Greece

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 Greece 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?

When the Greek debt crisis burst in 2010, the initial main problem was that there was no existing mechanism in place to provide financial assistance to indebted countries. Therefore, the 1st Greek bailout programme consisted of bilateral loans from Euro area member states amounting to 80bn euros and a 30bn euros loan from the IMF. In the meantime, however, the EFSM was set up through Regulation 407/2010 of the 11th of May 2010 under the procedure of Article 122§2 TFEU, whereas the EFSF was created by the euro area Member States following the decisions taken on 9 May 2010 within the framework of the Ecofin Council.[1] The EFSF provided financial assistance to Greece under the second Economic Adjustment Programme, while the undisbursed assistance from the Greek Loan Facility was also shifted to the EFSF.[2]

The negotiations for the EFSF/M thus took place at the same time with the finalisation of the Greek Loan Facility. Therefore, many of the political/legal difficulties concerned this agreement[3] and the EFSF/M was not discussed in Parliament as such during its negotiation. There was no major opposition to the establishment of the EFSF and the general attitude of the Greek MPs throughout the crisis is that EU institutions should do more to address the crisis. In that context, the EFSF was never perceived as problematic from a constitutional perspective. Generally, in the public and parliamentary debates, the Government presented the establishment of a European bailout mechanism as a negotiated success, a proof of the recognition of the European character of the economic crisis and a net of security for the Greek and the Eurozone economy. On the contrary, the opposition parties often objected that this European mechanism is nothing but a mechanism for an orderly default and only serves the interests of the creditors.[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 Greece and in what way does it involve Parliament?

It is difficult to say what the procedure is for the obligations of Greece vis-à-vis the EFSF to come into force and effect, as it depends on the nature of the EFSF agreement. This issue provoked many debates in Parliament; from the relevant debates it is obvious that there is uncertainty on the subject.

Article 28 of the Constitution determines the procedural and substantial conditions for the ratification of international agreements:

“1. The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.   
2. Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement.

3. Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.”[5]

The interpretive clause of this article states that “Article 28 is the basis for the participation of the Country in the procedures of European integration.” However, for the EFSF agreement, this constitutional procedure was not followed until September 2011.

Article 1 paragraph 4 of the legal statute 3845/2010, containing measures for the implementation of the mechanism for the support of the Greek economy,[6] provided a very broad authorization to the Minister of Finance to represent the Greek State and to sign any memorandum, agreement or loan, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone, the IMF and the ECB, in order to implement the First Economic Adjustment Programme. According to the last sentence of this paragraph, “[t]he memorandums, agreements and conventions are introduced to Parliament for ratification.” Some days later, however, the Government proposed an amendment to this procedure which was voted in Parliament through the emergency procedure: instead of ratification, the relevant texts would be introduced to Parliament for “discussion and briefing.” The amendment added also that these memorandums, conventions and agreements would enter immediately into force with their signature.[7] In other words, with this amendment, the entering into force of the relevant agreements did not presuppose the substantial and procedural ratification conditions set by the Constitution (articles 36 and 28). Therefore, if the EFSF is considered part of the mechanism for the rescuing of the Greek economy, no ratification procedure is needed.

However, the Minister of Finance submitted a draft law on the 4th of June 2010, concerning the ratification of the Greek Loan Facility and the participation of the country to the EFSF. The second article of the draft law habilitated the Minister of Finance to sign any memorandum, agreement and convention in relation to the EFSF.[8]

The explanatory report of this draft is not clear as to the entering into force of the EFSF agreement. It mentions that “[Greece], which has been already financed and will be financed for three years by the loan facility approved the previous month, will not participate immediately in the European mechanism [meaning the EFSF], or, more precisely, it is considered that it has already participated, since [the EFSF] is in continuity with and constitutes an expansion of the Greek support mechanism. [Greece] will of course participate in the legal person that will materialize [the European support mechanism] and will participate integrally in the future, when it will have overcome the crisis and will have fulfilled the obligations that it has assumed.”[9] Nevertheless, this draft law was only discussed in the Permanent Commission of Finance and was never introduced to the Parliament Plenary Session for voting.[10]

