Not now and not soon – that has been the message from Prague on the Czech Republic’s refusal to sign up to the European Union’s fiscal pact, approved by the majority of EU countries on January 30.
 
The Czech Republic is unlikely to join the fiscal pact in the near future, prime minister Petr Nečas told daily Lidové noviny on February 1, quoted by The Prague Post. 
 
Nečas, in power since June 2010 and who leads the conservative Civic Democratic Party, said that a referendum vote - which, in his view, would be necessary to put the treaty into effect – was not feasible in the current political scene.
 
However, he did not rule out that the country may join the fiscal pact in the longer term. Nečas' decision was lauded by president Václav Klaus, who opposes the treaty and has said he would not sign it into law.
 
In the words of a European Council statement, the fiscal pact aims to strengthen fiscal discipline through the introduction of more automatic sanctions and stricter surveillance, and in particular through the "balanced budget rule".
 
Balance or surplus
The new treaty requires national budgets to be in balance or in surplus. This will be achieved if the annual structural government deficit does not exceed 0.5 per cent of nominal GDP. If a member state deviates from this rule, an automatic correction mechanism will be triggered. The mechanism will fully respect the prerogatives of national parliaments, according to the European Commission.
 
Furthermore, the member states will have to incorporate this "balanced budget rule" into their national legal systems, preferably at constitutional level. The deadline for doing so is one year at the latest after the entry into force of the treaty.
 
Should a member state fail to transpose the "balanced budget rule" rule on time, the EU Court of Justice will have jurisdiction to take a decision on the matter. The Court's decision will be binding, and, if not implemented, can be followed up with a penalty of up to 0.1 per cent of GDP. This amount will be payable to the European Stability Mechanism if the country's currency is the euro, otherwise to the general budget of the EU.
 
The excessive deficit procedure will also be more automatic. Euro area member states commit to support the Commission's proposals except when a qualified majority of them would be against the decision.
 
The member states parties to the new treaty will report their public debt issuance plans to the European Commission and to the Council. They will coordinate among themselves and with the EU institutions in advance all of the major economic reforms that they plan to undertake.
 
The euro area member states will hold meetings at least twice a year and will elect the president of the euro area summit by a simple majority of votes. Reports of the meetings will be presented to the European Parliament (EP). The President of the EP may be invited to be heard at the euro summit.
 
The treaty will be signed in March and will enter into force once it has been ratified by at least 12 euro area member states. It will be legally binding as an international agreement and will be open to the EU countries which do not sign it at the outset.
 
‘Gritted teeth’
On January 30, Nečas cited a lack of rights for non-euro zone members (the Czech Republic is among EU states that do not use the euro), low attention to debt criteria and Klaus' unwillingness to sign the document as reasons for the Czech refusal. However, Nečas did not rule out joining the fiscal pact later, "with gritted teeth," The Prague Post reported.
 
The Czech prime minister's decision to join the UK in refusing to back an EU fiscal pact has prompted an angry response from coalition colleagues. Foreign minister Karel Schwarzenberg accused him of harming the Czech national interest.

European Council President Herman Van Rompuy, quoted by the Voice of America, said that he was not concerned that the UK and the Czech Republic did not join the new agreement, saying the 17 that use the common euro currency and other interested countries must be able to work on their problems, even if the EU is not unanimous on the approach.

"With this treaty we maintain as much as possible the unity of the union, taking into account that those who have a common currency have the possibility to deal with the problems linked to their currency," Van Rompuy said.