Thursday, 13 May 2010

European financial stabilisation mechanism: Open Europe accuses: “Profound dishonesty”

In the 11 May 2010 post on the eurozone rescue package They Said It Wouldn’t Happen, the Open Europe Blog makes these specific allegations with regard to Article 122 TFEU:

3) EU leaders are basing parts of the bailout on Article 122 of the EU Treaties. This is profoundly dishonest and involves a huge legal stretch. Article 122 states that,

"Where a member state is in difficulties or is seriously threatened with difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member state."

As we’ve stated before, the European Council has previously said that any use of this article must be compatible with the no bailout rule in the EU Treaties. This interpretation is now being completely ignored.

Telegraph journalist Bruno Waterfield summarises the issue well on his EUobserver blog,

“'Exceptional occurrences beyond control’? This is a lie. A whopping, howling lie told to us by Europe’s political class. This crisis is a product of human agency, the choices and decisions taken by people facing circumstances that are man-made and, thus, susceptible to political intervention. To use a legal clause designed for earthquakes or potentially extreme unforeseen circumstances that threaten the existence of one member state to save the skins of the EU’s political class is profoundly deceitful – quite aside from being legally dodgy."

(The whole Open Europe blog post is worth reading as a summary of the arguments leveled at the eurozone rescue package.)


At the time the Lisbon Treaty was drafted, the disruption of natural gas supply to EU member states was perceived as a grave risk. The ‘area of energy’ was added to the text.

As we have seen from the legislative history of Article 122 TFEU, the extension of qualified majority voting (QMV) and the addition of ‘a spirit of solidarity’ were duly presented to the ratifying parliaments.

The spirit of solidarity means that the member states have a greater responsibility than before to help a fellow-member in difficulties or even threatened with severe difficulties.

Even if QMV has been extended to other difficulties than natural disasters, a qualified majority is not an easy test to pass. The Council, where the governments of the member states are represented, has to be convinced about the legal conditions, the European Commission needs to make a proposal and the Council has to decide on the scope and the conditions for financial assistance.

Open Europe alleges that the “European Council” has previously said that any use of this article must be compatible with the no bail-out rule in the EU Treaties and that this interpretation is now being completely ignored.

First of all, the answer by the acting Presidency of the Council of the European Union is explicitly said not to be binding on either the Council or its members. Secondly, “exceptional occurrences beyond the control of a Member State” have never been defined nor discussed by the Council. Thirdly, the Council stands ready to examine any proposal from the Commission based on then Article 100(2) TEC. In conjunction with the Declaration on Article 100 TEC, the compatibility with the “no bail-out” rule is then mentioned in passing in a sentence leading to the inter-institutional agreement on budgetary discipline and financial perspectives.

When in fact, the acting Presidency declared its willingness to examine any proposal from the Commission compatible with the treaties, Open Europe’s assertion can be seen as somewhat misleading.

Open Europe’s allegation that the interpretation is now being completely ignored is not backed up by anything in the quoted excerpt.

Of course, even if Open Europe’s allegations are partly misleading and partly lack even a shred of evidence, it does not necessarily mean that they are wrong.

For a somewhat more objective take on the European financial stabilisation mechanism, we need to take a closer look at the no bail-out rule (now Article 123 TFEU) and to discuss the meaning of exceptional occurrences beyond the control of member states.

The discussion continues here on Grahnlaw.

Ralf Grahn