of the

96 Diamant and Van Emmerik, 2011, p. 1950.

Jorick Straatman Tilburg University 37 ANR 383693 budget of the Netherlands. However, only principal features for the budget are included. There are no specific rules because they depend on the economic situation.97 The government has chosen not to incorporate the golden rule in the Constitution. The amendment procedure for the Constitution is complicated but incorporation of the rule in the Dutch Constitution would probably make it more durable. There is and remains considerable trust in the legislative branch of the government to deal with budget issues because it is possible to cancel the rules by another legislative act. The legitimacy of the budget is a political issue and with the approval of the bill it stays that way. There is no guarantee that the statute will have an everlasting and permanent character; the government and parliament are able to cancel the act in the future if they want to and have the necessary majority in parliament. The bill gives a direction for the political institutions and the financial markets. There is no direct visibility of the European norms in the bill and it has no effect on the enforceability of the rules by the courts. In addition, the courts in the Netherlands are very reserved in the review of governmental policies compared to, for example, the Federal Constitutional Court Germany. In the bill there is an enforcement mechanism, but it does not include any review by the courts. The focus in the enforcement mechanism is on the finances of the regional and local governments and whether they are meeting the provisions of the Wet HOF regarding their contribution to the deficit criterion. It is the task of the advisory division of the government and parliament (i.e. the Council of State) to review whether the yearly budget act is in line with the European rules for a sustainable budget. It is questionable whether the golden rule in the bill for Sustainable Public Finances, that still has to become an act, is sufficient to meet the provisions of the Fiscal Compact. According to article 8 of the Fiscal Compact, the EC will examine and report whether the provisions adopted by each of the contracting parties are in compliance with article 3.2. If it is concluded by one of the parties that a party has failed to comply with this article, the matter can be brought to the Court of Justice of the EU. Strictly legally it is assumed that the Netherlands will comply with the article because the rules will become part of the legal system. The bill would have probably more value if the criteria would be mentioned specifically. Currently it is assumed that these criteria depend on the MTO. The MTO depends on the economic developments in the EU and in the country itself. If, for instance, the debt-criterion would be mentioned in the bill specifically and the government and parliament are not able to meet these requirements in their yearly budget act they will breach

97 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, 33 416, no. 3, p. 5.

Jorick Straatman Tilburg University 38 ANR 383693 the conditions of the SGP. Possible conditions or sanctions in the decision making-process would be helpful to deal with such a breach. Currently, there are no national consequences for the government and parliament if they do not meet the provisions of the SGP. An example is the introduction of some kind of qualified majority voting to approve the bill. This implies that the procedure to approve the budget bills by parliament should change. However, this requires a constitutional amendment, which is, as explained earlier, very hard to accomplish. However, there is one aspect of the Dutch legal system that will make the provisions of article 3.2 of the Fiscal Compact directly enforceable in the national legal system. This aspect is described in section 93 of the Constitution. Technically, it is not necessary to mention the criteria of the SGP specifically in the national bill for Sustainable Public Finances. The Senate accepted the bill of approval of the Fiscal Compact on the 25th of June and ratification will make the Fiscal Compact superior to national law according to the monist doctrine that is practised in the Netherlands. The criteria of the SGP will automatically become the benchmark for the budget in the Netherlands when the government ratifies the Fiscal Compact. The criteria become binding for the national budget when the Fiscal Compact is ratified. With this structure the question remains what will happen when the Netherlands are not able to meet the provisions of the SGP. Currently, the EC monitors the developments of the economies in the eurozone countries and they decide on the possible extension of the period in which the countries are allowed to breach the deficit-criterion. The role of the Dutch legislature is minimal in these developments and while they have a final say in the creation and approval of the national budget, it seems that their role in theses ‘new’ budget regimes is affected. However, it is also possible that the act that approves the Fiscal Compact will be cancelled by a new parliament in the future.

