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.           
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. 
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What political/legal difficulties
did Luxembourg 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?

No difficulties known.

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 Luxembourg and in what way does it involve Parliament?

The participation of Luxembourg is based on ‘Loi du 9 juillet 2010 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro’[1] , passed by the Luxembourg parliament (Chambre des Députés) on 1 July 2010. 58 members of parliament voted in favour of the law, one abstained (André Hoffmann from déi Lénk (Democratic Socialists))[2] . The Luxembourg EFSF-law is an ordinary law and consists of two articles of which the first authorises the Luxembourg government to issue a guarantee of up to Euro 1.15 billion to the EFSF and the second lays down that the EFSF is exempted from any fees, charges, direct and indirect taxes and any duties of registration. This law had to be approved by parliament because Article 99 of the Luxembourg Constitution requires that all loans need parliamentary confirmation. Issuing a financial guarantee also falls into this category.

The increase of the EFSF guarantee sum also had to be confirmed by the Luxembourg parliament. The Chambre des Députés passed ‘Loi du 22 septembre 2011 modifiant la loi du 9 juillet 2010 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro’[3] on 15 September 2011 which increased the participation of Luxembourg for the EFSF from Euro 1.15 billion up to Euro 2 billion. The law was confirmed by 54 MPs (déi gréng (the Greens), CSV (Christian Democrats), LSAP (Social Democrats), DP (Conservative Liberals)).[4] The five members of parliament who did not vote in favour of the law were members of the National Conservatives (ADR) and the representative of the Democratic Socialists (Déi Lénk)[5] who had already abstained in the voting for the first Luxembourg EFSF-law.

The EFSF is an institution based on Luxembourg law. The Luxembourg State represented by the Minister of Finance Luc Frieden (CSV-party; Christian Democrats) requested the public notary on 7 June 2010 to establish the EFSF which is created as a Special Purpose Vehicle (SPV)/entité ad hoc. In its first article, the EFSF statute lays down that it is a Luxembourg public limited liability company (‘société anonyme’)[6] governed by its statutes and the Commercial Companies Act (‘Loi du 10 août 1915 sur les sociétés commerciales modifiée’[7] ). The immunity of the EFSF was modified in one of the Luxembourg ESM-laws (see question VIII.3).

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

The law authorises the government to issue guarantees. More explicit requirements about the way of issuing guarantees are not contained in the law. The guarantee is issued by the Luxembourg state via the Luxembourg treasury.[8]

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

In the framework of the Luxembourg legislative procedure, the Luxembourg State Council (Conseil d’Etat) published an opinion on the legislative proposal authorising the government to issue guarantees to the EFSF (more information about the role of the Conseil d’Etat and its comepetences under the Luxembourg Constitution can be found in question II.2). This procedural requirement is laid down in Article 83bis of the Luxembourg constitution. In its opinion concerning the first EFSF-law from 8 June 2010 the Conseil d’Etat criticized that the norms of the law did not make it clear which kind of guarantee (legal nature) is granted to the EFSF and that there is no rule about possible objections against the guarantee.[9] In its second vote, after the parliament (Chambre des Députés) had put some terminological changes to the formulation of the law, the Conseil d’Etat declared its approval.[10]

One of the main discussions on this law was an amendment proposed by the government in the framework of the legislative packages on the ESM. The amendment contained the granting of a far-reaching immunity to the EFSF. In the view of the Conseil d’Etat, granting a wide degree of immunity to the EFSF is contrary to the international obligations of Luxembourg (in particular Article 6 ECHR (right to a fair trial and to access to court) and to the principle of equality laid down in Article 10bis (1) Luxembourg Constitution).[11] The high degree of immunity is particularly difficult in the case of the EFSF because it is a Luxembourg corporation under private law and no international organisation. The fact that the EFSF is completely outside the jurisdiction of any Luxembourg Court is seen as being not in conformity with the principle of equality laid down in Article 10bis Luxembourg Constitution. The Conseil d’Etat was of the opinion that the immunity is way too far-reaching and cannot be a justified reason for inequality under the respect of objectivity, rational justification, adequacy and proportionality.[12] This is why the Conseil d’Etat pleaded for a less far-reaching degree of immunity and proposed a new text for this article, which is in accordance with the principle of equality.