The situation becomes more complicated, as article 93 of the statute 3862/2010, implementing three non-related non-related European directives, habilitates the Minister of Finance “to represent the Greek State in the EFSF and to sign any memorandum, agreement or loan, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone and the ECB and to proceed to any necessary act for the participation of the Greek State in legal persons and authorities constituted for the implementation of the European Support Mechanism.”[11] The same article declares that the relevant agreements and conventions enter into force with their signature and are brought into Parliament for discussion and briefing. Concerning the loan agreements, however, the article requires their ratification by Parliament and provides that they enter into force only after the publication of the ratification statute in the Official Gazette. Finally, article 94 of the same statute attributes a retroactive effect to these provisions, from the 1st of June 2010.[12] In her speech in the parliamentary debates on the 5th of July, the representative of the majority argued that Greece had signed the EFSF agreement of the 16th June under the condition of approval by the Parliament; it was this approval that was asked with the submission of article 93 to vote.[13]

A little more than a year later, however, the EFSF Framework Agreement of the 16th of June 2010 (along with its 3 annexes), the amendment of the EFSF Framework Agreement of the 30th of June 2011 (along with its 4 annexes), and the amendment of the EFSF Framework Agreement of the 1st of September 2011 (along with its 3 annexes) were all ratified by the Greek Parliament through Law 4021/2011, also imposing a property tax and regulating bank supervision.[14] In fact, it is practice in Greece to try and discuss agreements along with the fiscal measures that accompany them in one go, in order to put pressure on MPs to vote in favour of ratification as a package deal. The agreements were introduced verbatim in both English and Greek. For their ratification, the procedure of Article 28§1 of the Constitution was used, which provides the requirement of a simple majority of MPs to vote in favour of its ratification.[15] The ratification statute was discussed in the Plenum on the 20th, 21st and 22nd and the 27th of September 2011 and entered into force with its publication in the Official Gazette on the 3rd of October.[16] In the relevant parliamentary debates, it is sometimes implied that it is not the EFSF per se that is ratified, but rather the new role assumed by the EFSF, which, after the amendment of the Framework Agreement, could provide loans to countries in financial difficulty for the recapitalization of banks, could buy bonds of over-debited countries in the primary and secondary market and could provide preventive loans to countries submitted to pressures by the markets.[17]

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Greece? 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?

Greece stepped out from the obligation to issue Guarantees under the EFSF (See article 2(7) of the Framework Agreement).[18] There was no discussion in Parliament about the issuance of guarantees for the EFSF and possible practical repercussions of this. An extended public discussion took place on the guarantees required by the creditors for the loan agreements with Greece, which is described in the relevant questions. Further, no information could be retrieved on eventual guarantees issued before the stepping-out of Greece.[19]

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

The legal and political difficulties during the national procedures related to the entry into force of the EFSF Framework Agreement did not concern so much the agreement per se or the issuance and increase of guarantees but rather the role of Parliament in its application (see question IV.6).

The EFSF Framework Agreement and its amendments were all ratified by the Greek Parliament through Law No 4021/2011.[20] The ratification statute was discussed in the Plenum on the 20th, 21st and 22nd and the 27th of September 2011 and entered into force with its publication in the Official Gazette on the 3rd of October.[21] However, the debate in Parliament was not focused on the EFSF. This is due to the fact that through the same Act two sets of provisions were introduced that were perceived as more important at the time; first, the rules for bank supervision and for the Fund that would assume responsibility for the recapitalization of the Greek Banking system and, second, a new tax linked to property.[22] In fact, it is practice in Greece to try and discuss agreements along with the fiscal measures that accompany them in one go, in order to put pressure on MPs to vote in favour of ratification as a package deal. Indeed, the statute obtained a broad consensus in Parliament precisely because most political parties perceived the institutionalization of the EFSF and its ratification by Parliament as a positive evolution for the Greek economy.[23]

