The Treaty on Stability, Coordination and Governance (TSCG)
The Treaty on Stability, Coordination and Governance (TSCG, "fiscal compact") builds on the budgetary rules outlined in the Stability and Growth Pact.
The Treaty on Stability, Coordination and Governance was signed on 2 March 2012 by the leaders of all euro area members and eight other EU member states, and entered into force on 1 January 2013.
Signatories to the treaty agreed to implement a balanced budget rule in their national legislation through permanent, binding provisions, preferably of a constitutional character, by the end of 2013.
Under this rule, annual structural government deficit must not exceed 0.5% of GDP.
The deficit must also be in line with the country-specific minimum benchmark figure for long-term sustainability.
This figure is set by the preventive arm of the Stability and Growth Pact.
Automatic correction mechanism
Countries must implement a correction mechanism - in other words, design measures to reduce the budget deficit. These measures will be triggered automatically in the event of a significant deviation from the agreed benchmark figure for long-term sustainabililty.
The deadline for implementation of this mechanism is by the end of 2013.
Treaty signatories also agreed to inform each other, the Council of the EU and the European Commission in advance when they plan to issue new debt. They will also discuss all plans for major economic policy reforms.
Euro Summit meetings
Furthermore, the signatories agreed to hold Euro Summit meetings, which bring together heads of state or government of the eurozone, at least twice a year.
The Eurogroup is responsible for the preparation and follow up of these meetings.