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 The Netherlands 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?
It is relevant to note that the political situation in The Netherlands during the negotiation of the EFSF and the EFSM was particular. The government fell in February 2010 because of a conflict over military participation in Afghanistan. The social democrats (PvdA) pulled out of the coalition that formed the government, leaving the Christian democrats (CDA) to manage on- going affairs until after the elections and the formation of a new government in October 2010. According to customary Dutch constitutional law, within such an interim period, government can only deal with current affairs and is not allowed to decide on any ‘controversial’ affairs. The negotiation of the EFSF and EFSM therefore took place against this background and there was a strong political need for broad support by parliament of the implementation of these measures.
The parliamentary debates in The Netherlands on EFSF and EFSM were preceded by the aid package for Greece and partly debated together. The Minister of Finance asked for express consent from parliament for the participation in the Greek aid package. Parliament endorsed the aid package for Greece on 7 May 2010. There existed broad support for the creation of the EFSF within parliament, which was approved by a majority of parliament on the 11th of May (Social Democrats and the Party for Freedom voting against). Thereby parliament supported implicitly all rescue operations of EFSF aid including the aid that was later provided to Ireland and Portugal.
The main issues that were debated in parliament centred around two issues. The first was the involvement of the IMF in order to supervise the implementation of economic restructuring in Greece. The involvement of the IMF was broadly supported within parliament and demanded by most political parties. The second issue was that the new measures should not lead to the creation of more powers for the EU to the detriment of the (budgetary) sovereignty of Member States that have a ‘sound’ budgetary position within the EU. This was discussed also with reference to more general statements by most political parties that a ‘political union’ or ‘economic government’ should be prevented. The extent to which these measures would impact the (budgetary) sovereignty of Greece was not considered important.
Regarding the budgetary process it is furthermore relevant to note that the Dutch Minister of Economic Affairs did not follow the correct procedure as prescribed by Dutch State budgetary law (on the specifics of the budgetary process see further under question II.1) with the establishment of the EFSF. The rules of procedure were breached but this was considered to be legitimate in view of the broad parliamentary support for participation in the EFSF.
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 The Netherlands and in what way does it involve Parliament?
The Dutch government asked for support of parliament for the participation in EFSF on the basis of Dutch budgetary law (Compabiliteitswet ‘CW’) that requires notification to parliament for participation of the Dutch State in private undertakings (article 34 CW). Normally this procedure requires the government to submit a notification to parliament that sets out the plans to participate in a private undertaking. Government is then to respect a waiting period of 30 days during which parliament can object or ask for further information regarding the plans of government to participate in the private undertaking. In this case the normal procedure was not followed in view of the urgency and the broad parliamentary support that was given to government during the parliamentary debate on the Greek aid measures and the establishment of the EFSF. Although broad parliamentary support was sought and given, the normal procedural framework that would apply to these governmental actions was ignored.
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in The Netherlands? 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?
See for an explanation of the Dutch budgetary process the answer to question II.1.
The establishment of the EFSF and the resulting obligation to issue guarantees touches on the budget-rights of parliament. Parliament was informed with a policy letter (d.d. 10 may 2010) about the establishment of the EFSF and the consequent obligation for the Dutch government to issue EUR 26 billion on guarantees. In the subsequent debates of 10 and 11 may parliament explicitly approved Dutch participation in all support programmes that EFSF would engage in, beyond the immediate support to Greece. Parliamentary involvement in these acts is ensured on the basis of the procedural agreements that were established between government and parliament – see further under question II.1.
What political/legal difficulties did The Netherlands 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 initial broad parliamentary support for the EFSF measures implicitly included the future support actions for Portugal and Ireland. The increased guarantee commitments did need express parliamentary support. Other than the budgetary impact, the parliamentary debate regarding the increased guarantee commitments focussed on the question of parliamentary control on the functioning of the EFSF – which will be discussed further in the answer to question 6. Eventually there was broad support for the EFSF and the increase of guarantees commitments. The big opposition parties (Party for Freedom (PVV), the Socialist Party (SP)) voted against but this did not affect the clear majority (including some of the smaller opposition parties) that was in favour of the measures.
Is there a (constitutional) court judgment about the EFSM or EFSF in The Netherlands?
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 relationship between government and parliament is regulated under the auspices of the parliamentary budget-rights. Parliament and government agreed on a ‘working basis’ with respect to parliamentary involvement in the application of the EFSF – see the answer to questions II.1-II.2.
