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 Ireland 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 EFSF and EFSM agreements were not discussed in Parliament before their announcement in May of 2010. No details are available regarding the Government’s negotiating strategy in relation to the Regulation or the Framework Agreement.
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 Ireland and in what way does it involve Parliament?
While the power to commit the State to international agreements is vested in the Government pursuant to Article 29.4 of the Irish constitution, Article 29.5.1° provides that ‘[t]he State shall not be bound by any international agreement involving a charge upon the public funds unless the terms of the agreement shall have been approved by Dáil Éireann [the lower house].’ Additionally, Article 29.6 establishes Ireland as a dualist legal system providing that ‘[n]o international agreement shall be part of the domestic law of the State save as may be determined by the Oireachtas [Parliament]’ The EFSF Framework Agreement, being an international agreement involving a charge on public finances was accordingly implemented in Ireland by the passage of an ordinary piece of legislation, the European Financial Stability Facility Act 2010 (the EFSF Act 2010). The EFSF Act 2010 gives powers to the Minister for Finance to issue guarantees for the purposes of the EFSF (s 2) and provides that funds dispensed and received by Ireland pursuant to any operations under the EFSF be paid from and to the Central Fund (ss 3-4). The Minister is obliged to report Ireland’s on-going involvement in EFSF operations to the Dáil (lower house) on a regular basis (s 5). The EFSF Framework Agreement itself was attached as a schedule to the 2010 Act.
It was presented by the Government on 18 June 2010. The Bill was debated in the Dáil (lower house) and passed on the 24 June 2010. It was debated in the Seanad (upper house) and passed on the 1 July 2010. A motion for early signature in the Seanad was also passed on 1 July 2010. It received the signature of the President and passed into law on the 7 July 2010.
The 2010 Act was amended in 2011 by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 to provide for changes to the EFSF Framework Agreement and the terms of the original Greek loan facility. The 2011 Act incorporated those changes to the EFSF Agreement agreed in June 2011 and increased the amount that could be drawn down from the Central Fund from €7 billion to €12.5 billion.
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Ireland? 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?
Under s. 2 of the EFSF Act 2010 the Minister for Finance is empowered to issue guarantees of up to €7 billion on behalf of the state.
In the Dáil a question was raised surrounding the provision for fact that a guarantee would have to be given for 120% of the amount stipulated and whether this in fact increased Ireland’s overall liability. In his response the Minister for State for Finance explained that the 120% figure was only with respect to guarantees issued with respect to individual assistance programmes and that Ireland’s total potential liability of €7 billion was not affected by that provision. Sinn Féin opposed the measure with a spokesman arguing in the Dáil that ‘one cannot treat a debt-fuelled over-consumption problem by adding much more debt.’
In the Seanad a single independent Senator queried the potential liability that Ireland was exposing itself to stating that ‘I worry when the Minister of State says, apropos of nothing, that the Government will guarantee another large sum of €7 billion in this case on top of what we guaranteed to Greece.’
What political/legal difficulties did Ireland 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 significant difficulties were encountered during the procedures relating to either the entry into force of the EFSF Framework Agreement or the issuance of guarantees.
Opposition parties were largely supportive of the EFSF during the debate on the EFSF Act 2010 and concurred with the Government’s position that it was in Ireland’s interest to secure the stability of the Eurozone via the establishment of such a facility and the Bill passed with a majority.
The debate took place in the backdrop of the first Greek Bailout and measures to introduce a greater coordination of budgets in the Eurozone. The opposition Labour party tabled one amendment to subject the information held by Irish authorities in relation to the EFSF to the Freedom of Information Act. This was rejected by the Government (and hence a majority of the Dáil) who pointed to the need to protect confidential business and political information. The opposition Fine Gael party tabled an amendment to create more detailed reporting obligations for the Government under the Act. This was rejected by the Government (hence majority of the Dáil) who claimed that sufficient reporting obligations already existed in s. 5 of the 2010 Act. Sinn Féin was the only party to oppose the 2010 Act arguing that a broader European stimulus strategy was required.
Guarantees were issued by the Minister for Finance under s. 2 of the 2010 Act. The Amendment Act 2011 likewise enjoyed cross party support. The Bill was presented as a follow up to the renegotiation of Ireland’s financial assistance package in June of 2011 in which EFSF loans were extended and their interest rate reduced. The amendment was thus seen as in both Ireland’s immediate interest and in the interest of achieving/maintaining broader stability in the Eurozone. At this stage Fine Gael and the Labour Party had formed a governing coalition. Fianna Fáil, in opposition supported the amendment. Some independent and Socialist Party deputies opposed the Bill on the grounds of an opposition to the general response to the Eurozone crisis.
In the Seanad the debate ‘did not necessarily…examine the Bill’s specifics, which are in the main not controversial but [examined] the wider issues around the euro and the stability of the single currency.’ Some concerns were raised regarding the dominance of Germany and France in developing on-going solutions to the Eurozone crisis and the rushed Parliamentary procedures being used to pass them in Ireland. A motion was also passed allowing for an early signature of the legislation by the President.
Is there a (constitutional) court judgment about the EFSM or EFSF in Ireland?
There is no constitutional court judgment concerning the EFSF.
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?
There is no formal role for Parliament in the application of the EFSF.
S 5 of the 2010 Act provides that the Minister shall lay a report before the Dáil every 6 months of the EFSF’s operation detailing the value of the guarantees issued, money paid and money received by the State. These figures are to be provided for the preceding 6 months and the total period.
What political/legal difficulties did Ireland encounter in the application of the EFSF?
There have been no known significant difficulties encountered in the application of the EFSF.
In case Ireland 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?
Ireland participated in one instance of bilateral funding to another EU Member State during the crisis, namely the first Greek programme of assistence in 2010. Ireland’s contribution of €1.3 billion (1.64% of the total of the Euro area contribution of €80 billion) was authorised by the Euro Area Loan Facility Act 2010. It was debated on the 18th and 19th of May in the Dáil (lower house) and on the 20th of May in the Seanad (upper house). In the Dáil Ministers and opposition spokespeople spoke of the need to show solidarity with Greece on the basis of the principle of solidarity itself and also because it was in Ireland’s interest. This was particularly the case given Ireland’s then vulnerable financial position. Some concerns were raised about proposed plans to deepen economic coordination, in particular the role of the Commission in budgetary policy. While generally in favour of such a development opposition speakers stressed the need for Parliament to be properly involved, particularly in light of the then (and arguably continuing) lack of parliamentary involvement in the budgetary process. Similar concerns were raised in the Seanad.
What other information is relevant with regard to Ireland and the EFSM/EFSF?
No other relevant information.