© European Union, 2012
On 2 March 2012, the heads of state or government of all EU member states with the exception of the United Kingdom and the Czech Republic signed a Treaty on Stability, Coordination and Governance (TSCG) in the Economic and Monetary Union. This Treaty aims at safeguarding the stability of the euro area as a whole.
"Once this treaty enters into force", President Herman Van Rompuy stated at the signing ceremony , "its effects will be deep and long-lasting". He highlighted three points: stability, coordination, and governance.
The TSCG requires national budgets to be in balance or in surplus. This rule has to be incorporated into national law within one year of the entry into force of the treaty, using provisions that are guaranteed to be adhered to throughout national budgetary processes.
The rule will be deemed to be respected if the country-specific medium-term objective as defined in the revised Stability and Growth Pact is met, with a lower limit of a structural deficit of 0.5% of GDP. If significant deviations from this objective or the adjustment path towards it are observed, a correction mechanism will be triggered automatically. The mechanism includes an obligation to implement suitable measures over a defined period of time.
The transposition of the balanced budget rule can be verified by the EU Court of Justice. The Court's judgement is binding and can be followed up with financial sanctions if the member state concerned fails to comply with it.
The contracting parties whose currency is the euro commit themselves to adopting Council decisions within the framework of the excessive deficit procedure unless opposed by a qualified majority.
Economic policy coordination and convergence
The TSCG also provides for economic policy coordination and convergence: the contracting Parties have to report on their public debt issuance plans and to make sure that major economic policy reforms are discussed beforehand and, where appropriate, coordinated among themselves.
Governance in the euro area
There will be informal Euro Summit meetings, bringing together the heads of state or government of the euro area countries. The heads of state or government of the Contracting Parties whose currency is not the euro will participate in summit discussions e.g. of competitiveness or the fundamental rules that will apply to the euro area. When appropriate and at least once a year, they will participate in discussions on specific issues concerning the implementation of this Treaty.
The TSCG will enter into force after it has been ratified by 12 euro area member states, and it will be open to the accession of EU member states other than the contracting Parties.
The target date for entry into force is 1 January 2013.The aim is to incorporate the TSCG's substance into EU law within five years of its entry into force.
Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (pdf)
Webcast of the ceremony of signature
Speech by President Herman Van Rompuy at the ceremony (pdf)
Press release (pdf)