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.
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)
What political/legal difficulties did Estonia 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?
During the negotiations of the EFSF (and the EFSM) in May 2010, Estonia was not yet a member of the Eurozone. Estonia adopted the Euro on 1 January 2011 and participated in the revision of the EFSF in June 2011. Estonia subjected its acceptance of the broadened intervention instruments EFSF and EFSM to strict conditionality and use only on the basis of the concluded MoU’s.
Prior to the discussion in the Estonian Parliament (Riigikogu) on the draft resolution 90 OE on 27-29 September 2011, Indrek Teder, the Chancellor of Justice, addressed an opinion to the chair of the Riigikogu Economic Affairs Committee. The Chancellor of Justice is an independent institution established under the Constitution of Estonia. His tasks are twofold. As a general body of petition, the Chancellor of Justice ensures that public authorities do not infringe the fundamental rights of citizens and observe laws and the practice of good administration while performing their duties. As a guardian of constitutionality, the Chancellor of Justice ensures that the laws, regulations and other legislative acts are adopted in conformity with the Constitution and other laws. Under the Chancellor of Justice Act, the Chancellor of Justice may exercise this function either on the basis of an application or on his own initiative. Both legal acts in force and draft acts may be subject to the constitutionality procedure. In case an infringement has been established, the Chancellor of Justice may propose to the institution which has adopted the act to bring it in conformity with the Constitution or laws. If the institution that has passed the legislative act fails to reply to the proposal, the Chancellor of Justice may submit a request to the Constitutional Review Chamber of the Supreme Court to declare the legislative act in question unconstitutional or invalid. The Constitutional Review Chamber reviews the constitutionality of laws and regulations which have entered into force as well as those which have not been promulgated by the President and have not entered into force.
In the letter, the Chancellor of Justice enlisted reasons for questioning the constitutionality of the draft resolution. He emphasised that the Constitution does not prohibit Estonia from participating in the EFSF and giving state guarantees, yet draws attention to the following aspects:
- providing state guarantees and delegating the decision-making to the Government of the Republic requires amending the State Budget Act because the provisions of the Draft go beyond the rules on state guarantees provided by in § 402 of the State Budget Act, in particular as concerns the involvement of the Riigikogu. § 402 does not provide for a possibility to delegate the decision-making to the Government;
- the draft resolution does not include the Riigikogu to a sufficient extent and does not guarantee control of the Riigikogu over the increase of guarantee obligations of the Republic of Estonia.
The proposals made by the Chancellor of Justice in his letter were given due consideration by the relevant parliamentary committees and the Chancellor of Justice agreed with the amendments made to the draft. § 402 State Budget Act was duly amended (see Question IV.4 below).
Entry into force
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 Estonia and in what way does it involve Parliament?
Under § 65 clause 1 of the Estonian Constitution, the Riigikogu shall pass laws and resolutions. The unicameral Riigikogu comprises 101 members.
In order to be able to make a confirmation that all necessary procedures under Estonian law have been concluded in order to join the EFSF, the Riigikogu adopted on 29 September 2011 a Resolution on ensuring performance of the obligations arising from the European Financial Stability Facility (EFSF) Framework Agreement and amendments thereto. The resolution was adopted with 59 votes in favour, 18 votes against, no abstentions.
Pursuant to the Resolution, the Government of the Republic must submit to the Riigikogu for approval drafts on MoUs to be concluded between the European Commission and a Eurozone country for the purposes of the guarantees given under the EFSF. Also, the Government of the Republic is given the task to present for approval to the Riigikogu European Union Affairs Committee the conditions on financing and economic policy of an assistance programme of a Eurozone country in question, the obligation to present arising from the Riigikogu Rules of Procedure and Internal Rules Act § 18 subsection 3. In the resolution, a mandate is given to the Government of the Republic to provide guarantees to a specific country within the limits of the guarantee that has previously been approved by the Riigikogu as a draft MoU. It falls within the competences of the Government under Government of the Republic Act § 201 subsection 1 to approve EFSF debt obligations by which aid programmes are guaranteed. The technical details and economic policy programme of the particular aid programme, as well as the financing plan will not be approved by the plenary of the Riigikogu but by the European Affairs Commission. In Paragraph 6 of the Resolution, the Riigikogu mandates the Government to conduct the procedures of providing guarantees and entertaining claims on the basis of the guarantees.
