Fiscal Stability Rules in Central European Constitutions

Abstract

The so called Fiscal Compact signed by 25 out of 27 EU member states requires the states to transpose the treaty’s rules that limit the annual structural deficit and the general government debt “through provisions of binding force and permanent character, preferably constitutional” (Art. 3, §2). While the goal is set, the means are up to respective states, and thus an extraordinary wave of constitutional engineering has been triggered. This paper deals with four countries in Central Europe which have already adopted fiscal stability rules into their law: Germany, Hungary, Poland and Slovakia. It describes the rules adopted and demonstrates that despite some similarities, four wholly distinct models of regulation have been used in these countries. These models are further examined and compared, in particular with respect to their substance (numerical, or institutional fiscal rules), criteria used (state debt, overall public debt, state budget deficit, or structural deficit) and enforcement mechanisms created (automatic cut of expenses, vote of non-confidence in the government, veto power of an independent fiscal council, judicial review, etc.). Finally, the models are evaluated both from the perspective of their democratic legitimacy and from the perspective of their expected efficiency, where the paper draws on existing empirical studies of fiscal stability rules enacted in the past.