The intergovernmental Fiscal Stability Treaty was signed in March 2012 by all EU member states except for the Czech Republic and the United Kingdom. The official name of this treaty is the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). This treaty aims to safeguard the stability of the euro area by requiring Member States’ national budgets to be in balance or in surplus. Countries will meet this goal if their annual structural government deficit does not exceed 0.5% of nominal GDP. If the deficit does exceed this figure, a correction mechanism will be triggered automatically. Any deficit must also be in line with the country-specific minimum benchmark figure for long-term sustainability. Progress on this will be assessed each year as part of the European Semester process.
The treaty also provides for economic policy coordination and convergence. This obliges Member States to report on their public debt issuance plans and to make sure that major economic policy reforms are discussed beforehand and, where appropriate, coordinated among themselves.
By signing the document, the country vows to abide by the pact’s budget restrictions. The decision still has to be ratified by the parliament and signed by president Miloš Zeman.