Regional Integration & the EU

June 2012

European Fiscal Cooperation And The Danish Private Sector TABLE OF CONTENT

Introduction

1

Defining the Theories

1

Definition of Integration

1

Neo-functionalism

1

Liberal Intergovernmentalism

1

European Legislation

1

The Treaty on Stability, Coordination and Governance Background

1 1

The TSCG & the European Cooperation

1

Enhanced Cooperation

1

Decision-Making Process

1

Differentiated Integration

1

Danish Private Sector

1

Ideology

1

Conclusion

1

Reference List

1

Appendices

1

Appendix A

1

Appendix B

1

Appendix C

1

1

Regional Integration & the EU

June 2012

Introduction The framework for the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (from here on the TSCG) was made at the EU summit in December 2011. At this meeting the European Council1 discussed the new structure for economic coordination and financial discipline in the euro-area (EUOa). This was in response to the current sovereign debt crisis in the EU which has put severe pressure on the credibility of the euro and member states. The TSCG extends the cooperation on economic policies by pursuing a strategy of stabilizing national budget deficits by reducing public spending. Therefore, I wish to discuss what challenges and opportunities the European cooperation and the private sector in Denmark will face as a result of the TSCG. I discuss the consequences on the cooperation by addressing the European integration process. In this regard I rely on the theoretical framework of the classic approaches: neo-functionalism and liberal intergovernmentalism. I have not chosen any of the more recent theories as many of them fail to actually explain integration, but are theories of governance which is not the focus of this study. I also consider the legislative procedure regarding the treaty and how it enforces a differentiated integration process. I have chosen only to focus at the private sector in Denmark due to my background knowledge of the debate in this area. I assess the opportunities in regard to welfare spending and the negative consequences the TSCG might have as a result of its ideological aspect. I am able to conclude that the TSCG strengthens integrations among its participants, but it also puts pressure on the process due to differentiated integration. Possible challenges may arise due to Hollande’s victory in France. It creates opportunities in the Danish private sector, but if it fails to raise growth the private sector will continue to struggle.

Defining the Theories The purpose of a theory is to explain something (Collins). Hence, in regard to the European cooperation the theories aim at explaining integration, more specifically the European integration process. Since the end of the Second World War2 the European integration project has been a process of setbacks and relaunches due to changing economic conditions, euro-skepticism, etc. However, people have different perceptions of what integration mean, which makes it even more important to define it. There has been a continuous debate between contrasting theories - most prominently between neo-functionalism and liberal intergovernmentalism - and several new 1 2

Consisting of the 27 heads of government and state of the European Union. Especially the 1950 Schumann Declaration and the establishment of the ECSC 2

Regional Integration & the EU

June 2012

theories have been presented in recent times. Many of the new theories fail to explain integration, and are theories of governance, e.g. multi-level governance, social constructivism. (Lecture 6, 2012) Post-functionalism is one of the most recent contributions by Hooghe & Marks. The theory is only scarcely developed and still needs to prove its ability to explain the integration process, which is why it is not applied in this study.

Definition of Integration To some scholars and politicians European integration means the goal is the development of a federal state, e.g. Haas (ref. 1968). However, I work under the perception that the European integration project is a continuous process, whereby countries become more interdependent. This process is characterized by many forms of integration such as political, economic, social and it has no specific end point. I rely on the definition of integration as “the creation and maintenance of intense and diversified patterns of interaction among previously autonomous units” (Wallace, 1990: 9). William Wallace deals with the concept of formal and informal integration. Formal integration are “changes in the framework of rules and regulations” to steer informal flows. It is an incremental process via decisions, treaties, and bargains. The informal integration is a continuous flow, the creation of norms (Lecture 6, 2012), and interaction following the dynamics of the markets, technology, communications networks, and social change (Wallace, 1990: 9). He defines formal integration as political integration which Lindberg defines as nations seeking to “make joint decisions or to delegate the decision-making process to new central organs” (Lindberg, 1963: 149).

