IV – Early Emergency Funding

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Austria

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 Austria 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?

Austria already had a legal basis for granting international financial assistance to countries with which it is economically connected, which is called Payment Balance Stabilization Law (ZahlungsbilanzstabilisierungsG, BGBl I Nr. 52/2009)[1] that was written with the Euro-crisis in mind. The first Eurozone-crisis measures, notably the Art. 126 TFEU-based 1st round of Greek assistance[2] and the necessary procedures for the Art. 122 (2) TFEU-based EFSM-regulation were discussed in the plenary of the National Council[3] on May 19, 2010.[4] They were discussed because the Payment Balance Stabilization Law needed to be amended as a consequence of these first Euro-crisis measures. The amendment basically foresees that the Minister of Finance can commit future budget resources to such international financial assistance (up to 2 billion in the 2009 version and up to 2.3 billion in the 2010 version of the law). The amendment further creates a basis for the issue of guarantees in the framework of the EFSF up to 15 billion.[5]  (Nota bene that this is a little confusing since the extraordinary ECOFIN meeting where commitment to the EFSF was first made[6] took place on May 9 and 10, 2010, the plenary session of the National Council on May 19 and the signature of the EFSF framework only on June 9, 2010 – more on this in question IV.2).

The Federal Chancellor Fayman (Social Democrat Party) opened the National Council’s plenary session from May 19, 2010 with “explanations” about the lessons from the Greek crisis and measures to stabilize the common European currency. He talked about it in terms of necessary budget consolidation within the Eurozone. Budget consolidation was in his opinion necessary in order not to be dependent of debt and interests and in order to discipline speculators. Hedge funds should be brought under control and a financial transaction tax should be introduced. Better coordination of economic and fiscal policy was necessary and tools should be in place to intervene if member states deviated too much from common goals.

The subsequent debate in the plenary remained rather general on European integration, the questions discussed were whether the EMU was a “neoliberal project” per se, the need for more political integration within the Eurozone, the need for fiscal discipline of all members, whether the crisis measures are actually in Austria’s own interest and how much are solidarity gestures.

Overall, the main position of the 2008 to 2013 government that was constituted by a coalition of the Social-democrat Party (Sozialdemokratische Partei Österreichs, SPÖ) and the Austrian People’s Party (Österreichische Volkspartei, ÖVP) (conservative center-right party) under an SPÖ chancellor, Werner Faymann, was in favor of the proposed amendment to the Payment Balance Stabilization Law and of the crisis measures in general. From the opposition parties, the Greens were divided and voted partially for and partially against the amendment, whereas the far-right parties, the Free People’s Party (Freiheitliche Partei Österreich, FPÖ) and the small Coalition for the Future of Austria (Bündnis Zukunft Österreich, BZÖ) were strongly opposing it and voted against.

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 Austria and in what way does it involve Parliament?

The EFSF Framework agreement was signed by the Austrian Minister of Finance on June, 9, 2010 and since the agreement was about setting up a society under private (Luxembourgish) law, it was considered as part the government’s capacities to engage in private law transactions (Art. 17 B-VG[7]). Therefore, an approval of the agreement by the parliament was not necessary for the signature of the agreement. A legal basis for Austria’s guarantee commitments had already been decided by the National Council on May 19, 2010, when they agreed on an amendment of the Payment Balance Stabilization Law (ZahlungsbilanzstabilisierungsG (ZaBiStaG), BGBl I Nr. 52/2009)[8] (as mentioned in question IV.1). The amendment stipulates that the Minister of Finance can commit the Federal Republic according to the conclusions of the ECOFIN Council from May 9, 2010 (§ 2a ZaBiStaG). In other words, the amendments of May 19th, 2010 already enable the Finance Minister to promise guarantees under the yet to be signed EFSF framework agreement. The amendment further stipulates that for all loans and guarantees made under that Payment Balance Stabilization Law, the Minister of Finance needs to agree with the Federal Chancellor first (§ 3 ZaBiStaG). The Minister of Finance also has to deliver a report to the main committee (of the National Council) at the latest one month after the end of the quarter in which he or she explains all measures taken on the basis of the Payment Balance Stabilization Law (§ 4a ZaBiStaG). The amendment entered into force a day after its publication in the Federal Law Gazette[9], on June 12, 2010.

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Austria? 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 questions IV.1 and IV.2.

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

Increasing the commitments under the EFSF as agreed by the Heads of State and Government on March 11, 2011 was a major issue discussed in the National Council. The reason for that was that the Payment Balance Stabilization Law had to be amended again in order to raise the possible guarantees to which the Minister of Finance is entitled to commit (§ 2a ZaBiStaG) from 15 billion to 21.629 billion.[10] The SPÖ, the ÖVP and the Greens voted for the amendment that entered into force on October 8, 2011, a day after its publication in the Federal Law Gazette.[11]

The office of the Chancellor, several provinces, the Court of Auditors, the chamber of labour, and the chamber of commerce all gave written opinions in a pre-parliamentary proceeding and sent them to the National Council.[12] The Financial Committee of the National Council recommended the adoption of the amendment[13] and the Committee’s report was discussed in parliament at length.[14] The head of the far-right party FPÖ, Strache, wanted to initiate a referendum about the proposed amendment but the proposal did not get the necessary majority (51 yes-votes against 116 no-votes).[15] Otherwise, the government’s position was again that strengthening the “rescue umbrella” is fundamental for the Euro to survive. Then Finance Minister Fekter (ÖVP) specified that the entire European strategy of combating the crisis through the EFSF has also helped Austria fighting the banking crisis. The fact that Austria had managed the crisis pretty well until then was further due to the fact that a common, European solution had been found and Austria would have never gotten away so well alone. In particular, she refers to EU efforts that have helped Austrian banks that were exposed in many of these countries a lot.[16] The rest of the Austrian People’s Party joined in this tone. They stressed that Austria was not only helping Greece but first of all helping itself by helping to stabilize and save the Euro. The Social Democrat party stressed some social aspects of the crisis measures and the problems of austerity. Loosening austerity would be a sign of solidarity. The Greens are in favour of the crisis measures but stress that their democratic legitimacy of the loan facilities must be better safeguarded.

Finally, the SPÖ, ÖVP and Greens vote for the amendment whereas the FPÖ and BZÖ vote against it, which means that it was adopted with a majority of 117 against 53 votes.

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

No.

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?

There is only a small explicit role for the parliament foreseen in the Payment Balance Stabilization Law, although the Minister of Finance can issue guarantees only as authorized by such a Law that goes through the parliament, therefore, in a way the Minister remains ‘bound’ by the parliament. As explained in question IV.2, according to § 3 ZaBiStaG the Minister of Finance has to agree with the Chancellor on guarantee issues. According to § 4a ZaBiStaG (introduced in the 2010 amendment, left untouched in 2011 and then amended again in 2012[17]), the Minister of Finance has to report to the main committee of the National Council. There, these reports are “acknowledged” by vote in the main committee. The disbursement of tranches could be discussed in the same way – on the basis of the Finance Minister’s Reports to the main committee. Main committees’ meetings are not documented like the National Council meetings through stenographic protocols, which means that only press releases give an insight into the content of the debates.

However, § 2a ZaBiStaG that was introduced in the 2010 amendment and in its again amended version from 2011, as explained in question IV.4, contain both a numerical limit up to which the Minister of Finance is allowed to issue guarantees (up to 15 billion under the original EFSF Framework Agreement and 21.629 billion under the Amended EFSF Agreement for Austria). Due to the particular set-up of the EFSF, a Member State that becomes a borrower steps out as a guarantor which means that the guarantee commitments for all other Member States raise (because they need to step in order to maintain the overall upper ceiling). Therefore, the decision on a new aid package automatically raises the overall guarantee limit for which an amendment of the Payment Balance Stabilization Law (and therefore the involvement of the parliament) would have been necessary. This, however, did not happen (as opposed to Germany). It did not happen because the Payment Balance Stabilization Law from 2010 authorized the issue of guarantees up to 15 billion, which is a bit more than the maximum amount Austria was committed to under the original EFSF agreement (12.24 billion). Therefore, the fact that Ireland and Portugal became step-out-guarantors did not exceed the authorized 15 billion guarantee commitment. In the 2011 amendment of the Payment Balance Stabilization Law however, only precisely the amount Austria was committed to under the amended EFSF agreement was authorized (21.629 billion) which means that new bailout packages would have necessarily lead to an amendment of the Payment Balance Stabilization Law. The only new bailout package after the entry into force of the 2011 amendment of the EFSF agreement was the second package for Greece. Greece, however, had been a step-out guarantor from the very beginning of the EFSF (Art. 8 (2) EFSF Agreement) which means that the shares of the other countries had been calculated accordingly. Therefore, no amendment of the Payment Balance Stabilization Law was necessary. The case of Spain is complicated (see also question VIII.7) because the bailout happened in the middle of the ratification process of the ESM – when the capital and setting of the ESM were already agreed (and at that time in Austria had already passed through parliament, see question VIII:2) it was already clear that EFSF-commitments would be taken over by the ESM.

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

As explained in the first part of question IV.6, the Minister of Finance has to report the measures he or she takes to the main committee of the National Council. In the case of the package for Ireland, the FPÖ and the BZÖ criticized the respective reports of the Minister of Finance at the main committee meeting of November 25, 2011.[18] Their major criticism was that aid packages were never-ending and that it was yet another bank-bailout in disguise. The ÖVP and SPÖ acknowledged that this situation was not ideal but that there were no other options at present. With a little cynicism, the Greens pointed out that the BZÖ and FPÖ had not objected to the (federal) bailout of the provincial Hypo-Alpe-Adria bank (see question I.1 for details on this). Nevertheless, the reports were approved by the majority.

No press release exists on a discussion of the package for Portugal.

The last press release about the main committees’ discussion of specific bailout measures before the 2012 reform of the National Council’s participation in the bailout measures (see Footnote 25 and question VIII.6) exists on the second package for Greece.[19] The Minister of Finance pointed out that a Greek default would be too costly and the risk of Greek insolvency had to be reduced. She further pointed out that PSI is discussed on the European level but that default is out of question because of the lacking procedure for that. The then Vice-Chancellor Spindlegger (ÖVP) added to that that the private sector should be involved in a smart and creative way. The chancellor Faymann (SPÖ) specified that he is much more in favour of a financial transaction tax than of a bank tax because the latter would not oblige the entire financial sector to contribute. Former chancellor and MP Schüssel (ÖVP) said the expectations from a financial transaction tax are exaggerated and that a bank tax would only be passed on to the clients. The Greens criticized that the government was not taking an explicit position on the PSI. The BZÖ suggests a separation of a core Eurozone and a light Eurozone but remains alone with this idea.

Bilateral support    
IV.8    
In case Austria 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?

Austria participated in the bilateral loan package for Greece, referred to as “First round of loans to Greece” or “Greek loan facility”. For the debate on this, see question IV.1.  

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

No other relevant information.

[1]              Payment Balance Stabilization Law (ZahlungsbilanzstabilisierungsG, BGBl I 52/2009), original version from June 17, 2009, the original version at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2009_I_52/BGBLA_2009_I_52.pdf, pp. 32-33.

[2] The first round of loans to Greece (pooled bilateral loans) was based on Council Decision 2010/320/EU, notably consideration (8). The Decision is based on Art. 126 (9) and 136 TFEU. The conditions for the loan (besides the Memoranda with the Commission and the IMF) were based on the excessive deficit procedure of Art. 126. This is why these bilateral loan package is called here Art. 126-based measure; as opposed to the 122 (2)-based second round (EFSM). The distinction is important because the entire Austrian and German debate on rule of law vs state of necessity/self-caused crisis/circumstance beyond control was referring to Art. 122 (2) vs 125 TFEU and not to the first round.

[3]              The National Council is the bigger and more important one of the two chambers of the parliament and is directly elected. The second chamber, the Federal Council, consists of representatives of the nine provinces (Länder). Both together form the Austrian parliament.

[4]              Stenographic Protocol of National Council Session No. 66, XXIV Legislative Period, May 19, 2010, at http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00066/fname_190268.pdf.

[5]              First amendments to the Payment Balance Stabilization Law (BGBl I 31/2010) at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2010_I_31/BGBLA_2010_I_31.pdf.

[6]              Ecofin, Extraordinary Council Meeting, May 9/10, 2010, Press release at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/114324.pdf

[7]              Bundes-Verfassungsgesetz (Federal Constitutional Statute = the constitution), available in its current version at: http://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10000138; and available in English at http://www.ris.bka.gv.at/Dokumente/Erv/ERV_1930_1/ERV_1930_1.pdf (the English version is from 2010 and does not contain the latest amendments yet). 

[8]              Supra note 1 of this section.

[9]              Idem.

[10]             Explanation of the government for the proposed amendment of the Payment Balance Stabilisation Law at: http://www.parlament.gv.at/PAKT/VHG/XXIV/ME/ME_00300/fname_227389.pdf. Such an „explanation“ (Vorblatt/Erläuterungen) is given by the government for any proposed legislation to the National Council.

[11]             Second amendment of the Payment Balance Stabilization Law (BGBl 90 I/2011) at: http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2011_I_90/BGBLA_2011_I_90.pdf.

[12]             Opinion of the Audit Court (Rechnungshof) on the Second Amendment of the Payment Balance Stabilization Law, August 18, 2011, at http://www.parlament.gv.at/PAKT/VHG/XXIV/ME/ME_00300_04/imfname_228732.pdf.

[13]             Report of the Financial Committee (of the National Council) the Second Amendment of the Payment Balance Stabilization Law, September 27, 2011, at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01409/fname_231505.pdf

[14]             Stenographic Protocol of National Council Session No. 120, XXIV Legislative Period, September 30, 2011, at http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00120/fname_233946.pdf, pp. 10-74.

[15]             Idem, p. 78.

[16]             Background: Art. 143 TFEU based Balance of Payment assistance to Hungary, Latvia and Romania were crucial for Austria because of the exposure of its banks in these countries – Austria’s banks are invested with EUR 300 billion in Eastern Europe. Austria profited from BoPs indirectly and the government was conscious of that in the further handling of the crisis measures, especially the first ones. 

[17]             The third amendment of the Payment Balance Stabilization law (BGBl I 65/2012) http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_I_65/BGBLA_2012_I_65.pdf) passed as accompanying law of the TESM approval that will be discussed in the section on the TESM. The 2012 version of §4 ZaBiStaG says that the Minister of Finance has to report at the latest one month after the end of a quarter to the committee dealing with financial issues (in the 2010 version it had been the main committee) of the National Council. However, in the accompanying legislative package to the TESM there is an entirely new role of the National Council introduced through constitutional amendment that will be discussed in question VIII.6.

[18]             Press Release on the meeting of the Main Committee of the National Council from November 25, 2011, at http://www.parlament.gv.at/PAKT/PR/JAHR_2010/PK0940/index.shtml

[19]             Press Release on the meeting of the Main Committee of the National Council from July 17, 2011, regarding the Second Package for Greece available at http://www.parlament.gv.at/PAKT/PR/JAHR_2011/PK0741/.

Belgium

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 Belgium 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?

No legal difficulties; see the parliamentary discussion mention below in IV.2.

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 Belgium and in what way does it involve Parliament?

The federal government submitted the draft law authorizing financial participation in the EFSF on August 19th, 2010. Following the optional bicameral procedure of article 78 Const., the Senate decided proprio motu to evoke the draft legislation and confirmed the text as voted by the House. The resulting law entered into force on the day of publication, i.e. November 23rd , 2010.[1]

Article 3 of this law granted the caretaker government the right to participate in the capital of the EFSF, following the distribution key as set out in the EFSF. Additionally, the original draft set out a wide delegation to adjust this key, which was criticised by the Council of State in its Advice.[2]  The draft article 6 was thus amended to refer to the EFSF as the objective and framework of the delegation and stipulated that these governmental decrees have to be approved by the House within 12 months.

The Minister of Finance received his authorization to buy shares of the EFSF the same day.[3]

The higher key following the financial support to Ireland and Portugal was approved the next year by the law of September 26, 2011.[4] The Belgian part of the State guarantee was increased from 15.3 billion euro to 34.5, which amounts to approximately 10 % of the Belgian GDP.

The initial parliamentary debates were limited, given the urgency requested by the government. Most questions inquired into the general approach of the EU to the financial crises. The most poignant question as regards the EFSF raised the issue of the Excessive Deficit Procedure. The Minister of Finance responded that any expenditure following the EFSF would be marked as government debt, but would be calculated separately.[5]

The debates on the amendment of the law approving participation in the EFSF following the extension of the Framework Agreement in 2011 extended into the general approach to the financial crisis, with little detailed remarks concerning the EFSF in particular.[6]

Parliamentary involvement is thus limited to the authorizing act, and the stipulation that the delegation to the government to acquire capital in the EFSF, or undertake other measures in that respect, has to be approved within twelve months by formal law.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Belgium? 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?

According to article 4 of the Law of November 2nd, 2010, the Belgian State guarantees the EFSF issued loans for 165 % (initially 120%)[7] of the Belgian share in the distribution key. The maximum amount for the total of guarantees is 34 500 000 000 euro.

The debates were not of a technical nature, and focused more on the general approach to the crisis, see above, IV.2.

Activation problems 
IV.4     
What political/legal difficulties did Belgium 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 political situation was rather unstable at the time, and the caretaking government could not command a majority in Parliament. The main opposition party, the NVA, did support the legislative acts related to the EFSF, yielding a large majority in total despite the lack of formal majority.

From a legal angle, three questions arose: first, can a caretaking government submit draft legislative acts to parliament? Second, should the EFSF framework treaty be approved by parliament? And third, what are the conditions for the delegation to the government authorizing expenditure as regarding the EFSF?

With regards to the first question, the issue is whether the executive’s competence, limited to the ‘current affairs’ in a period of dismissal, includes limitations on the drafts put before parliament. The Council of State denied to opine on this question[8], but legal scholarship generally approves of this practice[9], since it does not detract any decision from the power of parliament. Even if one adheres to the limitation to the current affairs doctrine, classifying the proposal as urgent would be valid under the current affairs doctrine. The EFSF execution would certainly qualify.

Second, although article 167, paragraph 2 of the Constitution obliges Parliament to approve of all Treaties[10], the EFSF framework treaty has not been formally approved by the federal Parliament because it is “an intergovernmental agreement governed by English law and incorporating the EFSF under Luxemburg law”.[11] Again, the Council of State denied to opine on this classification.[12] Where parliamentary assent is lacking, the consequence would be the inability to derive rights and obligations from the Treaty before a Belgian judge, which is arguably not the intention of the EFSF treaty.

The delegation to the government to adjust the amounts that Belgium invests in the EFSF was criticised by the Council of State as being too wide, and was amended to be functionally limited to the operation of the EFSF. Additionally, the Royal decrees[13] authorized have to be approved by Parliament within twelve months.  

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

As the EFSF Framework Treaty has not been formally approved by Parliament, no ordinary proceedings can invoke this agreement. However, the law of November 2nd, 2010 was twice challenged before the Constitutional Court.

a.     Const. Court, Case 111/2011

In the first case, nr. 111/2011, private citizens argued that the execution of the EFSF framework treaty as laid down by the Act of November 2, 2010 violated article 48(7) TEU[14] and a number of constitutional provisions related to the parliamentary procedure. Both norms are not within the competence of the constitutional court.[15] The appeal was rejected for lack of merits.

1.     Name of the court: Constitutional Court

2.     Parties: Four private citizens

3.     Type of action/procedure: appeal for invalidation

4.     Admissibility issues: inadmissible due to reference to constitutional norms upon which the Court cannot adjudicate. The competence of the Constitutional Court is formally limited to federal division of competences, Title II of the Constitution (fundamental rights), and articles 170,172 and 191 (tax provisions and alien status). Through the equality provision and prohibition of discrimination (articles 10 and 11), the Court casts a wider net. However, in this case, no violation of the equality clause was invoked by the applicants.

5.     Legally relevant factual situation: /

6.     Legal questions: /

7.     Arguments of the parties: violation of articles 74 (competences of the House), 77 (bicameral competences) and 96 (general provision on the executive) of the Constitution, violation of articles 48(7) and 222 TFEU, and violation of article 1 of the Special Act on Institutional Reform.

8.     Answer by the Court: Court is not competent to adjudicate upon these norms, unclear appeal as to the precise violation.

9.     Legal effects of the decision/judgment: none.

10.  Main outcome and broader political implications: none.

b.      Const. Court, Case 33/2013

The second case, nr. 33/2012, fared equally bad from the point of view of the petitioners. They construed an argument based on democracy, and lamented the severe budgetary operations that would result from the operation of the EFSF. The Constitutional Court again rejected the plea for lack of merits.[16]

1.     Name of the court: Constitutional Court

2.     Parties: Two private citizens

3.     Type of action/procedure: appeal for invalidation

4.     Admissibility issues: inadmissible due to lack of locus standi. Applicants relied on their status as citizens and voters, and lamented the impact of budgetary constraints.

5.     Legally relevant factual situation: /

6.     Legal questions: /

7.     Arguments of the parties: /

8.     Answer by the Court: Court did not find a direct and individual concern and declared the appeal inadmissible.

9.     Legal effects of the decision/judgment: none.

10.  Main outcome and broader political implications: none.

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?

The entire operation of the EFSF was delegated to the government. In case a Royal Decree would be necessary, for instance to acquire shares of the EFSF on top of the amount indicated in the law of 2010, or to increase the guarantee, these decrees have to be approved by Parliament within twelve months.

Normally, such delegation to the executive would be unproblematic, but since Parliament lacks any effective sanctioning mechanism vis-à-vis a government that is already demissionary, little accountability was installed.

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

None.

Bilateral support     
IV.8    
In case Belgium 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 Law of May 12, 2010 authorized the Belgian demissionary government to partake in the Commission-led Greek Loan Facility for an amount of 1 billion euro.[17] This amount was later increased (Law of December 29, 2010) to almost 2.9 billion for the full term of three years.

Political support was heavily in favour, though the extreme-right Vlaams Blok Party urged modesty of the EU in issuing financial support, and proposed to grant national parliaments more voice in this process.[18]

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

None.

[1] Law of 2 November 2010 concerning the participation of the Belgian State in the ‘European Financial Stability Facility’ and the issuance of State guarantee for the financial instruments emitted by this Corporation, Official Gazette 2010, 23 November 2010. http://www.ejustice.just.fgov.be/mopdf/2010/11/23_3.pdf

[2] Parl. Doc. House, 2010-11, nr. 53K24/1, p. 14. The draft article 6 was amended to refer to the EFSF and stipulated that these governmental decrees have to be approved by the House within 12 months. http://www.dekamer.be/FLWB/PDF/53/0024/53K0024001.pdf

[3] Royal Decree of November 23, 2010, Official Gazette November 25, 2011.

[4] Law of September 26, 2011, Official Gazette September 30, 2011. http://www.ejustice.just.fgov.be/mopdf/2011/09/30_2.pdf

[5] Parl. Doc. House, 2010-11, nr. 53K24/2, p. 5. http://www.dekamer.be/FLWB/PDF/53/0024/53K0024002.pdf

[6] See Parl. Doc. House, 2011-12, nr. 53K1715/3. http://www.dekamer.be/FLWB/PDF/53/1715/53K1715003.pdf

[7] Amended by law of September 26, 2011.

[8] See the advice of the Council of State, Parl. Doc. House, 2010-11, nr. 53K24/1, p. 13. http://www.dekamer.be/FLWB/PDF/53/0024/53K0024001.pdf

[9] A. Alen & K. Muylle, Handboek Belgsich Staatsrecht (Kluwer 2011) p. 151, and references in note 556.

[10] With the minor exception of the “executive agreements that aim to execute and update existing treaties”.

[11] Parl. Doc. House, 2010-11, nr. 53K24/1, p. 4. http://www.dekamer.be/FLWB/PDF/53/53K0024001.pdf

[12] Parl. Doc. House, 2010-11, nr. 53K24/1, p. 14. http://www.dekamer.be/FLWB/PDF/53/53K0024001.pdf

[13] As often the case, these Royal Decrees require the assent of the ministers of the government, hence ensuring parity between the two linguistic groups (see article 99 Const.).

[14] European Council initiative installing QMV instead of unanimity has to be submitted to the national parliaments who enjoy a veto right.

[15] Constitutional Court, Case 111/2011 of June 23 2011. http://www.const-court.be/public/n/2011/2011-111n.pdf

[16] Constitutional Court, Case 33/2012 of March 1st, 2012. http://www.const-court.be/public/n/2012/2012-033n.pdf

[17] Law of May 12, 2010, Official Gazette May 25, 2010. http://www.ejustice.just.fgov.be/mopdf/2010/05/25_2.pdf

[18] Parl. Doc. House, 2009-10, nr. 52K2576/2, p. 11. http://www.dekamer.be/FLWB/PDF/52/2576/52K2576002.pdf

Bulgaria

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 Bulgaria 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?

The information is not publicly available. Furthermore, no debates relating to this question were found in the verbatim records of the Bulgarian National Assembly.

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 Bulgaria and in what way does it involve Parliament?

Bulgaria is still not a Eurozone Member State and as such this question is not applicable to it.

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Bulgaria? 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 applicable to Bulgaria as Bulgaria was not obliged to issue such Guarantees.

Activation problems      
IV.4    
What political/legal difficulties
did Bulgaria 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 applicable to Bulgaria.

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

The EFSF has not been litigated at the BCC.

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?

Not applicable to Bulgaria.

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

Not applicable to Bulgaria.

Bilateral support    
IV.8    
In case Bulgaria 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?

No, Bulgaria did not participate in the provision of funding on a bilateral basis to other EU Member States.

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

Not other relevant information.

Croatia

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 Croatia 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?

Croatia did not participate in the negotiation of the EFSF and the EFSM. No debate on these two issues can be found neither in any of the sessions of the Croatian Parliament, nor of the Croatian Government. Only a few blog and newspapers articles deal very superficially with these issues, just mentioning them, primarily as a negative phenomenon, since the EFSF and the EFSM were identified as having potential negative economic consequences for the Croatian industry and budget and of which Croatia shall be aware once it becomes the EU Member State on 01 July 2013.

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 Croatia and in what way does it involve Parliament?

Croatia is not a Eurozone member state; it is not a party to the EFSF.        

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Croatia? 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?

Croatia is not a Eurozone member state; it is not a party to the EFSF.        

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

Croatia is not a Eurozone member state; it is not a party to the EFSF.        

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

There is no such case law. Croatia is not a Eurozone member state; it is not a party to 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?

Croatia is not a Eurozone member state; it is not a party to the EFSF.        

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

Croatia is not a Eurozone member state; it is not a party to the EFSF.        

Bilateral support      
IV.8    
In case Croatia 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?

No, Croatia did not participate.

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

Not applicable.

Cyprus

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 Cyprus 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?

The Draft Bill on the ratification of the EFSF was discussed at the Cypriot Parliament on 24 June 2010, under the ‘urgency procedure’, after it had been discussed by the Parliamentarian Committee of Finance and Budget on 14 and 21 June 2010.[1] The Committee[2] recommended to the Parliament the enactment of the Bill under discussion in law, by simple majority.[3] The ‘democratic Party’ , the ‘leftish’ coalition ‘AKEL- Left- Nees Dynameis’ together with the member of the Social Democrats’ Movement (EDEK) agreed on the enactment of the Bill in law. The main objections did not relate to issues of (budgetary) sovereignty or the constitutionality of the EFSF but rather on the capacity/ability of Cyprus to meet its financial obligations as to the guarantees. In this respect, the representatives of the Ministry of Finance had to stress that the contribution of Cyprus in guarantees would not exceed 5% of the GDP of Cyprus, a manageable amount, considering in particular the many benefits Cyprus would gain from its participation in the EFSF, such as the more favourable interest rates, the stricter application of the SGP, the better control of the statistical data, and the improvement of the budgetary position of many Member States.

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 Cyprus and in what way does it involve Parliament?

The EFSF Framework Agreement was implemented in Cyprus as an ordinary piece of legislation, Law 13 (III) of 2010 with the title ‘The law on the participation of the Republic of Cyprus in the European Financial Stability Facility’. According to the accounting Laws 112 (I) of 2002 and 22 (I) of 2004 on the management of the revenue and expenditure of the Republic of Cyprus, any loan agreement has to be ratified by law in order to be valid.[4] The standard procedure for the adoption of laws in Cyprus is described in Art. 73, 78 and 80 of the Constitution of the Republic of Cyprus. In brief, the Draft Bill is brought before the House of Parliament where it is presented and discussed (the procedure commonly known as ‘first’ and ‘second reading’) and approved or rejected by simple majority. The relevant Draft Bill is then brought before a specialised Parliamentary Committee, in the present case the Parliamentarian Committee of Finance and Budget, which discusses, amends and finalizes the Draft Bill. For the preparation of the Draft Bill on the EFSF the Committee was convened twice, on 14 (with the presence of the Minister of Finance) and 21 June 2010. Following the procedure, the Committee prepared an explanatory report, which was distributed before the discussion at the House of Parliament (sitting in plenary session). The discussion at the House of Parliament (known also as the ‘third reading of the Draft Bill), sitting in plenary session, took place on 24 June 2010. The Draft Bill was discussed and approved by the House of Parliament by simple majority.

Upon the increase in the lending capacity of the EFSF, Cyprus passed the new Law 22 (III) of 2011 ratifying the Agreement regarding Cyprus’ participation in the EFSF (Official Gazette of the Republic of Cyprus No. 4151) incorporating these amendments.[5]

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Cyprus? 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?

