At the 16/17 December 2010 European Council a political decision was taken to amend the Treaties through the simplified revision procedure of article 48(6) TFEU. On March 25, 2011 the European Council adopted the legal decision to amend article 136 TFEU by adding a new third paragraph: “The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
The process of approval of this decision by the member states in accordance with their respective constitutional requirements as prescribed by article 48(6) has been completed and the amendment has entered into force on 1 May 2013.
What political/legal difficulties did Luxembourg encounter in the negotiation of the amendment of article 136 TFEU?
No difficulties known.
How has the 136 TFEU Treaty amendment been approved in Luxembourg and on what legal basis/argumentation?
The amendment was ratified on the basis of the ‘Loi portant approbation de la décision du Conseil européen du 25 mars 2011 modifiant l’article 136 du traité sur le fonctionnement de l’Union européenne en ce qui concerne un mécanisme de stabilité pour les Etats membres dont la monnaie est l’euro’ . It was approved by the Chambre des Députés by a majority of 66,7% on 26 June 2012, granted by the Grand Duc du Luxembourg on 3 July 2012 and published in the official gazette on 5 July 2012. 48 members of Parliament voted in favour (all members of the parliamentary groups supporting the government (Christian Democrats and Social Democrats) as well as all members of the opposition parties déi gréng (the Greens) and DP (Conservative Liberals)). 5 MPs voted against the law (ADR (National Conservatives) and déi Lénk (Democratic Socialists)). This law consists of one unique Article, which contains the approval of Luxembourg to Council decision 2011/199/EU. In addition, the mentioned Council decision is attached and forms part of the national law. The approval by a qualified majority was necessary because the Luxembourg Constitution demands such a majority for those laws, which transfer competences to an international institution.
Luxembourg laws, which transfer competences to an international institution, must be adopted by a qualified majority (Articles 49bis, Article 37 (2), Article 114 (2) of the Luxembourg constitution). In the case of a conflict between the national norm and a norm of international law, which has direct effect, the international rule prevails. The same rule is applied in a conflict between national and EU law because the Luxembourg Conseil d’Etat has decided that the European Treaties have created a new legal order and that the Member States have limited their competences in favour of this new order.
Luxembourg has a monistic tradition which means that rules of international law apply in the same way as national legal acts. However, Luxembourg has to approve the international treaty. Thereby, it is important to distinguish between the ratification and the internal legal force. The ratification act simply states that the international treaty is hereby approved which authorises the government to ratify the treaty, but it does not create any legal effect of the rules contained in the international treaty. The ratification is an approval and does not transpose the rules laid down in the international treaty. In order to enter the international treaty into force as part of Luxembourg’s internal law, three conditions have to be fulfilled: (1) Luxembourg must have ratified the treaty, (2) the treaty must be in force on the international level and (3) the wording of the treaty must be published in the public gazette such as prescribed for national legal acts. Even though many acts of ratification contain the approval as well as the text of the international treaty as part of the national law, these two steps (ratification and internal legal force) must be distinguished. The publication of the ratification act is legally different from the publication of the text of the international treaty required by Article 37 of the Luxembourg Constitution, even though these two steps are often made in the same national legal act.
What political/legal difficulties did Luxembourg encounter during the ratification of the 136 TFEU Treaty amendment?
Even though the amendment of Article 136 TFEU does not itself create financial obligations, the government reasoned the amendment of Article 136 TFEU by the need to introduce the ESM, which causes financial obligations for Luxembourg. In the view of all Luxembourg institutions (government, parliament, Conseil d’Etat, etc.), the amendment of Article 136 TFEU and the creation of the ESM are closely linked. All debates about the amendment of the European Treaties also refer to the establishment of the ESM itself.
The Luxembourg Conseil d’État agreed on the law, which contains the approval of Luxembourg to Council decision 2011/199/EU, but also expressed some critique (for more details about the role of the Conseil d’Etat and its competences under the Luxembourg Constitution see question II.2). Several points were criticised by the Conseil d’Etat. Firstly, the law did not contain a financial schedule (fiche financière), which is compulsory for all laws burdening the budget (Article 79 (1) of Loi du 8 juin 1999 sur le Budget, la Comptabilité et la Trésorerie de l’État). A fiche financière is an overview containing the expected short, middle and long term effects on the budget. In addition, the type, duration and impact of the expenses must be mentioned. Secondly, the Conseil d’État was not convinced that the ESM would achieve the highest rating from rating agencies and would be an effective rescue mechanism because the main part of the monetary volume of the ESM (Euro 620 billion out of Euro 700 billion) has to be raised at the financial market under the support of guarantees by all Eurozone-Members, including those which – at least for a certain period of time – do not have access to the financial market. Thirdly, it was criticised that political decisions simply follow the economic and financial realities and do not lead them. Fourthly, the Conseil d’Etat emphasised (by agreeing to the position of the ECB) that the ESM shall lead to a European and not an intergovernmental mechanism. Fifthly, the Conseil d’Etat had some doubts whether the amount of Euro 700 billion is sufficient to bring enough reassurance into the financial market because the necessary financial needs are significantly higher. Sixthly, the Conseil d’Etat mentioned the systemic dimension of the debt crisis and emphasised the necessity to reduce public debts and increase the competitiveness of the European economy. The Conseil d’Etat regretted that the government did not include its analysis of Luxembourg’s position within this economic surrounding.