Neo-functionalism Neo-functionalism was the first attempt to theorize European integration especially by Haas & Lindberg. The theory has its roots in functionalism which stress the need for interdependency between nations (Bache, et al. 2011). Neo-functionalism defines European integration as a process, in contrast to federalism, and stress the need for supranational institutions where nonstate actors are the main drivers such as the Commission and the CJEU3. Moreover, a key concept of the theory is the spillover effect (Lecture 6, 2012). There are three main categories of spillover: (1) functional spillover refers to a situation where “a given action, related to a certain goal, creates a situation in which the original goal can be assured only by taking further actions, which in turn create a further condition and a need for more” (Lindberg, 1963: 9). Hence, to achieve the goal in one area other areas must be functioning too, and the process continuous. (2) Cultivated spillover is a top-down process where the Commission actively pushes for more integration in contrast to (3)

3

Court of Justice of the European Union 3

Regional Integration & the EU

June 2012

political spillover which is a bottom-up process where political actors ask for greater integration, e.g. as a result of interest-group pressure. The European cooperation faced its first major setbacks in the 1960s, during de Gaulle’s time as President of France. It became evident that the theory had some gaps, failing to explain the power of national states. I.e. the theory has been unable to explain all aspects of the integration process.

Liberal Intergovernmentalism As a consequence of the above-mentioned problem, a counter-argument was set up against neofunctionalism: intergovernmentalism. This theory stress that state actors are predominant, and the integration process would only go as far as national governments would allow it (Bache et al. 2011). Moravcsik attempted to further improve this theory, due to lacks such as treating the state as a black box, not explaining the functioning of the approach, etc. (Bache et al. 2011) He developed liberal intergovernmentalism (LI) which includes features from neo-functionalism. He attempts to integrate non-state actors bargaining at the national level, then taken to the EU-level where governments are present. He stressed the importance of economic preference over geopolitical interest. Moravcsik used the approach to explain some key episodes of the European integration process, the framework thus works very well in explaining treaty formation e.g. the CAP, Common Agricultural Policy.

European Legislation The EU is based on two types of instruments: ‘hard law’ and ‘soft law’. For this assignment I will not deal with ‘soft law’ instruments, but it includes written norms, and not actual laws, such as green and white papers. ‘Hard law’ on contrary are binding instruments. It includes primary legislation, the treaties and conventions, and secondary legislation: regulations, directives, decisions, recommendations, etc. Regulations are directly binding on all member states and national regulation is not required. Directives sets a goal, how to achieve that goal is up to the individual member states to implement via national legislation. The main focus of this study is on primary legislation, i.e. treaties, which all other legislation is based on. An EU treaty must be ratified by all member states to enter into force. The treaties lay ground for EU’s objectives, decision-making procedures, rules for the institutions, etc. (europa b)

4

Regional Integration & the EU

June 2012

The Treaty on Stability, Coordination and Governance On the 2nd of March 2012 25 heads of state and government (from here on the Contracting Parties) signed this intergovernmental agreement. It will come into force on the 1st of January 2013 if, by that time, 12 euro-countries have ratified it. It is open to the EU countries which have not signed it (European Council 2012).

Background Cooperation on economic policies is not a new phenomena in the EU. The Stability and Growth Pact, SGP from 1997 (EUOb) laid out the rules for budget discipline and coordination of national fiscal policies of the member states of the union (COMa). The main focus was to keep inflation low and did not include specific requirements on the fiscal polices pursued by national governments (Guardian, 2003). However, governments have failed to comply with the pact (COM 2011) and implementation has been unsuccessful (ECB 2011)4. Instead governments have had high public spending financed by debt and this has led to the current European sovereign debt crisis where member states have been unable to renew loans and a series of bailouts have been granted (NY Times 2012). The TSCG is thus part of a policy to regain confidence in the EU. It aims at securing long-term public finances and avoid sovereign debt crises, like the one at present, in the future (EUOa) and to secure the stability of the euro (TSCG). Danish Minister for Economic Affairs and the Interior also argued that the TSCG aims at restoring confidence in the political system. The reason is that the market will be unwilling to invest if the framework laid out is not stable (Vestager 2012). Thus, by regaining confidence the TSCG paves the way for increased investment thus growth and employment. For the main points of the TSCG see Appendix A.