In general, there was no major opposition to the establishment of the EFSF and the general attitude of the Greek MPs throughout the crisis is that EU institutions should do more to address the crisis. In that context, the EFSF was never perceived as problematic from a constitutional perspective. Relevant objections (e.g. transfer of sovereignty, English law as the applicable law to the agreement) had already been raised at an earlier stage when the first bailout agreement went through the Greek Parliament (see questions X.1-X.7). The only objection raised by the opposition parties to the EFSF institutional framework was that it constituted a mechanism of orderly default that only protected the interests of the creditors.[24]

As explained above, the EFSF Framework Agreement and its amendment that concerned the increase of guarantees were ratified through one Act by the Greek Parliament. However, concerning the issuance or increase of guarantees, the question is not applicable to Greece, since the country stepped out from its relevant obligations (see question IV.3). There was some resentment in the Greek Parliament concerning the initial refusal of Slovakia to contribute to the EFSF given that the Greek Parliament has consented to its accession to the Eurozone just a few months earlier (by the LA.O.S. party).[25]

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

No, the constitutional court judgment concerns measures implemented under the financial assistance instruments and not the EFSF per se (see question X.9). There is no constitutional judgment concerning the EFSM.

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?

The role of Parliament in the application of the EFSF is marginal. This provoked heated debates in Parliament, especially during the discussion of article 93 of the law 3862/2010. This article, included in a statute implementing three non-related European directives, habilitates the Minister of Finance “to represent the Greek State in the EFSF and to sign any memorandum, agreement or loan convention, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone and the ECB and to proceed to any necessary act for the participation of the Greek State in legal persons and authorities constituted for the implementation of the European Support Mechanism.”[26] The same article declares that the relevant agreements and conventions enter into force with their signature and are brought into Parliament for discussion and briefing.[27]

These provisions provoked strong reactions by many deputies during the discussions of the draft law in the competent Permanent Commission of Finance of the Parliament. Most deputies, including some important members of the governing party (V. Papandreou, Geitonas, Magkoufis), objected that this article conceded too broad powers to the Minister of Finance, practically giving him/her a “carte blanche” and making any effective parliamentary scrutiny impossible.[28] The degradation of the role of Parliament through these provisions was also stressed in the Plenum discussion on the 5th of July 2010 by deputies of all the parties of the opposition.[29]

As a response to the strong reactions in the Permanent Commission, the Government proposed an amendment concerning loan agreements under the EFSF framework. For their entering into force, article 93 requires their ratification by Parliament and the publication of the ratification statute in the Official Gazette. However, during the Plenum discussion, the representative of N.D. objected that, in these cases, the ratification would only be fictitious and Parliament would be obliged to approve already taken decisions at the European level.[30] The representative of LA.O.S. argued that this provision had no sense because Greece would never be able to become a creditor for other countries.[31]

Despite these reactions, article 93 was voted by the majority of deputies and was attributed retroactive effect, from the 1st of June 2010.[32]

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

The application of the EFSF was never a major issue in the public debates in Greece, given that Greece was a recipient of the EFSF. Relevant political/legal difficulties only arose during the negotiation and implementation of the specific financial assistance instruments, for which see the relevant questions (X.1 and following).

Bilateral support    
IV.8    
In case Greece 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?

No, Greece was only a recipient of loans on a bilateral basis. It did, however, contribute to the EFSF and the ESM later on.

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

Greece is a debtor state to the EFSF, so relevant information can be found in the section concerning financial assistance (questions X.1 f.).

[1] See the chronological account of the Euro-crisis, http://ec.europa.eu/economy_finance/crisis/2010-05_en.htm

[2] See EFSF, Frequently Asked Questions, p. 18 f., available at http://www.efsf.europa.eu/attachments/EFSF%20FAQ%2004032013.pdf.

[3] See Questions X.1-X.6.

[4] See for example Minutes of the Greek Parliament, Plenary Session of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf

[5] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[6] Law 3845/2010, ΦΕΚ Α’ 65/6.5.2010.

[7] Law 3847/2010, ΦΕΚ A’ 67/11.5.2010, sole article, paragraph 9 (statute readjusting certain allowances for public pensioners). On the parliamentary debates that this provision caused, see questions X.1 and following.