Jorick Straatman Tilburg University 39 ANR 383693 5. Conclusion This study focuses on the intensified influence of the EU on the budgetary policies of its member states and one specifically, the Netherlands. The two main subjects of this study are the European legal framework of public finances and the legal system of the Netherlands in which measures are adopted to comply with this framework. In March 2012 the Fiscal Compact was introduced as a new instrument to cope with the budgets of countries that have problems with their financial stability following the outbreak of the euro crisis in 2010. The Fiscal Compact aims to strengthen economic and budgetary surveillance of the contracting parties and was drafted as an international treaty. However, it is substantially part of the European legal order because it is related to the SGP. In this paragraph we will draw conclusions that arise from the section in which the incorporation of the Fiscal Compact was discussed. The research question that was posed in the introduction and that will be answered is:

By which legal measures has the Fiscal Compact been adopted into the legal system of the Netherlands and do these measures satisfy the requirements of the Fiscal Compact?

The most important aspects for the answer on the first part of the research question are the legal consequences and legal developments in the Netherlands. There are two statutes that are a direct result of the signing of the Fiscal Compact. The first is the act that approves the ratification of the Fiscal Compact. The Senate tacitly accepted the bill of approval on the 25th of June. The government is now able to notify the Council that the internal ratification procedure has been completed. Currently, the Dutch government deposits its ratification mechanism at the European Council. The act to approve the Fiscal Compact has not been amended by the members of the House of Representatives. In its advice, the Council of State reported its concern on the Fiscal Compact and stated that the Fiscal Compact creates a legal structure parallel to the one of the EU and that it may create overlap with section 121 of the TFEU. The Fiscal Compact can be in conflict with this provision when economic policies are carried out in the light of the Fiscal Compact and not in the legal framework of the TFEU. According to section 121 TFEU, the Council executes its power when member states regard their economic policies as a matter of common concern. The other concern is the reversed qualified majority that has to vote against proposals of the Council concerning contracting

Jorick Straatman Tilburg University 40 ANR 383693 parties that breach the provisions of the SGP to obstruct them. Normally, the qualified majority has to vote in favour of these Commission-proposals. The other legal development is the bill to adopt the criteria of the SGP into the legal system of the Netherlands. This obligation is laid down in article 3.2 of the Fiscal Compact. It is preferred to convert these criteria into “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary process.” The government opted for the adoption of the provisions in a normal statute. However, the bill for this statute still has to be approved by the Senate. The Committee on Finance published its preliminary report on the 25th of June. However, this bill does not mention the criteria specifically. The only number that is mentioned is the structural deficit that, according to the MTO, must not exceed 0,5% of the GDP. The bill focuses on the contribution of the regional and local governments to meet the provisions of the SGP. These governments are not allowed to contribute more than 0,5% to the deficit of the nations budget. When they do, an enforcement mechanism will be activated. This mechanism does not involve the judiciary but a mechanism instead. This mechanism can eventually lead to the withdrawal of funding to these governments or a penalty by the EC. Besides the legal consequences two other developments were found in the Netherlands. The first is a financial one, namely the budget cuts on public spending by the government. The cuts are necessary to meet the EMU-deficit provision of 3% of the GDP. When member states fail to meet this criterion they can be subjected to the excessive procedure of the EC. However, because of the poor economic outlook in the eurozone several countries have permission to breach this criterion and receive more time to recover their public finances without entering this procedure. In the Netherlands, there have been several cuts and a new round of budget cuts worth € 6 billion for the budget of 2014 has been announced. The cuts in the beginning of 2012 led to the downfall of the Rutte I-cabinet when Geert Wilders (PVV) pulled out of the Catshuisoverleg during which the coalition-partners where negotiating about the budget for 2013. With the new cuts for 2014 in place, the budget has been cut by around € 30 billion since 2010. This is much more than 10% of the 2010 budget. The second development is the influence of parliament in the decision-making procedures for the budget. Parliament was the main institution to develop the yearly budget act but during the crisis its role has been affected because of two reasons. The first is the influence of the EU on the budgetary decision-making in the member states. The Fiscal Compact is part of this development and the introduction of the Two-Pack in May 2013