The TSCG & the European Cooperation So far, the TSCG has only been ratified by 5 euro-countries (EUOd), wherefore the treaty has not come into force yet. I aim at placing the TSCG in a theoretical context considering the impact of the treaty on the european cooperation if it is implemented. I do this by applying theories of integration and by analyzing the decision-making process and the possible consequences in regard to the process of European integration.

4

This also caused its reformation in 2005 (EUOc) and further tightening via the Six-Pack in 2011 (europa a). 5

Regional Integration & the EU

June 2012

Enhanced Cooperation The TSCG runs along side the SGP, in some areas the TSCG relies on the SGP and in others the rules are more stringent, e.g. as the budget rule must be implemented into national law (europa a) wherefore it is more binding than the SGP. As a consequence of the treaty, the Contracting Parties agree to constrain their actions when preparing the national budgets. They allow the CJEU to impose sanctions and the Commission to monitor, evaluate, and recommend which mechanism to turn to, if they do no adhere to the treaty. It is thus a vertical expansion (Appendix B) of the political integration between the contracting parties, as formal integration is pursued to encourage informal flows, i.e. encourage investment and growth in the economy. How can this type of integration then be explained using the available theoretical frameworks? I suggest that it can be explained both from a neo-functionalist and a LI perspective. The reason is that each focus on different areas of the integration process. The neo-functionalist approach focuses on the logic of the integration process, how-come nation states surrender sovereignty to supranational institutions. Whereas LI accomplish to explain treaty formation. Neo-functionalist theory suggests that a spillover effect of an economic and monetary cooperation with the introduction of a common currency is to coordinate national macroeconomic policies (Lecture 20, 2011). The very basic reason for this need is trust. In the 1930s Germany experienced high rates of inflation which created the opportunity for Hitler to come into power. Since then, Germany has continuously avoided a similar situation and they currently have stricter rules regarding budget deficits than other EU member states (Policy Network). This is also why Germany has been a strong initiator and proponent of the TSCG (Spiegel, 2012). However, Southern European member states have not had the same resistance towards inflation and devaluation. They have built up high amounts of debt and is part of the reason for the current sovereign debt crisis. The countries have lost their trustworthiness and are unable to obtain loans from private financial institutions. The TSCG is thus a result of a functional spillover, in order to restore trust in the EMU by pursuing a sound strategy on economic policies. On the other hand, the process of the formation and ratification of the TSCG is very much characterized by the framework of LI. It was the European Council who initiated the process of the treaty (European Council, 2011) as opposed to the Commission who is the normal initiator of policy formation in the union. The British veto of the treaty confirms that the cooperation only goes as far as the individual governments allow it to. British Prime Minister, David Cameron, said “We were offered a treaty that didn't have proper safeguards for Britain,” (BBC 2011). Afterwards, Czech Republic also left the negotiations (BBC 2012) and the rest of the EU member states had to give up the idea of an EU treaty and move forward with an intergovernmental agreement instead.

6

Regional Integration & the EU

June 2012

So, the two theories applied, rather than substitute, complement each other in explaining the impact on the European integration process as a result of the TSCG. The treaty has enhanced the European corporation by vertically expanding integration on economic policies. Nonetheless, it is not implemented as EU-law. Not all member states are part of this agreement, and it is not certain whether all the Contracting Parties will ratify the treaty in their parliaments. Therefore, the treaty also creates challenges to the European cooperation by enforcing an EU at different paces which I will now look closer into.

