Tracking eurozone crisis measures: Barbarians at the gate

Despite the decisions taken with regard to Greece, the battering rams of the markets were pounding the gates of the eurozone castle and sappers were undermining the walls of confidence.

Business as usual was no longer an option for the second largest currency in the world.



We have fundamental reforms to carry out and we will carry out those reforms. It is a major priority for me and for the European Council, said president Herman Van Rompuy in a statement on Greece and solidarity in the Euro Area on the eve of an extraordinary weekend (5 May 2010).



In our latest blog post we tracked the eurozone crisis measures to the activation of financial support for Greece, but now we start to turn towards the responses given to the challenges for the whole eurozone, as well.



The extraordinary meeting of the heads of state or government of the euro area 7 May 2010 issued a statement, which endorsed the implementation of the support package for Greece, described as reflecting the principles of responsibility and solidarity.


16 Musketeers



The national leaders reiterated, in their own words, the motto of the Three Musketeers “all for one, one for all”:

In the current crisis, we reaffirm our commitment to ensure the stability, unity and integrity of the euro area. All the institutions of the euro area (Council, Commission, ECB) as well as all euro area Member States agree to use the full range of means available to ensure the stability of the euro area.

Consolidation and stabilisation

The heads of state or government outlined the next steps towards fiscal consolidation, endorsed the actions of the European Central Bank (ECB) and indicated the establishment of a European stabilisation mechanism during the same weekend:

Today, we agreed on the following:

- First, consolidation of public finances is a priority for all of us and we will take all measures needed to meet our fiscal targets this year and in the years ahead in line with excessive deficit procedures. Each one of us is ready, depending on the situation of his country, to take the necessary measures to accelerate consolidation and to ensure the sustainability of public finances. The situation will be reviewed by the Ecofin Council on the basis of a Commission assessment by the end of June at the latest. We have asked the Commission and the Council to strictly enforce the recommendations addressed to Member States under the Stability and Growth Pact.

- Second, we fully support the ECB in its action to ensure the stability of the euro area.

- Third, taking into account the exceptional circumstances, the Commission will propose a European stabilization mechanism to preserve financial stability in Europe. It will be submitted for decision to an extraordinary ECOFIN meeting that the Spanish presidency will convene this Sunday May 9th.

In addition, the leaders of the euro area were prepared to strengthen economic governance and to make rapid progress on financial markets regulation and supervision.

Practically every timetable was accelerated, with the Europe Day ECOFIN Council called to hammer out the details.




Ralf Grahn

Eurozone governance: Cameron nixes treaty change

According to the BBC, UK prime minister David Cameron has politely told chancellor Angela Merkel in Berlin that he wants to play a positive role in Europe and that a strong eurozone is in the UK’s own interest.

However, Cameron excludes any treaty change giving the European Union more powers to shore up the eurozone, and he referred to the unanimity rule and the British veto. Cameron also excluded British participation in “bolstering” the euro. (By this I understand financial stabilisation measures.)

These are essentially the same things Cameron said the previous day, when he met president Nicolas Sarkozy in Paris.



UK government programme



While adding non-participation in financial stabilisation, what Cameron said is contained in the agreement between the Conservatives and the Liberal Democrats: The Coalition: our programme for government.

Here are three relevant excerpts:

We will ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament.


We will amend the 1972 European Communities Act so that any proposed future treaty that transferred areas of power, or competences, would be subject to a referendum on that treaty – a ‘referendum lock’. We will amend the 1972 European Communities Act so that the use of any passerelle would require primary legislation.


We will ensure that Britain does not join or prepare to join the Euro in this Parliament.

The inadequacy of the Lisbon Treaty rules on economic governance is in plain view. If monetary union without fiscal and political union is a structural weakness, there are two coherent responses for EU leaders:

1) Make necessary changes to the EU treaties, or
2) openly act to dismantle the eurozone.

Best wishes for the eurozone, while vetoing necessary treaty change, comes awfully close to the Leninist saying to give the Mensheviks support in the same way as the rope supports a hanged man.




Ralf Grahn

Euro Group leaders rescuing the euro

The latest in our series of blog posts inspired by the rescue actions in the eurozone was More on the EU’s no-bailout rule (European financial stabilisation mechanism), 14 May 2010.



The problem

In addition to the mind-boggling sums involved and the sudden calls for solidarity national leaders have done little consistent work to prepare their citizens for, the population has been bewildered by seemingly contradictory rules:

If EU bailouts are prohibited, is financial assistance allowed?

EU citizens have been taught that their country is not liable for the commitments of other member states: the so called no-bailout rule (Article 125 TFEU). On the other hand, EU financial assistance is expressly allowed in case of a serious threat of severe difficulties caused by natural disasters or exceptional occurrences beyond the control of a member state, according to Article 122(2) TFEU.

If citizens can make neither head nor tail of this, it is the responsibility of the national political leaders and the institutions of the European Union to elucidate.

This means that we have to sift through the paper trail left by the European Council, the Commission and the Council.

If the EU institutions work properly and transparently, the answers should become clear. If not, a vacuum is left to be filled by all sorts of protests, conjectures and conspiracy theories.

There is a lot to look at, so we have to advance patiently, one step at a time, without being stunned by the magnitude of the decisions. On the contrary, these monumental actions require detailed scrutiny and open discussion.