Jorick Straatman Tilburg University 41 ANR 383693 implies that national parliaments and governments have to present their first indications on the budget for next year already in April the year before. This means that the legislative procedure in the Netherlands to determine the budget bill needs to change. Currently, the government and parliament can work on the budget bill until September, whereas the Two- Pack demands that the bill is finished in April. With this common budgetary timeline the EC wants to improve the budgetary surveillance cycle and further economic governance in the euro area. This Two-Pack can be in conflict with section 65 of the Dutch Constitution in which is stated that the budget for next year is presented on the third Tuesday in September with a large ceremony. This differs several months from the proposed deadline of the EC in April. The second reason that parliament has less influence to determine the budget is the decision-making procedure by the Minister of Finance during the euro crisis. The decisions for the bailout and eventually nationalisation of the Fortis/ABN AMRO and SNS Reaal banks were never submitted to the national parliament. Moreover, the legal procedures to approve these expenditures were never used and the question can be raised whether these investments were legitimate. Afterwards, the Dutch parliament accepted the exceptional circumstances and a majority indicated that they understood the immediate response of the Minister to save the bank during these times of crisis. It was not possible to enforce the budget right that is originally laid down by parliament, due to the confidentiality and the sensitivity of the information and the time span in which the important decisions had to be made. This brings us to the answer on the second part of the research question. Do these developments satisfy the requirements of the Fiscal Compact? Since parliament accepted the bill of approval for the ratification of the Fiscal Compact the government can deposit its ratification mechanism in Brussels. With the deposit of its ratification mechanism the government will ratify the Fiscal Compact and its provisions will directly be adopted in the legal system of the Netherlands. The principle of monism vis-à-vis international law laid down in section 93 of the Constitution makes the criteria directly enforceable in the legal order of the Netherlands. However, the question is whether these criteria comply with section 105 of the Constitution, which states that parliament has the right to determine the budget in a yearly statute. The politicians that ratified the Fiscal Compact are the same politicians that are involved in the development of the budget. Therefore, it is expected that, at this moment, they approve these budgetary measures. The act that approved the ratification of the Fiscal Compact can be cancelled in the future if an anti-EU cabinet takes office. The chances on such a development will increase when the economic developments remain uncertain and public expenditures need to be cut again.

Jorick Straatman Tilburg University 42 ANR 383693 Simultaneously to the approval procedure of the Fiscal Compact, another bill has been designed to incorporate the provisions of the Fiscal Compact in the legal system of the Netherlands. These European requirements for budgetary discipline have been included in the bill on Sustainable Public Finances by the Dutch cabinet. This bill takes the framework for the public finances to a new level where European norms are included for the deficit- and debt- position of the budget of the Netherlands. The bill does not mention the criteria specifically. This is in contrast with the criteria for the deficit and debt in the SGP. It is assumed that these criteria depend on the MTO, which depends on the economic developments in the EU and in the country itself. When this bill is adopted by parliament it will have the same status as the yearly budget acts. Furthermore, it will give direction to the political institutions and financial markets in the Netherlands. Nevertheless, there is no guarantee that the statute will have an everlasting and permanent character; the government and parliament are able to repeal the act in the future if they want to and have the necessary majority in parliament. A constitutional amendment would give the rules more permanence, but it would be complicated to incorporate the criteria in the Dutch Constitution as done in Germany and Spain. Following these considerations we can conclude that the government and parliament of the Netherlands have taken two measures to satisfy the requirements of article 3.2 of the Fiscal Compact. The first is the bill of approval to ratify the Fiscal Compact that makes the SGP-criteria directly enforceable in the national legal system. The other is the bill on Sustainable Public Finances to adopt the European framework on the financial stability for the national, regional and local governments. The Netherlands seems to meet the restrictions of the Fiscal Compact, but whether the acts will have a permanent character is questionable. The legislative framework on the sustainability of the public finances is supported by the cuts on the public spending by the government to meet the restrictions of the SGP. An enforcement mechanism in which courts have a central role is not introduced. However, it is questionable whether such a mechanism would fit in the Netherlands where there is a lot of trust in the legislative branch. Nevertheless, it is this legislative branch that nowadays has less power in the economic and financial policy field than it had before the crisis. Not only because of the influence of the EU, but also because of the decisions made by the Minister of Finance during the crisis.

