Fiscal Pact –Tally—Updated as of June 11, 2012     Print Email

As the European Union faces the most serious crisis in its founding, NINE eurozone countries have ratified the Fiscal Pact, designed to bring stability and increased fiscal discipline to the 27-nation union.

The Pact, approved in January, by leaders of 25 of the 27 EU countries (UK and Czech Republic withheld support) requires ratification by 12 eurozone members to become effective in January 2013. As shown in the Institute of International and European Affairs chart below, nine eurozone members have ratified the pact— Demark, Greece, Ireland , Latvia, Poland, Portugal, Romania, Slovenia and Romania. National parliaments ratified the Pact, except in Ireland, where ratification was by nationwide referendum.

 

Under the terms of the Pact, overall debt cannot exceed 60% of the country’s GDP, and government budget deficits should be at or below 3% of GDP. Moreover, governments’ annual structural deficit cannot exceed 0.5%. The structural deficit measures government deficit independent of fluctuations in the business cycle. These provisions must be enacted into national law.

Enforcement of violations is through the EU Court of Justice, which can impose fines of up to 0.1% of GDP. Only countries which have ratified the Pact will have access to funding from the European Stability Mechanism (ESM) after March 1, 2013.

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