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 Spain 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.
On 30 March 2011 the then President of the Spanish Government (José Luís Rodríguez Zapatero) explained to the Congreso de los Diputados the agreements reached by the European Council on the 24-25 March 2011. Regarding European economic governance, the President highlighted: (1) the revision of the Stability and Growth Pact; (2) the adoption of the Euro-Plus-Pact; and (3) the compromise to modify Article 136 TFEU so that the ESM could be set, and become the main regional net of financial security in the world. In relation to the ESM, he briefly explained to the Congreso the purpose of this new mechanism. Besides, the President stressed the importance of the compromises reached in order to overcome the Eurocrisis and safeguard the Welfare State in Europe. In the same parliamentary sitting, Mariano Rajoy Brey, the Head of the Partido Popular (the main party of the opposition at the time), expressed his agreement with the measures adopted by the European Council, and criticised the (Spanish) Government for having disregarded earlier proposals presented by the Partido Popular in the same direction. As regards the rest of the parties in the Congreso, it is important to stress the positions of Josu Iñaki Erkoreka Gervasio (member of the Partido Nacionalista Vasco) and Ana María Oramas González-Moro (member of Coalición Canaria). As for the former, Erkoreka expressed the support of his party to the instruments adopted. However, he made two criticisms to European economic governance: (1) there are so many instruments in place that the picture is complex and difficult to understand; (2) the EU only moves forward after crises. This is so because, according to Erkoreka, as a result of the Greek bailout, the Union created the European Financial Stability Mechanism; and as a consequence of the Irish bailout, the EU proposed to create the ESM. Moreover, the MP added that the ESM is not an instrument to prevent future crises, so other instruments of a preventive character should also be put in place. On the other hand, Ana Oramas strongly criticised the ESM because, according to her, it is not a mechanism of shared responsibility, since money will not lent but loaned with market interest rates.
Months later, on 27 July 2011, Rodríguez Zapatero explained to the Congreso the main aspects of the 21st of July meeting of the Eurogroup in Brussels. Regarding the ESM, the treaty of which had been signed on the 11th of July by the finance ministers of the Eurogroup MS, the President merely reminded to the House the advantages of the new mechanism (mainly, its permanent character). As for the parliamentary debate on the ESM, the only noteworthy interventions were those by Pedro María Azpiazu Uriarte (member of the Partido Nacionalista Vasco) and Gaspar Llamazares Trigo (member of Izquierda Unida). Both MP considered the measures adopted by the Eurogroup (among which the ESM) as short term/stop-gap solutions, and they criticised the lack of a purely European public finance system.
Finally, on 8 February 2012, after the signing of the second version of the ESM Treaty, Rajoy (the newly appointed President of the Spanish Government) appeared before the Congreso to expound the conclusions of the 30th of January 2012 meeting of the European Council. According to Rajoy, the ESM is an essential complement to the institutional design of the Eurozone, and it makes it possible to ensure liquidity to those MS that fulfil their fiscal duties. Besides, Alfredo Pérez Rubalcaba (member of the Partido Socialista Obrero Español, the main party of the opposition) highlighted the fact that the ESM should be endowed with 750.000 million Euros right from the beginning, and he criticised the fact that “Europe likes doing things by halves”. From a similar perspective, Erkoreka (member of the Partido Nacionalista Vasco) stressed the need for the ESM to be endowed with more resources from its launch. Both Erkoreka and Rosa María Díez González (member of Unión Progreso y Democracia) stressed that the measures undertaken were not enough. For instance, Díez claimed that the measures adopted were not really attacking the real causes of the crisis and she asked for further reforms, mainly regarding a greater political and fiscal Union.
How has the ESM Treaty been ratified in Spain and on what legal basis/argumentation?
