Member Article

The Treaty, which is technically an intergovernmental treaty and not an EU instrument (due to the UK and the Czech Republic not wishing to sign up to it), was introduced in December 2011 by Germany and France. The signed treaty is the result of a concerted effort by the Eurozone and the majority of the other EU members to impose fiscal and financial discipline among themselves.

The main elements of the Treaty include:

the introduction of the "balanced budget rule" which effectively means that that national budgets should be balanced or in surplus; this principle will be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of GDP;

the balanced budget rule is to be incorporated into national (constitutional) legislation;

the European Courts of Justice may impose a penalty of up to 0.1% of GDP, payable to the ESM, if the balanced budget rule is not transposed to national legislation correctly or within the given timeframe;

an automatic correction mechanism will be triggered in the event a government deviates from the balanced budget rule;

there will be reversed qualified majority voting in respect of the decision whether to place a country in an excessive deficit procedure; and

the treaty also includes provisions on the coordination and convergence of EU Member State’s economic policies and on governance of the Eurozone. In particular Euro Summit meetings will take place at least twice a year.

Now the Treaty has been signed, it must now be ratified by the Member States. In some cases, such as Ireland, this may require a referendum to be held. Provided at least 12 parties to the Treaty ratify it, the Treaty will enter into force on 1 January 2013.