Euro Group

If we oversimplify matters crudely, we can say that the economic policy coordination specific to the second largest reserve currency in the world, the euro, depends on an informal intergovernmental arrangement.

Article 137 of the Treaty on the Functioning of the European Union (TFEU) refers to the Protocol on the Euro Group.



Protocol No 14 aims at ever closer coordination of economic policies within the euro area, and the Euro Group has a president, elected for two and a half years (Jean-Claude Juncker). Article 1 contains the substance of the arrangement (OJEU 30.3.2010 C 83/283):

Article 1

The Ministers of the Member States whose currency is the euro shall meet informally. Such meetings shall take place, when necessary, to discuss questions related to the specific responsibilities they share with regard to the single currency. The Commission shall take part in the meetings. The European Central Bank shall be invited to take part in such meetings, which shall be prepared by the representatives of the Ministers with responsibility for finance of the Member States whose currency is the euro and of the Commission.

The Ministers of Finance (although not specifically mentioned as such) meet informally to discuss. The Euro Group does not make formally binding decisions.



Eurozone leaders


However, it was an even more informal meeting of the heads of state or government of the euro area countries which set things in motion on 7 May 2010:



Statement of the heads of state or government of the euro area (press release)


Based on the principles of responsibility and solidarity, the participants expressed their political will to provide 80 billion euros (110 billion with the IMF) to Greece, in exchange for the Greek reform package, which was described as ambitious and realistic.

The leaders reaffirmed their commitment to ensure the stability, unity and integrity of the euro area, and they stated that the institutions of the euro area (Council, Commission, ECB) as well as the eurozone member states agreed to use the full range of means available to ensure stability.

The national leaders said that their countries were prepared to accelerate the consolidation of public finances. They promised strict enforcement of recommendations under the Stability and Growth Pact.

The meeting expressed support for the European Central Bank (ECB) in its action to ensure the stability of the euro area.

Taking into account the exceptional circumstances, the Commission would propose a European stabilisation mechanism to preserve financial stability in Europe, to be decided at an extraordinary ECOFIN meeting 9 May 2010.


The President of the European Council decided to accelerate the work of the Task Force, given the preparedness of the national leaders to:

- broaden and strengthen economic surveillance and policy coordination in the euro area, including by paying close attention to debt levels and competitiveness developments;

- reinforce the rules and procedures for surveillance of euro area Member States, including through a strengthening of the Stability and Growth Pact and more effective sanctions;

- create a robust framework for crisis management, respecting the principle of Member States' own budgetary responsibility.

The press release noted that the Commission would present its proposals on May 12.


Finally, the leaders agreed on the need to make rapid progress on financial markets regulation and supervision.



My impressions

The meeting was a first response to a grave crisis threatening one of the core aims of the European Union: an economic and monetary union (EMU) whose currency is the euro.

The leaders of the eurozone member states said the right things, although only words followed by deeds have the ability to convince hard-nosed or jittery markets.

The Ministers of Finance (ECOFIN) and the European Commission were left to nail down the details of a persuasive package over the weekend.




Ralf Grahn

Background: European financial stabilisation mechanism

The Council of the European Union has issued COUNCIL REGULATION (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism; published OJEU 12.5.2010 L 118/1.


Once upon a time, I explored the stages leading towards the Lisbon Treaty, writing a number of blog posts about what became Article 122 of the Treaty on the Functioning of the European Union (TFEU).

Now that the EU member states have felt the need to shore up the common currency, it is interesting to see in which terms the provision on financial assistance was discussed at the time. In this blog post we look at the legislative history of Article 122 TFEU.



EU: Economic crisis management I (26 September 2008) noted the extension of qualified majority voting (QMV) from Article 100 of the Treaty establishing the European Community (TEC) to encompass all forms of financial assistance, as described in the Swedish and Finnish ratification bills. The text of joint Declaration 6 was presented.



EU: Economic crisis management II (26 September 2008) recalled Article III-72 of the Draft Constitution proposed by the European Convention, which did not change Article 100 TEC essentially.



EU: Economic crisis management III (27 September 2008) noted that Article III-180 of the Constitutional Treaty remained substantially unchanged.



EU: Economic crisis management IV (27 September 2008) related one of the few cases where the intergovernmental conference (IGC 2007) leading to the Treaty of Lisbon took a fresh look at a provision. These “innovations” resulted in two additions: a spirit of solidarity and the explicit mentioning of the area of energy. (In the reply to a comment, I expressed my subjective view: I am worried that, with or without Lisbon, Europe is not up to taking on our common challenges, be they foreign and security policy or financial meltdown.)



EU: Economic crisis management V (28 September 2008) presented some UK sources about the spirit of solidarity, the distinct mention of energy and QMV in Article 122 TFEU.



EU: Economic crisis management VI (28 September 2008) saw energy supply, severe economic difficulties and solidarity as an interesting testing ground for the European Union in the years ahead. Legislative materials from Sweden and Finland as well as some comments in book form were mentioned.


First conclusions

Qualified majority voting (QMV) was extended to the whole provision. The spirit of solidarity was added. The area of energy was added.

In my view, the legislative history of Article 122 TFEU shows that the governments and commentators did present the changes openly. The ratifying parliaments were not duped.

Further discussion will follow on Grahnlaw.




Ralf Grahn