Press Releases

6. 2. 201217:13

The main arguments of Prime Minister Petr Nečas regarding why the Czech Republic has not committed to ratification of the fiscal compact

Prime Minister Petr Nečas has requested the preparation of an unofficial translation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, the so-called fiscal compact. The Office of the Government will provide both Czech and English versions to the general public. We will also provide a summary of the main arguments of the Prime Minister as to why the Czech Republic has not yet committed to signing it.

The main arguments of Prime Minister Petr Nečas regarding why the Czech Republic has not committed to ratification of the fiscal compactThe final text of the compact is not very satisfactory for the Czech Republic and there is not yet widespread agreement on the method for its ratification. Therefore, at Monday’s meeting of the European Council, Prime Minister Petr Nečas announced that he is unable at this time to politically support the so-called fiscal compact. However, he did not rule out the possibility that he would sign it in the future.

1. Procedural aspects: unclear ratification and little time for analysis

Prime Minister Petr Nečas clearly declared that he will not commit to signing the compact before he can be confident that he will be able to fulfil this commitment. “Until decisions are made on how this compact will be ratified and also how it will be put into effect, meaning the moment the euro is adopted, I cannot sign it. The government is agreed on this,” said Prime Minister Petr Nečas.

According to the Czech Prime Minister there has also been a form of abuse in that they modify texts directly at the meeting of the heads of state or government of the EU Member States, which they then immediately afterwards bindingly vote on, without the possibility for proper reading, analysis and evaluation. “This is simply not the way to carry out such negotiations, and under my leadership the Czech Republic will not allow itself to be manoeuvred into making such fundamental decisions under such strange conditions, at a meeting of a circle of a few European leaders, on the basis of a document whose final form I saw for the first time five minutes before. Even if we were the only ones in the whole of the EU to do so, we would still respect all democratic procedures and would rationally consider all the steps we take,” added Prime Minister Petr Nečas.

At the same time, the Prime Minister said that even if the government wanted to sign the fiscal compact, it must first ask the President for authorisation to do so. In addition, before it is signed, both chambers of parliament should give their opinions on it.

2. The voting cartel is a massive change in the operation of the EU

As regards the actual content of the compact, it has not been possible to push through the binding inclusion of a debt criterion in addition to the budget deficit criterion in Article 7. Article 7, or the so-called voting cartel, is, in and of itself, a massive change in the operation of the EU, which the Prime Minister is not in favour of as a matter of principle, as it commits the state to vote for European Commission proposals even against its will.

3. The conditions for participation at euro summits are inadequate

Similarly, it has not been possible to amend the conditions for participation at so-called euro summits to the satisfaction of the Czech Republic. The final text is based on a backroom-arranged compromise, which is not favourable for the Czech Republic and is in fact worse than the original draft. The text only ensures restricted participation for non-eurozone members at summits on specific subjects. It of course does not say who will stipulate and interpret the subjects in advance. It is the opinion of the Prime Minister that all the countries that have committed to adopting the euro should, as standard, be invited as observers (of course without voting rights) to all summits if their commitment is to be valid.

The fact that this principle was not respected actually also placed this commitment into doubt. In one fundamental matter the European Council even introduced a substantial worsening in terms of euro summits: euro summits will also be called on themes of competitiveness, which in the opinion of the Prime Minister should be addressed by the EU27, as they relate to the internal market. This is a step towards the completely unnecessary and dangerous splitting of Europe and a reaction like “we’d better be there” would in actual fact be passive reconciliation with this fact.

4. The Czech Republic is in a different situation to other states

Eurozone states have an interest in the compact due to the nature of the matter: some of them receive money from the European Financial Stability Facility (EFSF) and other mechanisms, while others pay them and want the former to sign this compact. This is a completely logical relationship, which the Czech Republic would clearly respect if it was a full eurozone member.

For non-eurozone members the story is different. Half of them are or recently were so-called Programme Countries, meaning that they draw or recently drew aid for the stabilisation of public finances from the International Monetary Fund (IMF) or from the European Union and are not in the so-called IMF Financial Transactions Plan, meaning among the completely “healthy” states in macroeconomic terms. In view of their difficult economic situation, adopting the compact would be quite a logical step for them.

The Czech Republic, on the other hand, is one of the five non-eurozone members that are expected to provide financial help through not insignificant amounts towards eurozone stabilisation. The Czech government has also already agreed to provide this help. In addition, of the Central and Eastern European states we are the only one neither drawing from the IMF nor even having anything promised (unlike Poland with its “Flexible Credit Line”) and we are thus in the same position as Denmark and Sweden. This, however, also means that we can permit ourselves a little more leeway than states that are or recently were dependent on aid from others, recently received a warning letter from the European Commission regarding their budget deficit, or that already have aid promised. It is still important to emphasise that this matter must not be confused, for example, with political cohesion in the EU (as sometimes happens in political discussions) through which poorer regions and states are supported, irrespective of course of their budget situation (hence the signing of the fiscal compact cannot either be considered to be any moral obligation towards the so-called net payers in the EU).

From the perspective of non-eurozone members we are thus, together with Denmark, Sweden and the United Kingdom, in a situation that gives us a relatively high degree of freedom in terms of decision-making. Of these states, Denmark and Sweden of course have long made a referendum a condition for the eventual adoption of the euro and, in addition, Denmark and the United Kingdom also have a permanent opt-out from the euro. On the contrary, we are a state with a commitment to adopt the euro and (so far) without a referendum being a condition for its adoption. It is also important to take this specific situation, which on the one hand has given us more leeway to manoeuvre, while on the other hand has made deciding on potentially signing much more difficult, into consideration. In view of the fact that, in addition, the compact as a whole is not an effective contribution towards resolving the crisis in the Eurozone that would justify the transfers of powers connected with it, I could not agree on behalf of the Czech Republic with a peaceful conscience,” the Prime Minister added.

5. Success for the Czech Republic: we can join the compact later

The main success from the negotiations is the fact that the fiscal compact will remain open for signing by all Member States in the future, and this without the condition of the agreement of the existing Contracting Parties as some kind of entrance ticket. “The Czech Republic succeeded, upon its own request and initiative, in amending Article 15 in such a way that nobody can refuse accession at a later date,” the Prime Minister said.