The parliamentary Committee for Financial and Budgetary Affairs (Commission des Finances et du Budget) discussed both legislative proposals (approval to the amendment of Article 136 TFEU and to the ESM) in the same session. In its meeting on 20 March 2012 the Minister for Finance Luc Frieden from the Christian Democrats (SVP) emphasised that the capital for the ESM will be financed by budgetary expenses, but that this will not influence the estimation of the public debt in view of the Maastricht criteria (ESA95) because Member States receive a real economic equivalent. In view of these criteria the participation is neutral. Furthermore, it is not clear how ESM and EFSF shall cooperate during the period of time when both of them are in force. Moreover, in the case of a request for financial assistance of a Member State, parliament shall be informed before taking a decision at the EFSF-level, which was approved by the government. However, there is no right to approval for the parliament.
The law approving the amendment of Article 136 TFEU was discussed in a parliamentary plenary session on 26 June 2012 along with two other laws concerning the approval to and the implementation of the ESM (see question VIII.2). The rapporteur of the Luxembourg Article 136 TFEU-law (Michel Volter from the Christian Democrats) emphasised that the participation of Luxembourg is slightly higher than its shared capital of the ECB (0.2497%). Due to the situation in countries such as Estonia, Slovakia, Slovenia, Malta and Cyprus the shared capital amounts to 0.2504%, which is equivalent to a capital of Euro 1.7528 billion. Luxembourg has to deposit Euro 200 million as paid-in capital to the ESM. This was made clear in the public session, because the Conseil d’Etat had asked for clarification. The total participation of Luxembourg in ESM and EFSF covers the sum of Euro 3.7528 billion. The representative of the LSAP (Social Democrats) was of the opinion that the ESM is not satisfying, but an important step onwards. He also mentioned that the six biggest countries are able to overrule the rest because of the ESM-voting-system, which is seen as highly problematic. The weak part of the ESM was seen in its reduced possibilities for the parliament to intervene in the decisions. Gast Gibéryen from the ADR (National Conservatives) criticized that the ESM means the transfer of sovereignty rights to an undemocratic EU. Furthermore, the voting-right of Luxembourg in the ESM is nearly inexistent because it has a participation of 0.25%, while countries like Germany and France have more than 20% and can block every decision in the ESM council. He also emphasised that the Luxembourg Central Bank has receivables of Euro 120 billion in the TARGET2-System, which increases the public debt. The participation of Luxembourg in the ESM (guarantees and paid-in capital) reaches the sum of Euro 1.75 billion, which means 3.305 Euro for every citizen in Luxembourg, while other countries have lower sums per capita. Serge Urbany from déi Lénk (Democratic Socialists) raised the question whether a second constitutional vote should be made before the adoption of the ESM-laws. However, the president of the parliament did not arrange a separate vote.
At the same session three motions were presented. A member of the party déi gréng (the Greens) introduced a motion which demands from government to take care that banks work in a way achieving social and economic goals such as credits on a sustainable level for small and medium enterprises, to fulfil the goals of the EU 2020 strategy, to make sure that economic policy in the EU also fulfils social goals laid down in the Treaties and to ask the European Court of Justice whether the ESM is in line with the social goals of the ESM. However, the motion was refused (8 votes in favour, 43 against the law and 9 abstentions). Also the second motion of déi gréng was refused (10 yes, 39 no, 1 abstention). The second motion aimed at increasing the coordination of economic policy on the European level, making sure that money is used for social goals, using the interests of the credits from ESM for the sectors mentioned in the EU 2020 strategy and pleading for a banking licence for the ESM. The third motion, also introduced by déi gréng, was approved and demanded from government to increase the transparency of the ESM. It obliges the government to present the position of the Luxembourg Governor at the ESM before the ESM Council of Governor’s meeting. In addition, the government must report to the parliamentary Commission for Financial and Budgetary Affairs (Commission des Finances et du Budget), explaining the financial impact on Luxembourg of decisions taken at the level of the ESM, the conditions offered to the benefitted country and the relation to reports of the Commission.
Because of the severe financial engagement of Luxembourg, two members of the opposition (Gast Gibéryen, from the National Conservatives, and Serge Urbany, from the Democratic Socialists) claimed that it is necessary to have a qualified majority in order to pass the law. In the view of the two MPs, the financial engagements resulting from the adoption of the law authorising the ratification of the Art. 136 TFEU amendment (in combination with the ESM) are seen as permanent international engagements, which need the support of a two-third majority in the parliament because the Luxembourg Constitution (Article 49bis, Article 37 (2), Article 114 (2)) requires such a majority for the transfer of competences to an international institution (for more details on this constitutional background see question V.2). Alex Bodry from the Social Democrats (LSAP) which was part of the government at this time also argued in favour of a qualified majority voting in the Luxembourg parliament because it is not clear whether this decision does not mean an abandonment of sovereignty.
However, the government represented by the Minister for Finance Luc Frieden (Christian Democrats) was not of the opinion that this law has to be passed by a qualified majority because the law does not confer sovereign powers to an international institution.
Is there a (constitutional) court judgment in Luxembourg on the 136 TFEU Treaty amendment?
No. The opinions of the Conseil d’Etat cannot be considered as constitutional court judgments (see question II.2).
What other information is relevant with regard to Luxembourg and the 136 TFEU Treaty amendment?