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.           
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 Sweden 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 has not been possible to identify parliamentary debate on the EFSM at the negotiation stage. However, the Parliamentary Committee on Finance briefly commented on a Commission Communication on reinforcing economic policy coordination.[1] The Committee held that it supported the decision of the ECOFIN to establish the ESFM, and that it was similar to the mechanism to support non-euro states already in place.[2]

In a debate article in Financial Times in November 2010,[3] the Swedish Minister for Finance argued:

“The existing EU crisis lending facilities [the EFSF and the EFSM and a balance of payment of support] are financed in a way that neither reflects risk nor provides incentives for sound fiscal policies.

A crisis mechanism needs resources to lend to member states that have run into trouble. An important question is how to mobilise these resources in a way that minimises moral hazard.

This is most unfortunate, since experience has shown that irresponsible fiscal behaviour has adverse effects not only on the sinner but also on the euro area and the EU as a whole. The costs of this externality should be borne, to a much higher degree than is the case today, by those members that act irresponsibly.”

There seems to have been no specific debate on sovereignty, constitutional law, socio-economic fundamental rights, or the budgetary process.

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 Sweden and in what way does it involve Parliament?

Not relevant for Sweden.

Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Sweden? 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?

Not relevant for Sweden.

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

Not relevant for Sweden.

Case law     
Is there a (constitutional) court judgment about the EFSM or EFSF in Sweden?

Not relevant for Sweden.

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?

Not relevant for Sweden.

Implementing problems 
What political/legal difficulties
did Sweden encounter in the application of the EFSF?

Not relevant for Sweden.

Bilateral support   
In case Sweden 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?

Sweden has provided bilateral funding to Ireland (600 million Euros) and to Latvia (720 million euros).[4] Latvia never used the loan; it elapsed in December 2011.  Sweden has also provided a loan to Island (495 million euros).[5]

Only the funding to Ireland was debated in the Parliament:

In March 2012, the Government submitted its proposal on bilateral funding to Ireland.[6] It pointed out that Sweden’s economy is sensitive to financial instability in Europe, and that Sweden therefore, if necessary, should provide funding to states in a dire situation and with which Sweden has formed economic and political relations. A precondition was that other states participated in the funding. The Government pointed out that Ireland had suffered badly by the financial crisis and since Ireland had financial relations with many of the biggest economies in Europe, there was a risk that financial turbulence could spread to other states. If Ireland would not get support to manage its economic and financial crisis, there would be an increased risk for smaller euro states and also for Sweden.

Two very different proposals from individual MPs were submitted to the Riksdag (so-called ‘motions’[7] ). In the first one, submitted by two MPs from the far-right ‘Sweden Democrats’ (Sverigedemokraterna),[8] it was argued that it was not Sweden’s responsibility to solve other countries’ problems caused by the choice to abolish their monetary policy independence and by their failure to foster sound public finances. In the second one, two individual MPs from the ‘Left Party’ (Vänsterpartiet),[9] explained that the stabilisation programme for Ireland, adopted after negotiations between Ireland and the lenders, was of such a nature that the Left Party could not support it; the programme emphasised a cutback on public spending, including a decrease in the average pay in the public sector, cutback on welfare programmes, and privatisation.

Before the Riksdag could decide on the Government’s proposal, it had to be prepared by a Parliamentary committee. The Government’s proposal was sent to the Parliamentary Committee on Finance, which is responsible for any expenditure to the EU.[10] The Committee dismissed the two motions. The Committee stated that it was important that Sweden takes part in the international funding package for Ireland.[11] The argument was of an economic nature; Sweden is a small open economy and therefore sensitive to financial and economic turbulence. It was argued that if Ireland would not get sufficient support, there was a risk of contamination to other euro members.

The bilateral funding was debated in the Chamber on the 9th of May 2012.[12] There were no other relevant arguments in that debate than what had already come up in the Government’s proposal, in the two motions, and in the Opinion of the Committee on Finance. In the Chamber, 283 voted for the Government’s proposal, 20 against, 18 abstained, and 28 were absent.

What other information is relevant with regard to Sweden and the EFSM/EFSF?

No other relevant information.

[1] Communication from the Commission to the European Parliament, the European Council, the council, the European Central Bank, the economic and social committee and the Committee of the Regions Reinforcing economic policy coordination, COM/2010/0250 final.

[2] Finansutskottet utlåtande 2009/10:FiU40, Utlåtande om förstärkt samordning av den ekonomiska politiken, http://www.riksdagen.se/sv/DokumentLagar/Utskottensdokument/Betankanden/Utlatandeomforstarktsamordn_GX01FiU40/

[3] Anders Borg, Minister for Finance, Financial Times, 16 November 2010. Reproduced at the Government’s website, http://www.regeringen.se/sb/d/3212/a/155944

[4] Regeringens skrivelse 2009/10:244, ‘Villkoren för Sveriges kredit till Lettland’ (On the Conditions for the Swedish Funding to Latvia), Stockholm 2nd of September 2010. http://www.regeringen.se/content/1/c6/15/18/64/e8573d39.pdf

[5] Regeringens proposition 2010/11:132, ‘Förlängd tillgänglighetsperiod för krediten till Island’, http://www.regeringen.se/sb/d/14250/a/167572

[6] Regeringens proposition 2011/12:119, Stockholm the 22 of March 2012, http://www.riksdagen.se/sv/Dokument-Lagar/Forslag/Propositioner-och-skrivelser/Utlaning-till-Irland_GZ03119/?html=true

[7] Individual members of parliament or a group of members may submit a proposal (a ‘motion’) to the Riksdag dealing with the same issues as the Government’s proposal. This has to be done no later than 15 days after the Government has presented its proposal. The Government has to implement such proposals if the Riksdag approves them.

[8] Motion 2011/12:Fi13 by Erik Almqvist and Johnny Skalin (both Sverigedemokraterna), http://www.riksdagen.se/sv/Dokument-Lagar/Forslag/Motioner/Utlaning-till-Irland_GZ02Fi13/?text=true

[9] Motion 2011/12:Fi14 by Ulla Andersson and others (Vänsterpartiet), http://www.riksdagen.se/sv/Dokument-Lagar/Forslag/Motioner/Utlaning-till-Irland_GZ02Fi14/?text=true

[10] According to the Swedish Parliament’s website, the Committee on Finance also prepares ‘matters concerning general guidelines for financial policy, adoption of the central government budget and matters concerning the activities of the Riksbank. It also prepares matters concerning expenditure limits for expenditure areas and estimates of State revenue’. http://www.riksdagen.se/en/Committees/The-15-parliamentarycommittees/

[11] Finansutskottet betänkande, 2011/12:FiU41, http://www.riksdagen.se/sv/DokumentLagar/Utskottensdokument/Betankanden/201112UtlaningtillIrland-_GZ01FiU41/ 

[12] Riksdagens protokoll 2011/12:111, paragraph 10 and 16, http://www.riksdagen.se/sv/Dokument-Lagar/Kammaren/Protokoll/_GZ09111/