The European leaders signed on 2 of March the new treaty aimed at strengthening fiscal discipline and convergence in the euro area. The treaty introduces a "balanced budget rule" which consists in a requirement for national budgets to be in balance or in surplus, a criterion that would be met if the annual structural government deficit does not exceed 0.5% of GDP at market prices.

The Treaty on Stability, Coordination and Governance, or the so-called fiscal compact treaty, has been signed on 2 of March for the leaders of twenty-five Member States, with the abstention of the UK and the Czech Republic. The content of the new Treaty, which introduces a "balanced budget rule", was endorsed at the last European Council meeting in January.

Once the treaty enters into force, in the event of deviation from this "balanced budget rule", an automatic correction mechanism will be triggered. It will be defined by each member state on the basis of principles proposed by the European Commission. The EU Court of Justice will be able to verify national transposition of the balanced budget rule. Its decision is binding, and can be followed up with a penalty of up to 0.1% of GDP, payable to the European Stability Mechanism in the case of euro area Member States.

The treaty also contains provisions on the coordination and convergence of member states' economic policies and on governance of the euro area. In particular, Euro Summit meetings will take place at least twice a year. The fiscal compact will be legally binding as an international agreement and will enter into force following ratification by at least 12 euro area Member States. It will only apply to those contracting parties whose currency is the euro, while the others will be bound by its provisions once they adopt the euro, unless they declare their intention to be bound by certain provisions at an earlier date.