A number of member states have received direct financial assistance through balance of payments support (Hungary, Rumania, Latvia), bilateral agreements/IMF (Greece), the temporary emergency funds/IMF (Ireland, Portugal, Greece), and the permanent emergency fund (Spain and Cyprus).
Several member states have (also) indirectly benefited through the Securities Markets Programme (SMP) created in May 2010, a bond-buying programme of the European Central Bank that was replaced in September 2012 by the Outright Monetary Transactions (OMT) programme (Greece, Ireland, Portugal, Italy, Spain).
If relevant, describe the political, economic and legal situation leading up to the moment of the formal request of direct financial assistance.
In the early-mid-2000s, Greece’s economy was strong and the government took advantage by running a large structural deficit, partly due to high defence spending and to the organization of the 2004 Olympic Games. In 2004, the Council engaged the excessive deficit procedure against Greece, due to the noncompliance of the country’s economic situation to the requirements of the SGP. However, in 2007 the procedure was closed since the situation of excessive deficit had been corrected. After the burst of the 2007 financial crisis, Greece was hit especially hard because shipping and tourism, two important sectors of the domestic economy, were affected by the economic situation. In March 2009 the Council, in its opinion on the revised stability program for 2008-11 submitted by Greece, assessed that there were serious dangers of deterioration of the economic situation of the country because of the general deficiencies of the Greek state to impose fiscal discipline, but also because of the general economic situation. Therefore, the Council called the Greek authorities to reinforce fiscal discipline, through cuts in current expenditures and structural reforms. Greece was put under the excessive deficit procedure in 2009. In several recommendations and opinions under this procedure, the Council and the Commission suggested to the Greek Government austerity measures, cuts in expenditure and structural reforms. In early 2010, as concerns about Greece’s national debt grew, policy makers suggested that emergency bailouts might be necessary.
The event that set things in motion can be located in 2009 just a few months after the autumn 2009 elections when the newly-elect centre left (PA.SO.K.) government announced that the official deficit figure for 2009 would be 12.5% of the GDP whilst the officially predicted figure according to the Council decision for the excessive deficit procedure against Greece was 4.4% of the GDP. This was when the term “Greek statistics” was first coined. Though the PA.SO.K. government had been elected on the basis of a programme which did not contain austerity, its Prime Minister, Giorgos Papandreou, claimed to have been taken by surprise because of the real situation of the Greek economy and announced that austerity measures would need to be taken. This change of policy delayed the promoting of reforms and increased the Greek bond yields.
Things deteriorated rapidly since the beginning of 2010 when a series of credit rating agencies downgraded en masse the creditworthiness of the Greek economy (from A- to BBB+). In March 2010, the Greek government adopted an austerity package, containing tax increases and wage and pension cuts (something which was considered a taboo in the Greek modern economic history). Market confidence was not, however, restored, despite these measures having been adopted. Negotiations between European leaders and Papandreou were not fruitful in the beginning and Papandreou announced that, if Eurozone partners did not support Greece in this difficult situation, Greece would make recourse to the IMF, with which he claimed to already be in contact. In their Statement of the 15th of March, the Heads of State and Government of the Euro area announced their support to Greece and the creation of a mechanism, with the participation of the IMF, to provide financial assistance in case of emergency. In their Statement on the 11th of April, the Heads of State and Government of the Euro area Member States agreed that they would support the Greek economy through a 3-year-period rescue package which would include bilateral loans of € 110 bn, pooled by the Commission (KfW represented Germany) and the participation of the IMF. Loans were granted on non-concessional interest rates (5.5%) and under strict conditionality. However, uncertainty and panic in global financial markets further augmented and, as a consequence, the Greek creditworthiness was further downgraded, the euro lost a lot of its value and markets started perceiving an eventual default of the Greek economy as inevitable. The Greek Government officially requested the activation of the financial support mechanism on April 23rd.
Though the economic situation seemed to have calmed down for a while, political and social unrest increased. Soon it became apparent that the first rescue package would be insufficient and the Eurozone leaders approved a preliminary second rescue package at an EU summit on 21 July 2011. Later, it was agreed that the aid package would reach the amount of €130 billion, it would be provided through the newly created European Financial Stability Facility (and the IMF) whilst the repayment period was extended from seven to 15 years and the interest rate was lowered to 3.5%. Furthermore, for the first time, this also included a private sector involvement (PSI), meaning that the private financial sector accepted a voluntary haircut. The procedure was completed in spring 2012.
