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Stability Pact court case: Commission wins small but important victory

Est. 1min

14-07-2004 (updated: 29-01-2010 )

Languages: Deutsch

The ECJ has annulled the Council’s conclusions relating to an
excessive deficit procedure against France and Germany. The court
ruled that the Council had used the wrong procedures.

The ECJ has delivered its much awaited judgement on the
controversial decision by the Council to effectively suspend an
excessive deficit procedure against France and Germany. On the
first count, the court ruling recognises the possibility of a de
facto suspension of the rules because the Commission cannot bring
an action for annulment of a decision as no decision was actually
taken. But on the second count, it ruled in the Commission’s favour
by saying that the procedure by which the conclusions were adopted
was incorrect:

  • Regulation 1467/97 sets out situations in which a decision to
    hold the process in abeyance could be taken – this was not one of
    those situations
  • Voting rules for a decision to give notice to a country were
    used rather than voting rules for adopting a recommendation for a
    country to correct an excessive deficit

 

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Positions

In a statement, the Commission welcomed the
ruling in that it "confirms the Commission’s view as to the
respective roles of the Commission and the Council in the
application of the Stability and Growth Pact making thereby
budgetary policy coordination more transparent and more predictable
in the future". Commission President Romano Prodi welcomed the
ruling saying that "it confirms the central role of the Stability
and Growth Pact regulations in the European budgetary surveillance
process.”

The Council welcomed the clarification rendered
on the interpretation of both the provisions of the Treaty on the
excessive deficit procedure (Article 104) and the Stability and
Growth Pact, clarifying the respective roles of the Commission and
the Council. As regards the latter finance minister noted with
satisfaction a passage of the ruling that read: "Responsibility for
making the member states observe budgetary discipline lies
essentially with the Council."

The Council however said it would closely
examine the implications of the court’s decision for the
application of the pact’s provisions and proposals for
strengthening and clarifying the implementation of the pact as part
of prospective discussions this Autumn. It also noted that "France
and Germany have undertaken firm commitments to reduce the budget
deficit as set out in the Conclusions of 25 November and have taken
steps to implement those commitments; and expects them to remain
fully engaged to fulfilling the commitments set out therein".

The EPP-ED spokesperson on economic and
monetary affairs, Austrian MEP Othmar Karas, was also upbeat about
the judgement, commenting that "this trend-setting ruling
clarifies, that the Council took too many liberties. The attempt to
reduce Europe to the Council alone has collapsed today". He went on
to say that "the Commission has demonstrated that they are not to
be blackmailed. Now the Council cannot and must not go back to
normal. They now have to make a decision compliant with the rule of
law and the treaties of the European Union", concluded Karas.

ELDR leader Graham Watson said it was "a bad
day for pact breakers". His interpretation was that "the European
Court of Justice has clearly said that European Member States
should not unilaterally depart from the rules that they make for
themselves. By refusing to honour their own rules on the Stability
Pact, finance ministers broke European law. We cannot have a Europe
in which the rules count for the small but not the large. The price
we risk paying when large Member States flout the rules is bigger
bullies and weaker European law for all of us. The new European
Commission must refashion a pact that is every bit as committed to
fiscal discipline and controlled public spending but much less
vulnerable to political abuse."

 

Background

In recent years France and Germany have persistently flouted the
Stability and Growth Pact rule that says eurozone countries must
keep their public deficits to a maximum of three per cent of their
GDP. On 25 November 2003, the Council chose not to accept the
Commission's recommendations, which would have taken the two
countries a step further towards the ultimate sanction of fine as
set out in the excessive deficit procedure.

The Commission requested a ruling by the European Court of
Justice in which it sought:

  • annulment of the Council's failure to adopt, despite the
    Commission's recommendations, decisions establishing that neither
    France nor Germany had taken adequate measures to reduce their
    deficits and decisions giving notice to each of those two Member
    States
  • annulment of the conclusions adopted by the Council in so far
    as they contain decisions to hold in abeyance the excessive deficit
    procedures with regard to France and Germany and decisions
    modifying the recommendations  

The European Court of Justice decided to use a fast track procedure
to reach its judgement.

Timeline

  • A Commission proposal on economic governance is due out in
    autumn 2004

 

Further Reading

Languages: Deutsch

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