After ESM Treaty was signed, on 2 February 2012, the Spanish Government asked the Parliament to give its consent for the ratification of the treaty following the procedure of Article 94(1) of the Constitution (i.e. authorisation by a simple majority of both the Congreso and the Senado). On 28 February 2012 the Board of the Congreso requested a Report from its Comisión de Asuntos Exteriores(External Affairs Commission) on the ESM Treaty and established a deadline for tabling amendments on the Treaty. In this sense, there were two veto proposals, one by Unión Progreso y Democracia, and the other by Grupo Mixto. On 12 April, the ESM Treaty (including the proposals for veto) was debated in a plenary session of the Congreso. Moreover, the vetoes were voted together at the end of the session, the result being: 12 votes in favour, 302 against and 13 abstentions (out of 350 potential votes).
Later, on 17 May, and also in a plenary session, the Congreso discussed the Report by the Comisión de Asuntos Exteriores and voted the ESM Treaty. The outcome of the voting was: 292 votes in favour, 17 against, and 6 abstentions (out of 350 potential votes). It is important to highlight that the ESM Treaty was voted together with the Decision to modify Article 136 TFEU.
As for the same procedure in the Senado, on 21 May the Board of the Senado requested a Report from its Comisión de Asuntos Exteriores on the ESM Treaty and established a deadline for tabling amendments. Finally, on 6 June, the ESM Treaty, including the Report by the Comisión de Asuntos Exteriores, was discussed and voted in a plenary session of the Senado. No amendments/vetoes were proposed in the Senado.The outcome of this voting was: 234 votes in favour and 1 against (out of 265 potential votes), the negative vote being from Entesa pel Progrés de Catalunya.
Lastly, Article 63(2) of the Spanish Constitution establishes that the King/Head of State (Felipe VI) shall manifest the consent of the State to enter into international obligations such as international treaties. In this sense, on 21 June 2012 the King passed and ratified the ESM Treaty through the final Instrumento de Ratificación(Ratification Instrument). The Treaty entered into force in Spain on 27 September 2012.
What political/legal difficulties did Spain encounter during the ratification of the ESM Treaty?
As explained in VIII.2, on 12 April 2012 the ESM Treaty was debated in a plenary session of the Congreso de los Diputados. The debate started with the defence of the ESM Treaty by José Manuel García Margallo, the Spanish Minister of External Affairs and Development Cooperation. According to Margallo, while the economic dimension of the European integration process may be able to subsist without a solidarity mechanism (like the ESM), the same does not hold true for the political aspect of such process.
Later, the parliamentary groups that had presented veto proposals on the ESM Treaty explained them to the Congreso. First, Irene Lozano Domingo, member of Unión Progreso y Democracia defended the veto of her parliamentary group. In her view, with the creation of the ESM, Spain will transfer competences to a new international organisation. Therefore, the issue touches upon the sovereignty of the State and should therefore be approved through a Ley Orgánica, according to what is established in Article 93 of the Constitution. Lozano highlighted the fact that the ESM Treaty is not EU law and she added that it is harmful to Spanish interests, since the voting rights are linked to the contribution of each MS. The MP concluded by claiming that the EU has a coherence problem, because it fights against tax havens and then it creates a mechanism that will have its money in Luxembourg. After Lozano, Alfred Bosch I Pascual, member of the Grupo Mixto, defended the veto proposal of his parliamentary group. According to Pascual, the ESM Treaty should not only refer to MS’ sovereign debt, but also to sub-sovereign debt or regional debt; and he highlighted that Spain should not criticise the fact that other countries have more important voting rights since, from his point of view, this is only logical.
Once the defence of the two veto proposals finished, the different parliamentary groups explained their positions regarding the ESM Treaty. In this sense:
- Joan Josep Nuet Pujals, member of Izquierda Plural, expressed that his parliamentary group would vote against the ESM Treaty, because it is only beneficial to banks and lobbies.
- Immaculada Riera I Reñé, member of Convergència I Unió, expressed the support of her parliamentary group not only to the ESM Treaty, but also to the compromise that it symbolises in order to reinforce the European project.