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Estonia? 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?
Amendments were made to both the State Budget Act and the Riigikogu Rules of Procedure and Internal Rules Act.
Pursuant to § 104 clause 11 of the Constitution, a majority of the membership of the Riigikogu is necessary to amend the State Budget Act. The amendment was adopted on 29 September 2011 with 60 votes in favour, none against, one abstention.
To the State Budget Act § 402, clause 32 was added. The addition states that state guarantee can be given to an EU Member State or a legal person, of which the majority share belongs to the EU Member States. In this event, the Riigikogu may oblige the Government to apply for complementary delegations from the Riigikogu or provide an opinion on decisions made with regard to the guarantee provided by the Riigikogu.
On 29 September 2011, also § 1521 subsection 2 of the Riigikogu Rules of Procedure and Internal Rules Act was amended to include that the Government shall submit to the Riigikogu at their own initiative or at the request of the Riigikogu European Union Affairs Committee or the Foreign Affairs Committee “other significant matters of the European Union”.
Many questions were raised and remarks made in the Riigikogu. These concerned primarily:
– whether it has been implied in the procedure of the Government deciding on the size of guarantees that the Member States are ready to give up full state sovereignty and amend the founding treaties;
– whether the guarantee appears in the state budget as a debt;
– whether the approval to provide guarantees affects the state rating;
– whether or not the EFSF generates further centralisation of the European Union that leads to a decrease of national sovereignty;
– that the Resolution violates Estonian laws (the Riigikogu lacks legal basis to adopt the resolution) and Constitution (it is against the object of the Constitution to give the Government the opportunity to decide upon every specific loan).
The Resolution of the Riigikogu was adopted on 29 September 2011 with 59 votes in favour, 18 against, no abstentions.
What political/legal difficulties did Estonia encounter during the national procedures related to the entry into force of the EFSF Framework Agreement and/or the issuance and increase of guarantees?
No political or legal difficulties were encountered.
Is there a (constitutional) court judgment about the EFSM or EFSF in Estonia?
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?
The Riigikogu has to approve the decisions on aid packages on the basis of § 65 clause 10 of the Constitution pursuant to which the Riigikogu shall, on the proposal of the Government, decide on borrowing by the state and on the assumption of other proprietary obligations by the state as opposed to the technical details for which no parliamentary approval is needed (see question IV.2). The Government submits to the Parliament the following drafts for debate:
– the draft parliamentary resolution, drafted by the Government;
– the draft MoU;
– the draft on Private Sector Involvement (PSI).
The Estonian position in the European Council and at the Meeting of the Heads and State or Government of the eurozone Member States (Eurosummit) receives prior consent from the European Union Affairs Committee of the Riigikogu. The Riigikogu adopts the resolution by simple majority.
The conditions on financing and economic policy of an assistance programme of a Eurozone country requiring financial assistance will be approved by the European Union Affairs Committee of the Riigikogu.
The disbursement of tranches requires the approval of the Riigikogu European Affairs Committee.
What political/legal difficulties did Estonia encounter in the application of the EFSF?
Debates on the 2nd Greek package took place at the Riigikogu on 23 February 2012. Questions were raised on the effect of the loans on the Estonian debt rate; whether Greece can reduce the debt, achieve economic growth and return to the financial market; improving efficiency of the Greek tax authorities and taxation system; the future relationship between the EFSF and the ESM; what is the plan B if the aid package fails to produce results; the idea of economically less wealthy Estonia providing assistance to more wealthy Greece; by which mechanisms can the aid to Greece be stopped. There was lengthy debate in the Riigikogu and the general sentiment expressed in the speeches by the parliamentarians, especially those representing the opposition, was questioning the efforts of the Greek government and the general mentality of the country and its people.
The resolution to approve the draft memorandum of the 2nd Greek aid package was adopted by the Riigikogu with 56 votes in favour, 32 votes against, no abstentions.
On 11 January 2013, The Riigikogu European Union Affairs Committee approved the disbursement of tranches to Ireland and Portugal. No difficulties have been encountered.
In case Estonia 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?
What other information is relevant with regard to Estonia and the EFSM/EFSF?
Estonia joined the eurozone on 1 January 2011. Prior to that, very few discussions on the EFSF, etc. took place.