Eurozone: Friendly fire or collateral damage?

We continue monitoring the new era of European disintegration, especially in what is still known as a eurozone of 332 million inhabitants in 17 countries.

Yesterday, chancellor Angela Merkel noted how closely the break down of the euro was related to the fate of the whole European project:

Scheitert der Euro, steht das europäische Projekt insgesamt auf dem Spiel.

(Merkel's full ”Stabilitätsunion” speech in Magdeburg.)

The Financial Times tells us that the German Bundesbank opposes ECB bond buying (22 August), still. Spiegel Online International reports that president Christian Wulff has joined the prominent opponents in Germany: German President Questions Legality of ECB Bond Purchases (24 August 2011).

For good measure, the German Bundesbank criticised the decisions of the 21 July 2011 eurozone summit on the second Greek bail-out and the added flexibility of the EFSF, as well.

In the context of the second bail-out of Greece, in the blog post Eurozone issues collateral and honesty (24 August), we saw the eurozone summit statement and the following deal on collateral between Finland and Greece. The eurozone partners did not warm to footing the bill, but for the government of Finland it remained a question of how, not if, collateral will be given.

Peter Spiegel on the FT Brussels blog continued by asking [UPDATED] Will Finland sink the Greek bail-out? (24 August). Markets and market watchers were becoming jittery.

The Open Europe blog looked at positions taken by leading politicians, country by country: Collateral Thinking (24 August 2011).

(By the way, the populist True Finns (Perussuomalaiset) have just decided to call themselves The Finns in English.)

Ruth Berschens in Handelsblatt tells us today that the collateral for Finland is off the table. The headline sounds conclusive: Sicherheitspfand für Finnland ist vom Tisch (25 August). However, the euro area governments seem to be discussing real estate as collateral.

If they reach no positive outcome, the Greek bail-out may unravel, and with it the eurozone as we know it.

We could then be left wondering if the eurozone broke up and the EU declined through friendly fire or as collateral damage.

***

The new articles on 841 euroblogs are just one click away. Follow and participate in the discussion about the eurozone and other European issues on multilingual Bloggingportal.eu, an important part of the European public space.



Ralf Grahn

Eurozone issues collateral and honesty

The Finnish government has (admittedly, because of domestic political weakness) consistently demanded collateral for the second bail-out of Greece. This precondition was, somewhat obscurely, recognised by the eurozone summit 21 July 2011.


Protesilaos Stavrou

The euroblogger Protesilaos Stavrou has written an interesting piece on the effect of the demands for collateral as a precondition for approval of the second bail-out of Greece: Demands for collaterals show lack of a collective spirit (24 August 2011).

Finland set the snowball rolling, so I wrote two blog posts about the root causes and the events in Finnish: Suomi näyttää: Euroalue on korttitalo (23 August) and Suomen Kreikka-vakuudet vastatuulessa: Mistä tämä kertoo? (24 August 2011). (Why not try machine translation?)


Eurozone summit

The government of Finland has, admittedly as a result of domestic electoral politics, set collateral as a precondition for participating in the second bail-out package for Greece.

Although preparation for and discussions in Euro Group and Council meetings remain murky for outsiders, these aspirations have been aired publicly long and often enough. They come as no surprise for the euro area partners.

The eurozone summit acknowledged this demand, although the language is less than crystal clear. See: Statement by the heads of state or government of the euro area and EU institutions; 21 July 2011; point 9:

9. Where appropriate, a collateral arrangement will be put in place so as to cover the risk arising to euro area Member States from their guarantees to the EFSF.

This agreement in principle was the basis for the deal between the Finnish and the Greek government, which the Ministry of Finance in Finland informed about in a 16 August 2011 press release (Finnish only).

The snowball effect and fears that the Greek rescue package could be delayed or even unravel, have suddenly led to a 'Nein' from Merkel and the need for new discussions to open the Gordian knot. For the government of Finland it is still a question of how, not if, collateral will be given.