No budgetary sovereignty or constitutional issues were raised neither in the report of the Parliamentarian Committee of Finance and Budget, nor during the plenary session at the Parliament. The main issue that was raised was the financial capacity of Cyprus to meet its obligations/guarantees.[6] (See also question I.1)

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

No significant difficulties were encountered during the national procedures relating to the entry into force of the EFSF Framework Agreement. Neither in the Report of the Parliamentarian Committee nor during the discussion in the House of Parliament are any debates observed, besides the questions and doubts earlier raised on the financial capacity of Cyprus to meet its obligations/guarantees.[7]

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

No such judgment exists on the (constitutionality of) the EFSM or 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?

The Parliament has no formal role in the application of the EFSF.

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

No political or legal difficulties have arisen with regard to the application of the EFSF.

Bilateral support      
IV.8    
In case Cyprus 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?

In the framework of the 1st and 2nd adjustment programme for Greece, €80 billion was pooled through the Greek Loan Facility (GLF), which consists of pooled bilateral loans from the Euro Area Member States. Cyprus’ contribution amounted to €110million.

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

As a result of the financial difficulties it was facing, Cyprus decided to request – on 8 April 2013 – to have its commitment to provide further guarantees suspended. In view of the fact that Cyprus was experiencing severe financial difficulties and had requested financial assistance, its request to step out as a guarantor of the EFSF, was approved by the Eurogroup Working Group (EWG) on 29 April 2013. The liability of Cyprus as a guarantor for notes issued prior to its stepping out is not affected.

[1] For the procedure see Art. 73 of the Constitution of the Republic of Cyprus.

[2] http://www2.parliament.cy/parliamentgr/008_05d/008_05_3094.htm

[3] Art. 78 of the Constitution of the Republic of Cyprus.

[4] Preamble of Law 13 (III) of 2010

[5] http://www.mof.gov.cy/mof/gpo/gpo.nsf/All/D4D70A41C37B0580C225791F002EF428/$file/4151%20%2030%209%202011%20%20PARARTIMA%201o%20%20MEROS%20%20III.pdf

[6] http://www2.parliament.cy/parliamentgr/008_05d/008_05_3094.htm

[7] http://www2.parliament.cy/parliamentgr/008_05d/008_05_3094.htm

Czech Republic

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 the Czech Republic 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?

The Czech Republic (CR) is not a member of the Eurozone and has not participated in the operations of the EFSF. Regarding the EFSM, which applied to all MS, CR has guaranteed the loans to Ireland and Portugal from the mechanism in the amount equalled to approximately 1.25% (the Czech Republic’s share on the EU budget),[1] in particular CR has guaranteed the loans in the amount of 6.7 bn CZK (app. 258,3 millions EUR) in the case of Ireland and 7.7 bn CZK (app. 297 millions EUR) in the case of Portugal.[2]

The EFSF was criticized for its legal framework – a private company by shares under Luxembourg law with full immunity in all MS, that is being an organization “above law, staying outside common European legislation, functioning outside the primary law, while having direct and significant impact on all MS of the EU, including [Czech Republic].”[3] A general criticism of the EFSM was raised in connection with the ESM within the debates on Article 136 TFEU Amendment. The debate on EFSM was rather non-existent. The political situation can be the reason – CR had a technocratic government and all political parties were preparing for general elections on May 28-29, 2010 (the voting in the Council took place on May 11). Therefore the issue was not debated in the Parliament (the Committee on EU affairs only took note on the (technocratic) Government position (supporting the EFSM) without any discussion. Finance Minister Eduard Janota stated in support of the CR position that the financial crisis and particularly the situation in Greece had caused the raise of Czech state debt obligations costs by 0.4% in the first 7 days in May only. President Klaus stated that CR should resist any involvement in assistance to Greece.[4]

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 the Czech Republic and in what way does it involve Parliament?

CR has not participated in the EFSF.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in the Czech Republic? 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?

CR has not participated in the EFSF.

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

CR has not participated in the EFSF.

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

No. CR has not participated in 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?

CR has not participated in the EFSF.

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

CR has not participated in the EFSF.

Bilateral support    
IV.8     
In case the Czech Republic 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?

Czech Republic did not participate in providing funding on a bilateral basis.

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

Not applicable

[1] Češi by na pomoc Portugalsku dali až 11,25 miliardy korun (The Czechs would participate with up to 11.25 billions CZK in the aid to Portugal), E15.cz, April 7, 2011, available at: http://zpravy.e15.cz/domaci/ekonomika/cesi-by-na-pomoc-portugalsku-dali-az-11-25-miliardy-korun.

[2] Czech National Bank, Hospodářská a měnová politika v EU (Economic an Monetary Union in the EU), available at: http://www.cnb.cz/cs/o_cnb/mezinarodni_vztahy/cr_eu_integrace/.

[3] MP Kateřina Klasnová (Public Affairs party), Chamber of Deputies of the Parliament, June 5, 2012 (during ratification of the EC Decision on the Art. 136 Amendment), available at: http://www.psp.cz/eknih/2010ps/stenprot/040schuz/s040017.htm.

[4] Euroskop.cz, Vnitřní trh in May 2010 (Internal Market in May 2010), June 4, 2010, available at: https://www.euroskop.cz/13/16552/clanek/vnitrni-trh-v-kvetnu-2010/. Of course, the EFSM did guarantee loans to Ireland and Portugal, not Greece.

Estonia

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 Estonia 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?

During the negotiations of the EFSF (and the EFSM) in May 2010, Estonia was not yet a member of the Eurozone. Estonia adopted the Euro on 1 January 2011 and participated in the revision of the EFSF in June 2011. Estonia subjected its acceptance of the broadened intervention instruments EFSF and EFSM to strict conditionality and use only on the basis of the concluded MoU’s. 

Prior to the discussion in the Estonian Parliament (Riigikogu) on the draft resolution 90 OE on 27-29 September 2011, Indrek Teder, the Chancellor of Justice, addressed an opinion to the chair of the Riigikogu Economic Affairs Committee.[1] The Chancellor of Justice is an independent institution established under the Constitution of Estonia. His tasks are twofold. As a general body of petition, the Chancellor of Justice ensures that public authorities do not infringe the fundamental rights of citizens and observe laws and the practice of good administration while performing their duties. As a guardian of constitutionality, the Chancellor of Justice ensures that the laws, regulations and other legislative acts are adopted in conformity with the Constitution and other laws. Under the Chancellor of Justice Act, the Chancellor of Justice may exercise this function either on the basis of an application or on his own initiative. Both legal acts in force and draft acts may be subject to the constitutionality procedure. In case an infringement has been established, the Chancellor of Justice may propose to the institution which has adopted the act to bring it in conformity with the Constitution or laws. If the institution that has passed the legislative act fails to reply to the proposal, the Chancellor of Justice may submit a request to the Constitutional Review Chamber of the Supreme Court to declare the legislative act in question unconstitutional or invalid.[2] The Constitutional Review Chamber reviews the constitutionality of laws and regulations which have entered into force as well as those which have not been promulgated by the President and have not entered into force.[3]

In the letter, the Chancellor of Justice enlisted reasons for questioning the constitutionality of the draft resolution. He emphasised that the Constitution does not prohibit Estonia from participating in the EFSF and giving state guarantees, yet draws attention to the following aspects:

  1. providing state guarantees and delegating the decision-making to the Government of the Republic requires amending the State Budget Act because the provisions of the Draft go beyond the rules on state guarantees provided by in § 402 of the State Budget Act, in particular as concerns the involvement of the Riigikogu. § 402 does not provide for a possibility to delegate the decision-making to the Government;
  2. the draft resolution does not include the Riigikogu to a sufficient extent and does not guarantee control of the Riigikogu over the increase of guarantee obligations of the Republic of Estonia.

The proposals made by the Chancellor of Justice in his letter were given due consideration by the relevant parliamentary committees and the Chancellor of Justice agreed with the amendments made to the draft. § 402 State Budget Act was duly amended (see Question IV.4 below).

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 Estonia and in what way does it involve Parliament?

Under § 65 clause 1 of the Estonian Constitution, the Riigikogu shall pass laws and resolutions. The unicameral Riigikogu comprises 101 members.

In order to be able to make a confirmation that all necessary procedures under Estonian law have been concluded in order to join the EFSF, the Riigikogu adopted on 29 September 2011 a Resolution on ensuring performance of the obligations arising from the European Financial Stability Facility (EFSF) Framework Agreement and amendments thereto. The resolution was adopted with 59 votes in favour, 18 votes against, no abstentions.

Pursuant to the Resolution, the Government of the Republic must submit to the Riigikogu for approval drafts on MoUs to be concluded between the European Commission and a Eurozone country for the purposes of the guarantees given under the EFSF. Also, the Government of the Republic is given the task to present for approval to the Riigikogu European Union Affairs Committee the conditions on financing and economic policy of an assistance programme of a Eurozone country in question, the obligation to present arising from the Riigikogu Rules of Procedure and Internal Rules Act § 18 subsection 3. In the resolution, a mandate is given to the Government of the Republic to provide guarantees to a specific country within the limits of the guarantee that has previously been approved by the Riigikogu as a draft MoU. It falls within the competences of the Government under Government of the Republic Act § 201 subsection 1 to approve EFSF debt obligations by which aid programmes are guaranteed. The technical details and economic policy programme of the particular aid programme, as well as the financing plan will not be approved by the plenary of the Riigikogu but by the European Affairs Commission. In Paragraph 6 of the Resolution, the Riigikogu mandates the Government to conduct the procedures of providing guarantees and entertaining claims on the basis of the guarantees.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Estonia? 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?

Amendments were made to both the State Budget Act and the Riigikogu Rules of Procedure and Internal Rules Act.

Pursuant to § 104 clause 11 of the Constitution, a majority of the membership of the Riigikogu is necessary to amend the State Budget Act. The amendment was adopted on 29 September 2011 with 60 votes in favour, none against, one abstention.

To the State Budget Act § 402, clause 32 was added. The addition states that state guarantee can be given to an EU Member State or a legal person, of which the majority share belongs to the EU Member States. In this event, the Riigikogu may oblige the Government to apply for complementary delegations from the Riigikogu or provide an opinion on decisions made with regard to the guarantee provided by the Riigikogu. 

On 29 September 2011, also § 1521 subsection 2 of the Riigikogu Rules of Procedure and Internal Rules Act was amended to include that the Government shall submit to the Riigikogu at their own initiative or at the request of the Riigikogu European Union Affairs Committee or the Foreign Affairs Committee “other significant matters of the European Union”.

Many questions were raised and remarks made in the Riigikogu. These concerned primarily:

          whether it has been implied in the procedure of the Government deciding on the size of guarantees that the Member States are ready to give up full state sovereignty and amend the founding treaties;

          whether the guarantee appears in the state budget as a debt;

          whether the approval to provide guarantees affects the state rating;

          whether or not the EFSF generates further centralisation of the European Union that leads to a decrease of national sovereignty;

          that the Resolution violates Estonian laws (the Riigikogu lacks legal basis to adopt the resolution) and Constitution (it is against the object of the Constitution to give the Government the opportunity to decide upon every specific loan).[4]

The Resolution of the Riigikogu was adopted on 29 September 2011 with 59 votes in favour, 18 against, no abstentions.

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

No political or legal difficulties were encountered.

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

No.       

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?

The Riigikogu has to approve the decisions on aid packages on the basis of § 65 clause 10 of the Constitution pursuant to which the Riigikogu shall, on the proposal of the Government, decide on borrowing by the state and on the assumption of other proprietary obligations by the state as opposed to the technical details for which no parliamentary approval is needed (see question IV.2).  The Government submits to the Parliament the following drafts for debate:

          the draft parliamentary resolution, drafted by the Government;

          the draft MoU;

          the draft on Private Sector Involvement (PSI).

The Estonian position in the European Council and at the Meeting of the Heads and State or Government of the eurozone Member States (Eurosummit) receives prior consent from the European Union Affairs Committee of the Riigikogu. The Riigikogu adopts the resolution by simple majority.

The conditions on financing and economic policy of an assistance programme of a Eurozone country requiring financial assistance will be approved by the European Union Affairs Committee of the Riigikogu.

The disbursement of tranches requires the approval of the Riigikogu European Affairs Committee.

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

Debates on the 2nd Greek package took place at the Riigikogu on 23 February 2012. Questions were raised on the effect of the loans on the Estonian debt rate; whether Greece can reduce the debt, achieve economic growth and return to the financial market; improving efficiency of the Greek tax authorities and taxation system; the future relationship between the EFSF and the ESM; what is the plan B if the aid package fails to produce results; the idea of economically less wealthy Estonia providing assistance to more wealthy Greece; by which mechanisms can the aid to Greece be stopped. There was lengthy debate in the Riigikogu and the general sentiment expressed in the speeches by the parliamentarians, especially those representing the opposition, was questioning the efforts of the Greek government and the general mentality of the country and its people.

The resolution to approve the draft memorandum of the 2nd Greek aid package was adopted by the Riigikogu with 56 votes in favour, 32 votes against, no abstentions.

On 11 January 2013, The Riigikogu European Union Affairs Committee approved the disbursement of tranches to Ireland and Portugal.[5] No difficulties have been encountered.

Bilateral support    
IV.8     
In case Estonia 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?

Not applicable.

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

Estonia joined the eurozone on 1 January 2011. Prior to that, very few discussions on the EFSF, etc. took place.

[1] Opinion of the Chancellor of Justice on the Draft Resolution of the Riigikogu (90 OE) of 25 September 2011.

[2] www.oiguskantsler.ee/en/constitutional-review

[3] www.riigikohus.ee

[4] Deniss Boroditš, Centre Party (opposition), First Reading of Draft Resolution 90 OE, Riigikogu, 27 September 2011.

[5] Riigikogu Press Release, 11 January 2013. 

Finland

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 Finland 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?

The earlier credit package adopted to assist Iceland (2009) and the opportunity provided for Latvia to borrow from Finland (2010) had attracted only little discussion in Finland. The Council Decision concerning the European Financial Stabilisation Mechanism of 2010 proved no particular difficulties for Finland. It provoked little discussion, and the same initially applied to the EFSF. The Government seems to have faced few difficulties with these new instruments during the negotiations. Basically, even if the crisis itself was unwelcome, the Government was in favour of these instruments in that particular situation, even if the big picture relating to the extent and depth of the crisis was not clear yet.

During the autumn 2010, the Grand Committee of the Parliament was informed several times about the developments concerning the situation. Also the possible need to amend the European Union Treaties was discussed. As during the euro crisis more generally, the Government has – in our view – demonstrated a willingness to seek various solutions and alternative ways out of the crisis.

While the situation was rather calm during the autumn 2010, the situation gradually grew more challenging for the Finnish Government, at least partly because of the approaching parliamentary elections of April 2011 and partly because the seriousness of the financial and economic situation became clearer. In the debates in the Parliament, the opposition raised questions concerning the relationship of Government’s politics obligating Finland to take part in the various emergency funds, on the one hand, and the attempts to cut public spending in Finland, on the other. Discussions in the Parliament were characterised by a deep suspicion concerning the Government’s intentions.

The national political and even constitutional pressure became serious at the same time as new decisions to increase the earlier guarantee commitments became imminent. The decision by the Heads of Government of the euro zone in March 2011 led to a difficult political situation in Finland, and increasing the commitments and the amendment of the Framework agreement later became a painful exercise for the new Government (appointed in June 2011).

On 14 March 2011 the situation led to an interpellation (VK 6/2010) in the Parliament, a procedure that in Finland always ends with a vote of confidence in the Government. The vote(s) were held on 15 March 2011 (aye 104 – no 62 final), and subsequently the Government won a clear confidence in the Parliament (PTK 172/2010).[1] The amendment of the Framework agreement was accepted by the Parliament in 28 September 2011.

Prior to the parliamentary elections held in April 2011 one of the major parties (the SDP) had promised that it would require securities for the various guarantee commitments and financial aid if it secured a position in Government. After the elections, it turned into the second largest government party, also holding the position of the Minister of Finance, who also acts as the Prime Minister’s first deputy. Thus, there has been a need for special arrangements in order to have these collaterals (see in greater detail reply to question I.1).

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 Finland and in what way does it involve Parliament?

The Government proposal (No 95/2010 vp, Belgian etc ja Euroopan rahoitusvakausvälineen välisen ERVV-puitesopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta) was presented on 18 June 2010. It was announced in the Parliament on 18 June 2010 and sent to the Finance Committee of the Parliament on 21 June 2010. After the Committee handling, it was returned to the plenary for consideration and was discussed on 23 and 30 June 2010. The act was approved on the 30 June 2011 (aye 157 – no 31). The President signed the act (No 669/2010) on 14 July and it entered into force on 16 August 2010.

A noteworthy aspect relates to the fact that the proposal was not sent to the handling of the Parliament’s Constitutional Law Committee at all. This Committee was later given the possibility to consider the Framework Agreement when it was first amended (see below question IV.4).

Despite its private law features, in Finland, the Framework Agreement was accepted by the Parliament according to Section 94.1 of the Constitution of Finland on 30 June 2011 (aye 157 – no 31). (Sec. 94.1, first sentence: “The acceptance of the Parliament is required for such treaties and other international obligations that contain provisions of a legislative nature, are otherwise significant, or otherwise require approval by the Parliament under this Constitution.) The provisions of the Agreement, in so far as they were of a legislative nature, were brought into force by an Act of Parliament (No 669/2010), and the rest of the Agreement by a Government Decree (No 691/2010).

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Finland? 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?

An Act on the State securities for the European Financial Stability Facility was enacted based on Governmental proposal (No 71/2010 vp, laiksi Euroopan rahoitusvakausvälineelle annettavista valtiontakauksista). The proposal was presented and announced in the Parliament on 4 June 2010, and sent to the Finance Committee on 8 June 2010. It was discussed and decided by the Parliament on 15–16 and 21 and 24 June 2010. The President signed the act (No 668/2010) on 14 July and it entered into force on the 15 July 2010.

According to Section 82 of the Constitution on State debt and guarantees,“ the incurrence of State debt shall be based on the consent of the Parliament, which indicates the maximum level of new debt or the total level of State debt. A State security and a State guarantee may be given on the basis of the consent of the Parliament.”

The Act on securities was enacted in the regular legislative procedure (Section 72 of the Constitution). According to the Act, the Government decides on the securities which are given to the Facility, but prior to this decision it is under an obligation to issue a statement to the Parliament. The situation is exceptional because statements are used in this context against what can be considered to be their constitutional function (Sec. 44 of the Constitution). Another peculiarity relates to how the Government is, based on an ordinary Act of Parliament, placed under an obligation to issue a statement to the Parliament in a certain situation. Normally the issuing of statements belongs to the political discretion of the Government; according to the Constitution “at the conclusion of the consideration of a statement, a vote of confidence in the Government or a Minister shall be taken, provided that a motion of no confidence in the Government or the Minister has been put forward during the debate.”

The Government has issued five statements during the crisis: Statements 2/2010 vp (on Ireland), 1/2011 vp (Portugal), 1/2012 vp (Greece), 3/2012 vp (Spain) and 1/2013 (on continuing the State Securities).

Activation problems
IV.4    
What political/legal difficulties
did Finland 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 national procedures used to bring the EFSF Framework Agreement into force nationally were not difficult. However, problems emerged and evolved gradually because of the subsequent increase of the guarantee commitments.

The Government informed the Parliament about the plans to increase the guarantee commitments in a memorandum (U 26/2011 vp) which was handled in the Grand Committee and other Committees. Also the Constitutional Law Committee issued a statement on this memorandum (its position was included in its meeting protocol 11/2011 vp of 31 August 2011).

The Government agreed with the changes to the guarantees as such but it did not consider all the proposals made at Eurozone level appropriate. The Government took a negative view on the proposal that the EFSF Board could decide by qualified majority on certain matters, and argued that the central features relating to the new measures should be either decided by unanimity among the guarantors or be included in the Framework Agreement itself.

Afterwards, the Government issued a proposal considering the acceptance of the changes required by the revised Framework Agreement and bringing them into force by law, also amending the law on State securities for the Facility, on 16 September 2011 (No 31/2011 vp, Belgian etc ja Euroopan rahoitusvakausvälineen välisen sopimuksen muuttamista koskevan sopimuksen hyväksymisestä sekä laiksi sen lainsäädännön alaan kuuluvien määräysten hyväksymisestä ja laiksi Euroopan rahoitusvälineelle annettavista valtiontakauksista annetun lain 2 §:n muuttamisesta). The proposal was announced on 16 September and sent to the Committees on 20 September 2011. This time the proposal was also handled in the Constitutional Law Committee of the Parliament.

The starting point for the considerations of the Constitutional Law Committee, which issued its statement on 22 September 2011 (PeVL, i.e. Statement of Constitutional Law Committee 5/2011 vp), was the finding that the funding of the Facility was guaranteed by the Contracting States. The fact that Section 82.2 of the Constitution requires the Parliament’s consent for a state security was an additional justification for a requirement of the Parliament’s approval. The Constitutional Law Committee paid special attention to the constitutional effects of a increase of the Finnish liabilities when the total amount of the securities by the Member States for the Facility was increased from EUR 440 billion to EUR 780 billion; for the Finnish part this entailed an increase from EUR 8 billion to EUR 14 billion. When evaluating the absolute amount of Finnish liabilities in relation to the annual national budget, the Constitutional Law Committee established that the risks related to the increase did not endanger the possibilities of Finland to meet the obligations it has based on its Constitution. This particular statement, which is not further developed in the Committee’s practice, and the unspecified obligations of the State it builds on, is rather open to different interpretations. The Constitutional Law Committee has not developed this statement further. It could be interpreted to refer for example to various economic, social and cultural rights that the State has the responsibility to provide for its citizens according to the Constitution and various international treaties. It could also be understood as referring to the external responsibilities of the State in its various international commitments. Various risk calculations are typically difficult to conduct, and the Parliament, its Committees and the experts they consult are largely reliant on the information and estimates provided by the Government. At the same time, the statement suggests that the absolute amount of commitments and the risks involved may affect the Committee’s future conclusions concerning the compatibility of a proposed financial measure with the Constitution (see also question X on the ESM Treaty). However, in view of the amount of commitments and the risks involved, the Constitutional Law Committee has confirmed the Government’s wide room of manoeuvre, which the latter exercises under an equally wide political responsibility.

Since the relevant Act included no accurate information concerning the exact amount of the securities in the way that the constitutional practice was deemed to require, the Government needed to propose a correction to the Act to remedy this omission (proposal No 150/2011 vp). This was preceded by an overheated political and partly constitutional discussion of the Government’s ability to act constitutionally and convincingly in the situation. Even the Constitutional Law Committee issued a statement on the issue (PeVL 14/2011 vp), and it gave a statement (PeVL 3/2012 vp) during the handling of the new proposal.

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

In the Finnish constitutional setting, which does not provide for a Constitutional Court and the ordinary courts have only a secondary role in the review of constitutionality of legislation, the Parliament’s Constitutional Law Committee is the primary control mechanism for ensuring the constitutionality of legislation, including international obligations and Union-related measures. The Committee has a central and active role. The Committee is politically organised within the Parliament: it is composed of MPs and reflects the power relations in the Parliament. But the Committee has an essentially judicial function: it establishes the correct interpretation of the Constitution. Its opinions generally enjoy authority and are treated as binding on Parliament and authorities. This makes the Committee the most central constitutional body of Finland.

Another feature which should be noted here is the organization of the participation and information of the Parliament in the European Union related matters. The core provisions are found in Chapter 8 of the Constitution in Sections 93.2, 96 and 97 of the Constitution. According to Section 93.2, the Government (not the President) prepares and decides in EU matters unless they require the approval of the Parliament, in which case the latter participates in the national preparation of EU decisions. The Parliament considers those proposals for acts, agreements and other EU measures that under the Constitution belong to its competence.

The Constitutional Law Committee has considered the measures combating the euro crisis as matters belonging to Section 96 or 97, which regulate in particular the ex ante participation and information rights of the Parliament in European Union affairs, irrespective of whether formally taken within the formal EU framework or outside of it (with regard to the Constitutional Law Committee’s findings on the EFSF, see question IV.4). It has thereby allocated the primary competence in these matters to the Government under Section 93.2, but simultaneously placed it under a strict obligation to report to the Parliament in all matters falling under the competence of the latter. This is in line with the traditional interpretation of Sections 96 and 97, which have been generally understood to extend beyond the matters that belong formally to Union competence to questions that can be considered ’comparable’ to Union matters both as regards their substance and their effects. Additionally, the relevant international agreements have also been approved by the Parliament under the Section 94/95 Procedure relating to the formal ratification of international agreements, offering the Parliament an exceptional possibility to address the same matters twice. Because they already had been considered ex ante by the Parliament in detail, the approval stage no longer raised significant problems.

The aforementioned interpretation of the Constitutional Law Committee has guaranteed strong rights of participation for the Parliament, giving it a wide prerogative to be informed while the matters were being negotiated and to require substantive and significant modifications to the proposed instruments (including e.g. ESM Treaty, Fiscal Compact) in order to guarantee their compatibility with the Finnish Constitution. Had the international agreements been treated as ’traditional’ international agreements, the Parliament’s rights of participation would have been limited to a ‘yes’ or ‘no’ at the stage when the substantive negotiations had already ended.[2]

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?

As explained above, the Government is under an obligation to issue a statement to the Parliament each time when the Facility decides on new aid.

In addition, all decision making in the Facility falls under Sections 96 and 97 of the Constitution, which regulate in particular the participation and information rights of the Parliament in European Union affairs. The Government has to communicate the relevant proposals for EU measures without delay for the determination of the Parliament’s position. In matters that fall under the Parliament’s competence, its position in practice equals the Finnish position, even if the Parliament usually leaves the details to the Government’s discretion and limits itself to steering the main political lines. Proposals are considered by the Parliament’s Grand Committee which ultimately determines its position, and also in the specialist committees. If the matter involves a constitutional dimension, it is sent to the Constitutional Law Committee, which is one of the specialist committees. The Government is obliged to keep the relevant committees updated with information on the negotiations and to keep the Grand Committee informed of its position. Section 97 of the Constitution includes provisions on the Parliament’s right to receive information on international affairs. It requires the Government to keep the Grand Committee informed through reports on the preparation of EU matters other than those falling under Section 96, either upon request or when otherwise necessary. On the basis of the information provided, the committees may issue statements to the Government, and they frequently do so.

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

National decision-making linked to the EFSF presumes a Government statement, which is followed by its consideration in the Plenary and a subsequent vote of confidence. For Finland, the questions relating to collaterals have been the key challenge both in the domestic debates and in relation to the other euro countries, since Finland has been the only country to require a collateral. For Finland the request for the collaterals is not a constitutional or legal demand: the condition has been of polical nature, dating back to the negotiations of the parties which form the Government. The condition was agreed as a part of the current coalition’s agenda and is elaborated in Attachment 3 to the Government Program.[3] .. Negotiating the collateral agreements has been challenging both legally and because of the strict time tables involved.[4] Additional challenges have been constituted by stepping-out guarantors, creditor status, ambiguities relating to maximum lending capacity and several questions relating to governance. The usefulness of collaterals has also been subject to debate.[5]    

Bilateral support    
IV.8    
In case Finland 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?

Finland enabled Latvia to borrow from Finland (2010), but this decision was not politically or legally problematic. Additionally, it took part in the credit package adopted to assist Iceland (2009).

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

Not applicable.

 

[1] Additionally, the euro crisis led to two other interpellations: VK 2/2011 (on 29 November 2011, vote on confidence 14 December 2011, see PTK 86/2011) and VK 4/2012 (on 13 April 2012, vote on confidence 25 April 2012, see PTK 42/2012).  

[2] We have dealt with these issues in a number of publications of 2013, see, Päivi Leino and Janne Salminen, The Euro Crisis and Its Constitutional Consequences for Finland: Is There Room for National Politics in EU Decision-Making?, 9 European Constitutional Law Review (EuConst) 3/2013 pp. 451–479; Päivi Leino and Janne Salminen, Should the Economic and Monetary Union be democratic after all? Some reflections on the current crisis German Law Journal, 7/2013 pp. 844–868; Päivi Leino-Salminen and Janne Salminen, Eurokriisin demokratiaulottuvuuksia, Lakimies Suomalaisen Lakimiesyhdistyksen aikakauskirja 111 Nr 3/2013 pp. 390–413 [Democratic dimensions of the Euro crisis], and Janne Salminen, Sopimus talous- ja rahaliiton vakaudesta – tie fiskaaliunioniin?, Lakimies Suomalaisen Lakimiesyhdistyksen aikakauskirja 111 Nr 6/2013 pp. 1076–1098. [Fiscal Compact – A Way to A Fiscal Union?].

[3] The Government program of Prime Minister Katainen’s Government can be found at http://valtioneuvosto.fi/hallitus/hallitusohjelma/en.jsp.print , see in praticular attachment nr 3.

[4] See ”Finland Gets Collateral Deal With Greece” by Kati Pohjanpalo, published on  17 August  2011 by Bloomberg, available at e.g. http://www.bloomberg.com/news/2011-08-17/finland-gets-collateral-deal-with-greece.html .

[5] See e.g.  ”Finland’s Greek collateral: still pointless” by Joseph Cotterill, published in Financial times on 4 June 2013, available at http://ftalphaville.ft.com/2013/06/04/1522742/finlands-greek-collateral-still-pointless/ .

France

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 France 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?

