VIII - ESM Treaty

The European Stability Mechanism (ESM) Treaty was signed on July 11 2011. It was later renegotiated and a new ESM Treaty was signed on February 2, 2012. The Treaty provides a permanent emergency fund that is intended to succeed the temporary emergency funds. It entered into force on September 27, 2012 for 16 contracting parties (Estonia completed ratification on October 3). The 17 contracting parties are the member states of the Eurozone, but the ESM Treaty is concluded outside EU law.    
http://www.european-council.europa.eu/eurozone-governance/esm-treaty-signature?lang=it and http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf)

What political/legal difficulties
did Portugal encounter in the negotiation of the ESM Treaty, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process.

Portugal did not oppose the ESM within the EU.

At the time in which ESM started being discussed in parliament, Prime-Minister José Socrates was still in office. Foreign Affairs Minister Luís Amado presented both the ESM and the amendment to article 136.º TFEU as an important step towards the stability of the euro. Discussions in parliament in December 2010 and January 2011 reveal that there was an overall agreement over the ESM. However, PPD/PSD raised serious concerns about what would be the consequences of non-complying with the commitments imposed by the new mechanism; whether resorting to the IMF would be the “solution”.[1]

In July 2011, the Minister of Finance signed the Treaty approving the ESM. Portugal was both a member and a beneficiary of ESM. At that point a new government, composed by a PPD/PSD and CDS/PP coalition was already in power too. Pedro Passos Coelho was Prime-minister. A modified version of the Treaty, incorporating amendments aimed at improving the effectiveness of the mechanism, was signed in Brussels on 2 February 2012.


How has the ESM Treaty been ratified in Portugal and on what legal basis/argumentation?

The procedure of ratification of an international treaty in Portugal is part of the Parliament´s political and legislative competence, as is stated on Article 161 of the CRP. [2]In what concerns the type of document adopted, accordingly with Article 166 (5) CRP, in the case of an international treaty the Parliament adopts a Resolution. Following the approval of the Parliament´s the resolution, by simple majority, in this case about the ESM Treaty, the document was signed by the President in accordance with Article 135 b) CRP. The Resolution on the ESM Treaty ratification was approved by the Parliament on the 13th of April with votes against of PCP, BE, PE, abstention of Pedro Delgado Alves (PS), Rui Pedro Duarte (PS) and favorable votes of PSD, PS, CDS-PP, which were the same votes of the approval of the Fiscal Compact.[3]

The ESM Treaty was approved first by Resolução da Assembleia da República n.º 80/2012 and finally ratified by the Decree of the President of the Republic n.º 93/2012 (published on the Diário da República I, n.º 117, 19 June 2012). The ratification then was notified to the EU Council on the 4th of July 2012. [4]


Ratification difficulties 
What political/legal difficulties
did Portugal encounter during the ratification of the ESM Treaty?

Resolução da Assembleia da República n.º 80/2012 (see question VIII.2) was approved with votes against of PCP, BE, PE, abstention of Pedro Delgado Alves (PS), Rui Pedro Duarte (PS) and favorable votes of PSD, PS, CDS-PP. Overall, the Parliament approved it by 204 votes (PSD, PS and CDS-PP) to 24 (PEV, PCP, BE), with 2 abstentions (two PS MP against 96 MP PS). [5]


Most of the political and legal quarrels during the debate coincide with those of the ratification of the TSCG (see question IX.1 onwards). On the same day (13 April 2012) the parliament discussed/voted two proposals of resolutions on the ratification of two international treaties (respectively on ESM and TSCG); three projects of resolution proposing a referendum about the TSCG and finally one project proposing new rules on a renewed national consensus about the EU (TSCG-related). Specifically on the negotiation of the ESM, the government was criticised for not having pushed for a higher financing capacity during negotiations – beyond the 500 000 millions euros. [6]

The Socialists regretted that the discussion and approval of all these initiatives was taking place at the same time therefore preventing a deeper analysis of implications. PS accused the government of being too hasty – Portugal would be the first EU MS to ratify the TSCG. [7] The Prime-Minister highlighted the importance of the swift approval for the external credibility of the State; the stability of the Eurozone and the maintenance of the single currency. The will to be the first Member State to ratify the Treaties was reiterated several times during the debate, as a way to “show that Portugal is compromised with its own recovery and that of the EU”.