Decision-Making Process The Lisbon Treaty clarifies via a ‘catalogue of competencies’ where the EU can and cannot operate. If the EU has exclusive competencies in an area it is only the union that can legislate in this area (TFEU: 2: 1). However, economic policies are under the area of policy coordination i.e. “The Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies.” (TFEU: 5: 1) Therefore, this policy area does not fall under the Ordinary Legislative Procedure as laid out in the TFEU5 by where the Commission proposes laws that is then co-decided by the European Parliament, EP, and the Council of Ministers. The normal procedure is for the Council of Ministers to decide by a qualified majority voting, QMV6. On more essential issues, such as treaty-reform, enlargement, taxation, etc. (Lecture 2, 2012) decisions must be taken unanimously. The area of economic policy, especially fiscal policies, is a sensitive debate where governments are very reluctant to give up national sovereignty, because if they are not to decide on these issues, what would we need national governments for? The procedure is different when new EU-treaties are made. All member states must approve and ratify the treaties (europa b). Therefore, it was not possible to make a treaty based on EU law due to the British veto as mentioned above. The EP has expressed its concern on this matter and underlines the need for measures under EU law (europa c). Regaining trust in the euro and stabilizing the European economy is of critical importance to the future of the union and its position on the world scene. A fragmented Europe will have great difficulties having a say in a new global agenda where the BRIC-countries are gaining strength and influence. Not being able to take united action on such a crucial matter as to stabilize the economy questions the unification and strength of the EU and also undermines the institutions and procedures of the EU. It must be noted that steps have been taken to account for this as the TSCG states the aim is to incorporate “the substance of this Treaty into the legal framework” of the EU within 5 years (TSCG: 16).

5 6

The Treaty on the Functioning of the European Union. See page 323 in Bache et al. 2011 for an overview of the policy areas covered by QMV. 7

Regional Integration & the EU

June 2012

Differentiated Integration Another area to give attention to is the participation of the Contracting Parties in the treaty. It has been an area of concern that the integration process has had to follow the “the slowest ship in the convoy” (Bache et al. 2011: 250). Therefore, some member states are able to enhance cooperation in the areas of non-exclusive competencies, excluding the area of Common Foreign and Security Policy without the participation of all member states. The TSCG will only apply to those who ratify it (Jørgensen, Appendix C) and non-euro countries do not have to cooperate on Title III, the Fiscal Compact, or IV regarding the coordination and convergence of economic policies. There are many supporters for such an arrangement of enhanced cooperation between a core group of member states. The Germane Chancellor being one of them (DRa 2012) stressing the need for a political union. Even though the TFEU states that such cooperation may not discriminate on trade nor distort competition (TFEU: 326) it does create an EU at different paces. The TSCG further deepens the gap between member states of the EU especially between the Contracting Parties and the two countries that stand outside the treaty. The TSCG thus also puts pressure on the European integration process as it allows a fragmentation of the process, where all countries do not follow the same path. It furthermore questions the ability of EU institutions to implement binding legislation in key areas.

Danish Private Sector It is a continuous political debate in Denmark whether the government should spend more or less on public welfare. Denmark is at the top when it comes to public welfare spending (Lecture 8, 2012). Therefore, when public spending is limited, or even reduced, it puts pressure on welfare spending. The Commission has recently published its recommendation in regard to the member states’ economic policies. It suggested that Denmark comply with the previous recommendation to reduce the public budget deficit to less than 3% of GDP (EUOd). This may lead to deterioration of public welfare. An example is the recent collapse of the tripartite negotiations where Henrik S. Larsen7 commented that it may result in harsh reforms with consequent savings on welfare (TV2 News 2012). If the resource strong citizens become too dissatisfied with the quality level of the welfare services they will be likely to turn to private offers. The firm Vestergaard Company A/S offers private health care insurance to their employees, i.e. instead of waiting 9 months (unable to work) to get surgery for a bad knee, they are able to get much quicker treatment in the private sector (Vestergaard). Another consequence is that the government also have to cut back in other areas that have usually been a public responsibility which may have to be privatized. Such a development creates business opportunity for the private sector in Denmark, especially in the area of welfare services. 7