One amending Budget Act proposed altogether to give the French guarantee to the EFSF and to increase the French contribution to the IMF resources[1] (Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010 (1), articles 3 and 4). It was presented to Parliament by the government as the part played by France in the stabilisation of the Eurozone – together with the adoption of the EFSM at EU level – and the next step to tackle the crisis after the bilateral approach taken to grant loans to Greece[2].

 The government also stressed that the contribution to the EFSF to be agreed to by France (111 billion euros) might have no impact on the national budget, as the primary aim was to create an instrument dissuasive enough to be never used[3]. Although some doubts were raised, a considerable majority of MPs voted the government proposal (see question IV.3 for more details on the debates at Parliament).

The government has presented the EFSM, the EFSF, and the increase of the resources of the IMF, together with the bilateral loans to Greece, as “stabilisation instruments” – and as the first of three kinds of developments in the management of the crisis. The second one was the strengthening of the European economic governance and budgetary discipline. Then French Minister for European Affairs, Pierre Lellouche[4], said this second development in particular was, to a large extent, the result of President Sarkozy’s leadership[5]. The third development pertained to fighting speculation and regulating finance. Overall, Pierre Lellouche insisted on the important role played by France and Germany, who were said to have shared a joint position during the negotiations that led to these developments. The EFSF itself was presented as similar to an already existing French instrument refinancing banks, the SFEF (Société de financement de l’économie française)[6].

Thus, the way the government presented these instruments – as “French-led” for a significant part – made less salient the issues of difficulties having taken place during the negotiation, or concerns over national sovereignty. Moreover, sovereignty appeared, in the debates, more threatened by the state of the public debt on financial markets, than by the responses to this threat.

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 France and in what way does it involve Parliament?

Under article 61 of the Organic Law on Budget Acts (Loi organique relative aux lois de finance of 1st August 2001 – “LOLF”[7]), State guarantees are authorised by a Budget Act voted by the Parliament[8] (see also question II.1 on the legislative process applicable for Budget Acts). Article 34-II-5° of the LOFL reads that the Budget Act of the year authorizes the State to give its guarantee and establishes its “regime”[9].  The French guarantee to the EFSF was authorised by Parliament in an amending Budget Act[10] (Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010 (1), article 3).

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in France? 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 also question IV.2.

The guarantees were authorized by an amending Budget Act adopted on 7 June 2010[11]. They constituted the last development in a chain of measures taken to tackle the crisis since 2008, and members of Parliament noted the stress imposed by financial markets on national legislatures (as well as an accelerated pace for lawmaking)[12].

The amending Budget Act followed the normal legislative process (see question II.1 on the legislative process for Budget Acts), and was adopted by a considerable majority[13]. This majority included the parliamentary groups of the right-wing party in power (UMP), of centrists, and of the main party of the opposition: the centre-left-wing Socialist Party (PS)[14]. After one reading in both Houses of Parliament (as is the rule for Budget Acts, see also question II.1), the Act was swiftly[15] adopted.

Three amendments were adopted by the National Assembly, two of which were only redactional. The third one importantly required that the Finance Committees of both Houses of Parliament be informed whenever the EFSF granted financing or loans[16]. The modified text went through to the Senate and was eventually voted without further modification[17].

More amendments were proposed by the parliamentary groups of the far left CRC (GDR at the National Assembly, CRC at the Senate), which constituted the main opponent to the EFSF in the debates. These amendments were all rejected.

Wide ranging debates took place, dealing with the general management of the crisis and not limited to the EFSF. Overall, there was a broad majority in favor of the creation of the EFSF, which was understood as a step forward in European solidarity and a necessary tool for the stabilization of the Eurozone, in a context of tightening access to financial markets for Greece, Ireland, Portugal, Spain and Italy[18].

However, several voices in Parliament, including the Socialist Party, regretted that the mechanism was limited in time[19]. Some MPs (including allies of the majoritarian right-wing party) argued in favour of rescheduling the debt of countries that are not likely to be able to reimburse the loans in too short an amount of time[20].

The question why Greece should not see its debts “restructured” rather than financed was also raised by several MPs across the political spectrum. The Government answered essentially that such restructuring would eventually lead to the destruction of the euro[21] (see also question IV.8 on the debates that occurred when France granted a bilateral loan to Greece).

The interest rate of the loans to Greece was criticized, too, as too high by several MPs from the far left to the UMP[22]. The government answered by comparing it to the even higher interest rates demanded of Greece on the financial markets, and stressing that such rates were an expression of the risk taken by the lender. Also, the rate was set so as to align it with IMF rates[23].

Several members of parliament, PS included, also raised doubts and expressed skepticism about the assertion that granting the guarantee of the State would not modify the budgetary balance[24] as long as the mechanism was left unused[25]. The main discourse from the government was, indeed, that the design of the mechanism could make its actual use unnecessary. UMP senator Serge Dassault, for instance, stressed the risk that the outlook of the French debt by rating agencies could be negatively impacted by its participation in the EFSF[26]. Minister of the Economy Christine Lagarde did not share his worries for the French outlook.

The main criticisms came from the far left. First, they argued that the EFSF was yet another manifestation of the conformation of European governments to the requirements of financial markets, rather than “breaking” the power of the latter over governments.

They also expressed their doubts about the justifications given for the creation of the EFSF. It was compared to the bilateral aid to Greece and presented as another example of how richer European countries try to actually save their own banks exposed in Greece, and to help their own weapon industry under contract with Greece[27].

The provisions regarding the “conditionality” to be imposed on the countries that would benefit from the EFSF were criticized as well. Indeed, as no precision was given regarding this conditionality, power on the matter would be given to the European Commission and the IMF, institutions presented as not easy to situate by the public on the political spectrum, and not directly accountable to the people[28].

Far left Martine Billard (GDR) also underlined what she presented as an inconsistency: article 122-2 TFEU now appeared to allow action on financial markets while, a few weeks before, article 123 seemed to forbid it[29].

She also regretted that the debate took place on a Monday afternoon (most of the members of parliament are usually still visiting their home constituencies at that moment of the week)[30]. The “solemn vote” of the amending Budget Act, however, would take place the following day – apparently at the insistence of the GDR[31].

Activation problems 
IV.4     
What political/legal difficulties
did France 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 EFSF Framework Agreement met relatively few difficulties to enter into force (see question IV.3 for the debates in Parliament). The increase of the French guarantee from 111 billion euros to 159 billion euros in September 2011 was also voted rather swiftly by the Parliament.

Yet, the amending Budget Act providing for this increase faced more opposition than the amending Budget Act authorizing the EFSF in 2010 (see also question IV.6). Moreover, the government felt the need to seek counsel from the Council of State on the legal need for France to have Parliament ratify the EFSF Framework Agreement. The Council of State concluded that ratification was unnecessary, provided certain conditions of information of Parliament were met (see also question IV.5).

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

There is no decision of the Constitutional Council on the EFSM, nor, apparently, of the Council of State. There is also no Constitutional Council decision on the EFSF.

However, the government sought the advice of the Council of State (Conseil d’Etat) at the occasion of the increase of the French guarantee to the EFSF, during the summer of 2011. The Council of State is the highest French administrative jurisdiction, with two main roles: jurisdictional and advisory. In its advisory role, the Council of State describes its own role as to control the quality of the documents presented to it, their coherence, and their suitability to obtain the stated objectives. It aims at ensuring the legal certainty of these documents, their respect for the hierarchy of norms, and for the great principles of competence allocation[32].

The Rapport public 2012 gives some information on the advice sought and given on the EFSF, but the complete version of the advice does not seem to be accessible to the public[33]. The short summary available reveals that the Council of State was consulted on the proposal of Act that would become the second amending Budget Act for 2011 (Loi n° 2011-1117 of 19 September 2011), which purpose was to authorise an increase in the guarantee given by the State to the EFSF (from 111 billion to 159 billion euros).

The question asked by the government to the Council – following an accelerated procedure called “saisie d’extrême urgence” – appears to have regarded the need for the Executive to seek ratification by Parliament of the agreement promising the French guarantee to the EFSF, in order to conform to the requirements of article 53 of the Constitution.

Under article 53 of the French Constitution: “Peace Treaties, Trade agreements, treaties or agreements relating to an international organization, those committing the finances of the State, those modifying provisions which are the preserve of statute law, those relating to the status of persons, and those involving the ceding, exchanging or acquiring of territory, may be ratified or approved only by an Act of Parliament”. As the EFSF may be said to be an international agreement pertaining to a “commitment of the resources of the State” for up to 159 billion euros, the government may indeed have feared that the absence of a process of ratification was a possible violation of the Constitution.

However, the Council of State issued a measured advice: “[n]oting that the project of amending Budget Act for 2011 authorizing that the guarantee of the French Republic be granted to the EFSF had for sole objective to grant the guarantee of the State to an organ created by an intergovernmental agreement, and that this agreement, taking the form of an agreement under international private law and according to which the signatory States have decided to create a financial body under private law, the mission of which consists in intervening on the financial markets according to the procedures and instruments ordinary to these markets, the Council of State has considered that prior ratification of this agreement, within the forms required under article 53 of the Constitution, was not necessary.[34]”. It is difficult to infer from this sole summary whether the reasoning of the Council of State, to declare ratification unnecessary, was that the amending Budget Act authorised a guarantee to an organ that had been created through a separate agreement; or if it was that this agreement existed under private international law and established a body under private law.

The Council of State however considered necessary that the government transmitted to the Parliament, “for its complete information at the time of the debate on the project of amending Budget Act, a consolidated version, in official French translation, of the terms of the agreement taken on 7 June 2010” between 17 Eurozone members States, as well as of “the modifying decisions taken on 11 March and 21 July 2011 by the Heads of State or Government of the same States”[35].

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?

State guarantees and their increases are authorized by Parliament through Budget Acts (see also question IV.2). As for the EFSF, the French Parliament introduced an amendment in the act authorizing the first guarantee of the State to the new instrument[36], and obtained the right to be informed every time the EFSF would grant financing and loans.

Following a summit of Heads of State and Government of the Euro Area on July 21, 2011, State contributions to the EFSF were increased, and new modalities governed its use. Like before, the authorization to give additional French guarantees to the EFSF (from 111 billion to 159 billion euros) was to be achieved through an amending Budget Act voted by Parliament[37] (Loi n° 2011-1117 of 19 September 2011) (see also question IV.2).

The new Act introduced a change in the information of the Parliament as regards the EFSF. Article 3-IV of Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010 was amended in a way that Parliament would no longer be informed every time the EFSF granted financing and loans[38]. Instead, the government would only need to inform the committees of both Houses of Parliament in a report, every semester, on the use made of the EFSF.

The changes in the modalities of use of the EFSF, decided by the European heads of States and governments on July 21, 2011, were also acknowledged.

The main party of the opposition – the Socialist Party (PS) – continued to support the principle of the EFSF as well as the need to increase the guarantees given to it by France. However, the PS also criticized more vocally this instrument as coming too late and doing too little, and argued in favour of a mutualisation of debts through the creation of Euro-bonds[39].

The far left continued to criticize the EFSF as a way to provide State guarantee to speculators, and continued to manifest its opposition to austerity measures imposed on Greece, presented as brutal and counter-productive[40]. 

Although the far left voted against the amending Budget Act, as well as most of the PS (with the notable exception of François Hollande and Jérôme Cahuzac), the Act was adopted with a center and right-wing majority[41]. It is to be noted that the Act did not pertain to the EFSF only, and that it was opposed also on other provisions contained in it.

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

The EFSF was again at the centre of debate in Parliament at the occasion of the increase of France’s guarantee to the scheme, in September 2011 (see also question IV.6). In this context, debates on the Greek aid package, decided by heads of States and governments on 21 July 2011, gave rise to increasingly diverging views between the two main parties of the political spectrum, regarding to the most adequate way out of the crisis.

Neither the right wing majority (UMP) nor the main, centre-left-wing party in opposition (PS) challenged the idea that a Greek default would cause a domino-effect on the other fragile States of the Eurozone.

However, the PS deplored that the German Chancellor Angela Merkel and the French President Nicolas Sarkozy buried the option of a mutualisation of debt through Euro-bonds, at the Elysée summit of 17 and 18 August 2011[42]. Without this option, the PS argued, the EFSF would never suffice to appease the markets once and for all. Moreover, the PS argued that renouncing to euro-obligations had the effect of worrying the markets as much as a Greek default would have, while not yet having the upside of relieving the Greek State from a part of its debt.[43] Involvement of the private sector in the relief of the Greek debt, also, was criticised by the Socialist Party for the voluntary form it took[44].

Bilateral support     
IV.8     
In case France 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?

France participated in the funding of Greece on a bilateral basis. The Member States of the Eurozone set, on April 11, 2010, the technical conditions for the granting of a possible loan to Greece, for a maximum of 30 billion euros the first year. France announced its participation to the scheme for an amount of 3,9 billion euros, with a maximum lending authorization of 6,3 billion euros for Greece in 2010[45]. The total lending capacity made available to Greece was soon raised to 16,3 billion euros over three years. The government assured that, as a financial operation, the loan would not appear as a deficit on public accounts[46]. The Parliament authorized the loan, promised to Greece by the right-wing government, in the amending Budget Act of May 7, 2010[47] (Loi n° 2010-463), with an overwhelming majority[48]. The far left constituted the main opposition to the Act.

The main reason advanced by the right-wing majority for granting the loan to Greece was a principle of financial solidarity between European states in times of crisis. Greece and other indebted Eurozone States being under attack on the financial markets, not showing this financial solidarity would give substance to the threat of a collapse of the Eurozone. Comparatively, the exposure of France and French banks to the Greek economy, estimated at around 53 billion euros, was said to be important, but not decisive in the decision to help the country. Moreover, financial assistance to Greece was considered in conformity with European law by the right-wing majority despite articles 123 and 125 of the TFEU, as long as it took the form of a loan, and on the basis of article 122 and 148 of the Treaty[49].

The vote in favour of the loan was justified, by the main party of opposition (PS, left), by the need to act quickly in the face of worsening conditions for Greece and other European countries on financial markets, and to make clear the financial support of France to Greece[50].

However, the discussions held at the Parliament showed questions and reservations on several issues (especially on the part of the centre-left and the far left)[51].

First, the 5% interest rate was considered by several members of Parliament as shockingly high, considering the vocabulary of “solidarity” surrounding the loan. France could itself borrow on the financial markets at a much lower interest rate, and would therefore make a profit from the loan. If this fact were to be known by the Greek people, it could result in its revolt and distrust towards Europe[52].

Second, the conditionality imposed on Greece in exchange for the loan was deemed unfair and excessively painful on the Greek people, as it would entail a series of reforms and cuts in the Greek public sector. It was also said that the Greek people could not be held responsible for the decisions of the political and financial elite that caused the crisis. There again, revolt against Europe could be the outcome. Moreover, austerity conditions, combined with a 5% interest rate, would make it more difficult for the Greek authorities to repay public debts and reassure financial markets[53].

Third, the three-year plan for debt reduction was considered excessively optimistic by several Members of Parliament, both right and left wing. Instead of a three-year plan, the government was asked why it did not agree on a longer-term loan (20 to 30 years were mentioned), more gradual conditions, and a restructuring of the Greek debt. Members of Parliament also questioned why a Greek exit from the euro would be unthinkable[54].

The Minister of the Budget, François Baroin, and the Minister of the Economy, the Industry, and Employment Christine Lagarde, answered to these questions in several ways.

The 5% interest rate on the loan was presented as pressure put on Greece to reform quickly its public sector, in order to enable itself to repay the loan. Low rates would also give bad incentives to European States in the adoption of virtuous measures of debt control. Moreover, the rate had to be the same for all lenders, some of them benefiting from less interesting rates than France or Germany on financial markets[55].

Also, the form of the loan granted to Greece was all the more justified, according to the then French Government, considering that Greek authorities had led inadequate policies and lied regarding the public debt of the country[56].

Both the 5% interest rate and the conditionality imposed on Greece were presented as a mere copy of the practices of the IMF to deal with such cases. In particular, it was stressed that the interest rate imposed by the European leaders should be as similar as possible to the one available under an IMF scheme[57].

Finally, the measures conditioning the disbursement of the loan were deemed necessary, by the right-wing government, for the long-term viability of Greek finances and economy[58], as well as for the eventual reimbursement of the loan. A more gradual or lengthy scheme would not have prompted dynamic responses on the part of the Greek government, and the risk would have arisen to never see significant structural changes happen in the country[59].

The General Rapporteur on the proposal of Act at the Finance Committee of the Senate, Philippe Marini (UMP, the ruling party), accepted the situation of conditionality imposed on Greece as that of a “financial protectorate”, enacting the alienation of its independence.  Yet, this alienation was qualified as “juridical”, one that was agreed to by the Greek authorities[60].

As regards the issues of a possible restructuring of the Greek debt or a Greek exit from the euro, the government answered that these options had been rejected at the level of the heads of States and governments, and were non-negotiable in Parliament. A restructuring was deemed too dangerous if it led to a chain-reaction on the financial markets over the sovereign debts of the weakest Eurozone-States, and an exit from Greece would lead to a collapse of the whole Eurozone.

The loan to Greece also led to broader discussions over European economic governance, its failures and its perspectives. The idea of a European Monetary Fund was advanced by many, from the right to the far left. The importance of disposing of a European tool (as opposed to one being international or American) was put forward. The role of the European Central Bank (ECB) was questioned, especially concerning the unconventional measures it took to stabilise the Greek debt[61]. Members of the right-wing majority considered it was important to debate the role of the ECB regarding inflation, the coordination of fiscal systems, labour costs, and budgetary policies; yet they also considered these points as out of reach at the present stage of response to the crisis[62].

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

The increase of the participation of the Eurozone countries to the IMF was understood as complementary to the creation of the EFSM/EFSF. The French Parliament voted this increase in article 4 of the same amending Budget Act as that authorising the first guarantee to the EFSF. In later debates, the centre-left (Socialist Party, PS) general rapporteur for the Finances Commission of the Senate underlined that the increase of the States’ participation to the IMF and the use of this money to aid European countries could be seen as a form of money printing outside of the control of the ECB[63].

[1] http://legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022318021 (See Question II.1 for more information on amending Budget Acts).

[2] http://discours.vie-publique.fr/notices/106001130.html

[3] Idem. See also Question IV.3 for more details on the position of the government during the debates in Parliament.

[4] Hearing of the Minister for Foreign Affairs at the Commission for European Affairs of the Senate on 18 May 2010.  http://www.senat.fr/europe/r18052010.html

[5] « Sur ce point, le Président de la République a fixé le cap ».

[6] : http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910071.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cr-cfiab/09-10/c0910071.pdf )

[7] http://www.legifrance.gouv.fr/affichTexte.do;jsessionid=A66320193C5E585C67BBCC5544239979.tpdjo14v_1?cidTexte=JORFTEXT000000394028&dateTexte=20130616

[8] The proposal of Act presented by the government to the Finance Committees is explicitly based on this reasoning: « L’entité ad hoc est un dispositif de précaution qui n’aura d’impact budgétaire qu’en cas d’appel effectif de la garantie. Il est toutefois nécessaire qu’une disposition de loi de finances autorise l’octroi de la garantie de l’État et fixe son régime, conformément aux dispositions de la loi organique relative aux lois de finances du 1er août 2001 (article 34-II-5°), qui rattachent cette matière au domaine exclusif de la loi de finances ». http://www.assemblee-nationale.fr/13/projets/pl2518.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/projets/pl2518.pdf ).

[9] «Dans la deuxième partie, la loi de finances de l’année… autorise l’octroi des garanties de l’Etat et fixe leur régime »

[10] [10] http://legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022318021

[11] Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010, http://legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022318021

[12] http://www.assemblee-nationale.fr/13/cri/2009-2010/20100206.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100206.pdf ). See for instance the position of Gilles Carrez, general Rapporteur at the Finance Committee of the National Assembly (UMP).

[13] Votes at the Assemblée Nationale : http://www.assemblee-nationale.fr/13/scrutins/jo0569.asp ; votes at the Senate : http://www.senat.fr/scrutin-public/2009/scr2009-219.html

[14] Socialist MPs have argued that such kind of mechanism was asked for, all over Europe, by other socialist parties.

[15] The proposal of Act was submitted to Parliament on 19 May and adopted on 3 June 2010.

[16] http://www.assemblee-nationale.fr/13/amendements/2518/251800003.asp See Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010 (1), article 3-IV : « Lorsqu’il octroie la garantie de l’Etat en application du présent article et lorsque l’entité ad hoc mentionnée au I apporte un financement ou consent des prêts, le ministre chargé de l’économie informe les commissions de l’Assemblée nationale et du Sénat chargées des finances. ». The amendment was proposed by the general Rapporteur at the Finance Committee of the National Assembly, Gilles Carrez (UMP). http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910076.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cr-cfiab/09-10/c0910076.pdf . The process of information of Parliament would later be modified and become semestrial rather than every time the EFSF was used (see also Question IV.6).

[17] http://www.senat.fr/dossier-legislatif/pjl09-511.html

[18] http://www.assemblee-nationale.fr/13/projets/pl2518.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/projets/pl2518.pdf )

[19] http://www.senat.fr/compte-rendu-commissions/20100531/fin.html#toc4

[20] http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910076.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cr-cfiab/09-10/c0910076.pdf  See for instance interventions by center-right wing Charles de Courson.

[21] Idem.

[22] http://www.senat.fr/compte-rendu-commissions/20100531/fin.html#toc4 ; http://www.assemblee-nationale.fr/13/cri/2009-2010/20100206.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100206.pdf ).

[23] http://www.senat.fr/compte-rendu-commissions/20100531/fin.html#toc4 , answer by Christine Lagarde to Roland du Luart.

[24] MP Moscovisci (PS): “ MP Moscovisci (PS): « on ne peut que s’étonner de la décision du Gouvernement de laisser inchangé le calcul des conditions de l’équilibre financier de l’État figurant dans le projet de loi de finances initiale. Permettez-moi donc, monsieur le ministre – et je souhaiterais que vous me répondiez sur ce point – d’exprimer quelques doutes sur la sincérité des comptes publics. » (31 May 2010, public examination at the National Assembly, http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100206.pdf ).

[25] The right-wing majority would later see Eurostat recommend that the State contributions to the EFSF be written down in public accounting as debt. However, the Commission would not consider these contributions as debt for the purposes of monitoring excessive deficit. http://www.assemblee-nationale.fr/13/rapports/r3718.asp#P229_48701

[26] http://www.senat.fr/compte-rendu-commissions/20100531/fin.html#toc4

[27] http://www.assemblee-nationale.fr/13/cri/2009-2010/20100206.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100206.pdf ). See in particular the position taken by Jean-Pierre Brard (GDR, far left).

[28] Idem.

[29] Idem.

[30] Idem.

[31] http://www.assemblee-nationale.fr/13/cri/2009-2010/20100208.asp (pdf: http://www.assemblee-nationale.fr/13/pdf/cri/2009-2010/20100208.pdf ) . Martine Billard: « La dépendance à ces marchés est telle que nous aurions voté ce plan à la sauvette si le groupe GDR n’avait demandé un vote solennel ».

[32] Conseil d’Etat, Rapport public 2012, p.13. http://www.ladocumentationfrancaise.fr/rapports-publics/124000492-conseil-d-etat-rapport-public-2012-volume-1-activite-juridictionnelle-et

[33] Ibid. p.145.

[34] Own translation from French : «  Constatant que le projet de loi de finances rectificative 2011 autorisant l’octroi de la garantie de la République française avait pour seul objet d’autoriser l’octroi de la garantie de l’Etat à un organisme créé par un accord intergouvernemental et que cet accord, pris sous la forme d’un accord de droit international privé par lequel les Etats signataires ont décidé de créer un établissement financier de droit privé, dont la mission consiste à intervenir sur les marchés financiers selon des procédures et instruments ordinaires de ces marchés, le Conseil d’Etat a considéré que la ratification préalable de cet accord, dans les formes requises par l’article 53 de la Constitution, n’était pas nécessaire ».

[35] « Toutefois, [le Conseil d’Etat] a appelé l’attention du Gouvernement sur la nécessité de transmettre au Parlement, pour sa complète information lors du débat sur ce projet de loi de finances rectificative, une version consolidée, en traduction française officielle, des termes de l’accord passé le 7 juin 2010 entre 17 Etats membres de l’Union européenne dont la monnaie est l’euro et des décisions modificatives prises les 11 mars et 21 juillet 2011 par les chefs d’Etat ou de Gouvernement des mêmes Etats ». Idem.

[36] Article 3-IV of Loi n° 2010-606 du 7 juin 2010 de finances rectificative pour 2010

[37] http://www.senat.fr/dossier-legislatif/pjl10-786.html

[38] Article 8-I-2 of Loi n°2011-1117 : « Le IV est ainsi modifié :
a) Les mots : ’’et lorsque l’entité ad hoc mentionnée au I apporte un financement ou consent des prêts’’ sont supprimés ;
b) Est ajoutée une phrase ainsi rédigée :
‘‘Il transmet chaque semestre aux commissions un état récapitulatif des interventions mises en œuvre par le fonds mentionné au I.’’ »

[39] http://www.assemblee-nationale.fr/13/cri/2010-2011-extra2/20112001.asp  See in particular the position held by Elizabeth Guigou.

[40] Idem. See in particular the position held by Jean-Pierre Brard

[41] http://www.assemblee-nationale.fr/13/scrutins/jo0792.asp ; http://www.senat.fr/scrutin-public/2010/scr2010-278.html

[42] http://www.assemblee-nationale.fr/13/cri/2010-2011-extra2/20112001.asp  , in particular the intervention of Jerome Cahuzac; http://www.senat.fr/seances/s201109/s20110908/s20110908_mono.html , in particular the intervention of Nicole Bricq.

[43] Idem.

[44] Idem, see in particular the intervention of Nicole Bricq at the Senate.

[45] Announcement made by French Minister to the Economy and the Finances Christine Lagarde on April 21, 2010: http://discours.vie-publique.fr/notices/106000864.html

[46] http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910062.asp

[47] http://www.assemblee-nationale.fr/13/dossiers/deuxieme_collectif_2010.asp ; http://www.senat.fr/dossier-legislatif/pjl09-424.html

[48]For the votes, see: National Assembly:  http://www.assemblee-nationale.fr/13/cri/2009-2010/20100175.asp#ANCR201000000164-00811 ; Senate: http://www.senat.fr/scrutin-public/2009/scr2009-198.html

[49] http://www.assemblee-nationale.fr/13/rapports/r2460.asp

[50] http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910062.asp ; http://www.assemblee-nationale.fr/13/cri/2009-2010/20100174.asp ; http://www.assemblee-nationale.fr/13/cri/2009-2010/20100175.asp ; http://www.senat.fr/compte-rendu-commissions/20100503/finances.html#toc2

[51] http://www.assemblee-nationale.fr/13/dossiers/deuxieme_collectif_2010.asp

[52] Idem.

[53] Idem.

[54] Idem.

[55] Idem.

[56] Minister to the Budget François Baroin thus said to the Finances Committee of the National Assembly :  “On ne peut pas, d’un côté, annoncer une aide à un pays en difficulté, qui a mené des politiques inappropriées et menti sur ses déficits et, de l’autre, se voir reprocher que cette aide revête la forme d’un prêt. ”. It was also repeated in several instances that the country’s officials had lied and falsified their public accounts. http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910062.asp

[57] http://www.assemblee-nationale.fr/13/cr-cfiab/09-10/c0910062.asp ; http://www.assemblee-nationale.fr/13/cri/2009-2010/20100174.asp ; http://www.assemblee-nationale.fr/13/cri/2009-2010/20100175.asp ; http://www.senat.fr/compte-rendu-commissions/20100503/finances.html#toc2 .

[58] Idem.

[59] Idem.

[60] http://www.senat.fr/compte-rendu-commissions/20100503/finances.html#toc2

[61] Idem.

[62] http://www.senat.fr/compte-rendu-commissions/20100503/finances.html#toc2

[63] Senator Nicole Bricq (PS, opposition), General rapporteur to the Finances Commission of the Senate, on 21 Ferbuary 2012: “Parmi les mesures censées contribuer à la stabilisation de la zone euro vient, au premier chef, le relèvement de 31,4 milliards du plafond des prêts de la France au FMI. Une création monétaire, en somme, où la BCE n’aura pas son mot à dire” http://www.senat.fr/compte-rendu-commissions/20120220/fin.html#toc2

Germany

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)

Negotiations
IV.1    
What political/legal difficulties
did Germany 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?

No difficulties known.

 

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 Germany and in what way does it involve Parliament?

The German Bundestag has to consent to the issuance of new financial commitments. According to Article 115 (1) GG, a federal law has to be adopted if Germany decides to take over borrowing obligations. The provision requires the authorization by a federal law for “the borrowing of funds and the assumption of surety obligations, guarantees, or other commitments that may lead to expenditures in future fiscal years”.

 

This is why Article 115 (1) GG formed the legal basis upon which the Act on the Assumption of Guarantees within the Framework of a European Stabilisation Mechanism (StabMechG)[1] was adopted by the German legislator on 22 May 2010.[2] The StabMechG authorized the Federal Ministry of Finance to issue guarantees up to the amount of Euro 123 billion with a possible extension of 20%.