Comment

Now, we should have the facts straight, in order to follow the next steps.

A few additional points.

I have little sympathy for populists who are keen to wreak havoc in the eurozone and consequently in the wider European and world economy, although I am far from certain that the structures of the eurozone are democratic and robust enough to succeed, or that the national political leaders are up to the challenges.

I understand that many people in the Mediterranean countries feel unkindly treated by less than generous remarks about their political system and national character.

However, the citizens and politicians in these countries need to take a deep and honest look in the mirror.

To put it crudely, can we expect European solidarity if citizens domestically cheat on each other through corruption or tax evasion?

Even if the lack of democracy and effectiveness at eurozone level are root causes of the euro area crisis, I would appreciate more reform-minded thinking from citizens in the weak eurozone countries, on how to enhance competitiveness, improve internal solidarity with regard to clientelism, tax-paying, corruption, governance, sustainable public finances etc. in order to embrace a brighter future in a globalising world and in Europe.

Honesty.

***

Follow and participate in the discussion about the eurozone and other European issues on multilingual Bloggingportal.eu, an important part of the European public space, with the new articles on 841 euroblogs just one click away.



Ralf Grahn

Ecofin: Eurozone bailout Portugal

It is a telling sign of weak EU structures that the chief outcome of the Economic and Financial Affairs Council (Ecofin) is produced ”in the margins” of the Council:

Statement by the Eurogroup and ECOFIN Ministers (16 May; no document identifier)

The unanimous decision by ministers is there, but references (links) to decisions and other documents in final or draft form would have made the statement more credible and readable.


Ecofin

Until the conclusions of the Ecofin meeting (16 and) 17 May 2011 are released, interested readers find guidance in the agenda and the background note (including a few paragraphs about Portugal).



Ralf Grahn


P.S. The members of the French blog collective ”les Cabris de l'Europe” produce the must-read Euroblog Europe 27etc, which discusses the shortcomings and feats of EU politics in France and elsewhere. Critical and constructive.

P.S. 1: Has the EU Council really internalised the newish Lisbon Treaty? The discussion about access to documents and Council transparency continues on Ronny Patz's blog post.

Finland: Eurozone shockwaves

The epicentre of the devastating 1755 Lisbon earthquake was much closer to Portugal than Helsinki, but how shattering are the shockwaves from Finland going to be? .

The pro-European PM-elect Jyrki Katainen is determined to shoulder responsibility in defence of the eurozone, but two out of the three likely main coalition partners are not.

Katainen will probably have to form a government with the Social Democrats who demurred on a Portuguese bailout in the election campaign and the True Finns who rode to a historic victory on outright rejection of everything which smacks of European integration.

Thus, participation by Finland in the eurozone bailout is no foregone conclusion. Finnish participation without changes is highly unlikely.

The unanimity requirement exposes how brittle eurozone structures are, indeed the state of European solidarity.

We mix media reports available in English with our own comments.


Election result

In the 17 April 2011 general election distributed the 200 seats of the Parliament of Finland, according to a proportional system of representation. The three political parties to come out on top:

National Coalition Party (European People's Party EPP) 44 (party leader Jyrki Katainen)
Social Democratic Party (Party of European Socialists PES) 42 (Jutta Urpilainen)
True Finns (EFD Group) 39 (Timo Soini)

The populist and nationalist True Finns sensationally added 34 MPs to their group of five.

Helsingin Sanomat depicted the astounding election victory of the True Finns, translated for the International Edition: Editorial: Timo Soini rewrote the electoral history books.

We note that the Centre Party (European Liberal Democrat and Reform Party ELDR) led by outgoing prime minister Mari Kiviniemi suffered heavy losses, bringing it down to 35 seats, as did the Green League (European Green Party EGP) led by Anni Sinnemäki, reducing the current government party to 10 parliamentarians. Both leaders have stated that they head for the opposition.