- Ignacio Sánchez Amor, member of Grupo Parlamentario Socialista, expressed the support of his parliamentary group to the ESM Treaty. Moreover, he stressed that the Government would always find the support of his group in European issues.
- José María Beneyto Pérez, member of Grupo Popular (the group in the Government), explained that the ESM Treaty is an international treaty, simply because it was more convenient to adopt it this way, and he highlighted the fact that the ESM will apply EU law, and not international law. To this, the Minister of External Affairs and Development Cooperation added that the creation of the ESM Treaty is not about the attribution of competences to a new intergovernmental organisation, but simply about a treaty imposing fiscal duties on MS, and thus it is to be adopted under Article 94 of the Constitution.
About a month later, the Congreso debated and finally voted the ESM Treaty. As for the debate, the only relevant interventions were the following ones:
1. Rafael Larreina Valderrama, member of Amaiur, stressed the fact that the ESM does not go to the root of the problems that have given place to the Eurocrisis. Moreover, he criticised the EU for being a Europe of a lack of solidarity, a Europe of the banking sector, and in particular of the German banks.
2. Joan Josep Nuet Pujals, member of Izquierda Plural, claimed that with the ESM Spain loses its sovereignty, since the mechanism entails a loss of control over Spain’s economic policy.
Regarding the same proceedings in the Senado, the ESM Treaty was discussed and voted in a plenary session held on 6 June, and the only relevant intervention was that of Joan Lerma Blasco, member of Grupo Socialista. The MP highlighted that, due to the relevance of the ESM Treaty, a long and detailed parliamentary debate should have been carried out in its regard. He therefore referred to the fact that the debate should have been conducted under Article 93 of the Constitution. Besides, in his opinion, the European Central Bank should be in charge of the functions that will be attributed to the ESM (for example, because the ECB would be able to act much faster).
Is there a (constitutional) court judgment on the ESM Treaty?
There is no judgement/pending judgement by the Constitutional Court or by any other Spanish Court on the ESM Treaty.
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?
According to Article 41 of the ESM Treaty, the first instalment of paid-in capital shall be paid within fifteen days of the date of entry into force of the Treaty (i.e. in the case of Spain, either in late September or in October 2012). The remaining instalments shall be paid on the coming anniversaries of the first instalment. As for the first payment, however, no reference can be found to this issue in the parliamentary debates that took place between late September and October 2012, or in the earlier negotiation and ratification processes of the ESM Treaty. The same applies for the parliamentary debates of September-October 2013, which should coincide with Spain’s second instalment. Besides, Spain’s contribution to the ESM was introduced in the State’s Budget Law for 2013 and also in the draft of the State’s Budget Law for 2014. However, none of the amendments presented to these laws in the Parliament concerned Spain’s contribution to the ESM.
Finally, linked to this issue, it is interesting to highlight that during the negotiation and ratification process of the ESM Treaty, some MP expressed their dissatisfaction regarding Spain’s voting rights in the ESM, given what the State would pay to the institution. In this sense, for instance, see the intervention of Irene Lozano Domingo, member of Unión Progreso y Democracia, in the plenary session of the Congreso of 12 April 2012.
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?
Since the ESM Treaty is in force in Spain, it is the Government who is responsible for any decision in the context of the new mechanism. In this sense, the role of the Parliament is to politically control the decisions of the Government regarding the ESM.In some occasions, it is a member of the Government who (unilaterally) decides to explain to the Parliament issues in relation to the ESM; other times is it a MP who directly asks to the Government (orally or through a written question) whatever query regarding the functioning of the ESM.
For instance, on 8 February 2013 María de los Ángeles Marra Domínguez, member of Grupo Socialista in the Senado, presented a written question to the (Spanish) Government where she asked the opinion of the Government regarding the fact that the role of Spain in the decisions of the EU is diminishing. In particular, one of the issues she was particularly interested in was the fact that Spain does not have any management position in the ESM. In its response to the question, the Government highlighted the appointment of David Vergara as a Deputy Director General of the ESM.