Chairman of the Parliamentary Social Democratic group 8

Regional Integration & the EU

June 2012

Ideology The TSCG is highly based on an economic ideology and a conviction of how to manage an economy in crisis. Neoliberalism supports minimum government intervention and assumes that privatization is preferred since markets are the best allocator of resources in society (Lecture 2011). Germany is a key proponent to such thought, she has greatly influenced the structure of the TSCG (npr 2011) since the country is a dominant player in EU politics. There are different views on how to achieve economic growth and employment. The form of policy the TSCG represent is not an expression of the ‘correct’ policy but of a political choice. There is no guarantee the treaty will boost the economy and Standard & Poor’s have downgraded several EU members states as a consequence of the EU summit in December (S&P 2012). The French President Hollande opposes the strategy of the TSCG as he believes EU should spend to boost the economy (DRb 2012). If the TSCG does not get the economy going, increasing demand, firms will not be willing to spend money on investment and may fire people. It is a vicious circle that will have negative consequences, also for the private sector in Denmark.

Conclusion There is no doubt that fiscal coordination is needed in the EU, to get out of the current crisis, due to the highly interdependent economies (Krugman 2008). The supranational framework, the SGP, has so far been unsuccessful to maintain a stable union, wherefore more binding measures have been needed. The TSCG is thus a functional spillover as explained by neo-functionalism. However, it has not been possible to make an agreement at the EU level, which underlines that the EU cooperation only goes as far as its member states allow it to as explained by LI. Differentiated integration is the key opportunity and challenge as it allows for greater integration among some member states but thereby also creates a fragmented EU. A possible challenge to the future of the TSCG is Hollande’s victory in France as he supports Keynesian thought of public spending to create growth. If France does not ratify the treaty it will be major defeat to the possible success of the treaty. The TSCG furthermore establish opportunities for business in the Danish private sector by limiting public budget deficits. The welfare sector highly relies on public funding, but this may change as a consequence of the TSCG. However, the TSCG is only one step our of the crisis, which is why the issue of promoting growth will be discussed at the EU summit in June (eu2012) to ensure future employment and growth.

9

Regional Integration & the EU

June 2012

Reference List Bache, I. et al. (2011): Politics in the European Union. New York: Oxford University Press BBC 2011, Euro crisis: UK alone as Europe agrees fiscal compact http://www.bbc.co.uk/news/world-europe-16115373 Accessed 07/06/2012 BBC 2012, EU summit: UK and Czechs refuse to join fiscal compact http://www.bbc.co.uk/news/world-europe-16803157 Accessed 07/06/2012 Collins http://www.collinsdictionary.com/dictionary/english-thesaurus/theory Accessed 06/06/2012 COMa, Stability and Growth Pact http://ec.europa.eu/economy_finance/economic_governance/sgp/index_en.htm Accessed 01/06/2012 COMb, Six-pack? Two-pack? Fiscal Compact? As short guide to the new EU fiscal governance http://ec.europa.eu/economy_finance/articles/governance/2012-03-14_six_pack_en.htm Accessed 01/06/2012 COM 2011, Public Finances in EMU 2011 http://ec.europa.eu/economy_finance/publications/european_economy/2011/pdf/ee-2011-3_en.pdf Accessed 01/06/2012 DR a 2012, Merkel vil støtte EU i flere hastigheder http://www.dr.dk/Nyheder/Udland/2012/06/07/0607123908.htm Accessed 08/06/2012 DR b 2012, EU er tættere på en vækstpakke http://www.dr.dk/Nyheder/Ligetil/Dagens_fokus/Udland/2012/05/24112818.htm Accessed 09/06/2012 ECB 2011, The ECB and the Sovereign Debt Crisis http://www.ecb.int/press/key/date/2011/html/sp111104_1.en.html Accessed 01/06/2012 eu2012, Minister Wammen hosts Growth Meeting in Aarhus and Horsens http://eu2012.dk/en/NewsList/Juni/Uge-23/pre-informal-gac Accessed 11/06/2012 10