Consensus politics

On Left Foot Forward, Taneli Heikka discusses Finnish consensus politics in wider and more personal terms: What really happened in the Finnish elections.


New government

The will of the electorate and the mathematics leave few options for a majority government.

Reuters provides a schedule for the government negotiations: Factbox: How Finland's next coalition govt will be formed.

The biggest Finnish daily, Helsingin Sanomat, discusses the options in its International Edition: Government of three largest parties envisioned.

YLE (Finnish public broadcasting corporation) news in English: Urpilainen: SDP To Join Government Negotiations.

The SDP is going to participate in government negotiations, but they know that they are practically indispensable if the Centre Party and the Greens stay on the sidelines.

Under long time party chairman and prime minister Paavo Lipponen, the Social Democratic Party was a staunchly pro-EU party. Under the second leader since then, Jutta Urpilainen, it is hard to foretell the future of the SDP as a European party.


Eurozone

Few international pundits are interested in Finland as such, but the repercussions for the eurozone and the European Union have turned the Finnish election result into a notable event in European and financial capitals.

NCP leader Jyrki Katainen wants to prevent panic, but his party is not going to form a majority in the next government. The coalition agreement is going to be a tough nut to crack, without scuppering euro area unanimity for stability actions.

See, for instance:

Helsingin Sanomat International Edition: Finnish election has implications for euro crisis.

YLE (Finnish broadcasting corporation) news in English: Katainen Believes in Finnish Support for Portugal Bail-out Package.

Reuters: Finnish PM-elect seeks to soothe EU bailout fears.

***

If events in Finland can influence the fate of the eurozone and the EU, mismanagement in Ireland, Greece and Portugal has caused a political tsunami in Finland.

Interdependence is stronger than ever, however voters act.



Ralf Grahn


P.S. The Internet-Law blog, written by Thomas Stadler, is an active source of fact and opinion in German on IT and intellectual property law.

Eurozone crisis: Quick view of Greek bailout and austerity measures

It is like watching a whole new ball game, with rules only a few people know. There are different teams in play at different moments, or relegated to the sidelines: the governments of the EU member states individually or as a whole, the heads of state or government of the eurozone, the Euro Group, the Council of the European Union (Economic and Financial Affairs, ECOFIN), the European Commission, the European Parliament (EP), the European Central Bank (ECB) and the International Monetary Fund (IMF).


There are also several balls in play at the same time: the €110 billion (including IMF) support package for Greece, Greek austerity and reform measures, the €60 billion European financial stabilisation mechanism, the €440 billion Special Purpose Vehicle, additional IMF participation, fiscal and economic reform promises from Spain and Portugal, generalised calls for greater fiscal prudence, proposals for stricter economic governance and ECB interventions in secondary sovereign bond markets.


The different turns have been headline news in Europe and globally, but can the non-expert public even begin to grasp the unfolding events?


Here is an attempt to limit the selection to a few helpful summaries for bewildered fellow-citizens. In this blog post we start the orientation with the Greek economy and continue with the bailout of Greece and the Greek reform and austerity measures.



Greek debt crisis



Wikipedia offers the background article Economy of Greece, with a section on the 2010 debt crisis (latest update 17 May 2010).



Greek bailout



On the €110 billion bailout of 2 May 2010, Reuters has a Factbox: Terms of euro zone emergency loans to Greece (3 May 2010), with key points of the agreement of eurozone finance ministers on the €80 billion bilateral loans to Greece, each member according to its share of the ECB capital key, as well as €30 billion IMF participation. If the eurozone lenders get their money back, they will make a profit on the loans bearing interest (about 5 per cent).



Greek reform and austerity measures



The eurozone loan promises are conditional on Greek reform and austerity measures. IHS Global Insight offered a summary in Greek Parliament Approves Crucial Austerity Package as Global Markets Reel (7 May 2010): expenditure cuts, pension reform, tax reform and labour market reform.




