On Thursday, 31 May, the Parliament of Latvia (Saeima) in the second and final reading adopted the draft law whereby Latvia ratifies the so-called EU Fiscal Compact. The Compact was ratified with 67 MPs voting for, 29 voting against, and one abstaining.

“By ratifying the Fiscal Discipline Treaty in the parliament, our country has taken a significant step towards being a part of the core of the European Union, that is, being among those keen to foster the economic growth and global competitiveness of the block. Latvia has already successfully proved that with a responsible fiscal policy, it is possible to overcome the crisis and to resume growth. In the years to come, we will continue Latvia’s economic breakthrough and keep a responsible fiscal policy high on the national policy agenda,” noted Speaker Āboltiņa.

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union required a two-thirds majority at a plenary sitting in which at least two-thirds of all MPs are present. According to Article 68 of the Constitution, this procedure is to be used in ratifying international agreements by which the state delegates a part of its competences to international institutions.

The Treaty is intended to foster budgetary discipline and improve the economic governance both in the euro area and those EU member states that choose to apply a part of the Treaty without being members of the euro area. The aim of the Treaty is to prevent the member states from developing an excessive budget deficit and public debt. The member states are committed to ensure that their general government budgets are balanced or in surplus; general government deficit should not exceed 3% of GDP.

Infringements of fiscal discipline will be identified by the European Commission, and any of the EU member states will be able to bring the case before the European Court of Justice. With regard to the member state that has failed to comply with the judgment of the Court of Justice, the Court will be able to impose on it a penalty payment appropriate in the circumstances and that does not exceed 0,1% of its GDP.

Apart from Latvia, five EU member states have ratified the Fiscal Compact - Greece, which has fully completed the ratification process, as well as Portugal, Slovenia, Romania and Denmark, whose parliaments have supported the Compact. Ireland is holding a referendum on it on 31 May. In order for the new Treaty to come into force, it has to be ratified by at least 12 members of the euro area.

Saeima Press Service