The deciding factor behind the creation of the Fiscal Council as an advisory body was the changes in the economic management framework of the European Union, which also affected fiscal policy. The basis for the creation of fiscal councils in the member states of the European Union was laid in December 2011 when a package of measures was passed, within which minimum requirements for national budgetary frameworks were envisaged. In addition to the introduction of numerical fiscal rules, the measures identified the need for independent monitoring and analysis of state finances (Council Directive 2011/85/EU).
The “two pack” that came into force in 2013 broadened the harmonisation of the economic policy framework for EU member states. Among other things, it provided that all euro area countries should create an independent institution to monitor the compliance of fiscal policies with the numerical fiscal rules and, where necessary, to assess the need for the corrective measures foreseen in the framework. If a member state does not have an independent institution that compiles or confirms the macro forecasts that are the basis for national fiscal policy, the fiscal council also takes responsibility for this. This means that the use of excessively optimistic growth forecasts as support for fiscal strategy can be avoided (Regulation (EU) No 472/2013 of the European Parliament and of the Council). As member states remain free to set other tasks for the fiscal council as well, the functions and authority of fiscal councils varies between countries.
The creation of fiscal councils was also covered in the Treaty on Stability, Coordination and Governance signed between member states of the EU in 2012, in the section on public finances. This treaty later gave a push to the creation of new fiscal councils in countries outside the euro area too. At the start of 2014 there were fiscal councils in 26 of the EU member states. The exceptions were the Czech Republic and Poland, where there was no operating fiscal council and no plan to set one up.
In its work, the fiscal council must meet certain conditions. A fiscal council should have:
- a) an operating framework that guarantees its independence and is based on laws or binding administrative measures,
- b) a remit that lets it initiate its own assessments,
- c) functioning operating procedures that allow it to appoint members with sufficient skills and experience,
- d) sufficient resources and access to information for it to be able to do its work, and
- e) the ability to communicate with the public.
These principles were set out in the European Commission’s Communication No 2012/342, which was published in June 2012.
The statutes of the fiscal council in Estonia were confirmed at the meeting of the Supervisory Board of Eesti Pank of 9 April 2014. The statute of the fiscal council requires it to publish its opinion on the forecasts for the macro economy and state financing and on the budget strategy and how the goals of the structural budget position of the general government are being achieved. The six members of the fiscal council were appointed to office on 14 May 2014 and they have a term of office of five years. The fiscal council meets whenever necessary, but not less than five times a year.
