Signed by 25 EU Member States (except for the UK and the Czech Republic), the Treaty on Stability, Coordination and Governance, or the European Budgetary Pact or Fiscal Compact, entered into force on January 1st 2013, after its ratification by 12 eurozone Member States. On 29th March 2013, 20 countries had ratified it, including 13 in the eurozone. It mainly aims to strengthen coordination of budgetary policies of the States taking part and to improve eurozone governance.
The Treaty’s main innovation comprises the introduction into national constitutional legislation of a budgetary “golden rule”, whose rules deem that the structural deficit of the Member States must not rise over 0.5 per cent of their GDP. The 0.5 per cent threshold is not obligatory immediately. Indeed the rule is deemed to be respected if the annual structural deficit matches the forecasts made by the government and communicated to the Commission via the four-yearly stability programme.
“The smooth functioning of the EMU requires not only the swift and vigorous implementation of the measures already agreed under the reinforced economic governance framework… notably the Treaty on Stability, Coordination and Governance…” Source: HvR June 2012 Report
"Fiscal compact" entered into force on 1 January 2013