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“An important step in European policy integration”

The Federal Cabinet has created the conditions for the European fiscal compact to be implemented in Germany. On 7 March, it agreed on draft legislation that is intended to implement stricter budgetary rules in German law. Foreign Minister Westerwelle spoke of it as “the right course towards more Europe”. Now the Bundestag and Bundesrat must pass the law with a two-thirds majority.

The fiscal compact opens a “new European chapter”, said Foreign Minister Westerwelle after the Federal Cabinet approved the draft legislation. “The contractually secured commitment we have made together to sound budgets is an important step in European policy integration and the right course towards more Europe and a better Europe,” he continued.

The Foreign Minister had beforehand presented the draft legislation on the fiscal compact to the cabinet. Within the Federal Government, the Federal Ministry of Finance and the Federal Foreign Office were jointly responsible for the project.

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, called the “fiscal compact”, is the contractual basis for a further enhanced coordination in fiscal and economic policy. In it, the Heads of State and Government commit themselves especially to enacting uniform and permanently binding budgetary rules in their national legislation.

National debt brakes

Among other things the fiscal compact envisages national debt brakes. According to the treaty, within a year of its coming into force, permanently binding rules must be enacted in the national legislation of the contracting parties. These are to ensure that the entire budget of the country is balanced or has a surplus. The implementation of these national debt brakes is to be reviewed through legal proceedings before the European Court of Justice.

The new fiscal compact was signed by the Heads of State and Government of 25 EU countries at the European Council of 1 and 2 March. Great Britain and the Czech Republic have not signed the treaty. The fiscal compact strengthens the legal basis of the economic and monetary union and requires EU member states to move towards budget consolidation. The fiscal compact will enter into force on 1 January 2013. It must be ratified by at least 12 EU countries.


Last updated 07.03.2012