The Luxembourg parliament has modified this proposal after the severe critique from the Conseil d’Etat.

Case law     
Is there a (constitutional) court judgment about the EFSM or EFSF in Luxembourg?

The Luxembourg Constitutional Court (Cour Constitutionelle) was established in 1996 by two laws.[13] The Court has the competence to control a posteriori the constitutionality of ordinary legislation, except those laws, which contain the approval to international agreements (Art. 95ter (2) Luxembourg Constitution). This is the consequence of the Luxembourg principle of precedence of international law over national law (see also question V.2).[14]

The Conseil d’Etat is an advisory body for legal questions in the Luxembourg political system, which has to be consulted about new legislative proposals (Article 83bis Luxembourg Constitution). The Conseil d’Etat analyses the proposal in relation to its accordance with the Luxembourg Constitution and the international obligations of Luxembourg. The Conseil d’Etat consists of 21 members of which at least 12 must have a legal education. Its opinions cannot be considered as constitutional court judgments. After the European Court of Human Rights had decided that the Luxembourg Conseil d’Etat did not fulfil the requirements of a tribunal in the sense of Article 6 ECHR[15] , Luxembourg amended the structure of the Conseil d’Etat in 1996.[16] Since then, the Conseil d’Etat does not have any jurisdictional competences. However, it is not a second parliamentary chamber. Its members are not determined in general elections, but mostly by the Grand Duke of Luxembourg. It is considered to be a non-parliamentary committee with competences under constitutional law whose task is to control the constitutionality of legislative proposals.[17] Its opinions enjoy a lot of attention[18] , but the Luxembourg parliament is not legally bound to the opinions. If the Conseil d’Etat objects to a legislative proposal, it publishes an opposition formelle (formal opposition). However, parliament can proceed with the legislative procedure. In this case, the Conseil d’Etat can use its suspensory veto (veto de temporisation). This veto stops the legislative procedure for three months.[19] If parliament still wants to pass the law, it has to mention publicly the formal opposition of the Conseil d’Etat. Altogether, the Conseil d’Etat has restricted competences in the Luxembourg legislative procedure but does neither fulfil the role of a court nor of a parliamentary chamber.

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?

Parliament is only informed by the government about decisions taken at the level of the EFSF. Alex Bodry, member of the LSAP (Social Democrats), which was one of the government parties at this time, mentioned that the Government should inform parliament about aid packages and discuss them in plenary sessions. However, this should not be a legal, but a political obligation.[20] The rapporteur for the first Luxembourg EFSF-law Lucien Thiel from the then governmental party CSV (Christian Democrats) also emphasized that the Chambre des Députés has to be informed about the activities at the EFSF and that parliament has to be consulted before every decision of the EFSF about granting financial assistance to a Member State. Within the reasons for the first EFSF-law the government committed itself to inform parliament regularly and previously about the development of the engagement of the EFSF and Luxembourg’s participation in this context.[21] However, this commitment was not part of the law and there is no compulsory procedure of parliamentary approval for every EFSF-decision. The government simply promised to inform parliament. However, the same political agreement can also be found in the report of the parliamentary Commission for Finances and Public Budget for the second EFSF-law, signed by the Rapporteur Michel Wolter from the CSV (Christian Democrats).[22] This makes it clear that there is a political agreement on informing parliament about the EFSF-measures, but no legally guaranteed obligation of the government.

Even though there is no legal obligation for the government to inform parliament, the Minister for Finance informs the committee for financial and budgetary affairs (Commission des Finances et du Budget) regularly about decisions of the EFSM and the EFSF. This happened – for example – in the framework of the rescue package for Ireland in the session on 30 November 2010.[23]

Implementing problems 
What political/legal difficulties
did Luxembourg encounter in the application of the EFSF?