Ralf Grahn

EU: No-bailout rule VI

The previous post mentioned a few UK references to Article 125 of the Treaty on the Functioning of the European Union (TFEU). We now turn to legislative materials from Sweden and Finland as well as some commentaries in book form, to see if the basically unchanged ‘no-bailout’ clause has elicited comments. If not, students of the matter would be advised to turn to materials on the Treaty of Maastricht and to specialist literature.


***


Lissabonfördraget

The consultation paper ’Lissabonfördraget’ was the first official Swedish description of the Lisbon Treaty amendments, and it is available at:

http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf

It was followed by the Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, published 29 May 2008:

http://www.regeringen.se/sb/d/5676/a/106277

The draft bill was given a green light by the Council on Legislation (Lagrådet):

http://www.lagradet.se/yttranden/Lissabonfordraget.pdf

The latest official government view, and now my standard reference for Sweden, is the ratification bill, with the Swedish parliament (Riksdagen) expected to decide on approval in late autumn, probably November (Regeringens proposition 2007/08:168 Lissabonfördraget; 3 July 2008):

http://www.regeringen.se/content/1/c6/10/84/02/8c96cf3e.pdf

Economic and monetary policy (23.2 Ekonomisk och monetary politik) is discussed on pages 180 to 185. The Swedish government explains procedural questions, including Article 102 TFEU (ToL). The rare cooperation procedure is abolished and replaced partly by the ordinary legislative procedure (multilateral surveillance) and partly by consulting the European Parliament (prohibitions on overdraft facilities and privileged access, and the ‘no bail-out’ clause) (on page 184):

Ӏndring av beslutsprocedurerna

Proceduren för samarbetsförfarandet finns i artikel 252 i EG-fördraget. Amsterdamfördraget minskade avsevärt tillämpningsområdet för samarbetsförfarandet, vilket för närvarande endast tillämpas på den ekonomiska och monetära politiken (artiklarna 99.5, 102.2, 103.2 och 106.2 i EG-fördraget). Genom Lissabonfördraget upphävs det s.k. samarbetsförfarandet i nuvarande artikel 252 i EG-fördraget (jfr avsnitt 16.2 om förfaranden för antagande av akter och andra bestämmelser). Beslutsförfarandena i de artiklar där samarbetsförfarandet idag tillämpas ändras därför enligt följande.

För att säkerställa en fastare samordning av den ekonomiska politiken ska rådet i dag på grundval av rapporter från kommissionen övervaka den ekonomiska utvecklingen i varje medlemsstat och inom unionen samt den ekonomiska politikens överensstämmelse med de allmänna riktlinjerna och regelbundet göra en samlad bedömning. För denna multilaterala övervakning ska medlemsstaterna lämna erforderliga uppgifter till kommissionen. Genom Lissabonfördraget anges att närmare föreskrifter om det multilaterala övervakningsförfarandet ska antas genom förordningar med tillämpning av det ordinarie lagstiftningsförfarandet (artikel 99.6 i EUF-fördraget). Ändringen innebär således en förstärkt ställning för Europaparlamentet.

I artiklarna 101–103 i EG-fördraget finns bestämmelser om förbud för Europeiska centralbanken (ECB) och nationella centralbanker att ge de gemensamma institutionerna eller de nationella offentliga organen, inklusive statsägda företag, rätt att övertrassera sina konton eller ge dem andra former av krediter. ECB eller centralbankerna får inte heller direkt från dem förvärva skuldförbindelser. En positiv särbehandling av gemenskapsorgan eller nationella offentliga institutioner eller företag är likaså förbjuden. Vidare ska gemenskapen inte ansvara för eller åta sig förpliktelser som har ingåtts av nationella offentliga institutioner eller företag. Genom Lissabonfördraget anges att rådet efter att ha hört Europaparlamentet får ange närmare hur dessa förbud ska tillämpas (artikel 103.2 i EUF-fördraget).”

