Fiscal Compact—A Preliminary Step Toward Fiscal Union of Europe （Ye Bin）

Abstract：On 2 March 2012, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”( also referred to as TSCG or more plainly the Fiscal Compact) was signed by 25 EU members except the Czech Republic and the United Kingdom. The compact, which includes six sections with 16 clauses, is generally considered as an important measure in response to the European debt crisis. The main objective is designed to enhance the economic pillar of the economic and monetary union, underscore more coordination in economic policy making and the imperative to improve economic governance in the Euro zone so as to realize the goal of sustainable development in growth, employment and social cohesion.   

But the compact is in essence an intergovernmental treaty instead of EU law; it contains in substance six core principles that require the contracting party to be in budgetary balance or in surplus within the treaty's definition, and that heavily indebted countries must proportionately cut their debt, and vesting EU institutions the power of supervision over their compliance with the budgetary criteria. So in this sense the Fiscal Compact is just an enhanced version of the framework for EU’s economic and monetary union other than a real fiscal union. The treaty is of landmark significance in European history albeit a preliminary step toward fiscal integration. 

IES Innovation Project Briefing，No. 4, 2012.