In a parliamentary discussion on 7 June 2011 about the debt crisis in Europe, the group déi gréng (the Greens) emphasised that the policy of austerity cannot be the only mean to solve the debt crisis, in particular in the case of Greece.[24] In the following, the discussion focused on the European decisions and the governmental parties (CSV (Christian Democrats) and LSAP (Social Democrats) highlighted that the participation of Luxembourg is risky, but necessary – a point of view which was also shared by one party being in opposition (the DP (Conservative Liberals)). The ADR (National Conservatives) was of the opinion that the European institutions are jointly responsible for the European debt crisis.[25] The National Conservatives and the Democratic Socialists also demanded a change in the national policies on tax dumping.

Bilateral support   
In case Luxembourg 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?

Luxembourg has given Euro 140.1 million as part of the bilateral loan program to Greece (figure from 30 September 2013).[26] The ‘Intercreditor Agreement’ from 8 May 2010 allows a loan of up to Euro 206.1 million.[27]

The loan to Greece was an operation of the Ministry for Finance for which – in the view of the government – the existing legislation (budgetary law which is adopted by simple majority in the parliament) was seen as a sufficient legal basis.[28] There was no separate law passed by the Luxembourg parliament. The parliamentary groups supporting the government (Christian Democrats and Social Democrats) as well as some parties being in opposition (Conservative Liberals and the Greens) approved this procedure.[29] The National Conservatives criticised the approach and demanded the adoption of a parliamentary law because Article 99 of the Luxembourg Constitution requires that every important financial engagement must be based on a separate law.[30] However, Luxembourg participated in the loan agreement with Greece without adopting a separate law.

What other information is relevant with regard to Luxembourg and the EFSM/EFSF?

Not other relevant information.

[1] Published in the national gazette under A – N° 108, p. 1890,

[2] Chambre des Députés, Séance 39, p. 549,

[3] Published in the national gazette under A – N° 201, p. 3632 (


[5] The positions of the different parties in the public session on this law can be found on

[6] Journal Officiel du Grand-Duché de Luxembourg, Recueil des sociétés et associations, C – N° 1189, 8 June 2010, p. 57026,



[9] Avis du Conseil d’Etat, 8 June 2010, p. 1-2,

[10] Dispense de second vote constitutionnel par le Conseil d’Etat, 6 July 2010,

[11] Avis complémentaire du Conseil d’Etat, 12 June 2012, p. 2,

[12] Avis complémentaire du Conseil d’Etat, 12 June 2012, p. 2,

[13] Loi du 12 juillet 1996 portant révision de l’article 95 de la Constitution; Loi du 27 juillet 1997 portant organisation de la Cour Constitutionnelle.

[14] See for example the national report of the Luxembourg Constitutional Court in the framework of the XVIth Congress of the Conference of European Constitutional Courts, 2014, p. 1,

[15] ECHR, 14570/89 – Procola v. Luxembourg,

[16] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 114

[17] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 115

[18] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 116

[19] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 123.

[20] Chambre des Députés, Séance 39, 1 July 2010, p. 546,

[21] Projet de Loi No. 6142 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro, 1 June 2010, p. 3,

[22] Commission des Finances et du Budget, Rapport sur le Projet de Loi N° 6314, 8 September 2011, p. 3,

[23] Commission des Finances et du Budget, 30 November 2010, p. 3,

[24] Chambre des Députés, Séance 35, p. 479-480,

[25] Chambre des Députés, Séance 35, p. 481,

[26] Minister for Finance, Bilan financier et situation financière de l’Etat, 28 October 2013, p. 6,

[27] Rapport de la Commission des Finances et du Budget, 8 September 2011, p. 2,

[28] Réunion de la Commission des Finances et du Budget, 23 April 2010, p. 3,

[29] Réunion de la Commission des Finances et du Budget, 23 April 2010, p. 3,

[30] See the report ‘L’ADR demande qu’une loi spéciale autorise le versement du prêt à la Grèce’ on www., 5 May 2010,