***

Lissabonin sopimus

The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), discusses economic and monetary policy (Talous- ja rahapolitiikka) on pages 209 to 214.

The ratification bill briefly describes Article 103 TFEU (ToL), renumbered Article 125 TFEU, where the union is not liable for member states’ debts or commitments, as essentially the same as Article III-183 Constitution and Article 103 TEC, [but it does not mention that the member states lack liability]. It then remarks on the expansion of paragraph 2 (page 210):

”103 artikla (uusi 125 artikla), jonka mukaan unioni ei ole vastuussa jäsenvaltioiden veloista tai niiden muista antamista taloudellisista sitoumuksista, vastaa asiasisällöltään perustuslakisopimuksen III-183 ja SEY 103 artiklaa.

Artiklan 2 kohtaa on laajennettu niin, että sen perusteella voidaan antaa myös 101 ja 102 artiklan soveltamista varten tarvittavat tarkemmat määräykset.”


The Finnish ratification bill is available at:

http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf


The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remarks under ’Ekonomisk och monetär politik’ on Article 103 TFEU (ToL), the future Article 125 TFEU, on page 213:

”Artikel 103 (blivande artikel 125), enligt vilken unionen inte ska ansvara för medlemsstaternas skulder eller andra ekonomiska förpliktelser, motsvarar i sak artikel III-183 i det konstitutionella fördraget och artikel 103 i EG-fördraget.

Artikel 103.2 har utvidgats så att med stöd av den får antas även närmare bestämmelser som behövs för tillämpningen av artiklarna 101 och 102.”

The ratification bill in Swedish can be accessed at:

http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf

***


de Poncins

Étienne de Poncins offers a few general comments on EU economic governance and budget matters, ‘La gouvernance économique et les questions budgétaires’ in his ‘Le traité de Lisbonne en 27 clés’ (Éditions Lignes de Repères, 2008), pages 245─251, but nothing specific on Article 125 TFEU.


Fischer

‚Der Vertrag von Lissabon‘, by Klemens H. Fischer (Nomos, Stämpfli & Verlag Österreich, 2008), traces the amendments Article by Article; here on pages 265─266. He offers the following statement on paragraph 2:

„Der bisherige Text von Absatz 2 wird gestrichen und durch einen neuen Text ersetzt, demgemäß in Hinkunft nicht mehr das Zustimmungsverfahren, sondern das Anhörungsverfahren zur Anwendung gelangt.“


Priollaud and Siritzky

François-Xavier Priollaud and David Siritzky offer a short introductory explanation on economic and monetary policy (pages 246 and 247) and on economic policy coordination, including the treaty amendments (pages 248 to 250) in their book ‘Le traité de Lisbonne – Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation française, Paris, 2008), but there is no comment on Article 125 TFEU.

***

Consultation procedure

Just in case someone wants to reflect on the consultation procedure (and other decision-making procedures), Martin Gellermann offers a description in Rudolf Streinz (Hrsgb.): EUV/EGV Vertrag über die Europäische Union und Vertrag zur Gründung der Europäischen Gemeinschaft (C.H.Beck, 2003). I quote the beginning of Konsultations- oder Anhörungsverfahren (page 2204):

„Als Ursprungsmodell für eine Beteiligung des Europäischen Parlaments am Prozess der gemeinschaftlichen Rechtsetzung erscheint das Konsultations- oder Anhörungsverfahren in dem der Kommission das Initiativrecht, dem Parlament eine Beratungsbefugnis und dem Rat das alleinige Entscheidungsrecht gebührt.“


Ralf Grahn

EU: No-bailout rule V

What, if anything, has been said about the amendments concerning Article 125 of the Treaty on the Functioning of the European Union (TFEU)?