Besides, in his intervention in the plenary session of the Senado on 8-9 May 2013, Francisco Ultrera Mora, member of Grupo Popular, referred to an intervention of Alfredo Pérez Rubalcaba, member of Grupo Socialista, the same day in the Congreso where the latter had asked the Government to spend 30,000 million Euros, and to ask for them to the EU if necessary. Ultrera Mora responded to this that Pérez Rubalcaba should know that Spain is not going to get another 30,000 million Euros from the ESM, and that the money of the Mechanism is only lent for very concrete purposes.
What political/legal difficulties did Spain encounter in the application of the ESM Treaty?
On 11 February 2013 Jesús Alique López, member of Grupo Socialista in the Senado, presented two written questions to the (Spanish) Government regarding:
(1) The way in which the first part of Spain’s financial assistance programme had been applied (in the past);
(2) The way in which the second part of Spain’s financial assistance programme would be applied (in the future).
On 22 February 2013 the Government presented the written response to the abovementioned questions. Essentially, the Government replied by explaining the main elements of the process by which Spain had been granted financial assistance (initially) through the EFSM (e.g. from the agreement of the Eurogroup on 20 July 2012 to the fact that it was agreed that, once the ESM was in place, the assistance would be granted through the newly created Mechanism). The written response also included a description to the two parts in which the financial assistance programme was divided, and an assessment on both. As for the description of the steps followed in the first part of the programme, the Government explained that, in December 2012, Spain received 39,468 million Euros, which were used to recapitalise Group 1 of banking institutions in the MoU, and to finance the contribution of the Fondo de Reestructuración Ordenada Bancaria (FROB) to the capital of the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria (SAREB). Regarding the second part of the programme, the Government stressed that, in February 2013, the second part of the financial assistance (1,865 million Euros) had been disbursed (from the ESM). As for the assessment of the assistance received, the Government highlighted how important it would be for the Spanish economy, since it would be essential to the flow of credit to companies and families.
Besides, regarding the application of the ESM to Cyprus, it is important to stress that the Spanish Parliament has not discussed any of the decisions of the ESM to provide financial assistance to Cyprus. In this regard, no debate on this issue followed any of the three disbursements of ESM financial assistance to Cyprus (in May, June and September 2013).
Have there been any relevant changes in national legislation in order to implement or to comply with requirements set by the ESM-Treaty?
(1) The Real Decreto-Ley 21/2012, de 13 de Julio, de medidas de liquidez de las administraciones públicas y en ámbito financiero,in its Disposición Adicional Quinta, establishes that in case Spain had to send information to the ESM (and to other institutions listed), in the context of a recapitalisation plan of the financial sector, the information would be exempted from the duty of secrecy enshrined in the Real Decreto Legislativo 1298/1986, de 28 de junio, sobre adaptación del derecho vigente en material de entidades de crédito al de las Comunidades Europeas.
(2) The Ley 9/2012, de 14 de noviembre, de reestructuración y resolución de entidades de crédito,in its Article 30(2), establishes that the payment of acquiring recapitalisation instruments shall be carried out in cash or in securities which are representative of sovereign debt, in securities issued by the EFSM or the ESM, or in securities issued by the Spanish Fondo de Reestructuración Ordenada Bancaria (FROB).
(3) The Ley 17/2012, de 27 de diciembre, de Presupuestos Generales del Estado para el año 2013 (the State’s Budget Law for 2013), in its Décima Cuarta (14th) Disposición Final, modifies Article 98(3) of the Ley 47/2003, de 26 de noviembre, General Presupuestaria, in the sense that any decision authorising the creation of sovereign debt shall include the collective action clauses adopted according to Article 12(3) of the ESM Treaty.
What other information is relevant with regard to Spain and the ESM Treaty?
No other relevant information.