The European Court of Justice and the stability and growth pact : just the beginning

Abstract

The procedures launched against Germany and France due to their excessive deficits, again brought the attention of the media and broader public to the Stability and Growth Pact (SGP). The point of culmination was reached when the European Commission filed a claim against the Council (C-27/04) which in essence concerned the enforceability and, thus, the functioning of the SGP in the context of the required cooperation between the two Community institutions. The ruling of the European Court of Justice (ECJ), however, was comparably more reluctant. While concentrating on the concrete steps taken by the Council in the deficit procedures against Germany and France, it sidestepped key questions on the nature and the sequence of the procedure and the division of power between Council and Commission in the enforcement of national budgetary discipline. As a result, the extent to which the system of fiscal surveillance and economic policy coordination binds the Member States, as well as the institutions, remains unsettled. The same can be said regarding the interplay between the Council and Commission not only in the case at hand, but also in future excessive deficit procedures. Can the procedure be continued against the will of the Council? Can there ever be sanctions against the will of the Council? Does the SGP therefore effectively force the Member States to abide by the principle of fiscal discipline?

It is one thing to confirm the Council as the central actor and decision-maker in the deficit procedure; it is, however, another to remain silent on the limits of the Council's discretion. When the ECJ mentions the possibility of an action for failure to act, it acknowledges the shortcomings of the procedure in those cases where the Council is unwilling to decide. Nevertheless, the ruling opens additional loopholes for inaction by the Council. This might be fatal not only for the current decisive phase of the excessive deficit procedure against Germany and France, but also for the existence of the pact as such. With the case of Italy, where the Council failed to adopt the recommendation of the Commission to initiate the early warning procedure, the next conflict between Commission and Council is pending. With the adoption of its Communication of 3 September 2004, the Commission has meanwhile reignited the discussion on the reform of the SGP at the political level.