Jorick Straatman Tilburg University 43 ANR 383693 References

Adams, M., and Van der Schyff, G., 2006, Constitutional Review by the Judiciary in the Netherlands: A Matter of Politics, Democracy or Compensating Strategy?, in: Zeitschrift für ausländisches öffentliches Resht und Völkerrecht, Heidelberg Journal of International Law, volume 66, 2006, p. 399-413 Bacelar Gouveia, J., 2011, Constitutional Law in Portugal, Alphen aan den Rijn: Kluwer Law International Boczek, B.A., 2005, International Law, A Dictionary, Oxford: Scarecrow Press, Inc. Búrca, de, G., 2008, Reflections on the EU’s Path from the Constitutional Treaty to the Lisbon Treaty, Jean Monnet Working Paper No. 3/2008, June 2008, available at: http://ssrn.com/abstract=1124586 Bureau for Economic Policy Analysis, 2013/06 Policy Brief on Economical Prospects for 2013 and 2014, Juniraming 2013 Bureau for Economic Policy Analysis, 2012, Uitgebreide kerngegevens: meeste recente ramingen 2011-2015, publication date 01/03/2012 Claes, M. and Van der Schyff, G., 2008, Towards judicial review in the Netherlands?, in: Constitutionalism in the Netherlands and South Africa, 2008, Nijmegen: Wolfs Legal Publishers Claes, M., Visser, de, M., Leenkegt, G. and Senden, L.A.J. 2008, The Netherlands, in: Preparing the European Union for the Future? Necessary Revisions of Primary Law after the non-ratification of the Treaty establishing a Constitution for Europe, edited by: Koek, H.F. and Karollus, M.M., FIDE XXIII Congress Linz 2008, Congress Publications Volume I, printed in Vienna: Bibliografische Information Der Deutschen Nationalbibliothek Dehousse, R., 2012, The “Fiscal Compact”: legal uncertainty and political ambiguity, Policy Brief No. 33, Notre Dame Directorate-General for Internal Policies, 2013, Policy Department C: Citizens’ Rights and Constitutional Affairs, Article 136 TFEU, ESM, Fiscal Stability Treaty: Ratification requirements and present situation in the Member States, 11th June 2013 version 16 Directorate-General for Economic and Financial Affairs, 2010, The Economic Adjustment Programme for Greece, first review – Summer 2010, Occasional papers 68, August 2010

Jorick Straatman Tilburg University 44 ANR 383693 Dixon, M., 2007, Textbook on International Law, 6th edition, published in the United States by Oxford University Press Inc. in New York Editorial Comment, The Greek sovereign debt tragedy: approaching the final act?, in: Common Market Law Review, volume 48, p. 1769-1776 Eijsbouts, 2010, Europees Recht, Algemeen deel sinds het Verdrag van Lissabon, Groningen: Europa Law Publishing European Commission, Commission takes steps under the Excessive Deficit Procedure, MEMO/13/463, date 29/05/2013, Brussels Haan, de, J., 2009, De financiële crisis: gevolgen voor de rijksbegroting, in: Tijdschrift voor Openbare Financiën, 2009, volume 41, issue 2, p. 95-106 Euro Summit Statement, 26 October 2011, European Council and Euro Area Summit, European Constitutional Law Review, 2012, volume 8, issue 01, February 2012, p. 1- 7, DOI: 10.1017/S1574019612000016, published online: 18/04/2012 Fabbrini, F., 2012, The Fiscal Compact, the 'Golden Rule' and the Paradox of European Federalism, available at SSRN: http://ssrn.com/abstract=2096227 Fiscal Compact enters into force, Pressroom Council of the European Union, Brussels, 21 December 2012, 18019/12, Presse 55 Government of the Netherlands, Nationalisation of SNS Reaal, Letter to parliament, 10/02/2013 Kamerstukken II (Dutch Parliamentary Papers) 2010-2011, Bezuinigingsmonitor 2010, 32 758, nr. 2 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, Voorstel van Wet, 33 319, no. 2 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, Memorie van Toelichting, 33 319, no. 3 Kamerstukken II (Dutch Parliamentary Papers) 2011-2012, Advies Raad van State, 33 319, no. 4 Kamerstukken II (Dutch Parliamentary Papers) 2012-2013, Memorie van toelichting, Wet Houdbare Overheidsfinanciën, 33 416, no. 3 Kochanov, 2012, in: Hyvärinen, 2012, EUI Working Papers, Another Legal Monster? An EUI Debate on the Fiscal Compact Treaty, available at: http://ssrn.com/abstract=2038674 Kreilinger, V., 2012, The making of a new treaty: Six rounds of political bargaining, Notre Dame Policy Brief, No. 32, February 2012 Hyvärinen, 2012, in: EUI Working Papers, Another Legal Monster? An EUI Debate on the Fiscal Compact Treaty, available at: http://ssrn.com/abstract=2038674

