Abstract: This Article analyzes the central provision of the recently enacted Fiscal Compact, which directs member states of the European Union (EU) to incorporate into their constitutions a "golden rule"-that is, a requirement that yearly budgets be balanced. The purpose of the Article is to examine-by surveying the introduction of these pervasive budgetary constraints in four selected EU member states (Germany, France, Italy and Spain)-the institutional implications that the "golden rule" has on the role of the political and judicial branches, both in the states and in the EU as a whole. The Article argues that, while the domestic effects of the "golden rule" are likely to vary from one state to another, the Fiscal Compact systematically enhances the powers of the EU institutions to direct and police the budgetary policies of EU member states, thus increasing centralization in the EU architecture of economic governance. The Article then contrasts this development with the federal experience of the United States. A comparative perspective sheds light on the fact that, while most U.S. states are also endowed with constitutional "golden rules," the federal government never played a role in their adoption and is barred from interfering with the budgetary processes of the states. In conclusion, the Article suggests that an unexpected paradox emerges in the new constitutional architecture of the EU: Although in crafting the institutional response to the Euro-zone crisis state governments have repeatedly discarded a U.S.-like federal model as being too centralized and centripetal for the EU, they have ended up establishing a regime that is much less respectful of state sovereignty than the U.S. federal system.
On March 2, 2012, twenty-five out of twenty-seven member states of the European Union (EU) agreed to sign in Brussels the Treaty on the Stability, Coordination, and Governance in the Economic and Monetary Union (TSCG).1 This treaty, generally referred to as the Fiscal Compact, was adopted under the pressures of financial markets, which, since 2008, have been threatening several countries of the Economic and Monetary Union (EMU) with the spectre of sovereign default.2 In this context, the treaty represents the latest, and allegedly conclusive, attempt to provide a satisfactory answer to the Euro-zone crisis.3 The Fiscal Compact raises a number of new issues in the fields of international law, EU law, and comparative constitutional law.4 Technically drafted as an international treaty, but functionally connected to the EU legal order, the Fiscal Compact pursues the goal of strengthening budgetary discipline in the member states of the Euro-zone.5 The enactment of the Fiscal Compact reflects the understanding that the existence of a common supranational currency (the Euro), coupled with a no-bail-out clause in Article 125 of the Treaty on the Functioning of the EU (TFEU), requires tighter fiscal constraints in the Euro-zone member states.6 In particular, this Article focuses on the obligation the Fiscal Compact imposes on signatory states to enact the so-called "golden rule"-a requirement that annual government budgets be balanced-in state constitutions.7 This requirement, which is unprecedented in the history of European integration, significantly increases the involvement of supranational institutions in the fiscal sovereignty of the states and is likely to affect the vertical balance of powers between the states and the EU.8
This Article examines the "golden rule" articulated in the Fiscal Compact by tracing its origin in German constitutional law and assessing the institutional challenges that its adoption raises in four selected EU member states (Germany, France, Italy, and Spain) and at the EU level. The developments taking place in the EMU are then compared to the experience of the United States in the field of fiscal federalism. The EMU and the United States appear to share several common structural features. …