 

The StabMechG was adopted via the usual procedure for the adoption of federal laws in Germany. However, the procedure only lasted 11 days which is very fast in comparison to other federal laws. The draft law was introduced in the legislative procedure by the governing coalition of the parliamentary groups of Christian Democrats (CDU/CSU) and Liberals (FDP) on 11 May 2010.[3] After the Budget Committee of the Bundestag had proposed some modifications to the draft law on 19 May 2010, the Bundestag adopted the modified version of the law on 21 May 2010 with 319 Yes votes, 73 No-Votes and 195 abstentions in a ballot by name.[4] The majority of MPs of the then governmental parties Christian Democrats (CDU/CSU) and Liberals (FDP) voted in favour of the law. However, there were four Christian Democrats and two Liberals who voted against the law as well as the complete parliamentary group of Left (Die Linke). The Social Democrats (SPD), the Greens (Bündnis 90/Die Grünen), three Christian Democrats and one Liberal abstained. The same day, the Bundesrat gave its consent to the StabMechG.[5] On 22 May 2010, the law was signed by the Federal President and entered into force via publication in the Federal Law Gazette.

 

The StabMechG was amended twice. The first modification, which entered into force on 9 October 2011, raised the guarantee sum from Euro 123 billion to Euro 211 billion and adapted the German law to the modifications of the EFSF-framework treaty.[6] The parliamentary voting by name in the Bundestag on 29 September 2011 led to the following result: 523 Yes-votes (governing coalition of Christian Democrats (CDU/CSU) and Liberals (FDP); Social Democrats (SPD) and the Greens (Bündnis 90/Die Grünen) from the opposition), 85 No-votes (the parliamentary group of the Left (Die Linke), one Social Democrat and one Green MP – all from the opposition, 10 Christian Democrats and three Liberals from the governing coalition) and 3 abstentions (one Social Democrat, one Christian Democrat and one Liberal).[7]

The second amendment, which was published in the Federal Law gazette on 23 June 2012 entered into force on 1 June 2012, strengthened the participation rights of the parliament.[8] The amendment was supported by all parliamentary groups, except the Left (Die Linke) forming part of the opposition.[9]

 

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Germany? 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 procedure is laid down in the StabMechG. According to this law, the Federal Ministry of Finance is authorized to issue guarantees up to an amount of Euro 211 billion for financial assistance programmes which the European Financial Stability Facility carries out to implement the emergency measures to the benefit of a euro-area Member State. Such guarantees can only be issued if it is indispensable to safeguard the stability of the euro area as a whole. In addition, there must be a common agreement by the euro-area Member States (excluding the Member State asking for financial support), the European Central Bank (ECB) and – where possible – the International Monetary Fund (IMF). Emergency measures can only be approved if the respective Member State agrees to strict conditions in the context of an economic and fiscal policy programme.

 

The StabMechG contains a further norm which binds the German representative in the EFSF board to a decision of the German Bundestag if the EFSF-decision affects the overall budgetary responsibility of the German Bundestag. The German representative is obliged to vote against an EFSF-decision as long as there is no other parliamentary authorization. The overall budgetary responsibility shall be deemed to be affected in particular

  1. in the event of the conclusion of an agreement on an emergency measure from the European Financial Stability Facility at the request of a euro-area Member State,
  2. in the event of a significant amendment to an agreement on an emergency measure, an amendment to its instruments and terms, and in the event of an amendment that has an impact on the amount of the guarantee facility,
  3. in the event of amendments to the Framework Agreement for the European Financial Stability Facility,
  4. in the event of the transfer of rights and obligations from the European Financial Stability Facility to the European Stability Mechanism, and
  5. in the event of the adoption of a significant amendment by the Federal Government to the guidelines of the Board of Directors of the European Financial Stability Facility.

 

If a decision of the Bundestag is not necessary, the Budget Committee must be informed and has the right to deliver opinions on the respective decisions. Furthermore, the StabMechG introduced a new sub-group of the Budget Committee (Stabilisation Board) which decides in all cases in which the Federal Government invokes the particular confidentiality of the matter. In addition, the Federal Government shall provide the German Bundestag with information on a comprehensive basis, as early as possible, continuously and, as a rule, in writing in matters pertaining to the StabMechG.

 

The Bundestag approved upon application of the Federal Government financial assistance in the framework of the EFSF for Ireland on 1 December 2010 (approval by the Budget Committee), for Portugal on 12 May 2011, for the Hellenic Republic on 27 February 2012[10], and for Spain on 19 July 2012[11]. Furthermore, there had been authorisations of the Bundestag to extend the term for loans in the framework of the EFSF for Spain and Portugal[12] as well as for Ireland[13] and the Hellenic Republic.[14]

 

As outlined below under question IV.4 the scope of the guarantees taken up by Germany was rarely debated in the legislative negotiations on the StabMechG in May, 2010. Mainly the possible extension of the guarantees of up to 20% was criticized. The opposition feared that such extension could become a ‘blank check’ for financial guarantees. Such fear mainly resulted from the fact that the legal details of the EFSF Framework Agreement were not known at the time when the Bundestag was supposed to vote on the StabMechG. [15]

This is why the parliamentary group The Greens (Bündnis 90/Die Grünen) asked the Federal Government after the entry into force of the StabMechG (the Greens abstained) whether it is intended to receive parliamentary approval for the EFSF-framework treaty. From their point of view, a parliamentary approval was required pursuant to Article 59 (2) GG because the framework treaty must be seen as a treaty regulating the political relations of the (German) Federal State. However, the Federal Government negated this question because they were of the opinion that the EFSF-framework treaty was a civil law agreement which does not fall within the category of Article 59 (2) GG-treaties.[16]

 

In the course of the first modification of the StabMechG which led to an increase of the guarantee sum, there were controversial discussions about the (in-)compatibility of the law with the German Constitution, in particular concerning participation rights of the parliament. The StabMechG transfers essential decision rights concerning EFSF-matters to a sub-group of the Budget Committee consisting of nine Members of Parliament in order to enable prompt decision in emergency cases. The Social Democrats (SPD) argued that it is not compatible with the German Constitution to transfer such parliamentary rights to a group of nine Members of Parliament.[17] The Left (Die Linke) entirely refused financial assistance measures such as provided for by the EFSF because these measures do not help financially suffering countries but increase social injustice.[18]

 

In the plenary debate on the first amendment of the StabMechG the extension of the guarantee sum up to Euro 211 billion was mainly criticized by The Left (Die Linke). Its head of the parliamentary group, Gregor Gysi, asked the Federal Government to promise that the guarantees issued by Germany would not be adopted at the cost of German pensioners, employees and small businesses.

 

The Greens (Bündnis 90/Die Grünen) criticized the “salami politics” of the Federal Government with regard to the necessity of financial guarantees. One of its MPs, Jürgen Trittin, accused the Federal Government of regularly defining financial red lines only to overstepping them shortly afterwards.[19] Gerhard Schick, another MP from the Greens, referred to rumors speculating that the lending capacity of the EFSF will be enlarged above the amount of Euro 750 billion and demanded the Federal Government to clarify if there is any validity behind such rumors.[20]

 

The most controversial debate about the enlargement of the EFSF concerned the participation rights of the Bundestag in EFSF decisions. For a detailed summary of the debate and its outcome see below under question IV.4, under II.2a, question IV.4, under III, 4 and question IV.5.

 

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

I. General Facts and Modus of Examination

 

The subsequent analysis focuses on the controversies that arose in the German Bundestag mainly with regard to the adoption of the European Financial Stability Facility (EFSF). The other measure mentioned above, the European Financial Stabilisation Mechanism (EFSM), was hardly discussed in the Bundestag as it was based on a Council Regulation[21] and, therefore, did not need the Bundestag’s formal approval. The EFSF, on the other hand, had to be implemented by the Bundestag through the means of a federal law. Nevertheless, the arguments for and against the EFSF and the EFSM are inextricably linked and were often voiced conjointly in the Bundestag debate.

 

Before outlining the analytical sources applied for the assessment of the negotiations about the EFSF, the main features of the legislative process in Germany will be summarized.

 

The Bundestag is the most important institution of the legislative process in Germany on the federal level as it decides (mostly together with the Bundesrat which represents the Länder) on all federal laws. Members and parliamentary groups of the Bundestag are able to introduce and revise new pieces of legislation as bills (also known as the ‘right of initiative)’. The Bundesrat and the Federal Government are also entitled to introduce new legislative proposals. Overall, 2/3 of the bills introduced stem from the Federal Government. Nevertheless, it is the Bundestag where these bills are debated, modified, and voted on through a complex legislative procedure.[22]

 

Usually a bill is presented and debated in the first plenary session of the Bundestag and then referred to the parliamentary committees (where expert hearings take place and bills are revised and modified). Further, in accordance with Rule 62 of the Rules of Procedure of the Bundestag, the Lead Committee recommends to the Bundestag a definite decision on the bill (the acceptance of the bill or the addition of amendments). Such decision is formally submitted to the Bundestag in a so-called recommendation („Beschlussempfehlung“) together with a report („Bericht”), the latter of which specifies the deliberations of the committee in more detail. In the end, the committee’s recommendation is debated in the second plenary of the Bundestag session and then usually voted upon in the third plenary session.[23]

 

In addition, also the Bundesrat participates in the legislative procedure and depending on the nature of the bill and the majority structures in the Bundesrat, the bill may even be rejected. If Bundestag and Bundesrat have consented to a bill, it enters into force once it is signed by the Federal President and published in the German Law Gazette (“Bundesgesetzblatt”).[24]

 

In the subsequent assessment of the legislative debate on the EFSF, two main sources of the legislative process will be drawn on: First, the plenary sessions will be analyzed, which are mainly used by members of the Bundestag to convey political standpoints to the public and the media (all debates can be found in the so-called plenary protocols, “Plenarprotokoll”).[25] Second, the recommendations and reports of the respective Lead Committee will serve as a basis for the assessment. [26] The reports are especially interesting as they contain a detailed summary of the positions of all parliamentary groups on the respective bill.

 

The Bundestag adopted three laws with regard to the EFSF:

 

First, on 22 May 2010 the ‘Law for the Acquisition of Guarantees within the Framework of a European Stabilization Mechanism’[27] (StabMechG) was adopted, which authorized the issuance of EFSF guarantees (see question IV.3). It was discussed together with the European Financial Stabilization Mechanism (EFSM), as outlined below.

 

Second, on 14 October 2011 the financial capabilities of the EFSF were extended through revising the StabMechG.[28]

 

Third, on 23 May 2012 the parliamentary rights regarding EFSF-measures were strengthened via a second amendment of the StabMechG.

 

Below, the debates on these laws will be presented separately, as the content and scope of the controversies differ notably.

 

II. Parliamentary negotiations on the EFSM and the StabMechG in May 2010

 

1. The Position of the Government

 

On 19 May 2010, Chancellor Angela Merkel held a Federal Government Declaration (“Regierungserklärung”) to the Bundestag. Those declarations are usually made during the election period, if policy-program corrections are inevitable, if issues of high public interest are at stake, or if important decisions have been taken on an international level.[29] Merkel explained her position with regard to the EFSM and the EFSF that had been initiated in several EU and Eurozone meetings during the weekend of 7-9 May 2010.

 

Merkel used drastic words in the Government Declaration in order to persuade the members of the Bundestag on the importance and necessity of the rescue packages.[30] By and large, two main arguments can be identified in Merkel’s Government Declaration that have been repeatedly used by the Federal Government throughout the financial crises to justify EU rescue measures.

 

First, Merkel linked the survival of the euro to the survival of the European project. She stressed that rescue measures are not only necessary to stabilize the Eurozone. To a larger degree, it is about “the preservation and probation of the European idea”[31]. According to Merkel, the Eurozone is a ‘community of fate’ and “if the Euro fails, Europe fails”.[32]

 

Second, Merkel promised to introduce stricter fiscal policy measures at the EU level as a ‘trade-off’ for the loan guarantees Germany had taken over. Merkel pointed out that a “new culture of stability” is needed in the European Union in order to improve the fiscal policy coordination and mutual supervision amongst all EU member states.[33] Merkel further stated “such rules should not depend on the weakest [Member State], but must be in conformity with the strongest”[34]. She concluded that her Government would fight for economically necessary fiscal policy measures – even if they were not supported by all EU Member States.

 

In the report of the Budget Committee, the then governmental parliamentary coalition of Christian Democrats (CDU/CSU) and Liberals (FDP)[35] reinforced this position of the government through reference to the expert hearing that took place on 19 May.[36] The conclusion of the experts was that financial assistance was necessary in order not to threaten the solvency of Eurozone states and provoke a further escalation of the crises. The experts also strengthened the government’s assessment that the rescue measure would not violate the ‘no-bailout’ clause of Article 125 TFEU (for details on the latter issue see part II.2 of this answer).[37] 

 

2. The Debate

 

Not many MPs opposed to the general idea behind the financial measures presented by Merkel. Only the parliamentary group The Left (Die Linke) voiced strong doubts (see below).

 

Other parliamentary groups in the Bundestag (Social Democrats (SPD) and the Greens (Bündnis 90/Die Grünen)) agreed with the necessity of a financial rescue package. The parliamentary leader of the Social Democrats, Frank-Walter Steinmeier, even said: “Let us be true: the decisions taken on May 8th and 9th – which were far-reaching decisions to save the euro – were correct.”[38] According to the Greens “the rescue fund to support the euro is in its intention the right signal of the European Union against financial speculations.”[39]

 

Overall, two major topics were debated: first the lack of involvement of the Bundestag in the elaboration of the EFSM/EFSF and second Merkel’s wavering position regarding the idea of a Financial Transaction Tax (FTT). The parliamentary group The Left from the opposition also heavily criticized the austerity measures imposed on EU Member States in return for receiving loans.   

 

a. The Lack of Involvement of the Bundestag

 

First, all opposition parties (Social Democrats, the Greens and the Left) criticized the information and transparency policy of the Merkel government before, during and after the Eurozone meetings on the weekend of 7-9 May 2010.

 

In particular, the Greens and the Left accused Merkel of having violated Article 23 (3) GG according to which the Federal Government is obliged to inform the Bundestag prior to the adoption of legislative acts in European matters and consider the position of the parliament in the negotiations on the European level.[40] The allegation of having violated the German Basic Law is especially important because it became subject to several cases brought to the German Federal Constitutional Court (FCC) (see question IV.5).

 

The Social Democrats did not overtly accuse the Federal Government of having breached the German Constitution but criticized that Merkel had not convincingly explained why the European Council decided so rapidly about the rescue measures. Merkel had claimed that the speedy procedure was necessary due to the turmoil of the markets. However, in the view of the Social Democrats, Merkel had failed to deliver evidence to proof this.[41]

 

Further, all three opposition parties criticized the fact that the Bundestag was supposed to vote on the StabMechG at a point in time when the legal details of the EFSF Framework Agreement were not yet known. The background to this criticism was that the parliamentarians knew about the financial scope of the EFSF but had not seen the legal provisions of the EFSF agreement in detail. What worried the parliamentarians most was the fact that the extension of 20 % of the German guarantee sum could become a ‘blank check’.[42] The parliamentary leader of the Greens, Jürgen Trittin, claimed that it is an “affront towards the parliament” that Merkel expects the Bundestag to vote on a rescue package of which the details are unknown.[43]

 

In order to attenuate the opposition’s criticism with regard to the involvement of the Bundestag, the then government coalition of Christian Democrats (CDU/CSU) and Liberals (FDP) together with the Greens introduced an amendment to the StabMechG (§ 1 (4) and (5)) after the first reading in plenary at the stage of the Budget Committee discussion.[44] The amendment had two main results: First, the Government assures to submit missing legal details of the EFSF to the Budget Committee before the final issuance of guarantees. Second, the Federal Government commits itself to make efforts in order to reach consensus with the Budget Committee before the issuance of new guarantees. Only in urgent situations, guarantees can be issued without prior consent of the Budget Committee, however the Federal Government has to inform the Committee afterwards without delay.

 

The amendments are – amongst others – relevant for cases in which the EFSF Board of Directors has to give its approval to loan requests of Eurozone states. Through the StabMechG, the Bundestag authorized the Federal Government, and thus by extension also the German EFSF representative, to issue loan guarantees up to the amount of Euro 123 billion. However, this does not mean that the Federal Government and its representatives in the EFSF could freely decide about the German guarantee sum. It is always necessary that the Federal Government makes efforts to reach consensus with the Budget Committee before the issuance of new guarantees (see also question IV.3). The wording of this obligation was however very weak and corrected in the Bundesverfassungsgericht’s judgment on 7 September 2011.[45] (see also question IV.5)

 

Eventually and despite the government’s endeavors to attenuate the opposition’s criticism through the integration of the amendments, the StabMechG was not supported by the oppositional parliamentary groups. Social Democrats and the Greens abstained, The Left opposed to the bill (for voting details see under paragraph 4).

 

b. Regulation of Financial Markets

 

Another issue that was repeatedly criticized by the opposition was the fact that the Federal Government did not take a clear position on how to restrict threats arising from financial markets. The opposition pointed out that they perceive the unregulated financial markets as a major source of the crisis. The parliamentary leader of the Greens, Jürgen Trittin, criticized the government for not having a steady position with respect to a FTT.[46] The parliamentary leader of the Social Democrats, Frank-Walter Steinmeier, criticized Chancellor Merkel for her wavering position regarding a FTT.[47]

 

In the report of the Budget Committee, the Social Democrats argued that progress in the fight against the financial crisis can only be made if the financial sector will be involved and held accountable. In the end, they even tied their consent to the StabMechG to a (written) promise of the Federal Government to introduce adequate regulatory measures of financial markets and introduce a financial transaction tax (at the G20 level or if that’s not possible at the EU level).[48] The Government refused to submit such a written promise (see under paragraph 4 below).

 

The Left criticized the Government’s approach towards the FTT and laid out a specific proposal on how to best regulate the financial markets in the report of the Budget Committee. With regard to the rescue packages, they mainly opposed to EU austerity measures tied to the granting of loans.[49] Their parliamentary leader, Gesine Lötzsch, thus requested an EU stimulus package, financed through 2 % of every Member State’s GNP. She said that the draconic austerity measures introduced on the basis of Merkel’s “neoliberal recipe” put economic recovery at risk and threaten social peace in Europe.[50]

 

4. Voting Behavior in the Bundestag

 

The 17th German Bundestag consisted of 620 MPs in total. On 21 May 2010, the StabMechG was voted on. 587 parliamentarians casted their votes, of which 319 were in favour and 73 against the law. 195 parliamentarians abstained. The positive votes stemmed from the governing coalition, the negative votes were mainly casted by the The Left, however, there were also 5 no-votes from the governing coalition and 1 from the Social Democrats (SPD). Social Democrats and the Greens mainly abstained.[51]

 

The Social Democrats justified their abstention-vote with the fact that Merkel had not submitted a written promise to introduce a FTT.[52] After all, this justification allowed the SPD to confirm its general consent with the StabMechG without voting in favour of it. The Greens argued that although they agree with the content of the StabMechG, they voted with abstention because the Federal Government had ignored the necessary procedures to involve and adequately inform the Bundestag.[53] The Left said that it would have voted for the bill if the government would have guaranteed to regulate financial markets and not force other EU states to raise taxes and decrease their social spending.[54]

 

III. Parliamentary negotiations about the amendment of the StabMechG in October 2011

 

On 21 July 2011, European leaders convened in Brussels for an emergency summit due to the worsening of the financial crisis in the Eurozone. The aim was to address the three major challenges of the crisis, namely debt solvency, contagion, and growth. In the end, two major decisions were taken. First, a new rescue package was adopted for Greece up to the amount of Euro 109 billion. Second, the political leaders agreed to enlarge the lending capacity of the EFSF from Euro 440 billion to Euro 780 billion. Overall, the enlargement of the EFSF meant that Germany had to increase its loan guarantees from Euro 123 billion to Euro 211 billion.

 

The first plenary debate on the EFSF took place on 8 September 2011, which consisted of two major elements: First, the enlargement of the EFSF was discussed on the basis of the bill called the ‘Law Amending the Law for the Acquisition of Guarantees within the Framework of a European Stabilization Mechanism’. Second, the strengthening of the Bundestag’s participation rights was discussed based on a resolution by the parliamentary groups of Christian Democrats (CDU/CSU) and Liberals (FDP), called ‘Securitization and Strengthening of the Parliamentary Rights with regard to further European Stabilization Measures’.[55] During the committee proceedings, the resolution was integrated into the amendment proposal and voted on as one bill in the Bundestag.

 

1. The Position of the Government with regard to the Enlargement of the EFSF

 

In the first plenary session on 8 September 2011, Finance Minister Wolfgang Schäuble explained the government’s position: He justified the necessity of expanding the EFSF budget through referring to the danger of contagion in the Eurozone. Schäuble explained that “[w]e needed to create this mechanism so that the problems of a country cannot be a threat to the stability of the entire euro zone."[56] The chairman of the parliamentary group of CDU/CSU, Volker Kauder, argued in favour of the EFSF by exposing its broader implications. “[I]t is not only about the expansion of the rescue fund […], it is about our future. It’s about jobs. It’s about perspectives, especially for the younger generation”[57], he argued.

 

In line with the rhetoric and argument of the Merkel government, Schäuble demanded the Eurozone countries in need of loans to mobilize their own efforts for reform. When it comes to giving out credits to cash-strapped states such as Greece, it is about providing help for the matter of self-help. “[T]he causes of the problems need to be solved by the countries themselves” [58], he claimed. The chairman of the FDP, Rainer Brüderle, said “if the Greeks fail to stick to their commitments, there will be no money; that is the rule of the game.”[59]

 

Schäuble further remarked that a change of the EU Treaties might be necessary in the long-term. It is very difficult to pacify the financial markets with the existing EU Treaties in a sustainable manner. The markets expect us to create a better institutional structure for our common currency. “[T]hat’s the direction we have to take.”[60]

 

2. The Debate

 

The expansion of the EFSF was much more controversial than its establishment in May 2010. Criticism was voiced strongly by the opposition parties and even came from within the government coalition.

 

In fact, until shortly before the voting, it was not clear if Merkel would receive the so-called Chancellor majority (“Kanzlermehrheit”[61]). One of the most prominent critics of the expansion of the EFSF within the governing parties was the vice-chairman of the parliamentary group of the Christian Democrats (CDU/CSU), Wolfgang Bosbach.[62] He criticized that the enlargement of the EFSF marks the transformation of the Monetary Union into a Debt Union, which is “not a way out of the crisis but rather a way into a crisis.”[63] According to him, the no-bail-out clause pursuant to Article 125 TFEU intends to ensure that over-indebtedness cannot be passed on to other Eurozone states.[64] Despite the opposition of some CDU-politicians, Merkel received the majority of votes in the Bundestag for the extension of the EFSF.[65]

 

Even the opposition parties Social Democrats and the Greens voted in favour of the EFSF enlargement. However, this did not preclude them to engage in a furious debate. Three issues – that were only indirectly connected to the EFSF expansion – became central points of discussion in the debate: first the handling of the crisis by the government, second the government crossing ‘red lines’, and third Merkel’s position towards Eurobonds. These issues were mainly discussed in the plenary sessions. The issue of improving the Bundestag’s participation rights was mainly dealt with in the parliamentary committees.

 

a. The Course of Action in the Crisis by the Federal Government

 

Already in the first plenary session, Social Democrats (SPD) and the Greens (Bündnis 90/Die grünen) confirmed that they would vote in favour of the EFSF-expansion. The parliamentary leader of the Greens, Jürgen Trittin, said that it is a matter of solidarity to be in favour of the enlargement of the EFSF. The former Finance Minister and MP Peer Steinbrück (Social Democrats) claimed that the enlargement of the EFSF is the “right step”[66].

 

Nevertheless SPD-Chairman, Sigmar Gabriel, accused the Federal Government of having worsened the crisis via “short-sighted and populist slogans” with regard to Greece.[67] Peer Steinbrück said that Merkel misses “a guiding principle, a perspective, a strategy, including a plan B and C” for dealing with the crisis.”[68] What is necessary is “a new narrative about Europe” which is not confined to the EU being an intergovernmental organization. Only then can it become clear why Germany has the responsibility to help stabilising the Euro currency.[69] 

 

b. Crossing ‘Red Lines’

 

The Greens criticized the “salami politics” of the Federal Government. Their parliamentary leader Jürgen Trittin accused the Federal Government of regularly defining ‘red lines’ only to overstep them shortly afterwards. “First, it was said: no cent for Greece and then a rescue package for Greece was implemented. The next red line was: no adoption of a rescue package and then the EFSF was established. Now it is: no permanent bailout fund but soon the ESM will be created.”[70] Another MP of the Greens, Gerhard Schick, referred to rumors speculating that the lending capacity of the EFSF should even be enlarged to up to Euro 1 billion and demanded the Federal Government to clarify if there is any validity behind such rumors.[71]

 

c. Eurobonds

 

Although not directly linked with the debate about the EFSF, all opposition parties criticized Merkel for her position in relation to Eurobonds. Sigmar Gabriel (Social Democrats) said that the Federal Government’s argument of the Eurobonds being an illegal pooling of debt is not credible, as the government has asked the ECB to do the same through buying bonds of indebted countries up to the amount of Euro 120 billion.[72] Jürgen Trittin (the Greens) spoke of the “European and monetary ghost-ride”[73] of the Federal Government. It is irresponsible to rant against Eurobonds although they have been introduced through the back door already, he said.[74] The parliamentary leader of the parliamentary group the Left (Die Linke), Gregor Gysi, called on the government to tell the truth about the introduction of Eurobonds.[75]

 

3. Voting Behavior in the Bundestag

 

On 29 September 2011, the amendment bill was voted on in the Bundestag. 611 parliamentarians casted their votes, of which 523 were in favour and 85 against the bill. 3 parliamentarians abstained (one from the Christian Democrats (CDU/CSU), one from the Liberals (FDP) and another one from the Social Democrats (SPD)). The positive votes stemmed from the governing coalition (Christian Democrats and Liberals), the Social Democrats and the Greens. Interestingly 10 MPs from CDU/CSU, 3 MPs from the FDP and one MP from the SPD voted against the amendment bill.

 

4. Improving the Participation Rights of the Bundestag

 

The improvement of participation rights of the Bundestag will be explained and focused on in greater detail as it has been one of the most controversial and important issues in the German constitutional debate. Especially Germany’s Federal Constitutional Court (FCC) has ever since its Maastricht judgment in 1993 defined the legal grounds for a stronger role of the Bundestag in European matters. In the following, it will be explained how and why participation rights of the Bundestag are improved by the amendment bill.

 

In the StabMechG, adopted on 22 May 2010, the Federal Government was only obliged to make efforts to reach consensus with the Bundestag’s Budget Committee before the issuance of new guarantees and could – in urgent situations – even issue them without prior consent of the Bundestag (for more details see paragraph II, 2a of this answer). In the public debate, the weak participation rights of the Bundestag were criticized, yet it was not until the enlargement of the EFSF that the public debate erupted.

 

The controversy started on 24 August 2011, when the German newspaper ‘Handelsblatt’ published an article reporting that Finance Minister Schäuble was striving for a regulation according to which the EFSF should be able to issue loan guarantees without prior consent of the Bundestag. The President of the Bundestag, Norbert Lammert, clarified in the same issue of ‘Handelsblatt’ that the Bundestag would not agree to such general authorization of guarantees. On 7 September 2011, the Federal Constitutional Court confirmed Lammert’s position. According to the FCC, the Bundestag’s budget responsibility has to be protected, especially in times of increased international cooperation and European integration. Amongst others, the Court ruled that the budget autonomy of the Bundestag was not sufficiently protected, as the Federal Government was simply obliged to make efforts to reach an agreement with the Budget Committee (see question IV.5).

 

This is why, the coalition parties of Christian Democrats (CDU/CSU) and Liberals (FDP) introduced a resolution on strengthening the Bundestag’s participation rights, called ‘Securitization and Strengthening of the Parliamentary Rights with regard to further European Stabilization Measures’. During the committee proceedings, the latter resolution was integrated into the amended StabMechG and consented to by all parliamentary groups (excluding the parliamentary group The Left (Die Linke)). Interestingly the matter of improving the Bundestag’s participation rights was mainly debated during the committee proceedings and not in plenary sessions.

 

In the following, the provisions on participation rights of the Bundestag will be explained in more detail.

 

First, § 3 StabMechG concerns EFSF measures that touch upon the budget responsibility of the Bundestag. It determines that the German representative to the EFSF can only consent to a decision in the EFSF Board of Directors if the Bundestag has previously consented to it. Four major fields of EFSF matters are identified that concern the budget responsibility of the Bundestag: the issuance of rescue measures for a Eurozone state, the modifications of an existing rescue measure, changes of the EFSF agreement, the transformation of the EFSF into the ESM.[76] § 3 (3) StabMechG specifies that if cases of particular urgency and confidentiality arise, a ‘special body’ will take over the participation rights of the Bundestag. Such a ‘special body’ is supposed to consist of nine members of the Budget Committee according to the majority situation of the Bundestag (the so-called “Neuner-Gremium” (Committee of Nine)).[77] 

 

Second, § 4 StabMechG determines that all other EFSF measures that concern the Bundestag and that are not mentioned in § 3 (2) StabMechG have to be adopted in consent with the parliamentary Budget Committee. Such issues concern the amendment of EFSF Board guidelines or the use of other EFSF instruments, such as the purchase of bonds on the secondary market.