Though the Greek debt crisis was mainly a result of bad public administration, the weakness of the domestic banking system, which is closely connected to the corrupt political class, also played an important role. At the outburst of the global financial crisis the Greek government at the time (N.D.) and the Prime Minister Kostas Karamanlis reassured the Greek people that the domestic banking system had not been affected and provided guarantees to private banks at the amount of 28bn euros. The issuing of guarantees to the banks continued during the following years. Greece has issued 168bn of guarantees during the crisis (and has provided 50bn for the recapitalization of banks, following the PSI agreement).
After the 2015 elections and the formation of a government coalition between SY.RIZ.A. and AN.EL., the Greek Minister of Finance refused to negotiate with the “troika”, since this formation has no institutional status. The agreement on the Greek debt is at the moment the object of hard negotiations between the newly elected Left Greek Government and the creditors of the country, the “institutions”.
Describe the public and political debate during the negotiations on the financial assistance instruments, notably the Memorandum of Understanding (MoU) and Financial Assistance Facility Agreement, in particular in relation to the implications for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process.
After it became clear that the situation of the Greek economy was not sustainable, debates were to a large extent focused on who was responsible for the situation with accusations being thrown between party officials, especially between those of PA.SO.K. and N.D., the rest of the parties accusing both. PA.SO.K. has been generally accused for “touting” the financial weakness of the country, thus making access to markets more difficult and deepening the debt crisis. Parliamentary debates often took place in a climate of political tension, with huge protests and violent incidents taking place outside the Parliament. Generally, it can be said that the Government perceived its negotiation position as very weak.
Considering the stance of the Government during the negotiations and the policy measures that had to be taken, these were discussed at many occasions in Parliament. In a discussion concerning the Stability and Growth Programme submitted by Greece in March 2010, the strategy for facing the crisis was extensively discussed. Papandreou said that the austerity measures were necessary to face the crisis but also to show to Europeans and to the world that Greeks were responsible and capable and willing of promoting reforms. These reforms were needed anyway, according to the Prime Minister, in order to fight corruption and the long term pathologies of the Greek state mechanism. The ongoing discussions at the time on the institutionalization of a European mechanism for facing the crisis showed, according to Papandreou and to members of the Government, the solidarity of the European partners and the recognition that the problem is not only Greek.
The opposition reacted strongly to the policy choices of the PA.SO.K. Government. Tsipras (SY.RIZ.A.) defended that austerity would lead to more recession and that an eventual recourse to the IMF was inopportune, because of the destructive consequences that this would have for the Greek economy and for the Greek people, as past examples of its intervention in other countries had shown. Tsipras also suggested that Greece had a negotiating advantage because the Greek debt was mainly at the hands of European banks and that the Prime Minister could use this advantage and could collaborate with other Southern European countries. The President of SY.RIZ.A. stressed that, though reforms were indeed needed in order to fight corruption and the pathologies of public administration, the reforms promoted by PA.SO.K. were only affecting the vulnerable members of society and damaged the long-term interests of the country and social rights without really fighting corruption. Samaras (N.D.) also reacted to the implication of the IMF in the rescuing of the Greek economy; he accused Papandreou for not fighting for a purely European solution to the problem. As an alternative, Samaras proposed the issuing of guarantees for the Greek debt by the European partners, in order to decrease the spreads of the Greek bonds. He also contested the merits of certain specific austerity measures promoted by the Government. The members of K.K.E. sustained that all this was a normal consequence of the politics of the previous governments and of the capitalist system, whose interests had been served by the EU, the IMF and the Greek Governments. Members of LA.O.S. expressed concerns about the loss of sovereignty that the recourse to the IMF implied.
As the following discussions show, the support by the European/IMF mechanism was generally perceived by the Government as a success and a web of protection for the Greek economy, whereas the opposition constantly stressed the anti-popular measures and the loss of sovereignty that it implied, especially because of the role of the IMF in the rescue plan. On the 22nd of April, while the negotiations for the rescue plan were taking place, the representative of PA.SO.K., responding to the accusations of the opposition, suggested that it was the European Right that had imposed the participation of the IMF in the rescue plan, due to the lack of expertise of the Eurozone institutions on the matter and due to the lack of a European mechanism which could be based on the Treaties. The representative of SY.RIZ.A. required that the IMF representatives leave from the Greek Ministries. The representative of LA.O.S. underscored the need for time extension of the debts and the need for briefing of Parliament on the situation.
