Watching Karlsruhe/Karlsruhe Watchers

Abstract

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, more commonly known as the Fiscal Compact, and the Treaty establishing the European Stability Mechanism (ESM) are closely linked in several ways. Both treaties are formally placed outside the European Union framework, but substantively govern Union matters. Together they are designed to combat the sovereign debt crisis which has been ravaging the European Union for years now. The Fiscal Compact does so by enhancing and sharpening budgetary discipline in the Eurozone states, the ESM Treaty by offering assistance to Eurozone states in financial distress. To receive financial aid from the ESM, states not only need to have ratified the Fiscal Compact, but also to have implemented a balanced budget rule in their national law in the way the Compact demands. Apart from combating the crisis, the Treaties also bring reforms to the Eurozone; they express the wish of the signatory parties to share their destinies in new ways.