 

Third, § 5 StabMechG regulates how the Federal Government has to inform the Bundestag about new developments, e.g. by submitting relevant documents at the earliest possible time.[78]

 

The most controversial part of the modified participation rights was the establishment of the Committee of Nine (“Neuner-Gremium”). During the committee proceedings, the Social Democrats (SPD) doubted that such a committee would be in conformity with the FCC judgment from 7 September 2011 and thus suggested a less powerful role of this sub-Committee – however without success. Nevertheless, the Social Democrats voted in favour of the amendments.[79]

 

In the end, the first Committee of Nine (“Neuner-Gremium”) was elected on 26 October 2011 for the legislature, constituting of 2 MPs from the Christian Democrats (CDU/CSU), 2 MPs from the Liberals (FDP), 2 MPs from the Social Democrats (SPD), 1 MP from the Greens (Bündnis 90/Die Grünen) and 1 MP from the Left (Die Linke) respectively.[80] One day later, the German Federal Constitutional Court (FCC) banned at the request of two MPs the establishment of the Committee of Nine (“Neuner-Gremium”) by a provisional order – a measure which is only ordered in extraordinary cases by the FCC (see question IV.5).

 

IV. Parliamentary negotiations on the amendment of the StabMechG in May 2012

 

The second amendment of the StabMechG was necessary because of the judgment of the Federal Constitutional Court (FCC) from 28 February 2012 (see for more details on the judgment under question IV.5). In this decision, the FCC declared that the so called Committee of Nine (“Neunergremium”) – a parliamentary sub-Committee of the Budget Committee consisting of 9 MPs who decide about rapid emergency measures in the framework of the German participation in the EFSF – was not in line with the German Constitution.

 

The legislative proposal of this amendment bill was introduced by the parliamentary groups of Christian Democrats (CDU/CSU) and Liberals (FDP), which supported the government at that time, as well as by the Social Democrats (SPD) and the Greens (Bündnis 90/Die Grünen), which were in opposition at that time, aimed at limiting the competences of the Committee of Nine and at creating rules which safeguard that the composition of the Committee represents the majority relations in the plenary.[81]

 

The amendments of the StabMechG led to more competences for the Bundestag in its plenary composition. According to the amendment, the Committee of Nine is still competent for decisions which are in need of a particular confidentiality which is in particular important for certain operations of the EFSF at the secondary market. It comprehends cases in which not only the content but the fact that a discussion and a vote about a certain measure take place must be kept confidential.[82] This is, for example, the case when the EFSF intends to buy government securities at the secondary market.

 

In addition, electing the members of the Committee of Nine will be based on a voting system which requires a personal and secret procedure. Every member of the Committee of Nine will have a replacement and the composition of the Committee will respect the composition of the Bundestag regarding its majority relations and the political emphasis.

 

1. The discussion in the Committee and the Plenary Stage

 

In the debate at the Budget Committee, the Social Democrats (SPD) reminded its members that they had already emphasized in earlier legislative procedures regarding the StabMechG that the rules concerning the Committee of Nine were not in conformity with the German constitution.[83] In the framework of the discussion in plenary session about the amendments of the StabMechG on 27 April 2012, the Social Democrats highlighted it again.[84] They regretted that the government coalition had not been willing to discuss the constitutional concerns of the Social Democrats at that time. However, they appreciated that the government coalition changed their attitude after the judgment of the FCC and worked on an interparliamentary group proposal of the amendment. In addition, the Social Democrats emphasised that the amended law will contain a possibility to hear experts for difficult and highly complex political decisions.

 

The Greens (Bündnis 90/Die Grünen) supported the amendments as well but they criticized that the procedure was – again – dominated by too much rush.[85] Legislative proceedings such as those of the amendment of the StabMechG should take into account other legislative proposals such as the implementation of the ESM and the Fiscal Compact in order to have a more profound and coherent legal situation. The Greens proposed a further amendment of the StabMechG which aimed at strengthening the rights of parliamentary minority groups. However, this proposal was refused in the Budget Committee by the Christian Democrats and the Liberals (government parties). The Social Democrats (SPD) and The Left (Die Linke) as opposition parties abstained. The Greens highlighted their proposal in the plenary session.[86] One of the most prominent MPs from the Greens, Hans-Christian Ströbele, who voted against the StabMechG in earlier legislative proceedings, argued that he is not totally convinced by the amendments but it is an important step into the direction of more parliamentary participation which is why he supported them.[87]

 

The only parliamentary group which opposed to the introduction of the Committee of Nine and which did not support this legislative amendment was the Left (Die Linke). They declared that the amendment improves the participation rights of the parliament but does not go far enough.[88] They did not see the practical and political necessity to have such a Committee at all. From their point of view, all decisions should be discussed in plenary sessions. There are already sufficient rules to take care of the confidentiality in plenary sessions. Otherwise, such decisions would become problematic under aspects of democratic theory – Steffen Bockhahn (The Left) argued in plenary session on 27 April 2012.[89] He criticed the Social Democrats and the Greens because they are responsible for the fact that the government will not have to convince all MPs from the Christian Democrats and the Liberals but will be able to send MPs to the Committee of Nine who will serve loyally for all government decisions.

 

2. Voting Results

 

The parliamentary groups of the Christian Democrats and the Liberals (government) as well as the Social Democrats and the Greens (opposition) voted in favour of the amendments on 27 April 2012. The Left voted against it.[90]

 

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

I. General Facts about the Federal Constitutional Court

 

The Federal Constitutional Court (Bundesverfassungsgericht), or briefly FCC, is the supreme guardian of the German Basic Law (“Grundgesetz”). Like any other constitutional court, it may not be active on its own but must be called upon. In the framework of Euro crisis measures, two types of proceedings were relevant: The constitutional complaint and the Organstreit proceeding.

 

The German constitution allows any individual that perceives its fundamental rights to have been violated by state action to submit a constitutional complaint (“Verfassungsbeschwerde”) to the FCC. Article 93 (1) no. 4a GG specifies that such constitutional complaints can be filed upon on the basis of a perceived violation of a fundamental right.[91]

 

The jurisdiction of the FCC can also be invoked if disputes between constitutional bodies, such as the Federal President, the Federal Government, the Bundestag, or the Bundesrat. In the former, also known as Organstreit proceeding („Organstreitverfahren“), the matter may concern political party law, electoral law or parliamentary law. This proceeding is pointed out in Article 93 (1) no. 1 GG. Further details about procedural requirements can be found in the Federal Constitutional Court Act (Bundesverfassungsgerichtsgesetz, or briefly BVerfGG) which concretises the constitutional provisions.

 

II. Judgments on the Greek Bailout and the EFSF

 

Since the beginning of the financial crisis in 2008, the Bundesverfassungsgericht had to decide in several cases about the conformity of various German laws implementing EU rescue measures with the German Constitution.

 

The first judgment from 7 September 2011, which concerned the Greek bailout and the EFSF rescue fund, came to the Court as a constitutional complaint by several economists, lawyers, and one politician from the Christian Social Union in Bavaria (CSU). The CSU politician was Peter Gauweiler whose name is also known from the OMT-judgment of the European Court of Justice in 2015.[92] The Bundesverfassungsgericht’s decision from 7 September 2011 was the first leading euro-case and is especially important because the Court developed standards of review that set the grounds for subsequent euro-case rulings.[93]

 

On 28 February 2012, the FCC judged on a dispute between organs of the state (Organstreit proceeding) concerning the lack of involvement of the Bundestag in the administration of the EFSF. In this matter, the FCC had already issued a temporary court order half a year before on 27 October 2011.

 

Throughout the below description of these FCC judgments, a pattern in FCC rulings on European Union matters will be identified. Ever since the Maastricht Case in 1993, the FCC has shown a high sensitivity towards EU integration. However, this support was mostly tied to the Court’s repeated claim to strengthen the role of the German Bundestag in European matters as required by Article 23 (2) GG. This obligation was applied to financial obligations stemming from the European level.

 

 

III. FCC Judgment from 7 September 2011

 

1. Name of the Court

 

Bundesverfassungsgericht/German Federal Constitutional Court (FCC)

 

2. Parties

 

The three constitutional complaints stemmed from two groups of plaintiffs. The first group was comprised of Prof. Karl-Albrecht Schachtschneider, a constitutional law professor from the University of Erlangen (as authorized representative of the group), the financial experts Joachim Starbatty,
Wilhelm Nölling und Wilhelm Hankel, and finally the former CEO of ThyssenKrupp Dieter Spethmann. This group of plaintiffs (except Dieter Spethmann) had already submitted a constitutional complaint to the FCC in 1998 directed against the introduction of the euro currency.[94] However this complaint had been rejected by the FCC because it declared it as obviously unfounded.[95]

 

The second (main) plaintiff was Peter Gauweiler, a member of the Bundestag from the parliamentary group of the Christian Social Union (CSU), a conservative parliamentary group which supported the government at that time. In June 2010, Gauweiler had already submitted an urgent application to the FCC against the German participation in the EFSF.[96] It was yet rejected by the FCC with reference to the possible ramifications for the German public. According to the Court, even a temporary suspension of financial commitments could tremendously reduce the confidence of the markets and therewith lead to “serious economic disadvantages for the general public.”[97]

 

3. Type of action/procedure

 

A constitutional complaint as laid down in Article 93 (1) no. 4a GG in conjunction with §§ 13 no. 8a, 90 et seq. Federal Constitutional Court Act (BVerfGG).

 

4. Admissibility & Arguments of the parties

 

In the judgment, the FCC dedicated more space to the review of admissibility than the review of substance. As the admissibility of the complaints was anything but self-evident and controversially discussed in the run-up to the FCC judgment, it will be pointed out in more detail below.

 

Overall, the Court only regarded the complaints against the Act on Financial Stability within the European Union (WFStG) and the StabMechG as admissible to the extent that they claimed a violation of their right to vote for the Bundestag on the basis of Article 38 (1) and Article 20 (2) GG in conjunction with Article 79 (3) GG.[98] In the view of the FCC, also individuals could claim that their fundamental right to vote for the Bundestag as stated in Article 38 (1) GG is violated if a financial obligation (such as an EU rescue fund) would result in incalculable burdens for the German budget which would limit the Bundestag’s political discretion factually. In their view, every German citizen can legally demand that the German parliament is consulted in questions which are important for the German democracy.

 

Apart from this constitutional complaint, the remaining claims of the plaintiffs were found to be inadmissible by the Federal Constitutional Court, as will be explained below.[99]

 

a. Article 14 GG

 

One of the plaintiff’s complaints was that the two German federal laws at stake, the WFStG[100], a federal law that granted the authorization to provide financial aid to Greece, and the StabMechG, violate the fundamental right to property (Article 14 (1) GG).[101] The plaintiffs argued that the fundamental right to property “guarantees the ‘citizen’s fundamental right to price stability’”[102] and ensures protection against state policy that prompts inflation. The EU rescue measures would trigger inflation and, therewith, diminish the value of (their) property.[103]

 

The FCC declared this claim to be inadmissible. The Court did not decide whether the purchasing power of money is included in the area of protection of the fundamental right to property. However, the Court seems to have doubts about it, at least when there is no more nuanced clarification of the concept of property in regard to the purchasing power of money. The complaints could be rejected in the view of the Court because they did not substantially prove the inflationary effects and the impairment of the value of the euro as a result of the EU rescue measures. Furthermore, the FCC clarified that – in general – it is not its task to review effects on monetary stability caused by economic and financial policy measures.[104]

 

b. EU legal acts

 

The plaintiffs did not only direct their constitutional complaint against the two federal laws but also against several EU legislative acts.[105] In particular, the plaintiffs attacked Council Decision from 9 May 2010 to introduce the Euro Stabilization Mechanism, Council Regulation No. 407/2010 of 11 May 2010 to establish a European Financial Stabilization Mechanism, and the purchase of government bonds of Greece or other Eurozone Member States by the ECB. They claimed that these acts are “ultra vires”, contravene the principle of democracy and infringe on the plaintiffs right under Article 38 (1) GG because they infringe German sovereignty without sufficient democratic legitimation.[106] The FCC considered the challenge of these EU legislative acts to be inadmissible as they were not measures of a German institution.[107] The FCC’s power of legal review is limited to acts from German public institutions.

 

In a similar vein the FCC rejected the plaintiffs’ challenge against the alleged omission of the European Commission to pre-emptively use measures against the indebtedness of Eurozone states as inadmissible. The plaintiffs made the omitted action of the European Commission responsible for the financial crisis. According to the Court, the German Constitution does not establish a duty for the European Commission (or the Federal Government) to pre-emptively intervene in such cases.[108] 

 

c. Article 125 TFEU (‘no-bailout clause’)

 

Especially interesting is the way in which the Court handled the complaint concerning the violation of Article 125 TFEU. The plaintiffs alleged that the financial assistance for Greece as well as the EFSF rescue measure violate Article 125 (1) TFEU. According to this provision, EU Member States should not be liable for the financial commitments of other EU Member States.[109]

 

The FCC encountered this claim in an obiter dictum referring to the parallel requirements resulting from the TFEU and the German Constitution by saying that the „provisions of the European treaties do not conflict with the understanding of the national budget autonomy as an essential competence […] but instead they presuppose it.“ Regardless of that, the FCC pointed out the importance of respecting the stability criteria for a sound budgetary management of Articles 123-126 and Article 136 TFEU. The Court stated that although „the interpretation of these provisions in detail is not essential [for this judgment], the acceptance of liability for decisions of other Member States with financial effects which overstretches the bases of legitimation of the association of sovereign states (“Staatenverbund”) – by direct or indirect communitarisation of state debts – is to be avoided.“[110]

 

5. Legally relevant factual situation

 

None.

 

6. Legal questions & Arguments of the parties

 

The plaintiffs claimed that their right to vote for the Bundestag under Article 38 (1) sentence 1 GG in conjunction with the principle of democracy (Article 20 GG) and the budget autonomy of the Bundestag to be violated by the two German federal laws.

 

With regard to the last argument, the plaintiffs claimed that Article 38 (1) sentence 1 GG grants every German citizen the right that the constitutional rights of the Bundestag are at least in essence safeguarded. The measure at stake, however, would disregard fundamental principles of the German Constitution, such as the principle of the social welfare state (Article 20 (1) GG) or the principles of the constitutional rules governing public finances and the therewith-connected borrowing limits (Article 115 GG).[111] Furthermore, the plaintiffs claimed that via the financial commitments for Member States of the Eurozone, Germany has abandoned its budgetary sovereignty. In particular, the budget autonomy of the Bundestag, which is the essential element of democratic parliamentarism (as stated in Article 110 (2) GG), is severely violated by the measures at stake.[112] 

 

7. Answer by the Court to the legal questions and legal reasoning of the Court

 

In the review of substance, the Bundesverfassungsgericht decided that the constitutional complaints, which were admissible, are unfounded. The Court stated that the „Bundestag has, not eroded its right to decide on the budget in a constitutionally impermissible manner.“[113]

 

Although the Court rejected the constitutional complaints as unfounded, it developed important standards of review that set the ground for subsequent euro-case rulings.

 

a. The Budgetary Responsibility

 

The link between the Bundestag’s budgetary responsibility and the fundamental right to vote was one of the main innovations in German constitutional law following from this case.[114] It’s constitutional basis is laid down in Article 38 (1) sentence 1, Article 20 (1) and (2) in conjunction with Article 79 (3) GG.[115]

 

In plain terms, the argument goes as follows: The fundamental right to vote for the Bundestag is violated if the Bundestag loses or abandons its budgetary responsibility leading to a situation in which current or future compositions of the Bundestag do no longer have the possibility to make political decisions about the budget because the indebtedness of the German budget caused by a prior parliamentary decision does factually not allow for such decisions.[116] Furthermore, the political latitude as safeguarded through the core identity of the German Constitution (Article 20 (1) and (2,) Article 79 (3) GG would be violated if the Bundestag does not remain „the master of its decisions.“[117] Even in a system of intergovernmental administration such as in the EU the Bundestag must be able to keep control of substantial budgetary decisions.

 

b. The ‚Mechanism’ Argument

As a result of the Bundestag’s budgetary responsibility, the FCC further pointed out that the Bundestag „may not transfer its budgetary responsibility to other actors.“[118] In particular, the Bundestag may not agree to any „mechanisms with financial effect“ which may result in erratic financial burdens with budget relevance without prior parliamentary consent.[119]

According to the FCC, a violation of the Bundestag’s budgetary responsibility would occur if the type and amount of levies imposed on German citizens were supranationalised and the Bundestag deprived of its right of disposal.[120] For this reason, the FCC determined that “no permanent mechanisms may be created under international treaties which are tantamount to accepting liability for decisions by free will of other states, above all if they entail consequences which are hard to calculate.“[121] The FCC thereby established a constitutional threshold limiting the Bundestag’s capability to establish supranational financial mechanisms. 

The premise behind this ’mechanism’ argument is the concept of electoral democracy, as outlined above: If a permanent mechanism is created under an international treaty that relinquishes the Bundestag’s budgetary responsibility, the fundamental right to vote for the Bundestag would be violated. Also, the political latitude as safeguarded through the core identity of the constitution would be violated if the Bundestag does not remain „the master of its decisions.“[122]  

The constitutional premise about the violation of Article 38 (1) GG has been well known for years, as the Court has mainly used it to assess questions arising from the formal transfer of competences of the Bundestag to adopt the budget of the European Union. Yet, the ’mechanism’ argument is new in the sense that it is now even applied to cases without the formal transfer of budgetary competences to the EU.

c. Emphasis on StabMechG

Despite the fact that the FCC concluded that none of the challenged federal laws relinquishes the Bundestag’s budget autonomy, the Court corrected one provision of the StabMechG. The governing coalition of Christian Democrats (CDU/CSU) and Liberals (FDP) had modified the StabMechG bill in the Budget Committee in order to attenuate the opposition’s criticism. The FCC criticized one of these amendments, as it merely obliges the Federal Government to make efforts to involve the parliamentary Budget Committee before issuing guarantees.[123]

According to the Court, this provision would not safeguard the on-going influence of the Bundestag with regard to the issuance of new guarantees. Notably, such marginal participation rights would affect the Bundestag’s budget autonomy “in a manner which would adversely affect the right to vote”[124]. The FCC therefore claimed that „in order to avoid unconstitutionality”[125] this norm of the StabMechG has to be interpreted to the effect that the Federal Government is “obliged” (and does not only has to “make efforts”) to obtain the prior consent of the Budget Committee if new guarantees for the EFSF are issued.

8. Legal effects and & broader political implications of the judgment

The FCC rejected all three constitutional complaints as unfounded. Nevertheless, the Court determined that the Federal Government could only issue guarantees if they are approved by the Budget Committee of the Bundestag beforehand. As a result of the FCC ruling, the German parliament modified the participation rights of the Bundestag.

 

IV. FCC Preliminary Ruling from 27 October 2011

 

1. Name of the Court

 

Bundesverfassungsgericht/German Federal Constitutional Court (FCC)

 

2. Parties

 

Two MPs from the parliamentary group of the Social Democrats were the plaintiffs. The German Bundestag was the respondent.

 

3. Type of action/procedure

 

Application to issue an interim order in the framework of an Organstreit proceeding. An interim order is a measure of the FCC to interrupt the exercise of the attacked rules until there is a decision on the merits. The FCC can issue such an order if this is absolutely necessary to prevent severe disadvantages or imminent violence or another important reason of the same severity. Factually, such an interim measure is only issued in exceptional cases.

 

4. Admissibility & Arguments of the parties

 

The FCC decided that it is not excluded that the plaintiffs are infringed in one of their constitutional rights laid down in Article 38 (1) sentence 2 GG. This is why the complaint is admissible. The main reasoning behind the application of this norm had been laid down in the judgment of the Bundesverfassungsgericht from 7 September 2011 to which the Court referred.

 

5. Legally relevant factual situation

 

The decision to issue an interim order by the FCC was supported by seven judges, one judge did not vote in favour of this order.

 

6. Legal questions & Arguments of the parties

 

The arguments of the plaintiffs are the same as in the main proceedings (see FCC judgment from 28 February 2012 below).

 

Regarding the issuance of an interim order by the FCC, the plaintiffs substantiated their claim with the fact that it would be factually impossible to undo an approval of the EFSF-Committee, while preventing the EFSF-Committee of making such a decision for a limited period of time would only re-establish the situation which had existed before the enactment of the StabMechG.

 

7. Answer by the Court to the legal questions and legal reasoning of the Court

 

In general, for an interim order the FCC balances the consequences of such an order with the consequences which would arise if this order would not be issued. In the case of the EFSF-Committee the FCC decided that the constitutional rights of the MPs could be infringed irreversibly if the Court does not issue the interim order. If the EFSF-Committee should grant its approval to an EFSF-measure Germany would be bound to it by international public law which could not be repealed by a decision of the FCC in the main proceedings. Furthermore, the German Bundestag would not be incapable of action if the interim order would be issued because the Budget Committee could decide about EFSF-measures. This is why the Court issued the interim order.

 

8. Legal effects and & broader political implications of the judgment

None.

 

 

V. FCC Judgment from 28 February 2012

 

1. Name of the Court

 

Bundesverfassungsgericht/German Federal Constitutional Court (FCC)

 

2. Parties

 

Two MPs from the parliamentary group of the Social Democrats initiated the court proceedings between governmental bodies (Organstreit proceedings) against the Bundestag. The Federal Government joined the party German Bundestag.

 

3. Type of action/procedure

 

Organstreit proceedings. This procedure is the main proceedings of the interim proceedings from 27 October 2011.

 

4. Admissibility & Arguments of the parties

 

In the reasons for the decision, the FCC briefly stated that the complaints are admissible because the two plaintiffs can invoke their own rights as MPs of the Bundestag (Article 38 para. 1 sentence 2 GG). Two regulations of the StabMechG may infringe their rights: First, in case of a particular urgency or confidentiality the parliamentary responsibility for the budget is transferred to a special committee, consisting of nine MPs (§ 3 (3) StabMechG), so-called Committee of Nine. Second, the Federal Government only has to report to this special committee (§ 5 (7) StabMechG).

 

5. Legally relevant factual situation

 

None.

 

6. Legal questions & Arguments of the parties

 

The plaintiffs referred to their constitutional rights as MPs as stated in Article 38 (1) sentence 2 GG. They argued that their right to participate in parliamentary decisions in matters concerning the Federal budget is one of the most important rights of MPs. The justifications for the Committee of Nine (urgency and confidentiality) are not convincing because the Bundestag already has a regulation for confidential decisions and it is possible to invite all MPs or at least the MPs who are members of the Budget Committee for EFSF-decisions. In addition, the StabMechG does not reflect the fundamental principle that Committees must reproduce the majority constellations in the plenary composition of the Bundestag (principle of “Spiegelbildlichkeit”) because MPs who do not belong to one of the parliamentary groups have no possibility to become a member of the EFSF-Committee. Furthermore, the rules about the EFSF-Committee are too vague which – from their point of view – is a violation of the principle of democracy. Moreover, the EFSF-Committee can decide with only five members being present which is also a violation of democratic principles. The StabMechG also contains the regulation that this Committee must decide in cases of emergency measures which include so many cases that the EFSF-Committee would be competent in general and not only – as planned – in exceptional cases. According to the StabMechG the Federal Government has the right to invoke urgency or confidentiality and there is no minority right to vote against this opinion of the government. Finally, they argued that all MPs must be informed subsequently about EFSF-measures in order to be able to control the Committee of Nine. Such an obligation is not provided for in the StabMechG.

 

The German Bundestag as the respondent rejected all arguments. The Bundestag highlighted that there is a parliamentary right to decide about every single EFSF-decision which could also have been in the sole competence of the Federal Government without a parliamentary approval. Installing the EFSF-Committee was necessary to guarantee the budget responsibility of the Bundestag in an intergovernmental system. The regulation respects the parliamentary legitimacy and its representativeness. From the point of view of the Bundestag, the restriction of rights of MPs in this case is justified by objective reasons of paramount importance. The Bundestag argued that the specific needs in EFSF-decisions make it necessary to install such a Committee because it is best suited to decide in cases of urgency or confidentiality. Furthermore, the Bundestag presented the argument that the competences of the EFSF-Committee are limited to the necessary degree. Moreover, there is no constitutional requirement that parliamentary minorities must have the right to vote against governmental decisions. It is only necessary to guarantee their participation in the process which is respected in the StabMechG.

 

The Federal Government declared its intervention in the Organstreit proceedings and has, therefore, the right to present its opinion in front of the FCC. In its pleading the Federal Government argued that it is essential to be able to react quickly on developments at the finanacial markets. This is why the number of members of the EFSF-Committee must be limited. It is the functionality of the Bundestag which justifies these provisions on the constitutional level and the openness of the Basic Law to international and European law. In addition, the principle of separation of powers would demand that the government must be able to act in fields such as foreign policy. From heir point of view, the EFSF-Committee does not have less democratic legitimacy than the Budget Committee because its members are also elected by the Bundestag as a plenary.

 

7. Answer by the Court to the legal questions and legal reasoning of the Court

 

The FCC had to decide on two legal questions. First, is a law which transfers budgetary competences of the parliament as a whole to a special committee of nine MPs in case of urgency or confidentiality in accordance with the German constitution? Second, is a law which limits the duty to report of the Federal government to the special committee in accordance with the German constitution?

 

a) The constitutionality of the Committee of Nine

The FCC highlighted the rights of the MPs of the Bundestag, e. g. the right to vote, the right to speak or the right to pose questions. Their parliamentary role is of particular importance in questions of the budget which belongs to the fundamental principles of a constitutional state to democratically shape itself. According to Article 110 (2) GG, it is only within the competence of the legislator to decide about the budget. Article 114 GG obliges the parliament to control how and whether the government executes the budget plan. Because of the high relevance of the budget for political decisions the German parliament has to remain in a position in which its budgetary decisions still have an effect. It is not in line with the German Constitution to transfer this competence – even if supported by a majority of the MPs – to another institution. Moreover, every MP has the right to criticize the budget plan and to control public spending. This is part of the freedom and equality of the mandate as a member of the Bundestag.

 

However, the Bundesverfassungsgericht emphasized that these rights can be limited by a legal reason of constitutional status. One of these reasons is the parliament’s capability of functioning. Article 40 (1) sentence 1 GG gives the Bundestag the right to adopt rules of procedure in order to make sure that the parliament can effectively fulfil its role and tasks. However, the competence for self-organisation of the Bundestag has to take into account the principle of proportionality. It is not constitutionally excluded that the Bundestag establishes committees which do not consist of all MPs. Though, transferring fundamental competences of the Bundestag as a plenary to a committee needs a higher justification than transferring less important competences. The Bundesverfassungsgericht made it clear that it is important to respect two basic rules in this regard:

  1. The majority rules in the Bundestag as a plenary must be reproduced in the committee (principle of “Spiegelbildlichkeit”);
  2. The possibilities to be informed for the MPs who are not members of the Committee cannot be restricted beyond the indispensable necessary degree.

 

§ 3 (3) StabMechG transferred the competence to decide about certain measures in the framework of the EFSF to the Committee in case of urgency and confidentiality. Both justifications are linked with the justification that the Bundestag has to remain its functionality. However, the FCC was not convinced that it is necessary to have a very small Committee in EFSF-matters justified because of urgency. All EFSF-decisions allow for enough time to invite a bigger group of MPs, for example the Committee for Budget Affairs (41 MPs).

 

The justification of confidentiality was only accepted by the Bundesverfassungsgericht because of one reason: The planning of purchases of government securities by the EFSF. In this case, the decision and even the fact that such a decision is discussed must be kept secretly if the success of the measure shall not be endangered. All other reasons of the StabMechG were not decisions which make it necessary to install such a small Committee because the Bundestag already has sufficient rules for confidential decisions.

 

The principle of Spiegelbildlichkeit is not explicitly contained in the StabMechG but the law must be interpreted in this way ruled the Bundesverfassungsgericht. This is why the norm itself was not unconstitutional but when applying it, meaning when voting for the MPs of the Committee of Nine, the Bundestag has to respect this principle.

 

b) The duty to report of the Federal Government

The FCC used the same argument in relation to the rights of MPs to be informed about EFSF-measures. The government is only allowed to withhold information as long as the status of urgency is still existing. When the reasons for urgency are no longer persisting, the government has to inform all MPs immediately. This is an essential rule so that the Bundestag is able to control the Committee of Nine.

 

8. Legal effects and & broader political implications of the judgment

 

Subsequently to the judgment, the StabMechG was amended within the meaning of the FCC judgment.

 

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?

The role of the Bundestag in EFSF decisions is established in the StabMechG. Question IV.4 specifies the relevant provisions and controversies in more detail.

 

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

No political/legal difficulties in the application of the EFSF in Germany are known.

 

Bilateral support      
IV.8    
In case Germany 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?

Germany did not participate in bilateral funding other than the first aid package for Greece of 2010.

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

No further relevant information.

 

[1] See the consolidated version: http://www.bundestag.de/blob/192554/08516a1e200e1e75a44ba3e724a8487b/stabmechg_en_2012_consolidated-data.pdf

[2] See Deutscher Bundestag. Gesetzesentwurf der Fraktionen der CDU/CSU und FDP. Entwurf eines Gesetzes zur Übernahme von Gewährleistungen im Rahmen eines europäischen Stabilisierungsmechanismus. Drucksache 17/1685, p.4

[3] Bundestag, printed matter No. 17/1685, http://dipbt.bundestag.de/dip21/btd/17/016/1701685.pdf

[4] Bundestag, plenary records No. 17/44, 21 May 2010, p. 4443-4445, http://dip21.bundestag.de/dip21/btp/17/17044.pdf.