Regional Integration & the EU

June 2012

EUOa, Finanspagt (europagt) http://www.euo.dk/emner/eu2012/eu-temaer/europagt/ Accessed 01/06/2012 EUOb, Hvad er Stabilitets- og Vækstpagten http://www.euo.dk/spsv/off/alle/117_88/ Accessed 07/06/2012 EUOc, Reform http://www.euo.dk/emner/euro/SVP/reform/ Accessed 07/06/2012 EUO d, Kommissionens økonomiske anbefalinger til medlemslandene http://www.euo.dk/nyheder/euidag/2012/maj/anbefalinger/ Accessed 11/06/2012 EUOd, Ratifikation af Finanspagten http://www.euo.dk/emner/eu2012/eu-temaer/europagt/ratifikation/ratifikation25/ Accessed 07/06/2012 Europa a, Six-pack? Two-pack? Fiscal compact? A short guide to the new EU fiscal governance http://ec.europa.eu/economy_finance/articles/governance/2012-03-14_six_pack_en.htm Accessed 07/06/2012 Europa b, EU Treaties http://europa.eu/about-eu/basic-information/decision-making/treaties/index_en.htm Accessed 07/06/2012 Europa c, Joint Motion for a Resolution http://www.europarl.europa.eu/sides/getDoc.do?type=MOTION&reference=P7-RC-20120003&language=EN Accessed 08/06/2012 European Council 2011, Statement by the Euro Area Heads of State or Government http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126658.pdf Accessed 07/06/2012 European Council 2012 http://european-council.europa.eu/home-page/highlights/the-fiscal-compact-ready-to-be-signed(2)?lang=en Accessed 01/06/2012 11

Regional Integration & the EU

June 2012

The Guardian, 2003, What is the Stability and Growth Pact? http://www.guardian.co.uk/world/2003/nov/27/qanda.business Accessed 07/06/2012 Haas, E. B. (1968), The Uniting of Europe: Political, Social and Economic Forces, 1950-57 (2nd edition). Stanford, CA: Stanford University Press Jørgensen, M. EU Coordinator at EU-Oplysningen. Krugman, P. 2008, The economic consequences of Herr Steinbrueck http://krugman.blogs.nytimes.com/2008/12/11/the-economic-consequences-of-herr-steinbrueck/ Accessed 09/06/2012 Lecture 2011, November 28 2011, The Impact of Public Policies by Jørgen G. Andersen in the course Political Science. Lecture 2, April 23 2012, Introduction to EU institutions - the Commission, the Council and the European council by Magali Gravier in the course Regional Integration and the EU. Lecture 6, May 7th 2012, Regional Integration Theory by Magali Gravier in the course Regional Integration and the EU. Lecture 8, May 14th 2012, EU’s Social Dimension by Sven Bislev in the course Regional Integration and the EU. Lecture 12, May 29 2012, Conclusions by Magali Gravier in the course Regional Integration and the EU. Lecture 20, November 30th 2011, The EU as a New Political System by Manuele Citi in the course Political Science Lindberg, L. (1963), The Political Dynamics of European Economic Integration. Stanford, CA, and London: Stanford University Press and Oxford University Press. NPR 2011, German Influence Looms Over Eurozone Deal http://www.npr.org/2011/12/11/143532071/german-influence-looms-over-eurozone-deal Accessed 09/06/2012 NY Times 2012, European Debt Crisis http://topics.nytimes.com/top/reference/timestopics/subjects/e/european_sovereign_debt_crisis/ind ex.html 12