Jorick Straatman Tilburg University 45 ANR 383693 MEMO/11/898, EU Economic Governance “Six-Pack” enters into force, Brussels, 12 December 2011 Pot, van der, C.M., Donner, A.M., Prakke, L., Reede, de, J.L., Wissen, van, G.J.M., Handboek van het Nederlandse Staatsrecht, 14th edition, Deventer: Kluwer Regeerakkoord VVD-PvdA, Bruggen Slaan, 2012, published 29/10/2012 Ruffert, M., 2011, The European Debt Crisis and European Law, in: Common Market Law Review, volume 48, p. 1777-1806 Schyff, van der, G., 2010, Constitutional Review by the Judiciary in the Netherlands: A Bridge Too Far?, in: German Law Journal, volume 11, number 2, p. 275-290 Schyff, van der, G. and Meows, A., 2013, Dutch Constitutional Law in a Globalizing World, in: Utrecht Law Review, volume 9, issue 2 (March)

Tekst & Commentaar Grondwet, Voorrang van een ieder verbindende bepalingen bij:

Artikel 94 Website Council of the European Union, European Stability Mechanism treaty signed, http://consilium.europa.eu/homepage/showfocus?lang=en&focusID=79757, last visit 07/03/2013

Website Council of the European Union, Agreements database, http://www.consilium.europa.eu/policies/agreements/search-the-agreements- database?command=details&id=&lang=en&aid=2012008&doclang=EN%22, last visit

27/06/2013

Website Eerste Kamer, Goedkeuring Verdrag inzake stabiliteit, coördinatie en bestuur in de

economische en monetaire unie, http://www.eerstekamer.nl/wetsvoorstel/33319_goedkeuring_verdrag_inzake, last visit

01/07/2013 Website Eerste Kamer, Rijkswet wijziging Statuut in verband met de opheffing van de Nederlandse Antillen, http://www.eerstekamer.nl/wetsvoorstel/32213_rijkswet_wijziging_statuut, last visit

11/06/2013 Website Eerste Kamer, Wet Houdbare Overheidsfinanciën, http://www.eerstekamer.nl/wetsvoorstel/33416_wet_houdbare, last visit 01/07/2013 Website Government of the Netherlands, Geen extra bezuinigingen in 2013, wel aanvullende maatregelen in 2014, http://www.rijksoverheid.nl/nieuws/2013/03/01/geen-extra- bezuinigingen-in-2013-wel-aanvullend-pakket-voor-2014.html, last visit 24/05/2013

Jorick Straatman Tilburg University 46 ANR 383693 Website Government of the Netherlands, Miljoenennota 2012: Koersvast in onzekere tijden, http://www.rijksoverheid.nl/nieuws/2011/09/20/miljoenennota-2012-koersvast-in- onzekere-tijden.html, last visit 22-05-2013 Website Supreme Court of the Netherlands, The ban on constitutional review, http://www.rechtspraak.nl/Organisatie/Hoge-Raad/Supreme-court/Pages/The-ban-on- constitutional-review.aspx, last visit 15/03/2013 Website Volkskrant, Hoe Wilders onverwacht de gedoogconstructie opblies, http://www.volkskrant.nl/vk/nl/9824/De-zoektocht-naar- miljarden/article/detail/3241382/2012/04/21/Hoe-Wilders-onverwacht-de- gedoogconstructie-opblies.dhtml, last visit 14/06/2013

Jorick Straatman Tilburg University 47 ANR 383693