The parliament-government relationship in Germany and the judgment of the Bundesverfassungsgericht functioned as a focal point for the parliamentary debate on government-parliament relationship in The Netherlands. The standpoint of the Dutch government is that the functioning of the formal and material budget-right of parliament provide control rights that, de facto, go further than or are in any case similar to the powers of parliament in Germany. This de facto right is considered to exist because of the power of parliament to ‘fire’ the minister if he is insufficiently informing parliament or acts not in accordance with the information that was provided to parliament – during a lot of EFSF negotiations this was a real power in view of the minority government in place at the time of these negotiations.
In practice, the Dutch ministers have demonstrated to be sensitive towards the information rights of parliament and continuously updated parliament about EU developments. It is considered that this is why parliament has shown continuous broad support for both the Greek aid measures and subsequent participation in EFSF.
Of relevance is furthermore a parliamentary survey (Commissie de Wit) that evaluated the measures that have been undertaken by the government in response to the crisis. This survey concluded with a few recommendations on the relationship between government and parliament, primarily from the perspective of ensuring a form of parliamentary control with respect to the measures adopted by government in crisis context. These recommendations all addressed a need to ensure a proper and effective role for parliament in cases where government needs to act quickly. The survey concluded that, where possible, parliament should be informed before measures are undertaken and according to the normal rules of parliaments’ budget-rights. In cases where this is not possible parliament should be informed as soon as possible afterwards with an explanatory memorandum of government that justifies and explains the reasons for the infringement of parliament’s budget-rights. As a whole these recommendations are all more or less reflected in the working relationship that has been established between parliament and government as explained in the answer to question II.1.
The government has in the application of the EFSF also informed parliament of developments on a confidential basis. The Dutch Minister of Financial Affairs (De Jager) informed parliament on a confidential basis about the consequences of the request of Ireland for financial aid. When Greece turned out not to be able to fulfil the bail-out conditions in 2011 the Minister in a similar vein called the members of parliament back from recess to have a confidential parliamentary meeting in order to discuss freely the potential measures to be taken and the position of the Dutch government during the Ecofin council of 16 and 17 May 2011. During these meetings the minister was not looking for a political mandate but rather to inform parliament of the developments and debate freely about possible actions. In these cases the Dutch minister made a clear distinction between situations where parliament was informed of measures on a confidential basis and situations where parliament was to provide a budgetary mandate. The latter mandate was always asked during public parliamentary debates. The former was installed because of the need to be able to freely discuss urgent situations without alarming the financial markets.
These instances show that government was working hard to keep parliamentary support for its actions in the EU crisis context. The minister was trying to get sufficient parliamentary support for all actions where it was possible and when it was not possible tried to make a parliamentary reservation for its support to EU measures. These efforts can perhaps be explained on the basis of the political context as further described in the answer to question IV.1.
What political/legal difficulties did The Netherlands encounter in the application of the EFSF?
No significant difficulties. The general line of a clear majority within parliament is to support EFSF measures provided that strict measures are enforced on the countries that receive money. In the case of Greece the support of parliament was conditional on the involvement of the private sector and a significant contribution of the IMF to that aid package.
In the application of the EFSF the government informed parliament on the basis of the working agreement as previously highlighted, thereby ensuring that the conditions for participation of parliament were respected.
In case The Netherlands 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?
The Netherlands contributed to the bilateral aid provided to Greece in May 2010. It is relevant to note that the measures were approved in a period when there was, arguably, no effective government in place (see answer to question IV.1). Furthermore, under the previous government a parliamentary motion was adopted (initiated by the Liberal Democrats (VVD)) on the 11th of February 2010 that explicitly stated that no Dutch taxpayer money whatsoever would be spend on a bilateral solution for Greece and to ensure a solution through the IMF. However, the Liberal Democrats supported and advocated for the aid package for Greece in May 2010, arguing that this Greek aid package was the exact reflection of what they meant with the February 2010 motion that demanded a solution for Greece through the IMF. Despite this apparent contradiction, no legal issues surfaced and there existed a broad parliamentary support for the aid which was subsequently approved on the 7th of May 2010. Of the main parties only the Party for Freedom (PVV) voted against the aid, arguing that The Netherlands should instead leave the Eurozone as soon as possible. 
The parliamentary debate focused mainly on the existence of the risks of a default of Greece and the negative effects on the Dutch economy. Other than that the main parties in parliament considered it important to ensure a role for the IMF in the supervision of the aid and the implementation for the restructuring conditions.
What other information is relevant with regard to The Netherlands and the EFSM/EFSF?