Ruta Vainiene, Senior Fellow, LFMI

On March 2, EU-25 leaders signed the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, commonly called the Fiscal Compact. The Treaty was not signed by the Czech Republic and Great Britain. Lithuania joined the treaty, but it still needs to be ratified by the Lithuanian Parliament (Seimas). Not being a member of the eurozone, Lithuania would be able to choose, which particular provisions of the treaty to commit to. However, after adopting the euro, the entire treaty will become mandatory.

Which rule is golden?

The foundation stone of the treaty is the so called Golden Rule, which establishes that the budgets of the countries who have signed the treaty must be in balance or in surplus. The requirement will be achieved if the lower limit of the structural deficit will be 0.5% of GDP. The lower limit of 1% of GDP will be allowed for countries with government debt significantly below 60% of GDP.