Vice-President Valdis Dombrovskis
Statement at the European Parliament Topical Debate
On “Fiscal Compact and its incorporation into the EU legal framework”
Strasbourg, 4 October 2017
Honourable President, Honourable Members of the European Parliament,
As you know, the Fiscal Compact is the cornerstone of the intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union or TSCG, which was signed in March 2012 by 25 Member States. 22 of those 25 Contracting Parties - namely the euro area countries, Bulgaria, Denmark and Romania - are bound by the Fiscal Compact.
The chief objective of the Fiscal Compact is to strengthen budgetary discipline by operating as a complement to the Stability and Growth Pact, the EU rule-based fiscal framework. In fact, the Fiscal Compact was initially proposed as an amendment to the Treaty on the Functioning of the European Union, and became part of an intergovernmental instrument only after having failed to garner unanimity in the European Council.
But this intergovernmental approach was understood from the outset as a way to move forward swiftly at the height of the economic and financial crisis. The integration of the Fiscal Compact into Union law was already foreseen at the time of its creation. This is clearly acknowledged in the text itself, specifically in the so-called ‘repatriation clause’.
This clause states that the necessary steps will be taken with the aim of “incorporating the substance” of the TSCG into the Union legal framework within five years at most from its entry into force. That means by 1 January 2018.
The Commission is not legally bound by the provisions of the TSCG. However, as a general principle, the Commission is in favour of integrating inter-governmental arrangements, such as the TSCG or the Treaty establishing the European Stability Mechanism, into Union law. These inter-governmental solutions were conceived as stopgaps during the crisis.
Their incorporation into Union law would bring greater democratic accountability and legitimacy across the Union.
These are not just the views of the Commission. The Five Presidents' Report argued that a well-functioning Economic and Monetary Union would benefit from the integration into the Union law of all intergovernmental instruments created during the crisis.
The Commission’s Reflection Paper on deepening the Economic and Monetary Union published this May recalled the agreement among the contracting parties to integrate the relevant provisions of the Fiscal Compact into EU law as one of the elements towards the completion of the Economic and Monetary Union by 2025.
Accordingly, President Juncker's Letter of Intent that accompanied his State of the Union speech, lists this step among the priority initiatives to be taken forward by the end of 2018.
The integration into Union law should take into account the flexibility built into the Stability and Growth Pact.
The Commission is currently exploring the concrete options for this incorporation, with the aim of putting forward a proposal as a part of the December package on EMU announced by president Juncker.
I look forward to hearing your views.