[8] See the draft law, http://www.hellenicparliament.gr/UserFiles/c8827c35-4399-4fbb-8ea6-aebdc768f4f7/CDANEIO.pdf.

[9] See the report, available at http://www.hellenicparliament.gr/UserFiles/2f026f42-950c-4efc-b950-340c4fb76a24/K-TAMEIONOM-EIS1.pdf,1β.

[10] The draft law was not voted: http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=bcf0f265-06e2-4d43-a1ce-06ce96d27fb1. The only information that could be retrieved on the relevant discussions in the Permanent Commission of Finance is available at http://www.skouzekaifilonos.gr/index.php?option=com_content&view=article&id=423:h-&catid=55:2010-04-28-12-55-47&Itemid=55. According to this information the draft law was not voted, because, according to the laws 3845/2010 and 3847/2010, only an information procedure of the Parliament was institutionalized and not any ratification procedure.

[11] See law 3862/2010, ΦEK 113 A’/13.07.2010. This statute was submitted to Parliament on the 22nd of June, was voted on the 5th of July 2010.

[12] See the statute.

[13] See the debates of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf, p. 9581 f.

[14] See law 4021/2011, ΦEK A’ 218/03.10.2011.

[15] This is explicitly provided in the minutes of the relevant Parliamentary session. See Minutes of the Greek Parliament, Plenary Session of the 20th September 2011, available at

http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110920.pdf.

[16] http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=96a46802-d7ce-4477-92cf-f845b79275d6.

[17] See the speech of the representative of the majority in the debates on the 20th of September 2011, cited above, p. 17245 f.

[18] http://www.efsf.europa.eu/attachments/EFSF%20FAQ%2004032013.pdf, p. 2.

[19] The representative of the majority in the debates on the 5th of July 2010 implied that no such guarantees would be issued. See the relevant parliamentary debates, cited above, p. 9582.

[20] See Act 4021/2011 ΦEK 218A’/2011.

[21] http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=96a46802-d7ce-4477-92cf-f845b79275d6.

[22] See the relevant parliamentary debates, on the 20th, 21st, 22nd and 27th of September: Minutes of the Greek Parliament, Plenary Session on the 20th of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110920.pdf; Minutes of the Greek Parliament, Plenary Session on the 21st of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110921.pdf; Minutes of the Greek Parliament, Plenary Session on the 22nd of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110922.pdf; Minutes of the Greek Parliament, Plenary Session on the 23rd of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110927.pdf.

[23] See the debates on the 20th, the 21st and the 22nd of September, cited above.

[24] See the Minutes of the Greek Parliament cited above.

[25] See the speech of the LA.O.S. deputy Kostas Aivaliotis in the debates on the 20th of September, cited above.

[26] See law 3862/2010, ΦEK 113 A’/13.07.2010. This statute was submitted to Parliament on the 22nd of June, was voted on the 5th of July 2010.

[27] This provision, practically identical with the one concerning the Greek Loan Facility (amended article 1 paragraph 4, law 3845/2010) is actually a repetition of the article 2 of a draft law, submitted on the 4th of June 2010 and concerning the ratification of the Greek Loan Facility and the participation of the country to the EFSF. However, this draft was never discussed and voted in Parliament. See question IV.2. See also the comment by the N.D. deputy Christo Staikoura, http://www.cstaikouras.gr/2010/06/dilosi-gia-ti-sizitisi-ke-enimerosi-epi-mnimonion-simfonion-ke-simvaseon/

[28] See «Νέες αντιδράσεις για το «εν λευκώ» [New reactions for the “carte blanche”]», Ελευθεροτυπία, Friday 25 June 2010, http://www.enet.gr/?i=news.el.article&id=176809.

[29] See the Minutes of the Greek Parliament, Plenary Session of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf, p. 9581 f.

[30] See the speech of Nikolopoulos in the debates of the 5th of July, cited above.

[31] See the speech of Aivaliotis in the debates of the 5th of July, cited above.

[32] See article 94 of the statute.