Regional Integration & the EU

June 2012

Accessed 01/06/2012 Policy Network, SPD fiscal policy and the “Golden Rule” http://www.policynetwork.net/pno_detail.aspx?ID=4118&title=SPD+fiscal+policy+and+the+“Golden+Rule” Accessed 07/06/2012 Spiegel 2012, Berlin Wants Panels to Check EU Fiscal Discipline http://www.spiegel.de/international/europe/schaeuble-proposes-expert-panels-for-eu-to-enforcefiscal-discipline-a-825208.html Accessed 07/06/2012 S&P 2012, Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=124532730 5715 Accessed 09/06/2012 TFEU, the Treaty on the Functioning of the European Union http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:en:PDF Accessed 11/06/2012 TSCG, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf Accessed 11/06/2012 TV2 News, June 9 2012 in the 11 o’clock news. Vestager, Margrethe 2012 http://www.euo.dk/emner/eu2012/eu-temaer/europagt/spgsalentv/ Accessed 01/06/2012 Vestergaard, Stefan. Managing director at Vestergaard Company A/S. Phone interview June 9, 2012. Wallace, W. (1990), The Dynamics of European Integration. London: Pinter Publishers Limited

Picture on Front Page http://ec.europa.eu/agriculture/rur/leaderplus/memberstates/index_en.htm

13

Regional Integration & the EU

June 2012

Appendices Appendix A The main points of the TSCG - The introduction of a ‘balanced budget rule’ i.e. “the budgetary position of the general government of a Contracting Party shall be balanced or in surplus;” (TSCG: 3.1.a) this implies that their annual structural deficit cannot exceed 0.5% of the gross domestic product (GDP) at market prices (TSCG: 3.1.b). - This rule must be written into national law with a “permanent character, preferably constitutional” (TSCG: 3.2). - In case of deviation from the medium-term objective (MTO) regarding achieving a balanced budget, or the adjustment path towards it, correction mechanism come into force to guarantee that automatic action is taken (COMb). - If the budget rule is not properly implemented the European Court of Justice can impose sanctions of up to 0.1% of the member state’s GDP (EUOa). - For better coordination “the Contracting Parties shall report ex-ante on their public debt issuance plans to the Council of the European Union and to the European Commission” (TSCG: 6) Furthermore, if the general government deficit exceeds 3% of GDP automatic sanctions will be imposed on the member state in question. This is, however, not a new possibility but was established in the Stability and Growth Pact (EUOa).

Appendix B Lecture 12, May 29 2012, Conclusions by Magali Gravier in the course Regional Integration and the EU. The European integration process has moved into different directions. Horizontal integration: considering the enlargement process, the triangle gets broader Vertical integration: more and more aspects are integration into the EU polity - Increasing policy areas - Taking further action in each policy area - Policies pooled at the EU level

14

Regional Integration & the EU

June 2012

Appendix C

Kære --Tak for din henvendelse. Traktaten vil først gælde for de enkelte deltagerlande, når de har ratificeret den nationalt. De vil derfor ikke være omfattet af traktatens bestemmelser, hvis den blot er underskrevet af en statseller regeringschef, men ikke ratificeret nationalt. Hvis 12 eurolande har ratificeret traktaten, kan den som du nævner træde i kraft, men den vil dog kun gælde for de deltagerlande, der har ratificeret den. Modsat de normale traktater der vedtages i EU-regi, er denne traktat lidt atypisk på grund af den såkaldte mellemstatslige karakter. Normalt vil en EU-traktat kræve, at alle medlemslande har ratificeret den, før den kan træde i kraft. Det er altså ikke tilfældet med traktaten bag finanspagten. Du kan følge ratifikationsprocessen på følgende link: http://www.euo.dk/emner/eu2012/eu-temaer/europagt/ratifikation/ratifikation25/ Du kan læse mere om finanspagten på følgende link: http://www.euo.dk/emner/eu2012/eu-temaer/europagt/ Med venlig hilsen Martin Jørgensen EUkoordinator

EUOplysningen !Christiansbor g DK-1240 København K. Tlf. +45 33 37 33 37 Dir. +45 33 37 36 22 www.euoplysningen.dk

15