Portugal

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 Portugal 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?

 

Law n.º 8-A/2010, of 10 May was approved in parliament to enable Portugal’s participation in the programme of financial assistance to Greece. Article 1 and 2 define its object: to allow the government to decide on the concession of loans to Eurozone Member States, in the context of EU coordinated efforts to guarantee the economical and financial stability of the euro.[1]

 

At the time this law was debated in parliament (7 May 2010) no EU mechanism/framework existed yet. It was debated in parliament as part of a “European solution” – which was already underway.

 

It was adopted with the votes in favour of PS, PPD/PSD, CDS/PP and BE. Against were PCP and PEV. PCP and PEV voted against because of the terms in which the “solidarity” mechanisms were being approved. MP Bernardo Soares’ stated that the conditions of the loan “favoured big enterprises and banks” while “fostering the unaccountability of financial markets”; the MP added that the loan represented a “condemnation [of Greece] to stagnation, recession and poverty” and that it could not accept it was “the only way”.[2]

 

The parliamentary plenary debate on the Law n.º 8-A/2010, 10 May, marks the beginning of a new era of debates on the Euro crisis. In the words of Carlos Costa Pina, Secretary of State of Treasury and Finance “never before the EU and the euro had been under such great threat”.

 

A few days later an agreement was concluded with Greece to coordinate a series of bilateral loans to that country. Immediately afterwards, the Council adopted a Regulation establishing a European financial stabilization mechanism (EFSM), which could be used in future situations similar to that of Greece. In addition, the ministers adopted a Decision in which they committed to support a separate and additional loan and credit mechanism, a European Financial Stability Facility (EFSF).

 

Under article 1 of Law n.º 8-A/2010, 10 May, the Minister of Finance is responsible for independently negotiating and deciding on Portugal’s (terms of) participation in EFSM and EFSF.

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 Portugal and in what way does it involve Parliament?

 

Law n.º 8-A/2010, of 18 May gives full power to the Minister of Finance to negotiate and decide on Portugal’s (terms of) participation in EFSM and EFSF (or in any coordinated effort) to guarantee the economical and financial stability of the euro through the concession of loans to Eurozone Member States (MS).

 

Alike other MS Portugal guaranteed the issue of bonds by EFSF by contemplating the transfer in the State budget law. Although the State Budget Law is approved in parliament the government alone is competent to decide to finance another Eurozone MS. The Government merely has to inform parliament of its decision and keep parliament informed on the progress (article 7, Law n.º 8-A/2010, of 18 May).

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Portugal? 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 approval of the issuance of guarantees under EFSF took place in parliament through the approval of law n.º 8-A/2010, of 18 May. This law approves the framework that enables the government to finance Eurozone MS in the sequence of the launch of the European Financial Stability Fund.[3] Alike other MS Portugal guaranteed the issue of bonds by EFSF. Portugal guaranteed 11 035, 384 million euros, the same as its quota in ECB. Guarantees issued under EFSF, and Lei n.º 8-A/2010, accounted for 92% of the total of guarantees issued by Portugal that year.[4] In practice, the first and only time Portugal guaranteed the issuance of debt by EFSF was in early 2011 to support Ireland. Soon after the Portuguese government asked to “step out” – request accepted by EU MS.[5]

 

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

 

Discussions in parliament did not compromise the entry into force of the EFSF Framework. Portugal was – at the time – on the recipient side (see question IV.3).

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

 

There is no constitutional court judgment concerning the EFSF.

 

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?

 

Law n.º 8-A/2010, of 18 May gives ample power to the Minister of Finance to negotiate and decide on Portugal’s (terms of) participation in EFSM and EFSF (or in any other coordinated effort) to guarantee the economical and financial stability of the euro through the concession of loans to Eurozone Member States.

 

This law was swiftly adopted to enable the participation of Portugal in the bail-out of Greece (May 2010). Although successive mechanisms and instruments have been adopted since then Law n.º 8-A/2010, of 18 May has not been revoked or altered.

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

 

See above questions IV.1, IV.2, IV.3, IV.4.

Bilateral support     
IV.8    
In case Portugal 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?

 

Portugal did not provide funding on a bilateral basis.

 

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

 

Not other relevant information.

[1] Free translation of articles 1 and 8 of Law n.º 8-A/2010, 18 May.

[2] See http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheDiplomaAprovado.aspx?BID=15920

[3] Relatório de Orçamento de Estado, Diário da Républica 16 de Outubro 2010, II Série A, n.º 17, XII Legislatura, 1.ª Sessão legislativa (2011-2012) available at 

[4] In Conta Geral do Estado 2010, page 205, Diário da Republica 7 de Julho de 2011, II Série A, n.º 8, XII Legislatura, 1.ª Sessão legislativa (2011-2012) available at http://app.parlamento.pt/webutils/docs/doc.pdf?path=6148523063446f764c324679626d56304c334e706447567a4c31684a5355786c5a79394551564a4a5353394551564a4a5355467963585670646d38764d634b714a5449775532567a63384f6a627955794d45786c5a326c7a6247463061585a684c314e31596e504471584a705a5355794d454576524546534c556c4a4c5545744d4441344c6e426b5a673d3d&fich=dar-ii-a-008.pdf&inline=true

[5] Proposta de Lei n.º 27/XII (1.º) Orçamento de Estado para 2012, Diário da Républica, 17 de Outubro de 2011, II Série A n.º 47, XII Legislatura, 1.ª Sessão Legislativa (2011-2012).