***

Statewatch

Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.4: Revised text of Part Three, Titles VII to XVII of the Treaty establishing the European Community (TEC): Other internal EC policies’ (Version 2, 24 October 2007) includes the current Title VII Economic and monetary policy.

Peers presented the text of Article 103 TFEU (ToL), to be renumbered Article 125 TFEU in the consolidated version, and highlighted the changes [except the small slip that ‘Community’ was not replaced by ‘Union’]. He offered the following comment (page 8):

“The consultation procedure will apply to this Article (along with Articles 101 and 102), in place of the ‘cooperation’ procedure. The measures concerned shall not constitute legislative acts. This entails a downgrade of the EP’s role here.”

The analysis 3.4 and other useful Statewatch analyses are available through:

http://www.statewatch.org/euconstitution.htm


***

FCO

The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 125 TFEU, Article 103 TFEU (ToL) in the original Lisbon Treaty (page 12):

“Draws on Article 103 TEC. Paragraph 2 replaces the cooperation procedure with consultation with the EP.”

The FCO comparative table is available at:

http://www.official-documents.gov.uk/document/cm73/7311/7311.asp

***

House of Commons Library

The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed ‘H. Economic and Monetary Policy’ on pages 61 to 64, but I found nothing on Article 103 TFEU (ToL).

The Library Research Paper 07/86 is available at:

http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf

***

House of Lords

I found nothing on Article 103 TFEU (ToL) or 125 TFEU in the House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008), but the Glossary offered a brief explanation of ‘Consultation’, on page 297:

“Consultation (of the European Parliament): a procedure which requires the Council to consult the EP and take its views into account before voting on a Commission proposal.”

[For a somewhat different take on the consultation procedure, read the following post.]

The impact assessment report is accessible at:

http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf


***

The following post is going to present additional legislative materials on Article 125 TFEU.


Ralf Grahn

EU: No-bailout rule IV

Bailouts of financial institutions dominate the news in the United States and Europe, but does the EU Lisbon Treaty change the European Community’s (European Union’s) and other member states’ lack of responsibility for public debt of a member state, the so called ‘no-bailout’ clause?

***

The currentt Treaty establishing the European Community (TEC) was to become the Treaty on the Functioning of the European Union (TFEU), and generally the innovations as agreed in the 2004 IGC were to be inserted into the Treaty by way of specific modifications ‘in the usual manner’ (points 17 and 18, pages 6 and 7). As we remember, the legal base in Article III-183(2) of the Constitutional Treaty was rewritten.

I found nothing specific in the mandate of the intergovernmental conference (IGC 2007 Mandate, Council document 11218/07, 26 June 2007) about Article 103 TEC.

***

In Article 2, point 89 of the original Treaty of Lisbon (ToL) the IGC 2007 agreed on the following concerning Article 103 TEC (OJ 17.12.2007 C 306/71):

89) In Article 103, paragraph 2 shall be replaced by the following:

‘2. The Council, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 101 and 102 and in this Article.’.

***

The TFEU table of equivalences confirms that Article 103 TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 125 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII (OJ 17.12.2007 C 306/211─212).

***

Consolidated Lisbon Treaty

Article 125 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/99:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 1 Economic policy

Article 125 TFEU
(ex Article 103 TEC)

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, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 123 and 124 and in this Article.

***

With regard to the current Article 103 TEC, in the first paragraph, the ‘Community’ was replaced by the ‘Union’; one of the so called horizontal amendments.

Paragraph 2 was rewritten. As in the cooperation procedure (Article 252 TEC), the Council acts on a proposal from the Commission. But according to the Lisbon Treaty, the European Parliament is only consulted.

***

Proposal from the Commission

Here is a reminder of the significance of a proposal from the Commission, as laid out in the Treaty of Lisbon (consolidated version, OJ 9.5.2008 C 115/173):

Article 293 TFEU
(ex Article 250 TEC)

1. Where, pursuant to the Treaties, the Council acts on a proposal from the Commission, it may amend that proposal only by acting unanimously, except in the cases referred to in paragraphs 10 and 13 of Article 294, in Articles 310, 312 and 314 and in the second paragraph of Article 315.