Other several negative aspects were also raised: the fiercest critiques were directed to the lack of a social agenda accompanying the Treaties, to combat the increase in unemployment rates. The PS put forward the possibility of creating an additional protocol to the Treaties, which would add a ‘social dimension’ – mainly focused on the correlation between economic growth and combating unemployment. The BE was particularly fierce in criticising the lack of ‘democratic participation’ in the whole process, with the denial of a referendum (see the answer to question IX.2). The PCP, on the other hand, claimed that the process presented a threat to the national sovereignty in political, economic and budgetary terms, adding that even the Constitutional Court was menaced and subdued to the Court of Justice of the European Union. The ‘golden rule’ was seen as a way to violate the Constitution, by imposing budgetary rules with a permanent and mandatory character, which will lead to the impoverishment of the country and loss of the democratic and free exercise of the people’s will. This party proposed no additional protocol, but rather a clear rejection of the ratification – and a referendum (see the answer to question IX.2).


The Prime Minister replied that the Government had the democratic legitimacy to present the ratification proposals, since it was elected by the people, and, as such, a discussion in the Parliament would amount to the most transparent way of ratifying the Treaties.


Case law         
Is there a (constitutional) court judgment on the ESM Treaty?


Capital payment   
What is the role of Parliament in the payment of the (first instalment of) paid-in capital required by the ESM Treaty (article 36 ESM Treaty)? What relevant debates have arisen in relation to this payment?

The payment of the first instalment required by the ESM is part of the law approving the Budget for 2013.[8] The procedure to approve the Budget is posited in Article 161 g) of the CRP, which states that the Parliament passes into law the laws on the most important options of national plans and the Budget, after proposal of the Government. Concerning the particular issue of the payment of part of the capital of the ESM, Article 130 of the Lei 66B 2012 (budgetary law) determines that the Government is authorized to proceed to it until the limit of € 803 000 000.[9]


Application & Parliament     
What is the role of Parliament in the application of the ESM Treaty, for example with regard to decisions to grant financial assistance and the disbursement of tranches, which both require unanimous adoption by the Board of Governors composed of the national Finance Ministers?

Article 1 and 2 of 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 any EU coordinated effort to guarantee the economical and financial stability of the euro through the concession of loans to Eurozone Member States. Parliament only has to be informed and updated (article 7).

Application difficulties    
What political/legal difficulties
did Portugal encounter in the application of the ESM Treaty?

See questions VIII.1, VIII.2, VIII.3.

Have there been any relevant changes in national legislation in order to implement or to comply with requirements set by the ESM-Treaty?

See question VIII.5.

What other information is relevant with regard to Portugal and the ESM Treaty?

No relevant information available to report.

[1] http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n31-0059&type=texto&q=Mecanismo%20Europeu%20de%20Estabilidade&sm=p

[2]           Same procedure mention on question V.2.

[3]           http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=36836.

[4]           See. DR_ESM.pdf and Ratification Tables. Pdf.

[5] See: http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=36836

[6]           http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n95-0020&type=texto&q=regra%20de%20ouro, and http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n34-0048&type=texto&q=Mecanismo%20Europeu%20de%20Estabilidade&sm=p

[7]           http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n95-0020&type=texto&q=regra%20de%20ouro

[8]           See: LEI-66B-2012_OE2013_DR.pdf.

[9]           See: Article 130 of  LEI-66B-2012_OE2013_DR.pdf, also, http://debates.parlamento.pt/page.aspx?cid=r3.dar_s2&diary=s2al12sl2n16-0103&type=texto&q=mecanismo%20europeu%20de%20estabilidade&sm=p