[5] Bundesrat, printed matter No. 298/10 and plenary records No. 870, 21 May 2010, http://www.bundesrat.de/SharedDocs/downloads/DE/plenarprotokolle/2010/Plenarprotokoll-870.pdf?__blob=publicationFile&v=3

[6] German Federal Law Gazette 2011, part I, No. 51, p. 1992, http://www.bgbl.de/xaver/bgbl/stArticlexav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl111s1992.pdf

[7] Bundestag, plenary records No. 17/130, 29 September 2011, p. 15236-15239, http://dipbt.bundestag.de/dip21/btp/17/17130.pdf#P.15204

[8] German Federal Law Gazette 2012, part I, No. 23, p. 1166, http://www.bgbl.de/xaver/bgbl/stArticlexav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl112s1166.pdf

[9] Bundestag, stenographi report of the 176th session, 27 April 2012, p. 20934.

[10] The voting result can be seen on http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=327

[11] The voting result can be seen on http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=124&url=/apps/na/na/fraktion.form&controller=fraktion

[12] The voting result can be seen on http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=219&url=/apps/na/na/fraktion.form&controller=fraktion; a further extension for Portugal was approved, see http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=222&url=/apps/na/na/fraktion.form&controller=fraktion

[13] The voting result can be seen on http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=221&url=/apps/na/na/fraktion.form&controller=fraktion

[14] The voting result can be seen on http://bundestag.de/bundestag/plenum/abstimmung/grafik?id=327

[15] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p.4.

[16] Bundestag, printed matter No. 17/2569, p. 2 et seq., http://dipbt.bundestag.de/dip21/btd/17/025/1702569.pdf

[17] Bundestag, printed matter No. 17/7130, p. 5, http://dipbt.bundestag.de/dip21/btd/17/071/1707130.pdf

[18] Bundestag, printed matter No. 17/7130, p. 6, http://dipbt.bundestag.de/dip21/btd/17/071/1707130.pdf

[19] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, Online available at http://dipbt.bundestag.de/dip21/btp/17/17044.pdf#P.4412,15227 A.

[20] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, 15219 D.

[21] Council Regulations automatically take effect in the member states. Council Regulation No 407/2010 of May, 11, 2010.

[22] See Deutscher Bundestag, ‘Initiation of Legislation. Online available at: http://www.bundestag.de/htdocs_e/bundestag/function/legislation/legislat/02initleg.html.

[23] See Deutscher Bundestag, ‘The legislation of the Federation’. Online available at: http://www.bundestag.de/htdocs_e/bundestag/function/legislation/legislat/index.html.

[24] See Deutscher Bundestag, ‘The legislation of the Federation’. Online available at: http://www.bundestag.de/htdocs_e/bundestag/function/legislation/legislat/index.html.

[25] See Deutscher Bundestag, ‘The first reading’. Online available at: http://www.bundestag.de/htdocs_e/bundestag/function/legislation/legislat/07firstrdg.html.

[26] See Deutscher Bundestag, ‘The committee stage’. Online available at: http://www.bundestag.de/htdocs_e/bundestag/function/legislation/legislat/08comstage.html.

[27] The German title of the law is: ‘Gesetz zur Übernahme von Gewährleistungen im Rahmen eines europäischen Stabilitätsmechanismus’

[28] These are the dates when the respective German bills officially took effect.

[29] http://www.bpb.de/nachschlagen/lexika/handwoerterbuch-politisches-system/40362/regierungserklaerung?p=all

[30] Schuler Katharina, ‘Merkel will weiter anecken’, in: Zeit Online, 19.05.2010. Online available at: http://www.zeit.de/politik/deutschland/2010-05/merkel-eu-regierungserklaerung.

[31] Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p.4126.

[32] Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p.4126.

[33] Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p.4128.

[34] Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p.4128.

[35] In this report, the German description of the political parties in the Bundestag will be used. The acronyms stand for the subsequent meaning. CDU (Christian Democratic Union); CSU (Christian Social Union); SPD (Social Democratic Party of Germany); FDP (Free Democratic Party), DIE LINKE (The Left Party), BÜNDNIS 90/THE GREENS (Alliance 90/the Greens). 

[36] See Deutscher Bundestag. Haushaltsauschuss, Protokoll Nr. 17/21, 21. Sitzung, 19.Mai 2010. The expert hearing comprised people from academia, the banking sector and think tanks. The following people were present: Dr. Heiner Flassbeck (UNCTAD Director of the Division on Globalization ad development Strategies), Prof. Dr. Clemens Fuest (Said Business School, Oxford University), Prof. Dr. Ulrich Häde (Europa-University Viadrina Frankfurt (Oder)), Jochen Sanio (President Bundesanstalt für Finanzdienstleistungsaufsicht), Dr. Daniela Schwarzer (Leiterin der Forschungsgruppe EU-Integration, SWP), Prof. Dr. Axel A. Weber (Präsident der Deutschen Bundesbank).

[37] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p.3; see also Deutscher Bundestag. Haushaltsauschuss, Protokoll Nr. 17/21, 21. Sitzung, 19.Mai 2010, pp.9-10.

[38] See Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p.4133.

[39] Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p.5.

[40] See for instance Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p. 5-6.

[41] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p. 4.

[42] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p. 4.

[43] See Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p. 4146.

[44] Except the party DIE LINKEN, the amendment was agreed upon by all parliamentary groups in the Budget Committee (including BÜNDNIS 90/DIE GRÜNEB and the SPD). However, the whole bill with the connected amendments was only recommended to the Bundestag with the votes of CDU/CSU and FDP: BÜNDNIS 90/DIE GRÜNEN and SPD abstained in the recommendation to the Bundestag. For details of this voting procedures see Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p. 6.

[45] See Kranen, Dirk Heiner/Löhr, Sebastian, 2011: Beteiligungsrechte des Bundestages und des Bundesrates bei Maßnahmen der EFSF, in: Wirtschaftsdienst 11, p. 759.

[46] See Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p. 4145.

[47] See Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p. 4131.

[48] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p.5, See also Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, pp. 4416 C.

[49] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss) zu dem Gesetzentwurf der Fraktionen CDU/CSU und FDP – Drucksache 17/1685 -. Drucksache 17/1741, p. 5.

[50] See Deutscher Bundestag, Plenarprotokoll 17/42, 42. Sitzung, 19.Mai 2010, p. 4142.

[51] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, pp. 4443-4445.

[52] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, pp. 4416D-4417A.

[53] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, p. 4423B.

[54] See Deutscher Bundestag. Plenarprotokoll 17/44, 44. Sitzung, 21. Mai 2010, p. 4422C.

[55] The German title of this resolution is: ‚Parlamentsrechte im Rahmen zukünftiger europäischer Stabilisierungsmaßnahmen sichern und stärken’.

[56] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011. Online available at http://dipbt.bundestag.de/dip21/btp/17/17124.pdf#P.14551,14552 B.

[57] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 15205 B.

[58] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14552 B.

[59] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14562 C.

[60] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14554 C.

[61] A chancellor majority has been reached when a law can be adopted in the Bundestag solely with the votes of the governmental parties (in this case CDU/CSU and FDP) and without the votes of the opposition parties. 

[63] See http://wobo.de/news/schuldenunion-waere-weg-in-die-krise.

[64] See http://wobo.de/news/schuldenunion-waere-weg-in-die-krise.

[65] See https://www.tagesschau.de/wirtschaft/efsf122.html.

[66] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 15208D.

[67] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14554 D.

[68] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011. Online available at http://dipbt.bundestag.de/dip21/btp/17/17130.pdf#P.15204, 15207 D.

[69] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011, 15207 D.

[70] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011, 15227 A.

[71] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011, 15219 D.

[72] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14556 B.

[73] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011, 15206.

[74] Deutscher Bundestag. Plenarprotokoll 17/124, 124. Sitzung, 8. September 2011, 14566 C.

[75] Deutscher Bundestag. Plenarprotokoll 17/130, 130.Sitzung, 29. September 2011,15215 B.

[76] See Law of October 13, 2011, Bundesgesetzblatt Teil I, 2011 Nr. 51, 13.10.2011, p. 1992. Online available at http://www.bgbl.de/Xaver/stArticlexav?startbk=Bundesanzeiger_BGBl#__Bundesanzeiger_BGBl__%2F%2F*%5B%40attr_id%3D'bgbl111s1992.pdf'%5D__1371479981676.

[77] See Law of October 13, 2011, Bundesgesetzblatt Teil I, 2011 Nr. 51, 13.10.2011, p. 1992.

[78] See Law of October 13, 2011, Bundesgesetzblatt Teil I, 2011 Nr. 51, 13.10.2011, p. 1992.

[79] See Law of October 13, 2011, Bundesgesetzblatt Teil I, 2011 Nr. 51, 13.10.2011, p. 1992.

[80] See Law of October 13, 2011, Bundesgesetzblatt Teil I, 2011 Nr. 51, 13.10.2011, p. 1992.

[81] See Deutscher Bundestag, printed matter No. 17/9145, 27 March 2012, p. 1, http://dipbt.bundestag.de/dip21/btd/17/091/1709145.pdf

[82] See Deutscher Bundestag, printed matter No. 17/9145, 27 March 2012, p. 5, http://dipbt.bundestag.de/dip21/btd/17/091/1709145.pdf

[83] See Deutscher Bundestag, printed matter No. 17/9435, 25 April 2012, p. 5, http://dipbt.bundestag.de/dip21/btd/17/094/1709435.pdf

[84] See Deutscher Bundestag, plenary protocal 17/176, 27 April 2012, p. 20927, http://dip21.bundestag.de/dip21/btp/17/17176.pdf

[85] See Deutscher Bundestag, printed matter No. 17/9435, 25 April 2012, p. 6, http://dipbt.bundestag.de/dip21/btd/17/094/1709435.pdf

[86] See Deutscher Bundestag, plenary protocal 17/176, 27 April 2012, p. 20931, http://dip21.bundestag.de/dip21/btp/17/17176.pdf

[87] See Deutscher Bundestag, plenary protocal 17/176, 27 April 2012, p. 20933-20934, http://dip21.bundestag.de/dip21/btp/17/17176.pdf

[88] See Deutscher Bundestag, printed matter No. 17/9435, 25 April 2012, p. 5, http://dipbt.bundestag.de/dip21/btd/17/094/1709435.pdf

[89] See Deutscher Bundestag, plenary protocal 17/176, 27 April 2012, p. 20930, http://dip21.bundestag.de/dip21/btp/17/17176.pdf

[90] See Deutscher Bundestag, plenary protocal 17/176, 27 April 2012, p. 20934, http://dip21.bundestag.de/dip21/btp/17/17176.pdf

[91] According to Article 79, para. 3 it is inadmissible to change the fundeamnetal rights laied out in Article1-19 of the GG through an amendment of the GG (this is the so-called „Ewigkeitsklausel“).

[92] Judgment from 16 june 2015, Case C-62/14, ECLI:EU:C:2015:400 – Gauweiler.

[93] See Schneider, Karsten, 2013: Yes, but…One More Thing: Karlsruhe’s Ruling on the European Stability Mechanism, in: German Law Journal 14(1), p. 56. Also Von Ungern-Sternberg, ‘Parliaments: Fig Leaf or Heartbeat of Democracy?’, European Constitutional Law Review (2012) 204-322

[94] See Frankfurter Allgemeine Zeitung, ‘Bundesverfassungsgericht billigt EU-Rettungsschirm’, 07.11.2011. Online available at: http://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/beschwerde-zurueckgewiesen-bundesverfassungsgericht-billigt-eu-rettungsschirm-11133178.html

[95] See Bundesverfassungsgericht [BVerfG – Federal Constitutional Court], 2 BvR 1877/97, 2 BvR 50/98, 31. März 1998.

[96] See Süddeutsche Zeitung, ’Karlsruhe lehnt Eilantrag ab’, 10.10.2010. Online available at: http://www.sueddeutsche.de/politik/euro-rettungspaket-karlsruhe-lehnt-eilantrag-ab-1.957050.

[97] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 1 BvR 1099/10, June, 6, 2010, para. 33.

[98] The plaintiffs had claimed several violations of Article38 GG, yet the FCC only accepted the argument about the violation of the Bundestag’s budgetary authority. The plaintiffs had, e.g., claimed that Article38, para.1 GG grants the right that every instance of European integration policy has to be specifically supported by the Bundestag and teh Bundesrat; for more arguments see Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 33, 34, 43-51.

[99] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 93.

[100] In German the law is called: ‘Gesetz zur Übernahme von Gewährleistungen zum Erhalt der fpr die Finanzstabilität in der Währungsunion erforderlichen Zahlungsfähigkeit der Hellenischen Republik’.

[101] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 110.

[102] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 37.

[103] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 37, 54.

[104] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 112.

[105] For an enumeration of the rest of the EU legislative decision that were part of the constitutional complaint see Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para.116.

[106] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para.114.

[107] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 116.

[108] For more details on the point see Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 117-118.

[109] According to one plaintiff this violation cannot be justified through reference to the state of emergency in Article122.2 TFEU, as “the overindebtnedness of Greece and other states is not an event comparable to a natural disaster.” Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 41, 40.

[110] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 129.

[111] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 33.

[112] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 36.

[113] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 133.

[114] See Schneider, 2013: Yes, but…One More Thing: Karlsruhe’s Ruling on the European Stability Mechanism, p.56.

[115] The argument is understood as a protection of the right to vote (Article38 (1) GG), including the preservation of the principle of democracy (Article 20 (1) and (2) GG) and guaranteed in Article 79 (3) GG as part of the unchangeable identity of the constitution.

[116] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 121.

[117] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 127.

[118] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 125.

[119] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 125.

[120] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 127.

[121] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 128

[122] Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 127.

[123] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 141.

[124] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 141.

[125] See Bundesverfassungsgericht [BVerfG –Federal Constitutional Court], 2BvR 987/10, 2BvR 1485/10, 2BvR 1099/10, September 7, 2011, para. 141.

Greece

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 Greece 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?

When the Greek debt crisis burst in 2010, the initial main problem was that there was no existing mechanism in place to provide financial assistance to indebted countries. Therefore, the 1st Greek bailout programme consisted of bilateral loans from Euro area member states amounting to 80bn euros and a 30bn euros loan from the IMF. In the meantime, however, the EFSM was set up through Regulation 407/2010 of the 11th of May 2010 under the procedure of Article 122§2 TFEU, whereas the EFSF was created by the euro area Member States following the decisions taken on 9 May 2010 within the framework of the Ecofin Council.[1] The EFSF provided financial assistance to Greece under the second Economic Adjustment Programme, while the undisbursed assistance from the Greek Loan Facility was also shifted to the EFSF.[2]

The negotiations for the EFSF/M thus took place at the same time with the finalisation of the Greek Loan Facility. Therefore, many of the political/legal difficulties concerned this agreement[3] and the EFSF/M was not discussed in Parliament as such during its negotiation. There was no major opposition to the establishment of the EFSF and the general attitude of the Greek MPs throughout the crisis is that EU institutions should do more to address the crisis. In that context, the EFSF was never perceived as problematic from a constitutional perspective. Generally, in the public and parliamentary debates, the Government presented the establishment of a European bailout mechanism as a negotiated success, a proof of the recognition of the European character of the economic crisis and a net of security for the Greek and the Eurozone economy. On the contrary, the opposition parties often objected that this European mechanism is nothing but a mechanism for an orderly default and only serves the interests of the creditors.[4]

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 Greece and in what way does it involve Parliament?

It is difficult to say what the procedure is for the obligations of Greece vis-à-vis the EFSF to come into force and effect, as it depends on the nature of the EFSF agreement. This issue provoked many debates in Parliament; from the relevant debates it is obvious that there is uncertainty on the subject.

Article 28 of the Constitution determines the procedural and substantial conditions for the ratification of international agreements:

“1. The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.   
2. Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement.

3. Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.”[5]

The interpretive clause of this article states that “Article 28 is the basis for the participation of the Country in the procedures of European integration.” However, for the EFSF agreement, this constitutional procedure was not followed until September 2011.

Article 1 paragraph 4 of the legal statute 3845/2010, containing measures for the implementation of the mechanism for the support of the Greek economy,[6] provided a very broad authorization to the Minister of Finance to represent the Greek State and to sign any memorandum, agreement or loan, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone, the IMF and the ECB, in order to implement the First Economic Adjustment Programme. According to the last sentence of this paragraph, “[t]he memorandums, agreements and conventions are introduced to Parliament for ratification.” Some days later, however, the Government proposed an amendment to this procedure which was voted in Parliament through the emergency procedure: instead of ratification, the relevant texts would be introduced to Parliament for “discussion and briefing.” The amendment added also that these memorandums, conventions and agreements would enter immediately into force with their signature.[7] In other words, with this amendment, the entering into force of the relevant agreements did not presuppose the substantial and procedural ratification conditions set by the Constitution (articles 36 and 28). Therefore, if the EFSF is considered part of the mechanism for the rescuing of the Greek economy, no ratification procedure is needed.

However, the Minister of Finance submitted a draft law on the 4th of June 2010, concerning the ratification of the Greek Loan Facility and the participation of the country to the EFSF. The second article of the draft law habilitated the Minister of Finance to sign any memorandum, agreement and convention in relation to the EFSF.[8]

The explanatory report of this draft is not clear as to the entering into force of the EFSF agreement. It mentions that “[Greece], which has been already financed and will be financed for three years by the loan facility approved the previous month, will not participate immediately in the European mechanism [meaning the EFSF], or, more precisely, it is considered that it has already participated, since [the EFSF] is in continuity with and constitutes an expansion of the Greek support mechanism. [Greece] will of course participate in the legal person that will materialize [the European support mechanism] and will participate integrally in the future, when it will have overcome the crisis and will have fulfilled the obligations that it has assumed.”[9] Nevertheless, this draft law was only discussed in the Permanent Commission of Finance and was never introduced to the Parliament Plenary Session for voting.[10]

The situation becomes more complicated, as article 93 of the statute 3862/2010, implementing three non-related non-related European directives, habilitates the Minister of Finance “to represent the Greek State in the EFSF and to sign any memorandum, agreement or loan, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone and the ECB and to proceed to any necessary act for the participation of the Greek State in legal persons and authorities constituted for the implementation of the European Support Mechanism.”[11] The same article declares that the relevant agreements and conventions enter into force with their signature and are brought into Parliament for discussion and briefing. Concerning the loan agreements, however, the article requires their ratification by Parliament and provides that they enter into force only after the publication of the ratification statute in the Official Gazette. Finally, article 94 of the same statute attributes a retroactive effect to these provisions, from the 1st of June 2010.[12] In her speech in the parliamentary debates on the 5th of July, the representative of the majority argued that Greece had signed the EFSF agreement of the 16th June under the condition of approval by the Parliament; it was this approval that was asked with the submission of article 93 to vote.[13]

A little more than a year later, however, the EFSF Framework Agreement of the 16th of June 2010 (along with its 3 annexes), the amendment of the EFSF Framework Agreement of the 30th of June 2011 (along with its 4 annexes), and the amendment of the EFSF Framework Agreement of the 1st of September 2011 (along with its 3 annexes) were all ratified by the Greek Parliament through Law 4021/2011, also imposing a property tax and regulating bank supervision.[14] In fact, it is practice in Greece to try and discuss agreements along with the fiscal measures that accompany them in one go, in order to put pressure on MPs to vote in favour of ratification as a package deal. The agreements were introduced verbatim in both English and Greek. For their ratification, the procedure of Article 28§1 of the Constitution was used, which provides the requirement of a simple majority of MPs to vote in favour of its ratification.[15] The ratification statute was discussed in the Plenum on the 20th, 21st and 22nd and the 27th of September 2011 and entered into force with its publication in the Official Gazette on the 3rd of October.[16] In the relevant parliamentary debates, it is sometimes implied that it is not the EFSF per se that is ratified, but rather the new role assumed by the EFSF, which, after the amendment of the Framework Agreement, could provide loans to countries in financial difficulty for the recapitalization of banks, could buy bonds of over-debited countries in the primary and secondary market and could provide preventive loans to countries submitted to pressures by the markets.[17]

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Greece? 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?

Greece stepped out from the obligation to issue Guarantees under the EFSF (See article 2(7) of the Framework Agreement).[18] There was no discussion in Parliament about the issuance of guarantees for the EFSF and possible practical repercussions of this. An extended public discussion took place on the guarantees required by the creditors for the loan agreements with Greece, which is described in the relevant questions. Further, no information could be retrieved on eventual guarantees issued before the stepping-out of Greece.[19]

Activation problems      
IV.4    
What political/legal difficulties did Greece 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 legal and political difficulties during the national procedures related to the entry into force of the EFSF Framework Agreement did not concern so much the agreement per se or the issuance and increase of guarantees but rather the role of Parliament in its application (see question IV.6).

The EFSF Framework Agreement and its amendments were all ratified by the Greek Parliament through Law No 4021/2011.[20] The ratification statute was discussed in the Plenum on the 20th, 21st and 22nd and the 27th of September 2011 and entered into force with its publication in the Official Gazette on the 3rd of October.[21] However, the debate in Parliament was not focused on the EFSF. This is due to the fact that through the same Act two sets of provisions were introduced that were perceived as more important at the time; first, the rules for bank supervision and for the Fund that would assume responsibility for the recapitalization of the Greek Banking system and, second, a new tax linked to property.[22] In fact, it is practice in Greece to try and discuss agreements along with the fiscal measures that accompany them in one go, in order to put pressure on MPs to vote in favour of ratification as a package deal. Indeed, the statute obtained a broad consensus in Parliament precisely because most political parties perceived the institutionalization of the EFSF and its ratification by Parliament as a positive evolution for the Greek economy.[23]

In general, there was no major opposition to the establishment of the EFSF and the general attitude of the Greek MPs throughout the crisis is that EU institutions should do more to address the crisis. In that context, the EFSF was never perceived as problematic from a constitutional perspective. Relevant objections (e.g. transfer of sovereignty, English law as the applicable law to the agreement) had already been raised at an earlier stage when the first bailout agreement went through the Greek Parliament (see questions X.1-X.7). The only objection raised by the opposition parties to the EFSF institutional framework was that it constituted a mechanism of orderly default that only protected the interests of the creditors.[24]

As explained above, the EFSF Framework Agreement and its amendment that concerned the increase of guarantees were ratified through one Act by the Greek Parliament. However, concerning the issuance or increase of guarantees, the question is not applicable to Greece, since the country stepped out from its relevant obligations (see question IV.3). There was some resentment in the Greek Parliament concerning the initial refusal of Slovakia to contribute to the EFSF given that the Greek Parliament has consented to its accession to the Eurozone just a few months earlier (by the LA.O.S. party).[25]

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

No, the constitutional court judgment concerns measures implemented under the financial assistance instruments and not the EFSF per se (see question X.9). There is no constitutional judgment concerning the EFSM.

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?

The role of Parliament in the application of the EFSF is marginal. This provoked heated debates in Parliament, especially during the discussion of article 93 of the law 3862/2010. This article, included in a statute implementing three non-related European directives, habilitates the Minister of Finance “to represent the Greek State in the EFSF and to sign any memorandum, agreement or loan convention, bilateral or multilateral, with the European Commission, the Member-States of the Eurozone and the ECB and to proceed to any necessary act for the participation of the Greek State in legal persons and authorities constituted for the implementation of the European Support Mechanism.”[26] The same article declares that the relevant agreements and conventions enter into force with their signature and are brought into Parliament for discussion and briefing.[27]

These provisions provoked strong reactions by many deputies during the discussions of the draft law in the competent Permanent Commission of Finance of the Parliament. Most deputies, including some important members of the governing party (V. Papandreou, Geitonas, Magkoufis), objected that this article conceded too broad powers to the Minister of Finance, practically giving him/her a “carte blanche” and making any effective parliamentary scrutiny impossible.[28] The degradation of the role of Parliament through these provisions was also stressed in the Plenum discussion on the 5th of July 2010 by deputies of all the parties of the opposition.[29]

As a response to the strong reactions in the Permanent Commission, the Government proposed an amendment concerning loan agreements under the EFSF framework. For their entering into force, article 93 requires their ratification by Parliament and the publication of the ratification statute in the Official Gazette. However, during the Plenum discussion, the representative of N.D. objected that, in these cases, the ratification would only be fictitious and Parliament would be obliged to approve already taken decisions at the European level.[30] The representative of LA.O.S. argued that this provision had no sense because Greece would never be able to become a creditor for other countries.[31]

Despite these reactions, article 93 was voted by the majority of deputies and was attributed retroactive effect, from the 1st of June 2010.[32]

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

The application of the EFSF was never a major issue in the public debates in Greece, given that Greece was a recipient of the EFSF. Relevant political/legal difficulties only arose during the negotiation and implementation of the specific financial assistance instruments, for which see the relevant questions (X.1 and following).

Bilateral support    
IV.8    
In case Greece 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?

No, Greece was only a recipient of loans on a bilateral basis. It did, however, contribute to the EFSF and the ESM later on.

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

Greece is a debtor state to the EFSF, so relevant information can be found in the section concerning financial assistance (questions X.1 f.).

[1] See the chronological account of the Euro-crisis, http://ec.europa.eu/economy_finance/crisis/2010-05_en.htm

[2] See EFSF, Frequently Asked Questions, p. 18 f., available at http://www.efsf.europa.eu/attachments/EFSF%20FAQ%2004032013.pdf.

[3] See Questions X.1-X.6.

[4] See for example Minutes of the Greek Parliament, Plenary Session of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf

[5] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[6] Law 3845/2010, ΦΕΚ Α’ 65/6.5.2010.

[7] Law 3847/2010, ΦΕΚ A’ 67/11.5.2010, sole article, paragraph 9 (statute readjusting certain allowances for public pensioners). On the parliamentary debates that this provision caused, see questions X.1 and following.

[8] See the draft law, http://www.hellenicparliament.gr/UserFiles/c8827c35-4399-4fbb-8ea6-aebdc768f4f7/CDANEIO.pdf.

[9] See the report, available at http://www.hellenicparliament.gr/UserFiles/2f026f42-950c-4efc-b950-340c4fb76a24/K-TAMEIONOM-EIS1.pdf,1β.

[10] The draft law was not voted: http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=bcf0f265-06e2-4d43-a1ce-06ce96d27fb1. The only information that could be retrieved on the relevant discussions in the Permanent Commission of Finance is available at http://www.skouzekaifilonos.gr/index.php?option=com_content&view=article&id=423:h-&catid=55:2010-04-28-12-55-47&Itemid=55. According to this information the draft law was not voted, because, according to the laws 3845/2010 and 3847/2010, only an information procedure of the Parliament was institutionalized and not any ratification procedure.

[11] See law 3862/2010, ΦEK 113 A’/13.07.2010. This statute was submitted to Parliament on the 22nd of June, was voted on the 5th of July 2010.

[12] See the statute.

[13] See the debates of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf, p. 9581 f.

[14] See law 4021/2011, ΦEK A’ 218/03.10.2011.

[15] This is explicitly provided in the minutes of the relevant Parliamentary session. See Minutes of the Greek Parliament, Plenary Session of the 20th September 2011, available at

http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110920.pdf.

[16] http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=96a46802-d7ce-4477-92cf-f845b79275d6.

[17] See the speech of the representative of the majority in the debates on the 20th of September 2011, cited above, p. 17245 f.

[18] http://www.efsf.europa.eu/attachments/EFSF%20FAQ%2004032013.pdf, p. 2.

[19] The representative of the majority in the debates on the 5th of July 2010 implied that no such guarantees would be issued. See the relevant parliamentary debates, cited above, p. 9582.

[20] See Act 4021/2011 ΦEK 218A’/2011.

[21] http://www.hellenicparliament.gr/Nomothetiko-Ergo/Anazitisi-Nomothetikou-Ergou?law_id=96a46802-d7ce-4477-92cf-f845b79275d6.

[22] See the relevant parliamentary debates, on the 20th, 21st, 22nd and 27th of September: Minutes of the Greek Parliament, Plenary Session on the 20th of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110920.pdf; Minutes of the Greek Parliament, Plenary Session on the 21st of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110921.pdf; Minutes of the Greek Parliament, Plenary Session on the 22nd of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110922.pdf; Minutes of the Greek Parliament, Plenary Session on the 23rd of September, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110927.pdf.

[23] See the debates on the 20th, the 21st and the 22nd of September, cited above.

[24] See the Minutes of the Greek Parliament cited above.

[25] See the speech of the LA.O.S. deputy Kostas Aivaliotis in the debates on the 20th of September, cited above.

[26] See law 3862/2010, ΦEK 113 A’/13.07.2010. This statute was submitted to Parliament on the 22nd of June, was voted on the 5th of July 2010.

[27] This provision, practically identical with the one concerning the Greek Loan Facility (amended article 1 paragraph 4, law 3845/2010) is actually a repetition of the article 2 of a draft law, submitted on the 4th of June 2010 and concerning the ratification of the Greek Loan Facility and the participation of the country to the EFSF. However, this draft was never discussed and voted in Parliament. See question IV.2. See also the comment by the N.D. deputy Christo Staikoura, http://www.cstaikouras.gr/2010/06/dilosi-gia-ti-sizitisi-ke-enimerosi-epi-mnimonion-simfonion-ke-simvaseon/

[28] See «Νέες αντιδράσεις για το «εν λευκώ» [New reactions for the “carte blanche”]», Ελευθεροτυπία, Friday 25 June 2010, http://www.enet.gr/?i=news.el.article&id=176809.

[29] See the Minutes of the Greek Parliament, Plenary Session of the 5th of July 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20100705.pdf, p. 9581 f.

[30] See the speech of Nikolopoulos in the debates of the 5th of July, cited above.

