Thursday, 2 October 2008

EU: No-bailout rule II

Article III-75 of the draft Constitution, proposed by the European Convention, corresponds with Article 103 TEC, and it is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’, Section 1 ‘Economic policy’.

In the draft Treaty establishing a Constitution for Europe, the ‘no-bailout’ clause is Article III-75, found in OJ 18.7.2003 C 169/40:

Article III-75 Draft Constitution

1. The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.

2. The Council of Ministers, on a proposal from the Commission, may adopt European regulations or decisions specifying definitions for the application of the prohibitions referred to in Article III-73 and in this Article. It shall act after consulting the European Parliament.

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Paragraph 1 replaced ‘Community’ by ‘Union’.

Paragraph 2 rewrote the decision-making and downgraded the European Parliament, merely to be consulted.

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The government of Sweden presented its views on the draft Constitution in ‘Europeiska konventet om EU:s framtid’ (Utrikesdepartementet, Departementsserien (Ds) 2003:58, 2003), but I found no reference to Article III-75.

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Ahead of the intergovernmental conference (IGC 2003─2004), the government of Sweden stated its positions on economic policy provisions, in ‘Europeiska konventet om EU:s framtid’ (Regeringens skrivelse 2003/04:13, den 2 oktober 2003), on pages 49─50, but I found no comment on Article III-75.

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Étienne de Poncins presented the proposed text of Article III-75 of the draft Constitution in ‘Vers une Constitution européenne’ (Éditions 10/18, 2003), page 296, without comment.

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For a look at the background, you can read the Final report of Working Group VI on Economic Governance, CONV 357/02 (21 October 2002), although the prohibitions concerning overdraft facilities (monetary financing) and privileged access and the ‘no-bailout’ clause were not mentioned:

http://register.consilium.eu.int/pdf/en/02/cv00/00357en2.pdf

Generally, the highly divided Working Group opted for the ‘status quo’ or more of the same, as seen in this snippet:

“The Group recommends that the current structure whereby exclusive competence for monetary policy within the Eurozone lies with the Community, exercised by the ECB under powers conferred upon it by the existing Treaty, and competence for economic policy lies with the Member States, should be maintained.

However, taking into account the fact that Member States' economic policies are regarded as a matter of common concern (Article 99 TEC), reflected in the existence of a number of rules at Community level, the Group also agrees that there is a need for improved coordination between the economic policies of the Member States.”

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In the following instalment we look at the ‘no-bailout’ clause in the Constitutional Treaty.


Ralf Grahn