Editorial: A European union in constitutional mutation?

European Law Journal

Volumn 20, Issue 2, 2014, Pages 127-141

  Menéndez, Agustín José ^a,b  

^a UNIVERSITY OF LEÓN   (Spain)

^b Arena   (Norway)

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EID: 84896899104     PISSN: 13515993     EISSN: 14680386     Source Type: Journal    
DOI: 10.1111/eulj.12080     Document Type: Editorial

References (38)

1. And of non-decisions. The relevance of the latter in the 'governance' of financial markets was highlighted many years ago by the Susan Strange. See, for example, her Casino Capitalism (Oxford: Blackwell, 1986), at 29-56.
2. In some cases, the granting of competencies to the Union implies a formal and material shift of power from Member States and eventually their regions to the EU (this is clearly the case with the much strengthened power to monitor and control national fiscal policy). In others, it may well be argued that the formal shift of the competence does not imply a shift of real power, but the recreation at the European level of a power that nation-states had lost a long time ago.
3. Regulation 1176/2011 of the European Parliament and of the Council on the prevention and correction of macroeconomic imbalances, 16 November 2011; OJ L 306, of 23.11.2011, 25-32
4. Regulation 1174/ 2011 of the European Parliament and of the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, 16 November 2011, OJ L 306, 23.11.2011, 8-11.
5. Vid. See Article 2a, second paragraph of the consolidated text of Regulation 1466/97. Further tightened by Fiscal Articles 3.1(a) and (b) of the Stability Treaty to 0.5% gross domestic product (GDP), except for countries with debt levels significantly below 60% and clearly 'sustainable' public finances, as specified in Article 3.1(d) of the same Treaty.
6. Article 5.1 second paragraph of the consolidated text of Regulation 1466/97. Article 6.3 establishes a specific limit to the 'deviation' that may occur in the implementation of the budget.
7. For a country such as Italy, with a debt of roughly 120% of its GDP, this implies reducing the debt by 3 GDP points per year. It does not take much imagination to foresee that this will lead to (mis)sale of public assets. And indeed contributed significantly to the quick rise in the interest that the Italian state had to pay for issuing debt in the early summer of 2011, leading to the 11th chapter in the Eurocrisis.
8. Fiscal Compact. For the common principles laid down by the Commission, see the Commission's communication, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0342:FIN:EN:PDF.
9. These new powers can be seen as codifying to a large extent the practice that has evolved in the several 'programmes' of 'financial assistance' to Eurozone and non-Eurozone Member States, in the framework of which the Commission, assisted by the European Central Bank (ECB) and the International Monetary Fund (IMF) (the famous troika) has shaped (if not micromanaged) the fiscal, labour and social policy of the bailed out states through the Memoranda of Understanding and the periodical revisions of the national compliance of the Memoranda.
10. Unsurprisingly, the breadth, scope and schedule of national budgetary processes have been radically altered, with the detailed framing norms enshrined in the one directive that is part of the Six-Pack Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States, OJ L 306, 23.11.2011, 41-47.
11. The programme remains a legal 'nasciturus'. We basically have the words spoken by President Draghi and Vice-President Constancio at the press conference of 6 September 2012 (http://www.ecb.europa.eu/press/pressconf/2012/html/is120906.en.html) and the press release of the ECB with the 'technical details' of Outright Monetary Transactions (OMT) (http://www.ecb.europa.eu/press/pr/date/2012/html/pr120906_1.en.html). The lack of a full legal text may well be due to the high probability of the constitutional validity of the mechanism being challenged before the German Constitutional Court, as indeed was the case. In the absence of a legal text, perhaps the chances of the programme being declared unconstitutional by the judges sitting at Karlsruhe are lesser.
12. See the press release of 8 December 2011, available at http://www.ecb.europa.eu/press/pr/date/2011/html/pr111208_1.en.html where two massive refinancing operations at fixed rate where announced. In December 2011, 529 billion euros were lent, while in March 2014 credit was refinanced for an amount of 488 billion euros, a total exceeding thus the trillion euro figure, equivalent to the GDP of Spain, or around 10% of the Eurozone GDP.
13. European Council Decision of 25 March 2011 amending Article 136 of the Treaty on the Functioning of the EU with regard to a stability mechanism for Member States whose currency is the euro, OJ L 91, 6.4.2011, 1-2; OJ L 91, 6.4.2011, 1-2.
14. Treaty Establishing the European Stability Mechanism, 2 February 2012, available at http://www.european-council.europa.eu/media/582311/05-tesm2.en12.pdf.
15. Regulation (UE) 1092/2010 of the European Parliament and the Council of 24 November 2010 on EU macroprudential oversight of the financial system and establishing a European Systemic Risk Board, OJ L 331, of 15 December 2010, 1-11
16. Regulation (UE) 1096/2010 of the Council of 17 November 2010 conferring specific tasks upon the ECB concerning the functioning of the European Systemic Risk Board, OJ L 331, of 15 December, 162-164.
17. Council Regulation (EU) no. 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions, OJ L 287 of 29.10.2013, 63-89
18. Regulation (EU) no. 1022/2013 of the European Parliament and of the Council of 22 October 2013 amending Regulation (EU) no. 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards the conferral of specific tasks on the ECB pursuant to Council Regulation (EU) no. 1024/2013, OJ L 287 of 29.10.2013, 5-14.
19. See the Commission's proposal, which at the time of going to print was still the relevant drafting to consult. 'Proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) no. 1093/2010 of the European Parliament and of the Council', COM (2013) 520 final, of 10 July 2013.
20. Regulation (EU) 1093/2010 of the European Parliament and of the Council establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC, 24 November 2010, OJ L of 15.12.2010, 12-47.
21. Regulation (EU) 1094/2010 of the European Parliament and of the Council establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision no. 716/2009/EC and repealing Commission Decision 2009/79/EC, 24 November 2010, OJ L of 15.12.2010, 48-83