2. As long as the Council has not acted, the Commission may alter its proposal at any time during the procedures leading to the adoption of a Union act.

***

The following instalment is going to take a look at some comments concerning Article 125 TFEU.


Ralf Grahn

EU: No-bailout rule III

We look at the ‘no-bailout’ clause in the context of economic and monetary union (EMU). What, if anything, did the Constitutional Treaty contribute?

***

In the Treaty establishing a Constitution for Europe the provisions on economic policy were 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’.

The ‘no-bailout’ clause is found in Article III-183, OJ 16.12.2004 C 310/78:

Article III-183 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, on a proposal from the Commission, may adopt European regulations or decisions specifying definitions for the application of the prohibitions laid down in Articles III-181 and III-182 and in this Article. It shall act after consulting the European Parliament.

***
Does the Constitution differ from the draft? In the Constitutional Treaty ‘The Council of Ministers’ became ‘The Council’. Paragraph 2 became the legal base for three Articles, III-181, III-182 and III-183.

***
Let us see if the ‘no-bailout’ rule has led to any comments in our reference materials.

***
The Swedish government memorandum ‘Fördraget om upprättande av en konstitution för Europa’ (Utrikesdepartemetet, Departementsserien (Ds) 2004:52, december 2004) described the signed Constitutional Treaty, but I found no comment on Article III-183.

***

No reference was found in the Swedish draft ratification bill ‘Lagrådsremiss ─ Fördraget om upprättande av en konstitution för Europa’ (2 June 2005).

***

The government of Finland laid out the Constitutional Treaty in its ratification bill ‘Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 67/2006 vp). On page 183 the government remarked that in Article III-183, as in Article 103 TEC, the union was not responsible for debts or commitments of member states [but it did not mention that the same lack of liability applies among member states]. It then remarked that the legal base for decisions specifying definitions had been expanded to cover Article III-182:

”III-183 artikla, jonka mukaan unioni ei ole vastuussa jäsenvaltioiden veloista tai niiden muista antamista taloudellisista sitoumuksista, vastaa asiasisällöltään SEY 103 artiklaa.

Artiklan 2 kohtaa on laajennettu niin, että sen perusteella voidaan antaa myös III-182 artiklan soveltamista varten tarvittavat tarkemmat määräykset.”

***

The same remark appears in Swedish in ’Regeringens proposition till Riksdagen med förslag om godkännande av Fördraget om upprättande av en konstitution för Europa och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen (RP 67/2006 rd), page 187:

”Innehållet i artikel III-183, enligt vilken unionen inte skall ansvara för medlemsstaternas skulder eller andra ekonomiska förpliktelser, motsvarar i sak artikel 103 i EG-fördraget.

Artikel III-183.2 har utvidgats så att med stöd av den får antas även närmare bestämmelser som behövs för tillämpningen av artikel III-182.”

***

Klemens H. Fischer in ‘Der Europäische Verfassungsvertrag‘ (Nomos, Stämpfli & Manz, 2005), pages 310─311, makes the observations that „Artikel III-183 EUVV korrespondiert mit Artikel 103 EGV“ and „Artikel III-183 EUVV korrespondiert mit Artikel III-75 VVE“ [but he makes no remarks on the changes concerning paragraph 2],


***


The next instalment turns to the IGC 2007 and the Lisbon Treaty.



Ralf Grahn

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.

***

Paragraph 1 replaced ‘Community’ by ‘Union’.

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

***

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.

***

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.

***

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.

***

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.”

***

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


Ralf Grahn

EU: No-bailout rule I

Central banks, such as the European Central Bank, have injected massive amounts of liquidity into financial markets and governments are busy shoring up tottering private sector banks, but what if the failing entities in EU countries were public, like member states themselves or public sector undertakings?

