The Stability Treaty

The Treaty will enter into force following the ratification of the Treaty by 12 eurozone countries. 1 January 2013 has been fixed as the target date.

It is necessary for all EU countries to ratify a new EU Treaty for it to enter into effect but such a requirement is unusual for intergovernmental treaties. The figure of 12 for the Stability Treaty was chosen in the course of negotiations.

The Fiscal Compact is not the name of the Treaty itself but what Title III of the Treaty is called. The Fiscal Compact sets out the balanced budget rule and provisions on debt reduction.

This section of the Treaty sets out the general intentions of the Treaty, the background to why it was agreed and how it links with EU law.

The European Stability Mechanism (ESM) is a permanent rescue funding programme to succeed the temporary European Financial Stability Facility. The ESM is due to be put in place in July 2012 and it will come into force once ratified by countries representing 90% of its capital commitments.

Only countries which have ratified the Stability Treaty will have access to funding from the European Stability Mechanism (ESM) - the permanent bailout fund - from 1 March 2013.

The Stability Treaty states:
“…the granting of financial assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the Contracting Party concerned…”

The Stability Treaty is to be applied and interpreted in conformity with the Treaties on the European Union and with EU law. Article 2 of the Treaty concerns the consistency and relationship with the law of the Union.