[31] See the speech of Aivaliotis in the debates of the 5th of July, cited above.

[32] See article 94 of the statute.

Hungary

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 Hungary 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?

There was no visible debate on the issue.

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 Hungary and in what way does it involve Parliament?

Not relevant for Hungary, as it is not a party to the EFSF.

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Hungary? 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 Hungary.

Activation problems      
IV.4    
What political/legal difficulties did Hungary 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 Hungary.

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

No.

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?

Not relevant for Hungary.

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

Not relevant for Hungary.

Bilateral support    
IV.8    
In case Hungary 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?

Hungary did not provide such bilateral funding.

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

Not relevant for Hungary.

Ireland

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 Ireland 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?

The EFSF and EFSM agreements were not discussed in Parliament before their announcement in May of 2010. No details are available regarding the Government’s negotiating strategy in relation to the Regulation or the Framework Agreement.

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 Ireland and in what way does it involve Parliament?

While the power to commit the State to international agreements is vested in the Government pursuant to Article 29.4 of the Irish constitution, Article 29.5.1° provides that ‘[t]he State shall not be bound by any international agreement involving a charge upon the public funds unless the terms of the agreement shall have been approved by Dáil Éireann [the lower house].’[1] Additionally, Article 29.6 establishes Ireland as a dualist legal system providing that ‘[n]o international agreement shall be part of the domestic law of the State save as may be determined by the Oireachtas [Parliament]’ The EFSF Framework Agreement, being an international agreement involving a charge on public finances was accordingly implemented in Ireland by the passage of an ordinary piece of legislation, the European Financial Stability Facility Act 2010 (the EFSF Act 2010). The EFSF Act 2010 gives powers to the Minister for Finance to issue guarantees for the purposes of the EFSF (s 2) and provides that funds dispensed and received by Ireland pursuant to any operations under the EFSF be paid from and to the Central Fund (ss 3-4). The Minister is obliged to report Ireland’s on-going involvement in EFSF operations to the Dáil (lower house) on a regular basis (s 5). The EFSF Framework Agreement itself was attached as a schedule to the 2010 Act.

It was presented by the Government on 18 June 2010. The Bill was debated in the Dáil (lower house) and passed on the 24 June 2010. It was debated in the Seanad (upper house) and passed on the 1 July 2010. A motion for early signature in the Seanad was also passed on 1 July 2010. It received the signature of the President and passed into law on the 7 July 2010.

The 2010 Act was amended in 2011 by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 to provide for changes to the EFSF Framework Agreement and the terms of the original Greek loan facility. The 2011 Act incorporated those changes to the EFSF Agreement agreed in June 2011 and increased the amount that could be drawn down from the Central Fund from €7 billion to €12.5 billion.

Guarantees
IV.3    
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Ireland? 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?

Under s. 2 of the EFSF Act 2010 the Minister for Finance is empowered to issue guarantees of up to €7 billion on behalf of the state.

In the Dáil a question was raised surrounding the provision for fact that a guarantee would have to be given for 120% of the amount stipulated and whether this in fact increased Ireland’s overall liability.[2] In his response the Minister for State for Finance explained that the 120% figure was only with respect to guarantees issued with respect to individual assistance programmes and that Ireland’s total potential liability of €7 billion was not affected by that provision.[3] Sinn Féin opposed the measure with a spokesman arguing in the Dáil that ‘one cannot treat a debt-fuelled over-consumption problem by adding much more debt.’[4]

In the Seanad a single independent Senator queried the potential liability that Ireland was exposing itself to stating that ‘I worry when the Minister of State says, apropos of nothing, that the Government will guarantee another large sum of €7 billion in this case on top of what we guaranteed to Greece.’[5]

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

No significant difficulties were encountered during the procedures relating to either the entry into force of the EFSF Framework Agreement or the issuance of guarantees.

Opposition parties were largely supportive of the EFSF during the debate on the EFSF Act 2010 and concurred with the Government’s position that it was in Ireland’s interest to secure the stability of the Eurozone via the establishment of such a facility and the Bill passed with a majority.

The debate took place in the backdrop of the first Greek Bailout and measures to introduce a greater coordination of budgets in the Eurozone. The opposition Labour party tabled one amendment to subject the information held by Irish authorities in relation to the EFSF to the Freedom of Information Act. This was rejected by the Government (and hence a majority of the Dáil) who pointed to the need to protect confidential business and political information. The opposition Fine Gael party tabled an amendment to create more detailed reporting obligations for the Government under the Act. This was rejected by the Government (hence majority of the Dáil) who claimed that sufficient reporting obligations already existed in s. 5 of the 2010 Act.[6] Sinn Féin was the only party to oppose the 2010 Act arguing that a broader European stimulus strategy was required.[7]

Guarantees were issued by the Minister for Finance under s. 2 of the 2010 Act. The Amendment Act 2011 likewise enjoyed cross party support. The Bill was presented as a follow up to the renegotiation of Ireland’s financial assistance package in June of 2011 in which EFSF loans were extended and their interest rate reduced. The amendment was thus seen as in both Ireland’s immediate interest and in the interest of achieving/maintaining broader stability in the Eurozone. At this stage Fine Gael and the Labour Party had formed a governing coalition. Fianna Fáil, in opposition supported the amendment. Some independent and Socialist Party deputies opposed the Bill on the grounds of an opposition to the general response to the Eurozone crisis.

In the Seanad the debate ‘did not necessarily…examine the Bill’s specifics, which are in the main not controversial but [examined] the wider issues around the euro and the stability of the single currency.’[8] Some concerns were raised regarding the dominance of Germany and France in developing on-going solutions to the Eurozone crisis and the rushed Parliamentary procedures being used to pass them in Ireland. A motion was also passed allowing for an early signature of the legislation by the President.

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

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?

There is no formal role for Parliament in the application of the EFSF.

S 5 of the 2010 Act provides that the Minister shall lay a report before the Dáil every 6 months of the EFSF’s operation detailing the value of the guarantees issued, money paid and money received by the State. These figures are to be provided for the preceding 6 months and the total period.

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

There have been no known significant difficulties encountered in the application of the EFSF.

Bilateral support    
IV.8    
In case Ireland 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?

Ireland participated in one instance of bilateral funding to another EU Member State during the crisis, namely the first Greek programme of assistence in 2010.[9] Ireland’s contribution of €1.3 billion (1.64% of the total of the Euro area contribution of €80 billion) was authorised by the Euro Area Loan Facility Act 2010. It was debated on the 18th and 19th of May in the Dáil (lower house) and on the 20th of May in the Seanad (upper house). In the Dáil Ministers and opposition spokespeople spoke of the need to show solidarity with Greece on the basis of the principle of solidarity itself and also because it was in Ireland’s interest.[10] This was particularly the case given Ireland’s then vulnerable financial position.[11] Some concerns were raised about proposed plans to deepen economic coordination, in particular the role of the Commission in budgetary policy. While generally in favour of such a development opposition speakers stressed the need for Parliament to be properly involved, particularly in light of the then (and arguably continuing) lack of parliamentary involvement in the budgetary process.[12] Similar concerns were raised in the Seanad.[13]

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

No other relevant information.

[1]               See generally G W Hogan and G F Whyte, JM Kelly: The Irish Constitution (LexisNexis Butterworths 2003) 545 ff.

[2]               See comments of Kieran O’Donnell, Dáil Debates, 24 June 2010, Vol 713 No 3.

[3]               See comments of Minister for State Martin Mansergh, ibid.

[4]               Arthur Morgan, ibid, 536.

[5]               Senator Shane Ross, Seanad Debates, 1 July 2010, Vol 203 No 13, 907.

[6]               Dáil Debates, 24 June 2010, Vol 713 No 3.

[7]               Arthur Morgan, ibid.

[8]               Aideen Hayden, Seanad Debates, 22 September 2011, Vol 210 No 5, 281.

[9]               Although it should be noted that this was part of a broader package of loans that were centrally managed by the European Commission. They were in effect quasi-multi-lateral.

[10]             See comments of Minister for Finance, Brian Lenihan, Dáil Debates, 18 May 2010, Vol 709 No 2, 254 and comments of Richard Bruton (Fine Gael spokesman for finance), ibid, 258 and Joan Burton (Labour spokeperson for finance), ibid, 264.

[11]             It is not in our interest to let the hunter gatherers in the bond markets kill Greece and eat it because, having done so, they will undoubtedly turn their attention to the next weakest animal in the pack’ ibid, 265.

[12]             Indeed Richard Bruton described Ireland’s budgetary system as ‘not fit for the running of a corner shop…We do not have any system for independent assessment of whether the fiscal stance being taken by Government is appropriate. As a result we have seen numerous reckless budgets introduced which poured fuel onto flames, in terms of economic strategy’ ibid, 260. For his general concerns regarding what was then being termed the ‘pre-vetting’ process see ibid, 261-262. See also comments of Joan Burton, ibid, 264.

[13]             See comments of Alex White, Seanad Debates, 20 May 2010, Vol 202 No 14, 895.

Italy

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 Italy 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?

The EFSF and EFSM were not discussed in the Parliament before their announcement in May of 2010.

Given also their peculiar genealogy, there are no details available regarding the Italian Government’s negotiation in relation to the Regulation or the Framework Agreement. For a long time, there has been no evidence of particular political/legal difficulties encountered in the negotiation. In the context of the new European elections campaign of 2014, however, the former Minister of Economy and Finance Giulio Tremonti has repeatedly spoken of a first opposition, by the Italian government, to the position of France and Germany for “banks-centered” interventions[1] already in 2010, and therefore referring already to the EFSF and EFSM terms, and not only to the ESM.

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 Italy and in what way does it involve Parliament?

 The Framework Agreement was implemented in the Italian legal order with Article 17 of Decree-Law (“decreto-legge”) n. 78/2010 (containing «Urgent measures on financial stability and economic competitiveness»), and therefore, at least initially, through a governmental decree which directly entered into force on 31 May 2010.

The first paragraph of Article 17 was the explicit authorization to the Minister of Economy and Finance to ensure the participation of the Italian Republic in the capital of the company formed with the other Member states of the Euro area, in accordance with the conclusions Council of the European Union of 9 and 10 May 2010.

Decree-laws are legislative acts of a temporary nature having the force of law, adopted in «extraordinary cases of  need and urgency» by the Government, pursuant to art. 77 of the Constitution of the Italian Republic. They need then to be converted into law by the Parliament within 60 days from the publication: Decree 78/2010 was in fact converted (with amendments) by Law n. 122, 30 July 2010.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Italy? 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 second paragraph of the aforementioned Article 17, Decree 78/2010, converted  by Law n. 122, 30 July 2010, was an authorization to the Minister of Economy and Finance to grant State guarantees on the liabilities of the company formed with the other Member states of the Euro area, «in order to form the financial funding to make loans (or other forms of financial assistance) to the Member States of the euro in accordance with the conclusions Council of the European Union of 9 and 10 May 2010 and other consequent decisions that will be passed by unanimous vote of the Member States of the euro area».

Through a renvoi to Article 2, paragraph 2 of the decree-law of 10 May 2010, no. 67, it was also provided that the necessary resources were to be obtained «by means of the emission of government bonds in the medium-long term»,  as extraordinary measures not to be calculated in the limits or levels provided by the Italian law.

The conversion into law was discussed in the Parliament between 1 June and 15 July, at the Senato della Repubblica,[2] and between 20 and 29 July, at the Camera dei deputati.[3] Given the wide and various array of topics included in the original Decree n. 78, the implications of the EFSF guarantees were not specifically debated.

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

 There have been no known significant difficulties encountered.

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

No. This may be considered not surprising in Italy, in general, for this kind of measures, given the restricted possible modalities of access to the Italian Constitutional Court. These are limited (briefly said) to appeals lodged by individuals before an ordinary judge – and therefore pertaining to legislative norms relevant and directly applicable in ordinary trials – then sent to the Constitutional Court after the suspension of the trial; and ex post direct appeals lodged by Regions and other powers of the State in case of invasion of constitutional attributions and «spheres of competences». Therefore, in Italy there is not the possibility of an ex ante review prior to the ratification of international agreements.

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?

 As noted, Art. 17 of the governmental Decree 78/2010, converted by the Parliament with Law July 30, 2010, n. 122, amounts to an ex-ante parliamentary delegation to the Minister of Economy and Finance to grant disbursements «in accordance with the conclusions Council of the European Union of 9 and 10 May 2010 and other consequent decisions that will be passed by unanimous vote of the Member States of the euro area».

The second part of its paragraph 2 provides then for the inclusion of these disbursements in a special attachment to the “Stato di previsione” complied by the same Minister and submitted to the Parliament, according to Law n. 196/2009 on Public accounting and Finance (see Questions VII:8 and II.4), for a subsequent control by the Chambers.

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

There have been no known significant difficulties encountered in the application of the EFSF.

Bilateral support   
IV.8    
In case Italy 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?

Italy participated in the bilateral support part of the first aid package for Greece in 2010.

Italy’s contribution quota was determined on the basis of the percentage of the stake in the total capital of the European Central Bank, and therefore amounted to 18.42 per cent of the total Euro area contribution of €80 billion.

The participation was debated both in the upper house (Senato della Repubblica, between 11 and 25 May 2010, http://leg16.senato.it/leg/16/BGT/Schede_v3/Ddliter/35379.htm) and in the lower house (Camera dei Deputati, between 3 and 15 June 2010, http://leg16.camera.it/126?pdl=3505) for the «conversion into Law» of the Decree n. 67/2010 «Urgent measures to safeguard the financial stability of the Euro», and the «order of execution» of the international agreement named as “Intercreditor Agreement” and of the agreement designated as “Loan Facility Agreement” («both signed on May 8th 2010»).

The Decree n. 67 made direct reference to the three-year program of financial support by means of bilateral loans to Greece defined in the Declaration of the Heads of State and Government and in the resulting decisions of the “Eurogroup”. It provided for the granting of loans in favor of Greece by decree of the Minister of Economy and Finances, in accordance with the conditions laid down with the decisions taken at the European level, and then for the communication of these decrees to the Parliament and to the Court of Auditors.

From a constitutional point of view, it was underlined by some scholars how the ratification was accomplished by unusual means.[4] In fact, a particular problem arose in relation to the legal nature of the original European agreements, and to the legal instrument to correctly implement them in the Italian legal order. The agreements at the European level, in fact, have been concluded after the approval by the Italian Council of Ministers of the Decree n. 67, and this latter, therefore, simply referred to the original Declaration of the Heads of State and Government and any consequent act. At the time of “conversion into Law” of the Decree, therefore, it was considered appropriate to make specific reference to legally binding agreements entered into force in the meantime: thus, these were annexed to the text of the Law of conversion, which now also contains the relative order of execution. Doubts were raised,[5] however, whether the agreements reached among the European partners were pure international agreements, which, pursuant to Art. 80 of the Italian Constitution, shall be subject to ratification, or, on the contrary, they were sui generis Community acts, therefore not subject to specific approval process (but with no specific legal grounds in the Treaties or in secondary European legislation). In the first case, in fact, one would see in such an approval an atypical order of execution, with no specific authorization for the ratification, and with the further anomaly of an execution order contained in a Law of conversion of a Decree, against the provisions of Art. 15 of the Law n. 400/1988 on the possible contents of Decree-laws in the Italian legal order.

As for the merits, in both the Chambers of Parliament, as usual for bills related to European affairs, there was a broad convergence of views between the centre-right party of the Popolo della Libertà (at that time, in charge of supporting the executive) and the centre-left party of the Partito Democratico.

Upper House

In terms of «relevant Parliamentary debates», it is firstly important to highlight that at the Senate (Senato), the MP rapporteur at the plenary discussion (Tancredi, center-right PdL) stressed the point of the need of a European intervention for the Greek situation, and described the conditions posed for the loan assistance, and the amount of the quota referred to Italy. He then clearly stated that the conversion into Law of the Decree n. 67/2010 «authorizes the government to carry out the operations of financial support for Greece agreed at international level», explaining how the “Intercreditor Agreement” and the “Loan Facility Agreement” were to be considered as a first stage of the European set of interventions for the financial crisis, leading to a strengthening of the preventive surveillance of public finances and of European «governance».[6] Interestingly, he also explicitly placed the new measures in the context of a «challenging» reform of the modern «welfare system», for a better and more rigorous use of the collective resources.[7]

A first representative of the centre-left PD, at the time in the opposition (Nicola Rossi), already during the examination in the V Committee on 20 May 2010,[8] noted that the Decree in object and the future economic measures announced by the Government are the basic steps for the future «material constitution of the European Union». Therefore he stated that it would be a serious mistake to limit the examination of the international economic crisis to the mere issue related to the Greek economic crisis and therefore called for a broader view in relation to the Italian economic situation, in broad relation to the European one. He stressed the point of the somehow comparable situation that Italy, Spain and Portugal would enjoy with the worsening of the crisis, and he called for a broad and powerful European intervention in this respect. He envisioned two possible models of reference. The first represents the evolution towards a political union that would require, as mentioned by the European Commission, a stage of preliminary analysis on the financial statements of each State by all the other Member States. A multilateral surveillance no longer a posteriori but also ex ante and that does not concern only the profiles of the deficit and debt but also the data structure of the economy of each country. He described this solution as much more flexible than the other viable alternative, modelled after the U.S. system: in that context, the individual states «would not be able to be in deficit if not for investments and would not be able to exceed stringent limits on the deficit».[9]

In addition, in the same venue, a second intervention by a PD representative (Morando) stressed the point of the need for structural reforms in Italy, and said that the situation in Greece was also determined by the poor efficiency of public financial control, the lack of transparency and credibility of financial institutions. He pleaded – with clear reference to the internal situation – for the establishment of an independent authority on public finances, as an institutional factor that (especially in the context of the Parliament) would greatly affect the credibility of a country in respect of the financial markets.[10]

A general support was based on the need to show solidarity with Greece but also because it was in Italy’s interest as vulnerable economy with similar problems of high public debt.[11]

Lower House

In the lower house (Camera dei Deputati), some weeks later (14 June 2010), the debate started with the discussion of the rapporteur (MP Marinello, PdL) on some of the aforementioned critical legal technical points, such as 1) the atypical nature of the Decree in question, «which, in essence, cannot be amended, as it includes and incorporates a commitment between states»[12] , and 2) the question raised by the specialized Committee on the Quality of Legislation that this kind of agreements reached between the European partners are (quite obviously) «sui generis Community acts, not submitted to a specific approval process»,[13] and often approved in other European states by «ordinary rules, without using the instrument of ratification of international agreements».

But the points raised no particular practical obstacles, and the political discussion followed more or less the same ideas already expressed at the Senate (Senato), with the PD representative (Gozi) even talking of «false economic sovereignty»[14] of the States with the intention to criticize their resistance to common European strong measures, given the common need of economic growth.

Only the representatives of relatively small groups, such as the center-left Italia dei Valori party (MP Cambursano) raised some general critical remarks on the economic sustainability, for both Greece and Italy, of the European plans, but without touching upon particular technical aspects.[15]

It is interesting to note that, at this stage, also the Lega Nord group (a federalist and regionalist political party rooted in the Northern part of Italy) voted in favor of the European measures, with the idea that that would strengthen their “fiscal federalism“ projects; and that also representatives of the main center-left PD party (MP Vannucci) highlighted the point of the need of a reform of the corrupt and inefficient Italian welfare/socio-economic rights system, also following a European common «harmonisation».

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

Not other relevant information.

[1]               See for instance, most recently, the interview by V. Zincone to G. Tremonti, “Quel che oggi temo di più è un asse Mosca-Berlino”, in Corriere della Sera – Sette, 1 maggio 2014 – numero 18, pp- 36-38.

[2]               http://www.senato.it/leg/16/BGT/Schede/Ddliter/35500.htm

[3]               http://www.senato.it/leg/16/BGT/Schede/Ddliter/35679.htm

[4]               See G. Napolitano, L’assistenza finanziaria europea e lo Stato ‘‘co-assicuratore’’, in Giornale di diritto amministrativo n. 10/2010.

[5]               Ivi.

[6]               «(…) an opportunity to relaunch the process of European cohesion, giving rise to the awareness of shared responsibility and the need to improve the tools to protect the European financial stability and to strengthen the coordination of budgetary policies»: http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=Resaula&leg=16&id=481753.

[7]               Ibidem.

[8]               http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=SommComm&leg=16&id=481105.

[9]               Ibidem.

[10]              http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=SommComm&leg=16&id=481105.

[11]              For instance, see MP Giarretta (PD) intervention in the plenary session of the 25th May 2010, http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=Resaula&leg=16&id=481753.

[12]              http://leg16.camera.it/410?idSeduta=0336&tipo=stenografico#sed0336.stenografico.tit00040 , p. 3.

[13]              Ivi.

[14]              Ibidem, p. 9.

[15]              Ibidem, pp. 22-25.

Latvia

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 Latvia 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?

Neither of the instruments was seriously discussed in Latvia. Since Latvia was not yet in the Eurozone, it was not a member of the EFSF. Therefore, Latvia did not prepare an official position on the EFSF and it was not discussed in the Parliament (Saeima).

In general, from a report from an informal ECOFIN meeting, which took place 16-17 September 2011, it follows that Latvia supported the position that the Eurozone countries should do everything in order to ratify the EFSF as soon as possible. As well, generally, Latvia supported the view that at the national level the fiscal policy questions should be dealt with either in the Constitution (Satversme) or in the appropriate laws and the consolidation should continue. According to the report, special attention should be paid to the promotion of growth and implementation of structural reforms.[1]

From the EFSF Newsletter it follows that after joining the Eurozone in 2014 “Latvia will not join as a guarantor of EFSF and therefore there will be no impact on EFSF issuance and the bonds that are available for tap”.[2]

There is no publicly available information regarding any discussions concerning the EFSM.

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 Latvia and in what way does it involve Parliament?

Not applicable, since Latvia is not a member of the EFSF.  

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Latvia? 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 applicable, since Latvia is not a member of the EFSF.  

Activation problems        
IV.4     
What political/legal difficulties
did Latvia 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 applicable, since Latvia is not a member of the EFSF

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

No, there has not been such a case before the Constitutional Court.          

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?

Not applicable, since Latvia is not a member of the EFSF.  

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

Not applicable, since Latvia is not a member of the EFSF.  

Bilateral support    
IV.8     
In case Latvia 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?

Latvia did not provide funding on a bilateral basis to other Member States.

However, part of the funding provided to Latvia came from other Member States. Scandinavian countries (Sweden, Denmark, Finland, Norway and Estonia) together promised to provide 1.9 billion euro and the Czech Republic and Poland together with the European Bank for Reconstruction and Development – 0.4 billion euro[3] (for the details concernining financial assistance for Latvia please see Question VIII.4).

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

There have been some concerns that after joining the Eurozone Latvia will be forced to pay or compensate e.g. Greek debts due to its loans received under the EFSF.[4] These concerns have been one of the most popular arguments invoked against joining the Eurozone.[5] They have been answered by official economists of the Bank of Latvia by stating that Latvia did not participate in Eurozone decisions on Greek loans and loans for other countries; therefore there is no legal ground for involving Latvia in guaranteeing these loans because this financial aid was approved without Latvian participation.[6]

The same opinion has been expressed in the Journal on the Latvian Interests in the EU, issued by the Ministry of Foreign Affairs, where another senior economist from the Bank of Latvia (V. Mičūne) argued that Latvia will join the euro after the EFSF will have already finished its active work and when this fund will be simply taking care of Greek, Portuguese and Irish loans until their full repayment.[7] According to her, since at the time of the conclusion of these particular loans Latvia was outside the Eurozone, did not participate in the decision-making processes, and by the time Latvia joins the Eurozone the EFSF will already have fulfilled its primary objective, Latvia cannot and will not be involved in guaranteeing this financial aid.[8] It was recently confirmed that Latvia will not become a member of the EFSF.[9]

[1] Informatīvais ziņojums, “Par neformālās Eiropas Savienības Ekonomisko un finanšu jautājumu padomes (ECOFIN) sanāksmē izskatāmajiem jautājumiem 2011.gada 16. – 17.septembrī”. Available under:

https://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=16&cad=rja&ved=0CFsQFjAFOAo&url=http%3A%2F%2Fwww.mk.gov.lv%2Fdoc%2F2005%2FFMzino_090911.2247.doc&ei=5DKbUeSbNYXVOZ-agPAG&usg=AFQjCNGeJtYP1RPb0DrpjeA7wvoy_WdxcA&sig2=1o567sITDVz7RLa-zTpwMw&bvm=bv.46751780,d.ZWU p. 4-5 (last visited 23 June 2013).

[2] EFSF Newsletter. Available under : http://www.efsf.europa.eu/attachments/ESM_EFSF_NEWSLETTER_11_December%202013.pdf p. 2 (last visited 15 January 2014)

[3] Starptautiskā aizdevuma programma. Available under:

http://www.fm.gov.lv/lv/sadalas/starptautiska_finansu_sadarbiba/starptautiska_aizdevuma_programma/ (last visited 23 June 2013).

[4] See e.g. Latvija aizņemsies miljonus, lai uzdāvinātu Grieķijai, available under: http://parlatu.lv/latvija-aiznemsies-miljonus-lai-uzdavinatu-griekijai/ (last visited 10 November 2013); Db viedoklis: Neesam tik bagāti, lai maksātu savus un vēl arī grieķu parādus, Dienas Bizness, 24 September 2012. Available under:  http://www.db.lv/viedokli/db-viedoklis/db-viedoklis-neesam-tik-bagati-lai-maksatu-savus-un-vel-ari-grieku-paradus-379137 (last visited 23 June 2013).

[5] See e.g. DB viedoklis: Neesam tik bagāti, lai maksātu savus un vēl arī grieķu parādus, Dienas Bizness, 24 Sep 2012. Available under: http://www.db.lv/viedokli/db-viedoklis/db-viedoklis-neesam-tik-bagati-lai-maksatu-savus-un-vel-ari-grieku-paradus-379137 (last visited 10 November 2013).

[6] A. Bambale, Latvijas Banka: Kurš maksās par Grieķijas parādiem?

1 February 2013. Available under: http://www.delfi.lv/news/comment/comment/aleksandra-bambale-latvijas-banka-kurs-maksas-par-griekijas-paradiem.d?id=43020050 (last visited 23 June 2013).

[7] V. Mičūne, ‘Eiropas Stabilizācijas mehānisma darbības principi’ in Latvijas Intereses Eiropas Savienībā 1/2013. Avaialable under: http://www.mfa.gov.lv/data/file/es_nr1_2013_netam.pdf p. 35 (last visited 23 June 2013).

[8] Ibid.

[9] EFSF Newsletter. Available under: http://www.efsf.europa.eu/attachments/ESM_EFSF_NEWSLETTER_11_December%202013.pdf p. 2 (last visited 15 January 2014)

Lithuania

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:2010:118:0001:0004: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 Lithuania 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?

There is no publicly available information on the discussions at the Government or Seimas with respect to either the EFSF or the EFSM.

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 Lithuania and in what way does it involve Parliament?

Not applicable, as Lithuania is in the Eurozone only since 1 January 2015.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Lithuania? 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 applicable, as Lithuania is in the Eurozone only since 1 January 2015.

Activation problems       
IV.4     
What political/legal difficulties did Lithuania 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 applicable, as Lithuania is in the Eurozone only since 1 January 2015.

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

Not applicable, as Lithuania is in the Eurozone only since 1 January 2015.

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?

Not applicable, as Lithuania is in the Eurozone only since 1 January 2015.

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

Not applicable, as Lithuania is in the Eurozone only since 1 January 2015.

Bilateral support   
IV.8    
In case Lithuania 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?

Not applicable.

 

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

Not applicable.

Luxembourg

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 Luxembourg 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?

No difficulties known.

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 Luxembourg and in what way does it involve Parliament?

The participation of Luxembourg is based on ‘Loi du 9 juillet 2010 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro’[1] , passed by the Luxembourg parliament (Chambre des Députés) on 1 July 2010. 58 members of parliament voted in favour of the law, one abstained (André Hoffmann from déi Lénk (Democratic Socialists))[2] . The Luxembourg EFSF-law is an ordinary law and consists of two articles of which the first authorises the Luxembourg government to issue a guarantee of up to Euro 1.15 billion to the EFSF and the second lays down that the EFSF is exempted from any fees, charges, direct and indirect taxes and any duties of registration. This law had to be approved by parliament because Article 99 of the Luxembourg Constitution requires that all loans need parliamentary confirmation. Issuing a financial guarantee also falls into this category.

The increase of the EFSF guarantee sum also had to be confirmed by the Luxembourg parliament. The Chambre des Députés passed ‘Loi du 22 septembre 2011 modifiant la loi du 9 juillet 2010 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro’[3] on 15 September 2011 which increased the participation of Luxembourg for the EFSF from Euro 1.15 billion up to Euro 2 billion. The law was confirmed by 54 MPs (déi gréng (the Greens), CSV (Christian Democrats), LSAP (Social Democrats), DP (Conservative Liberals)).[4] The five members of parliament who did not vote in favour of the law were members of the National Conservatives (ADR) and the representative of the Democratic Socialists (Déi Lénk)[5] who had already abstained in the voting for the first Luxembourg EFSF-law.

The EFSF is an institution based on Luxembourg law. The Luxembourg State represented by the Minister of Finance Luc Frieden (CSV-party; Christian Democrats) requested the public notary on 7 June 2010 to establish the EFSF which is created as a Special Purpose Vehicle (SPV)/entité ad hoc. In its first article, the EFSF statute lays down that it is a Luxembourg public limited liability company (‘société anonyme’)[6] governed by its statutes and the Commercial Companies Act (‘Loi du 10 août 1915 sur les sociétés commerciales modifiée’[7] ). The immunity of the EFSF was modified in one of the Luxembourg ESM-laws (see question VIII.3).

