One of the solutions almost generally accepted for counteracting the negative effects of the economic and financial crisis on public budgets is the balanced budget rule, perceived as key to maintaining sound and sustainable public finances. The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG or Fiscal Compact) requires its parties to include the balanced budget rule in their national law through binding and permanent provisions, preferably at constitutional level.
Therefore, a major legislative reform process, involving potentially a constitutional reform, has to be completed in 25 European states in order to allow for national mechanisms to ensure compliance with the balanced budget rule. The efforts for this purpose will inevitably reflect the specifics of each national system and will be fairly complex and potentially controversial.
A straightforward implementation of rules provided by the Fiscal Compact will not suffice, as any further compliance with such rules will require specific legislative measures directed at reducing public expenditure or at increasing public income. Accordingly, other rules or principles placed at the same level are likely to be incident on such legislative measures. Any legislative reform designed to insert a new principle into the national legal system has to consider other potentially applicable principles, to understand the effects of any collision of applicable principles and to identify adequate solutions.
In 2009 Romania avoided the effects of the financial crisis through a joint loan package provided by the EU and IMF, whose conditionality required measures for reducing the public deficit.
By choosing fallible or wrong legal solutions for deficit reduction in order to achieve a balanced budget, the state not only failed to reduce public expenditure, but it increased such expenses with additional amounts consisting of compensation the government was ordered to pay by the courts. In the French legal system the balanced budget principle has to some extent a legal form, but no effective application.
In an attempt to limit public expenditure by referring to a balanced budget, the constitutional revision of 2008 introduced a new type of programming laws but full respect of the new imperatives proved to be rather difficult and their interpretation by the constitutional judge generated additional problems.
The aim of this project is to identify and structure a legal mechanism for inserting in national legal systems of Romania and France the balanced budget rules provided by the Fiscal Compact in a manner that will be complementary to the existing principles, rules and case law.
The main benefit of exploring, structuring and charting such mechanisms will be a comprehensive proposal for a harmonized legal system that contains no contradiction between principles and also provides for solutions for cases when inherent collision of principles cannot be avoided.
The research should also consider the intended effect of the Fiscal Compact as ultimately being an attempt at constitutional harmonization at EU level.
Most studies relating to the balanced budget principle are focused on its validity as a principle as well as on the assessment of its economic impact.
A joint analysis of the Romanian and French cases is of particular interest due to the similarity of their political systems and, to some extent, of their legal systems.
Differences between the two legal systems will be used as an additional test of the viability of the normative approach developed within the project, also to assess the flexibility of the resulting legislative harmonization mechanism.
This could represent a pilot project for similar analyses related to the 25 EU Member States that have ratified the Fiscal Compact.