22. Regulation (EU) 1095/2010 of the European Parliament and of the Council establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision no. 716/2009/EC and repealing Commission Decision 2009/77/EC, 24 November 2010, OJ L of 15.12.2010, 84-119.
23. Something that accounts for the need of a specific regulation dealing with the relationship between the ECB and the European Banking Authority, see Regulation (EU) no. 1022/2013 of the European Parliament and of the Council of 22 October 2013 amending Regulation (EU) no. 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards the conferral of specific tasks on the ECB pursuant to Council Regulation (EU) no. 1024/2013, OJ L 287, of 29.10.2013, 5-14.
24. Many observers point that the effective authority of national institutions is closely tied to the creditworthiness of each state, or in operational terms, the rates that state has to pay when issuing sovereign debt. However, that indicator has not been thoroughly consistent, as Italy enjoyed rather affordable rates until mid-2011. Indeed, Italy had modest surpluses in Target 2 in the early months of the crises. But were Italian institutions really holding up even then?
25. That trend may also have to do with the strong institutional identity of the Court or the Bundesbank (which is related to German history and to the evolution of the German economy, but that it would very odd to explain by reference to the export successes of Germany), and by the way in which German politicians have played their cards (the two großekoalitionen led by Merkel perhaps reflecting the awareness of the increasingly hegemonic role played by Germany, as well as reflecting the wide consensus on socio-economic policy among Christian-Democrats and Social-Democrats).
26. These two contradictory developments may further the trend towards multiplying the power poles within the Commission along its President (the double-headed Representative for Foreign Affairs, and the President of the Eurogroup).
27. A ruling of the ECJ fining say the French state for a wrong transposition of the golden rule after the transposition was enshrined into the French Constitution and approved in a referendum would perhaps be the last judgment ever rendered by the ECJ.
28. Ousmène Mandeng, 'The IMF must quit the troika to survive', Financial Times, 17 April 2013. Mandeng was once deputy director of the IMF.
29. As is well known, the Fiscal Compact was enshrined in an intergovernmental Treaty because not all Member States would have agreed to its being incorporated to a standard reform Treaty. The fact that the signatories to the Fiscal Compact are 25 reflects that the cleavage between insiders and outsiders of the Eurozone does not only depend on the formal status of Eurozone state. Much will depend on the concrete way in which the complex mechanism foreseen in the microprudential regulation unfolds. Non-Eurozone Member States may subject themselves to the authority of the ECB. Probably out of the hard lessons of the last years, specific provisions are included in the Regulation to govern the 'exit' of a non-Eurozone state for such voluntary submission. But which would be the circumstances in which a non-Eurozone state could discontinue such arrangement without endangering the stability of 'its' financial institutions?
30. When Maastricht was negotiated, countries with low inflation thought that the constitutionalisation of the no bailout principle sent the right signal to political and economic actors. They failed to realise that the use of law as a means of conveying credibility is highly problematic when future breaches of the law are highly probable. Sooner or later, some Member State will find itself in an impossible fix. The other Member States will have all the incentives in the world to avoid that state collapsing, as that may well result in what has been funnily referred as 'contagion' (words are never innocent, and the present crises illustrates this abundantly).
31. Here is important to distinguish between three different debates: on fiscal policy (whether or not, and when, to run deficits), on the legal framework of fiscal policy (which should be the legal norms governing fiscal policy) and on which should be the constitutional framework of fiscal policy (whether the legal norms framing fiscal policy should be written in the constitution, which in some cases may be equivalent to writing that in stone). Even if one were to conclude on the wisdom of a legal act limiting budget deficits, one could find inappropriate to constitutionalise the principle.
32. One which in its origin may have a certain Keynesian perfume, if the reader allows me the metaphor, but which has been articulated differently depending on the underlying normative and economic theory of the different authors.
33. Given that peculiar legal nature, it is perhaps unsurprising that at some point the chancellors of the exchequer of the Eurozone considered increasing the lending capacities of the Facility by 'leveraging' its funds.
34. It has been pointed that there is nothing new in the Treaties pointing to an intergovernmental treaty as the legal means of furthering integration (that was the case with the old international treaties foreseen in Art 220 of the original EEC Treaty).
35. It is national economies, one by one, that have to be balanced, not the European economy as a whole which is a bit confusing, given that monetary union was supposed to be a fundamental step in realising the single market goal.
36. So far, the Commission seems to believe that surpluses are less problematic than deficits, as if there could be surpluses without deficits in a European economy that remains largely on balance with third countries, which is not so surprising after all, given that the euro remains a very second reserve currency, and quite obviously the rest of the world is not in a monetary union with the Eurozone so that overall European surpluses tend to lead to the appreciation of the Euro, and the subsequent loss of competitiveness, which in due course does away with the surplus.
37. David Hume, Of Commerce, now in Selected Essays (Oxford: Oxford University Press, 1998), at 156.
38. For the harsh internal debate, see the (leaked) memorandum of the IMF, with a compte rendu of the decisive 10 May 2010 meeting, available at http://ep00.epimg.net/descargables/2014/02/01/3d638976e4fd3cd4001ab63dfa750acf.pdf.