Protocol on the Excessive Deficit Procedure

LONDON – Europe is now haunted by the spectre of debt. All European leaders quail before it. To exorcise the demon, they are putting their economies through the wringer.

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Before S&P dropped the bomb on Friday that France and Austria were losing their Triple-A-rating, most of the crisis reporting last week had been concerned with the different drafts for the new “Fiscal Compact” Treaty to be signed at the euro summit at the end of January.

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Protocol on the Excessive Deficit Procedure

PROTOCOL ON THE EXCESSIVE DEFICIT PROCEDURE

THE HIGH CONTRACTING PARTIES,

DESIRING TO lay down the details of the excessive deficit procedure referred to in Article 126 of the Treaty on the Functioning of the European Union,

HAVE AGREED upon the following provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union:

Article 1

The reference values referred to in Article 126(2) of the Treaty on the Functioning of the European Union are:

- 3% for the ratio of the planned or actual government deficit to gross domestic product at market prices;

- 60% for the ratio of government debt to gross domestic product at market prices.

Article 2

In Article 126 of the said Treaty and in this Protocol:

- government means general government, that is central government, regional or local government and social security funds, to the exclusion of commercial operations, as defined in the European System of Integrated Economic Accounts;

- deficit means net borrowing as defined in the European System of Integrated Economic Accounts;

- investment means gross fixed capital formation as defined in the European System of Integrated Economic Accounts;

- debt means total gross debt at nominal value outstanding at the end of the year and consolidated between and within the sectors of general government as defined in the first indent.

Article 3

In order to ensure the effectiveness of the excessive deficit procedure, the governments of the Member States shall be responsible under this procedure for the deficits of general government as defined in the first indent of Article 2. The Member States shall ensure that national procedures in the budgetary area enable them to meet their obligations in this area deriving from these Treaties. The Member States shall report their planned and actual deficits and the levels of their debt promptly and regularly to the Commission.

Article 4

The statistical data to be used for the application of this Protocol shall be provided bythe Commission.