Treaty on Stability Co-ordination and Governance in the Economic and Monetary Union
(called ‘Fiscal Treaty’ or ‘Stability Treaty’)
Fiscal Treaty promoted by German government as a condition of German support for ESM
Signatories: 25 EU Member States (United Kingdom and Czech Republic did not sign)
Signed on 2nd March 2012 by Heads of Government
Intended to come into force on 1st January 2013
Will not come into force unless ratified by 12 Eurozone States
Will not bind Ireland unless ratified by Ireland
Referendum planned for 31st May 2012
Not yet ratified by Ireland
The Fiscal Treaty emerged over December 2011 - January 2012 as supplementary to the ESM Treaty.
As set out in its name, the Fiscal Treaty has three components, the first dealing with Stability, the second with Co-ordination and the third with Governance.
The Stability section contains enforceable rules which will oblige Eurozone countries in particular to abide by strict budgetary limits and procedures. The Treaty requires Member countries to bring the conditions in the Stability section into national law preferably at the constitutional level within one year of the Treaty coming into force.
The EU Commission will monitor and police the rules. Eurozone countries which breach the rules will be vulnerable to significant financial penalties and other sanctions.
The Co-ordination section commits the Eurozone countries to economic policy co-ordination and convergence. President of the ECB Mario Draghi has described the Fiscal Treaty as the first step towards Fiscal Union.
The Governance section provides that the Heads of State of the Eurozone countries will meet at least twice annually to discuss Eurozone governance and rules, as well as conduct of their economic policies.