IACL roundtable Bucharest: constitutional rules for a balanced budget


Directed by Professor Elena-Simina Tănăsescu, a IACL roundtable was held in Bucharest, Romania, on on 21-22 November 2014 on ‘Shaping constitutional rules for a balanced budget’. A report of the event, including a complete video recording, is available here.

The financial power of the state has always been embedded with political power, although traditionally constitutions do not quite reveal it. However, budget law has been the cornerstone of the advent of the liberal state since the late eighteenth century, particularly through rules on the democratic control and transparency of public finances. Some of these rules have managed to penetrate constitutions from the beginning, in the form of procedural standards for parliamentary oversight of public funds or the necessary balance between revenue and expenditure. Nevertheless, the twentieth century saw a real transfiguration of the public financial system of the state under the impact of several major economic crises and responses made to them, particularly in terms of economic theory. Their influence on the legal aspect of public finances was non-negligible. At constitutional level that resulted, among others, in the addition of substantive rules regarding the management of public finances and the normative imposition of a specific idea of budgetary discipline, among others through the elevation of the (initially economic) concept of balanced budget to the level of a legal principle.

In fact, the legal concept of balanced budget became fashionable again especially with the financial and global economic crisis that started in 2008 and whose effects are far from finished. Many aspects of this crisis have already been subject of thorough analysis: from the European fiscal governance and legal challenges it poses to the States, through the impact of fiscal austerity on local autonomy or the protection of fundamental rights, and to the role of independent fiscal institutions in restoring the sustainability of public debt. Public law, particularly  the Constitution meant as framework and limit for the power of the state, has never been more fashionable.

But one cannot help noticing that a thorough and mainly legal analysis of the concept of balanced budget, outside the context of the economic crisis, is far from being achieved. Can permanent legal mechanisms for the allocation, management and control of public funds be identified? What is a balanced budget from a strictly legal point of view? And why would it become indispensable as a constitutional principle in contemporary public finances? Beyond the (rather) ethic issue of the public debt conceived as an implicit load placed on the shoulders of future generations, is there really a need for legal rules in order to frame and control public debt? (The constitutional concept of a balanced budget)

It is clear that the requirement of a balanced budget is posited at constitutional level precisely to have an impact on how the state exercises its functions. Vertical as well as the horizontal separation of powers are affected, while multiple surveillance of public finances became necessary both from below (local level) and from above (supranational level). Moreover, the financial autonomy of public agencies poses an additional challenge to the democratic oversight of the entire budgetary process. Are all these requirements and challenges bound to increase or decrease the deeply political nature of the budget process? (Budget balance and separation of powers)

For the XXI century has seen a new form of imposition of the balanced budget requirement on states, through injunctions came from international organizations. Delocalisation/Offshoring and fragmentation of the production of legal standards pertaining to public funds represents a mere symptom of postmodernism in public finances, but not to the point where any democratic process designed in constitutional legal dressing would become irrelevant. But it would be difficult to require economic theories or public policies to solve a problem, after all, of political nature. What is the role of fiscal discipline and what are its effects on political solidarity (expressed especially through financial equalization) in the modern state? (Balanced budget rule and its impact beyond law)