The European Union (EU) is not a federal state, ready to pick up the tab for government failure. On the contrary, economic and monetary union (EMU) is designed only to ensure responsible government borrowing in each nation state separately.

The present financial turmoil is an added reason to look at some of the basic economic policy rules within the European Community.

After the prohibitions on overdraft facilities (monetary financing) and privileged access for the public sector, we turn to the ‘no-bailout’ rule in Article 103 of the Treaty establishing the European Community (TEC). The avoidance of excessive government deficits ─ a problem on the rise ─ will be taken up after the posts on the ‘no-bailout’ clause.

***

Article 103 (ex Article 104b) of the Treaty establishing the European Community (TEC) is found in the latest consolidated version of the current treaties, published in the Official Journal of the European Union (OJ) 29.12.2006 C 321 E/84:

Part Three – Community policies

Title VII – Economic and monetary policy

Chapter 1 – Economic policy

Article 103 TEC

1. The Community 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. If necessary, the Council, acting in accordance with the procedure referred to in Article 252, may specify definitions for the application of the prohibition referred to in Article 101 and in this Article.

***

Objective

Article 103 TEC (originally Article 104b) is in force and directly applicable from 1 January 1994.

The objective of the ‘no-bailout’ rule in Article 103 TEC is to promote responsible budget policies, by stating that neither the European Community nor other member states shall be liable for or assume public debt in another ─ less responsible ─ member state.

***

Cooperation procedure

Economic and monetary union (EMU) is one of the rare areas where the cooperation procedure (Article 252 TEC) still applies with regard to the specifying measures mentioned in paragraph 2. Cf. Articles 99(5), 102(2) and 103(2).

Here is how the cooperation procedure is laid out in Article 252 TEC (OJ 29.12.2006 C 321 E/84):

Article 252 TEC

Where reference is made in this Treaty to this Article for the adoption of an act, the following procedure shall apply.

(a) The Council, acting by a qualified majority on a proposal from the Commission and after obtaining the opinion of the European Parliament, shall adopt a common position.

(b) The Council's common position shall be communicated to the European Parliament. The Council and the Commission shall inform the European Parliament fully of the reasons which led the Council to adopt its common position and also of the Commission's position.

If, within three months of such communication, the European Parliament approves this common position or has not taken a decision within that period, the Council shall definitively adopt the act in question in accordance with the common position.

(c) The European Parliament may, within the period of three months referred to in point (b), by an absolute majority of its component Members, propose amendments to the Council's common position. The European Parliament may also, by the same majority, reject the Council's common position. The result of the proceedings shall be transmitted to the Council and the Commission.

If the European Parliament has rejected the Council's common position, unanimity shall be required for the Council to act on a second reading.

(d) The Commission shall, within a period of one month, re-examine the proposal on the basis of which the Council adopted its common position, by taking into account the amendments proposed by the European Parliament.

The Commission shall forward to the Council, at the same time as its re-examined proposal, the amendments of the European Parliament which it has not accepted, and shall express its opinion on them. The Council may adopt these amendments unanimously.

(e) The Council, acting by a qualified majority, shall adopt the proposal as re-examined by the Commission.

Unanimity shall be required for the Council to amend the proposal as re-examined by the Commission.

(f) In the cases referred to in points (c), (d) and (e), the Council shall be required to act within a period of three months. If no decision is taken within this period, the Commission proposal shall be deemed not to have been adopted.

(g) The periods referred to in points (b) and (f) may be extended by a maximum of one month by common accord between the Council and the European Parliament.

***
In short, the cooperation gives the European Parliament more influence than consultation, but less than the co-decision procedure.

***
Prohibitions specified

Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b (1) of the Treaty (OJ 31.12.1993 L 332/1) is in force and directly applicable from 1 January 1994.

***

Next, we look at the corresponding proposal of the European Convention.


Ralf Grahn