Czech Republic

IV - Early Emergency Funding

IV     Early Emergency Funding

Prior to 2010, loan assistance to States was made primarily via bilateral agreements (to Latvia, Hungary, Romania, 1st round of Greek loan assistance).         
The European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF) are two temporary emergency funds, both resulting from the turbulent political weekend of 7-9 May 2010. On May 9, a Decision of the Representatives of the Governments of the Euro Area Member States was adopted expressing agreement on both funds.          
The EFSM is based on a ‘Council regulation establishing a European financial stabilisation mechanism’ of May 11, 2010 adopted on the basis of article 122(2) TFEU and therefore binding on all 27 member states of the EU.           
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:118:0001:0001:EN:PDF)
The EFSF is a special purpose vehicle created under Luxembourgish private law by the 17 member states of the Eurozone. The EFSF Framework Agreement was signed on June 7, 2010. On June 24, 2011, the Heads of State or Government of the Eurozone agreed to increase the EFSF’s scope of activity and increase its guarantee commitments.
(
http://www.efsf.europa.eu/attachments/20111019_efsf_framework_agreement_en.pdf and http://www.efsf.europa.eu/attachments/faq_en.pdf)

Negotiation
IV.1     
What political/legal difficulties
did the Czech Republic encounter in the negotiation of the EFSF and the EFSM, in particular in relation to (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

The Czech Republic (CR) is not a member of the Eurozone and has not participated in the operations of the EFSF. Regarding the EFSM, which applied to all MS, CR has guaranteed the loans to Ireland and Portugal from the mechanism in the amount equalled to approximately 1.25% (the Czech Republic’s share on the EU budget),[1] in particular CR has guaranteed the loans in the amount of 6.7 bn CZK (app. 258,3 millions EUR) in the case of Ireland and 7.7 bn CZK (app. 297 millions EUR) in the case of Portugal.[2]

The EFSF was criticized for its legal framework – a private company by shares under Luxembourg law with full immunity in all MS, that is being an organization “above law, staying outside common European legislation, functioning outside the primary law, while having direct and significant impact on all MS of the EU, including [Czech Republic].”[3] A general criticism of the EFSM was raised in connection with the ESM within the debates on Article 136 TFEU Amendment. The debate on EFSM was rather non-existent. The political situation can be the reason – CR had a technocratic government and all political parties were preparing for general elections on May 28-29, 2010 (the voting in the Council took place on May 11). Therefore the issue was not debated in the Parliament (the Committee on EU affairs only took note on the (technocratic) Government position (supporting the EFSM) without any discussion. Finance Minister Eduard Janota stated in support of the CR position that the financial crisis and particularly the situation in Greece had caused the raise of Czech state debt obligations costs by 0.4% in the first 7 days in May only. President Klaus stated that CR should resist any involvement in assistance to Greece.[4]

Entry into force      
IV.2     
Article 1(1) EFSF Framework Agreement provides that it will enter into force if sufficient Eurozone member states have concluded all procedures necessary under their respective national laws to ensure that their obligations shall come into immediate force and effect and provided written confirmation of this. What does this procedure look like in the Czech Republic and in what way does it involve Parliament?

CR has not participated in the EFSF.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in the Czech Republic? What debates have arisen during this procedure, in particular in relation to the implications of the guarantees for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

CR has not participated in the EFSF.

Activation problems        
IV.4     
What political/legal difficulties
did the Czech Republic encounter during the national procedures related to the entry into force of the EFSF Framework Agreement and/or the issuance and increase of guarantees?

CR has not participated in the EFSF.

Case law 
IV.5     
Is there a (constitutional) court judgment about the EFSM or EFSF in the Czech Republic?

No. CR has not participated in the EFSF.

Implementation
IV.6     
What is the role of Parliament in the application of the EFSF, for example with regard to decisions on aid packages (Loan Facility Agreement and Memorandum of Understanding) and the disbursement of tranches, both of which need unanimous approval by the so-called Guarantors, i.e. the Eurozone member states?

CR has not participated in the EFSF.

Implementing problems  
IV.7
What political/legal difficulties
did the Czech Republic encounter in the application of the EFSF?

CR has not participated in the EFSF.

Bilateral support    
IV.8     
In case the Czech Republic participated in providing funding on a bilateral basis to other EU Member States during the crisis, what relevant Parliamentary debates or legal issues have arisen?

Czech Republic did not participate in providing funding on a bilateral basis.

Miscellaneous
IV.9     
What other information is relevant with regard to the Czech Republic and the EFSM/EFSF?

Not applicable

[1] Češi by na pomoc Portugalsku dali až 11,25 miliardy korun (The Czechs would participate with up to 11.25 billions CZK in the aid to Portugal), E15.cz, April 7, 2011, available at: http://zpravy.e15.cz/domaci/ekonomika/cesi-by-na-pomoc-portugalsku-dali-az-11-25-miliardy-korun.

[2] Czech National Bank, Hospodářská a měnová politika v EU (Economic an Monetary Union in the EU), available at: http://www.cnb.cz/cs/o_cnb/mezinarodni_vztahy/cr_eu_integrace/.

[3] MP Kateřina Klasnová (Public Affairs party), Chamber of Deputies of the Parliament, June 5, 2012 (during ratification of the EC Decision on the Art. 136 Amendment), available at: http://www.psp.cz/eknih/2010ps/stenprot/040schuz/s040017.htm.

[4] Euroskop.cz, Vnitřní trh in May 2010 (Internal Market in May 2010), June 4, 2010, available at: https://www.euroskop.cz/13/16552/clanek/vnitrni-trh-v-kvetnu-2010/. Of course, the EFSM did guarantee loans to Ireland and Portugal, not Greece.