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Luxembourg? 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 law authorises the government to issue guarantees. More explicit requirements about the way of issuing guarantees are not contained in the law. The guarantee is issued by the Luxembourg state via the Luxembourg treasury.[8]

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

In the framework of the Luxembourg legislative procedure, the Luxembourg State Council (Conseil d’Etat) published an opinion on the legislative proposal authorising the government to issue guarantees to the EFSF (more information about the role of the Conseil d’Etat and its comepetences under the Luxembourg Constitution can be found in question II.2). This procedural requirement is laid down in Article 83bis of the Luxembourg constitution. In its opinion concerning the first EFSF-law from 8 June 2010 the Conseil d’Etat criticized that the norms of the law did not make it clear which kind of guarantee (legal nature) is granted to the EFSF and that there is no rule about possible objections against the guarantee.[9] In its second vote, after the parliament (Chambre des Députés) had put some terminological changes to the formulation of the law, the Conseil d’Etat declared its approval.[10]

One of the main discussions on this law was an amendment proposed by the government in the framework of the legislative packages on the ESM. The amendment contained the granting of a far-reaching immunity to the EFSF. In the view of the Conseil d’Etat, granting a wide degree of immunity to the EFSF is contrary to the international obligations of Luxembourg (in particular Article 6 ECHR (right to a fair trial and to access to court) and to the principle of equality laid down in Article 10bis (1) Luxembourg Constitution).[11] The high degree of immunity is particularly difficult in the case of the EFSF because it is a Luxembourg corporation under private law and no international organisation. The fact that the EFSF is completely outside the jurisdiction of any Luxembourg Court is seen as being not in conformity with the principle of equality laid down in Article 10bis Luxembourg Constitution. The Conseil d’Etat was of the opinion that the immunity is way too far-reaching and cannot be a justified reason for inequality under the respect of objectivity, rational justification, adequacy and proportionality.[12] This is why the Conseil d’Etat pleaded for a less far-reaching degree of immunity and proposed a new text for this article, which is in accordance with the principle of equality.

The Luxembourg parliament has modified this proposal after the severe critique from the Conseil d’Etat.

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

The Luxembourg Constitutional Court (Cour Constitutionelle) was established in 1996 by two laws.[13] The Court has the competence to control a posteriori the constitutionality of ordinary legislation, except those laws, which contain the approval to international agreements (Art. 95ter (2) Luxembourg Constitution). This is the consequence of the Luxembourg principle of precedence of international law over national law (see also question V.2).[14]

The Conseil d’Etat is an advisory body for legal questions in the Luxembourg political system, which has to be consulted about new legislative proposals (Article 83bis Luxembourg Constitution). The Conseil d’Etat analyses the proposal in relation to its accordance with the Luxembourg Constitution and the international obligations of Luxembourg. The Conseil d’Etat consists of 21 members of which at least 12 must have a legal education. Its opinions cannot be considered as constitutional court judgments. After the European Court of Human Rights had decided that the Luxembourg Conseil d’Etat did not fulfil the requirements of a tribunal in the sense of Article 6 ECHR[15] , Luxembourg amended the structure of the Conseil d’Etat in 1996.[16] Since then, the Conseil d’Etat does not have any jurisdictional competences. However, it is not a second parliamentary chamber. Its members are not determined in general elections, but mostly by the Grand Duke of Luxembourg. It is considered to be a non-parliamentary committee with competences under constitutional law whose task is to control the constitutionality of legislative proposals.[17] Its opinions enjoy a lot of attention[18] , but the Luxembourg parliament is not legally bound to the opinions. If the Conseil d’Etat objects to a legislative proposal, it publishes an opposition formelle (formal opposition). However, parliament can proceed with the legislative procedure. In this case, the Conseil d’Etat can use its suspensory veto (veto de temporisation). This veto stops the legislative procedure for three months.[19] If parliament still wants to pass the law, it has to mention publicly the formal opposition of the Conseil d’Etat. Altogether, the Conseil d’Etat has restricted competences in the Luxembourg legislative procedure but does neither fulfil the role of a court nor of a parliamentary chamber.

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?

Parliament is only informed by the government about decisions taken at the level of the EFSF. Alex Bodry, member of the LSAP (Social Democrats), which was one of the government parties at this time, mentioned that the Government should inform parliament about aid packages and discuss them in plenary sessions. However, this should not be a legal, but a political obligation.[20] The rapporteur for the first Luxembourg EFSF-law Lucien Thiel from the then governmental party CSV (Christian Democrats) also emphasized that the Chambre des Députés has to be informed about the activities at the EFSF and that parliament has to be consulted before every decision of the EFSF about granting financial assistance to a Member State. Within the reasons for the first EFSF-law the government committed itself to inform parliament regularly and previously about the development of the engagement of the EFSF and Luxembourg’s participation in this context.[21] However, this commitment was not part of the law and there is no compulsory procedure of parliamentary approval for every EFSF-decision. The government simply promised to inform parliament. However, the same political agreement can also be found in the report of the parliamentary Commission for Finances and Public Budget for the second EFSF-law, signed by the Rapporteur Michel Wolter from the CSV (Christian Democrats).[22] This makes it clear that there is a political agreement on informing parliament about the EFSF-measures, but no legally guaranteed obligation of the government.

Even though there is no legal obligation for the government to inform parliament, the Minister for Finance informs the committee for financial and budgetary affairs (Commission des Finances et du Budget) regularly about decisions of the EFSM and the EFSF. This happened – for example – in the framework of the rescue package for Ireland in the session on 30 November 2010.[23]

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

In a parliamentary discussion on 7 June 2011 about the debt crisis in Europe, the group déi gréng (the Greens) emphasised that the policy of austerity cannot be the only mean to solve the debt crisis, in particular in the case of Greece.[24] In the following, the discussion focused on the European decisions and the governmental parties (CSV (Christian Democrats) and LSAP (Social Democrats) highlighted that the participation of Luxembourg is risky, but necessary – a point of view which was also shared by one party being in opposition (the DP (Conservative Liberals)). The ADR (National Conservatives) was of the opinion that the European institutions are jointly responsible for the European debt crisis.[25] The National Conservatives and the Democratic Socialists also demanded a change in the national policies on tax dumping.

Bilateral support   
IV.8    
In case Luxembourg 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?

Luxembourg has given Euro 140.1 million as part of the bilateral loan program to Greece (figure from 30 September 2013).[26] The ‘Intercreditor Agreement’ from 8 May 2010 allows a loan of up to Euro 206.1 million.[27]

The loan to Greece was an operation of the Ministry for Finance for which – in the view of the government – the existing legislation (budgetary law which is adopted by simple majority in the parliament) was seen as a sufficient legal basis.[28] There was no separate law passed by the Luxembourg parliament. The parliamentary groups supporting the government (Christian Democrats and Social Democrats) as well as some parties being in opposition (Conservative Liberals and the Greens) approved this procedure.[29] The National Conservatives criticised the approach and demanded the adoption of a parliamentary law because Article 99 of the Luxembourg Constitution requires that every important financial engagement must be based on a separate law.[30] However, Luxembourg participated in the loan agreement with Greece without adopting a separate law.

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

Not other relevant information.

[1] Published in the national gazette under A – N° 108, p. 1890, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/016/901/091050.pdf.

[2] Chambre des Députés, Séance 39, p. 549, http://www.chd.lu/wps/PA_RoleEtendu/MergeServlet?lot=C-2009-O-039-0002.

[3] Published in the national gazette under A – N° 201, p. 3632 (http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/135/078/103747.pdf).

[4] http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/134/051/103530.pdf.

[5] The positions of the different parties in the public session on this law can be found on http://www.europaforum.public.lu/fr/actualites/2011/09/chd-efsf/.

[6] Journal Officiel du Grand-Duché de Luxembourg, Recueil des sociétés et associations, C – N° 1189, 8 June 2010, p. 57026, http://www.etat.lu/memorial/2010/C/Pdf/c1189086.pdf#Page=2

[7] http://eli.legilux.public.lu/eli/etat/leg/loi/1915/08/10/n1

[8] http://www.gouvernement.lu/3351296/Annexe-01c.pdf.

[9] Avis du Conseil d’Etat, 8 June 2010, p. 1-2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/005/909/090048.pdf.

[10] Dispense de second vote constitutionnel par le Conseil d’Etat, 6 July 2010, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/019/919/091188.pdf.

[11] Avis complémentaire du Conseil d’Etat, 12 June 2012, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/123/128/112227.pdf.

[12] Avis complémentaire du Conseil d’Etat, 12 June 2012, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/123/128/112227.pdf.

[13] Loi du 12 juillet 1996 portant révision de l’article 95 de la Constitution; Loi du 27 juillet 1997 portant organisation de la Cour Constitutionnelle.

[14] See for example the national report of the Luxembourg Constitutional Court in the framework of the XVIth Congress of the Conference of European Constitutional Courts, 2014, p. 1, http://www.vfgh.gv.at/cms/vfgh-kongress/downloads/landesberichte/LB-Luxembourg-FR.pdf

[15] ECHR, 14570/89 – Procola v. Luxembourg, http://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001-57944

[16] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 114

[17] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 115

[18] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 116

[19] Michael Schroen, Parlament, Regierung und Gesetzgebung, in: Wolfgang H. Lorig/Mario Hirsch (eds.), Das politische System Luxemburgs, 2008, p. 123.

[20] Chambre des Députés, Séance 39, 1 July 2010, p. 546, http://www.chd.lu/wps/PA_RoleEtendu/MergeServlet?lot=C-2009-O-039-0002.

[21] Projet de Loi No. 6142 relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro, 1 June 2010, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/096/875/089754.pdf.

[22] Commission des Finances et du Budget, Rapport sur le Projet de Loi N° 6314, 8 September 2011, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/131/046/103405.pdf.

[23] Commission des Finances et du Budget, 30 November 2010, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/078/914/097173.pdf.

[24] Chambre des Députés, Séance 35, p. 479-480, http://www.chd.lu/wps/PA_Archive/FTSShowAttachment?mime=application%2fpdf&id=1099852&fn=1099852.pdf.

[25] Chambre des Députés, Séance 35, p. 481, http://www.chd.lu/wps/PA_Archive/FTSShowAttachment?mime=application%2fpdf&id=1099852&fn=1099852.pdf.

[26] Minister for Finance, Bilan financier et situation financière de l’Etat, 28 October 2013, p. 6, http://www.gouvernement.lu/3351285/Annexe-01b.pdf.

[27] Rapport de la Commission des Finances et du Budget, 8 September 2011, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/131/046/103405.pdf.

[28] Réunion de la Commission des Finances et du Budget, 23 April 2010, p. 3, http://www.chd.lu/wps/PA_Archive/FTSShowAttachment?mime=application%2fpdf&id=1041737&fn=1041737.pdf.

[29] Réunion de la Commission des Finances et du Budget, 23 April 2010, p. 3, http://www.chd.lu/wps/PA_Archive/FTSShowAttachment?mime=application%2fpdf&id=1041737&fn=1041737.pdf.

[30] See the report ‘L’ADR demande qu’une loi spéciale autorise le versement du prêt à la Grèce’ on www. europaforum.public.lu, 5 May 2010, http://www.europaforum.public.lu/fr/actualites/2010/05/adr-grece/index.html.

Malta

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 Malta 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?

No discussion in the negation of the EFSF known.

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 Malta and in what way does it involve Parliament?

The Maltese Parliament passed an Act of Parliament, named ‘Participation and Guarantees under the European Financial Stability Facility Act’ (Act XIV of 2010; Chapter 505[1] ), after a very fast parliamentary procedure[2] on 14 July 2010 by unanimous vote. The Act entered into force on 3 August 2010. The Act refers directly to the EFSF Framework Agreement by guaranteeing every financial instrument or financial arrangement of the EFSF up to a sum of Euro 398.44 million. This sum was increased by Bill 86 of 2011[3] (which became the ‘Participation and Guarantees under the European Financial Stability Facility and the Government Borrowing and the Granting of Loans to the Hellenic Republic (Amendment) Act (Part 1 & Part 2)’ or Act XVIII of 2011[4] ) to Euro 704.33 million, passed by the House of Representatives on 10 October 2011 by unanimous vote. The procedure at the House of Representatives comprises five stages (three readings by the House, one Committee stage and one Report Stage[5] ) and the parliamentary procedure is completed by the assent of the President of Malta. The commencement of an act depends on the publication of the act in the Public Gazette. Act XVIII of 2011 entered into force on 18 October 2011.

Guarantees
IV.3     
Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Malta? 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 Maltese Parliament has authorized the government to issue Guarantees to the EFSF in the ‘Participation and Guarantees under the European Financial Stability Facility Act’ (see question IV.2). There is no additional parliamentary procedure. Malta issues a guarantee of Euro 704 million for the EFSF. The guarantee contains the obligation that the Minister for Finance, on behalf of the Maltese government, signs the payment and the money comes from the Maltese treasury. There will be no payment via bank guarantee, but via government guarantee. Malta’s statistics on the public debt contain an “EFSF Credit Line Facility” with a debt of Euro 4.5 million.[6]

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

During the reading of the original EFSF-Act, there was no in-depth discussion in Parliament. Since the Maltese government, led by Prime Minister Lawrence Gonzi and his Nationalist Party, did not have much time to adopt the law, parliament supported this by a very speedy adoption procedure.

Discussions took place during the parliamentary procedure of the amendment bill (‘Participation and Guarantees under the European Financial Stability Facility (Amendment) Bill’) (see question IV.2). The leader of the opposition, Joseph Muscat (Labour Party), criticised during the second reading in the plenary session on 5 October 2011, that the government has not given enough information about the on-going euro-crisis and the rescue mechanism.[7] He criticised that the “old” countries did not have to fulfil such strict obligations like the new countries. In particular in the case of Greece, the slack control was mentioned and the fact that German and French banks were engaged in Greece which is seen as having generated efficient control. In addition, the big Member States France and Germany had infringed the Maastricht criteria without any consequences. Another point of criticism, mentioned by Joseph Muscat (Labour Party), was the fact, that the European governments do not have any plan for economic growth, which is seen as the sole possibility to stop the negative development in crisis countries.[8] Helena Dalli, member of the Labour Party, confirmed this point of view and emphasised that all austerity measures had negative effects on the citizens of those countries, which had received financial support and had been obliged to pass certain austerity measures, in particular Greece.[9]

An important point of discussion raised during the Committee Stage concerned the procedure for the enactment of the first EFSF-Act. The records of the parliament did not contain the original agreement between the Member States concerning the EFSF, which was seen by Alfred Sant (Labour Party) as a fundamental procedural failure and which would make the law void.[10] The amendment bill refers to the original Maltese EFSF-Act and Alfred Sant was not of the opinion that such a reference is permissible if the original EFSF-Act is not valid. However, the parliamentary notes about the respective debate about the original Maltese EFSF-Act contain indications that the agreement was put on the table of the House of Representatives. Since Alfred Sant was not convinced of these indications, he demanded a ruling of the chairman of the House of Representatives. The chairman has this competence as part of the parliamentary procedure and he can interpret the Standing Orders of the House of Representatives. However, these rulings do not have the force of law, but members of the House of Representatives must obey them.[11] In this case, the ruling contained the reasoning that the House of Representatives should continue with the parliamentary procedure because the question whether a law is void or not can only be answered by the Maltese courts.[12] However, the ruling could not end the discussion and the House of Representatives adjourned the discussion onto the next sitting five days later. The discussion about the parliamentary procedure, which continued on 10 October 2010, led to the question, which procedural step the House of Representatives was making (Ratification or Implementation of the amended EFSF-agreement). It was not clear which of these steps parliament was discussing. Alfred Sant demanded a further ruling by the chairman and the ruling made it clear that a Parliamentary Act which authorizes the Government to borrow, lend and provide guarantees is an implementation act which implicitly contains the ratification of the EFSF-agreement. It is not necessary to pass two separate laws for these legally distinguishable steps.[13]

Furthermore, the government was criticised for not giving sufficient information to the Parliament and to enter into obligations without prior discussion in Parliament. The opposition (Labour Party) had demanded that the government should explain in more detail how the specific rescue mechanisms work and what was the position of the government in the Council of the European Union. However, government gave detailed information only some hours before the discussion in parliament began, which made an adequate preparation for the opposition (Labour Party) nearly impossible. In general, many members of the Labour Party criticised that the discussion does not face reality very much, on the national as well as on the European level. Based on this need to face reality, opposition in parliament (Labour Party) emphasised that budgetary sovereignty will not be the same as it is today. The countries lending money to others will demand that they have some kind of influence about the spending policy of other countries.

Moreover, Labour Party (opposition at this time) argued for the introduction of Eurobonds on the European level. These bonds are seen as a more adequate mechanism to solve the specific situation of crisis countries. Another point, which was mentioned and needed clarification, was the fact that the EFSF lends money to Member States with an interest rate between 3.5 and 4 %. However, if the guarantees are needed Member States have to borrow money from the financial market with an average rate of 5 %. This could lead to a loss every Member States has to bear.

It was also emphasised that the Maltese economy is mainly based on financial services and internet gambling, while other sectors such as tourism or construction work are losing their importance in the national economy. Malta must protect the financial sector as an important economic sector for the country, but must keep in mind that financial services can become a threat to the national financial stability. A further point was that there are some plans about new taxes or taxation harmonisation, which could endanger the highly important financial sector in Malta.

Also during the Committee Stage, the Labour Party (parliamentary opposition) proposed that the discussion should be continued next day, because they would like to prepare for the discussion properly. There were some changes to the law and its interpretation which had to be examined in detail. The government rejected this proposal by referring to the fact that international media are waiting for the approval of Malta (as one of the last countries) and it would endanger the credibility of the ratification process in the Eurozone and in Malta, if there would be a further postponement. The Labour Party accepted this, but emphasised its criticism with such fast ratification procedures.

The third and final reading passed the House of Representatives without any discussion. All parties agreed on the fact that it is necessary to show some solidarity with the European partner countries. This is why the bill was passed unanimously.     

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

No such judgment exists on the (constitutionality of) the EFSM or 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?

In the framework of the EFSF the Maltese government decides about the disbursement of money. The parliament passed the law containing the amount of money up to which the Maltese government can issue guarantees (‘Participation and Guarantees under the European Financial Stability Facility Act’, see question IV.2). The Maltese Parliament only has the right to pose questions about the behaviour of the Maltese representative in the EFSF, but does not have to approve any measures in the application of EFSF.

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

The Maltese House of Representatives discussed the financial situation in Spain after their application for financial assistance for the Spanish banking sector in a plenary session on 19 June 2012.[14]

Alfred Sant (member of the then in opposition Labour Party) asked whether there are any reliable instruments to measure crisis phenomena, in particular occurring problems in the banking sector.[15] The European-wide stress tests for banks had identified that Spanish banks have problems, but not that there will be a complete breakdown. He also asked which criteria Maltese banks, in particular the Bank of Valletta, will have to fulfil to pass successfully the next stress test. Furthermore, he also demanded more clarification about the impact of the Spanish banking breakdown on the Maltese banking sector and further clarification of the government’s position on the financial transaction tax plans.

Moreover, at the end of his intervention, he criticised that there seems to be no proportionality requirement for the lending procedure to Spain, because it is the fourth biggest economy in Europe and the Eurogroup will have to help Spain in order to avoid the complete collapse of the Eurozone. This puts a big country like Spain in a better position than small countries. He clarifies his argument by the example of the loan of Malta to the state-owned airline ‘Air Malta’ of about Euro 52 million. It took a lot of time to convince the European Commission that this financial support is necessary and the Commission obliged Malta to combine the lending with certain conditions in order to comply with the European state aid rules. In November 2010 the European Commission granted the Maltese government temporary permission to lend Air Malta € 52 million (rescue aid).[16] This loan is based on the ‘Government Borrowing and Granting of Loans to Air Malta plc Act’ (Act XVIII of 2010).[17] In May 2011 the Maltese government notified the European Commission of a € 130 million capital increase in order to restructure Air Malta. The European Commission had doubts that the restructuring plan is in conformity with the EU Rescue and Restructuring Guidelines, but approved the restructuring plan after an in-depth investigation in June 2012.[18] Malta had to demonstrate its capacity to ‘rescue’ Air Malta by generating money through the sale of land, subsidiaries and other assets. In contrast to this difficult procedure for Malta, the lending of money to Spain of a remarkably higher sum was – following the argumentation of Alfred Sant – made over night. This is not seen as a fair treatment of small countries such as Malta.

A further point of discussion concerned the way of lending to Spain. Finance Minister Tonio Fenech (Nationalist Party) had to make clear that the Maltese contribution is not increased by helping Spain because all the loans are made via the EFSF and the ESM. George Vella, member of the Labour Party (opposition), asked whether financial assistance to Spain will be given through the same procedure as in the case of the Greek loans. The Finance Minister Fenech answered that he is not exactly sure how the lending will be made, but assures that Malta’s contribution to the ESM and the EFSF will not be increased by this decision. In addition, Fenech emphasises that the lending of money to Greece via bilateral loans had to be done because there was no mechanism for such a case and since there are new mechanisms (ESM and EFSF), there is no necessity to help Spain via bilateral loans.[19]

Concerning the aid package for Ireland, Maltese Finance Minister Tonio Fenech (Nationalist Party) explained in the House of Representatives in a plenary session on 29 November 2010 that the package consists of 85 billion euro.[20] Amongst other sources, 22.5 billion come from the EFSM and 17.7 billion from the EFSF. Charles Mangion, member of the Labour Party, which was in opposition at this time, asked why there is an interest rate of 5.8 %.[21] Malta had provided a loan to Air Malta with a similar interest rate and he said that the risk of loss is greater in the case of Ireland than with Air Malta. On the other side, Ireland will probably not be able to pay such a high interest rate. Furthermore, he required clarification about the procedure on the European level to authorize the respective tranches of the € 85 billion loan, in particular whether the European rescue institutions can influence the disbursement of the next tranche and whether this decision has to be made unanimously by the board of governors. In addition, Alfred Sant, member of the Labour Party, criticised that the Irish people have to suffer because of the austerity measures, while the reason for the financial problems of Ireland was the gambling of the banks.[22] Finance Minister Fenech (Nationalist Party) answered that the banking sector is too much linked with other financial institutions, so that it would not be politically acceptable to let these banks go bankrupt.[23]

Bilateral support    
IV.8     
In case Malta 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?

Malta has given bilateral loans to Greece. These loans had to be approved by parliament, since they do not fall under the EFSF where parliamentary approval of individual disbursements is not required (see also question II.6).

The first law is Act III of 2010 (‘Government Borrowing and Granting of Loans to the Hellenic Republic Act’)[24] , which authorised and regulated the raising of loans for the Hellenic Republic. The sum was limited to Euro 30 million (Article 3 (1) of Act III of 2010). The Minister for Finance is authorised to borrow the money under the conditions of the ‘Local Loans (Registered Stock and Securities) Ordinance’[25] (Article 3 (2) of Act III of 2010). In cases of urgency, the Minister is also allowed to use temporarily money from the Consolidated Fund. The Maltese Parliament has passed the law on 12 May 2010 and the Act came into force on 18 May 2010.

This Act was amended by the ‘Government Borrowing and Granting of Loans to the Hellenic Republic (Amendment) Act’ (Act III of 2012).[26] The new Act contains the reference to the amended loan facility agreement of the lending countries and the Hellenic Republic entered into in Brussels on 27 February 2012. The amended lending agreement forms part of the Act and contains amendments for the ‘Grace Period’, the ‘Term’ and the lowering of the interest rate. This amendment did not concern the new Euro 100 billion loan to Greece as part of the second aid package, but simply ratified the amendments to the first loan facility agreement from 8 May 2010. The bill was passed on 26 March 2012 by Parliament[27] and entered into force on 30 March 2012.

A first reading of a new bill took place on 13 May 2013[28] which amends the national ‘Government Borrowing and Granting of Loans to the Hellenic Republic Act’. The aim of this bill is to implement the amendments of the Loan Facility Agreement Contract between Greece and the lending countries entered into in Brussels on 19 December 2012. Part of the Bill is the amended lending agreement. The House of Representatives passed the bill on 25 June 2013 and it entered into force on 28 June 2013 as ‘Government Borrowing and Granting of Loans to the Hellenic Republic (Amendment) Act’ (Act No VI of 2013).[29]

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

The Maltese Parliament discussed the amendment of the EFSF Act (see question IV.2) together with an amendment of the loan facility agreement between the lending countries and Greece from 14 June 2011, which made it necessary to amend the national ‘Government Borrowing and Granting of Loans to the Hellenic Republic Act’. This amendment forms part of the Act which ratified the participation in the EFSF and can be found under Article 5 of the ‘Participation and Guarantees under the European Financial Stability Facility and the Government Borrowing and the Granting of Loans to the Hellenic Republic (Amendment) Act (Part 1 & Part 2)’[30] (for more information see question IV.8).

[1]                       http://www.parlament.mt/file.aspx?f=23395

[2]                       See the overview under http://www.parlament.mt/billdetails?bid=55&legcat=7

[3]                       http://www.parlament.mt/file.aspx?f=23614

[4]                       http://www.parlament.mt/file.aspx?f=23426

[5]              See for an overview of the significance of the respective stages David Joseph Attard, The Maltese Legal System, Volume I, 2012, p. 54-55

[6]                       Budget Speech 2013 by the Minister for Finance Tonio Fenech, 28 November 2012, p. 11, http://www.finance.gov.mt/image.aspx?site=MFIN&ref=2013_Budget_Speech_EN

[7]              Transcript of Sitting 389 of the Plenary Session of the House of Representatives on 5 October 2011, p. 509 et seq., http://www.parlament.mt/file.aspx?f=20585

[8]              Transcript of Sitting 389 of the Plenary Session of the House of Representatives on 5 October 2011, p. 509 et seq., http://www.parlament.mt/file.aspx?f=20585

[9]              Transcript of Sitting 389 of the Plenary Session of the House of Representatives on 5 October 2011, p. 520 et seq., http://www.parlament.mt/file.aspx?f=20585

[10]             Transcript of Sitting 389 of the Plenary Session of the House of Representatives on 5 October 2011, p. 536 et seq., http://www.parlament.mt/file.aspx?f=20585

[11]             See http://www.parlament.mt/parliamentaryprocedures#c

[12]             Transcript of Sitting 389 of the Plenary Session of the House of Representatives on 5 October 2011, p. 540, http://www.parlament.mt/file.aspx?f=20585

[13]             Transcript of Sitting 390 of the Plenary Session of the House of Representatives on 10 October 2011, p. 588, http://www.parlament.mt/file.aspx?f=20586

[14]             Transcript of Sitting 491 of the Plenary Session of the House of Representatives on 19 June 2012, p. 482 et seq., http://www.parlament.mt/file.aspx?f=32221

[15]             Transcript of Sitting 491 of the Plenary Session of the House of Representatives on 19 June 2012, p. 486 et seq., http://www.parlament.mt/file.aspx?f=32221

[16]             See the press release IP/10/1509 of the European Commission from 15 November 2010, http://europa.eu/rapid/press-release_IP-10-1509_en.pdf

[17]             http://www.parlament.mt/file.aspx?f=23399

[18]             See the press release IP/12/702 of the European Commission from 27 June 2012, http://europa.eu/rapid/press-release_IP-12-702_en.pdf

[19]             Transcript of Sitting 491 of the Plenary Session of the House of Representatives on 19 June 2012, p. 489 et seq., http://www.parlament.mt/file.aspx?f=32221

[20]             Transcript of Sitting 290 of the Plenary Session of the House of Representatives on 29 November 2010, p. 498 et seq., http://www.parlament.mt/file.aspx?f=16877

[21]             Transcript of Sitting 290 of the Plenary Session of the House of Representatives on 29 November 2010, p. 499-500, http://www.parlament.mt/file.aspx?f=16877

[22]             Transcript of Sitting 290 of the Plenary Session of the House of Representatives on 29 November 2010, p. 500-501, http://www.parlament.mt/file.aspx?f=16877

[23]             Transcript of Sitting 290 of the Plenary Session of the House of Representatives on 29 November 2010, p. 502 et seq., http://www.parlament.mt/file.aspx?f=16877

[24]                     http://www.parlament.mt/file.aspx?f=23383

[25]                     http://finance.gov.mt/image.aspx?site=TRS&ref=Local%20Loans%20Ordinance%20Chapter%20161

[26]                     http://www.parlament.mt/file.aspx?f=23440

[27]                     Transcript of Sitting 460 of the Plenary Session of the house of Representatives on 26 March 2012, p. 953-971, http://www.parlament.mt/file.aspx?f=25742

[28]                     http://www.parlament.mt/billdetails?bid=429&legcat=13

[29]             http://www.parlament.mt/file.aspx?f=41154

[30]             http://www.parlament.mt/file.aspx?f=23426, p. 62 et seq

Netherlands

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 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.[1] Parliament endorsed the aid package for Greece on 7 May 2010.[2] 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).[3] Thereby parliament supported implicitly all rescue operations of EFSF aid including the aid that was later provided to Ireland and Portugal.[4]

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.[5]

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.[6]

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 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.

Guarantees
IV.3     
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.[7] 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.[8] 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.[9]

Activation problems       
IV.4     
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.[10] 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 o