On the 23rd of April, Giorgos Papandreou announced the recourse to the rescue mechanism. In his message the Prime Minister defended that recourse to the mechanism was needed due to the lack of access of the country to the markets. He suggested that Greece’s rescue would send a message to the markets and to the world that Greece was supported by its European partners. According to the Prime Minister, this was the only way to face the crisis, to return to economic stability, to promote reforms and to make proud the Greek people. The IMF was not at all mentioned in his speech.
During the negotiations on the conditions of the Loan Facility Agreement and the elaboration of the MoUs, the representatives of the IMF consulted the Government, parties of the opposition and trade unions. The Government also negotiated with representatives of the ECB and the Commission. The content of the negotiations is not exactly known.
During the parliamentary debates of the 30th of April, a member of LA.O.S. referred to the high interest rates with which financial assistance would be provided to Greece, referring also to certain comments by Martin Schultz and Daniel Cohn-Bendit in the European Parliament, as well as to some comments by then Spanish Prime Minister Zapatero. According to the MP of LA.O.S., the European partners would make profit to the detriment of the Greek state. The representative of the Government and Vice-Minister of Finance, Filippos Sachinidis answered that indeed the interest rates were higher than the ones imposed to other European states, but the IMF assistance would be provided with lower interest rates. In any case, according to the Vice-Minister, this was the only way for Greece to avoid bankruptcy.
The implications of the measures to socio-economic rights were also debated in Parliament in many occasions. Generally, the Government presented the harsh austerity measures as necessary for the fiscal consolidation of the country and for the fight against corruption. On the contrary, members of the opposing parties denounced these measures as violating fundamental social rights, concerning labor, pension, and health and welfare services. During the Parliamentary debates of the 30th of April, the President of SY.RIZ.A. raised a question concerning the presence of representatives of the IMF in the Ministry of Health. According to Alexis Tsipras, the measures required by the IMF in the health sector (containing cuts on wages, on functional expenses and on public financing) were destructive for the national health services. The Prime Minister responded that the pathologies of the National Health System were not connected to the IMF and that a better management should be imposed in any case without compromising the needs of Greek citizens. Tsipras responded that these measures were contrary to the ones announced in the political programme according to which PA.SO.K. had been elected and that they were required by the IMF, as the Prime Minister himself had informed the trade unions the day before.
In the discussion on a draft on security of labor, the Ministry of Employment informed the Parliament that the negotiations with the IMF concerned the 13th and 14th salary, the minimum wage, the collective bargaining rights and the possibility of unilateral recourse to arbitration by trade unions. The Minister of Employment said that the Greek Government had convincing arguments against the propositions of the IMF, referring also to the European acquis on these matters. The members of SY.RIZ.A. reacted strongly to the fact that these issues were under negotiation and suggested that, if the Government was sovereign, it should refuse any discussion on these matters. They accused the Government for leading the country into a “labor Middle Age”. They proposed that the Government should negotiate an advantageous interest rate from the ECB as the one applied to private banks and for an extension of the existing bonds’ maturation date. They also reacted to the fact that the Greek state would provide 17bn to private banks, who would obtain loans from the ECB with a much more advantageous interest rate.
The content of the Memoranda of Understanding was also discussed during their implementation. The measures included in the MoU were implemented with the law 3845/2010. This statute, imposing, among others, cuts on revenues of employees in the public sector, a VAT increase and other tax increases, was submitted on the 4th of May, discussed in one day in the competent Parliamentary Committee and discussed and voted on the 6th of May in Parliament, under the emergency procedure of article 76 par. 4 of the Greek Constitution. Generally, the discussion in Parliament was perceived by all parties as a “historical moment”, which would determine the future of the country.
The scientific service of the Parliament, in its report on the draft law, pointed out many legal and constitutional problems. Most importantly, the report expressed doubts as to the constitutionality of the provisions allowing the enterprise collective agreement to derogate from the sectorial and from the national collective agreement (and the sectorial to derogate from the national). This, according to the report resulted in a lack of guarantee of a minimum wage. Such lack is contrary to the principle of a social state (art. 25 par. 1 C), to the right to labor (art. 22 par. 1) and to the right to collective bargaining (art. 22 par. 2 and 3 C). As far as these measures were not temporary, the report expressed doubts as to their compatibility to the principle of proportionality. Concerning the cuts on revenues of public sector employees, the scientific service noted that it constituted an infringement of the right to property (art. 1 Additional Protocol of the ECHR) which could be justified by reasons of public interest. It noted however that the benefits for the public should be specified in the explanatory report and their existence and calculation should be based on law or on general principles of international law, or at least the infringement of the rights should be accompanied by compensation measures.
Concerning the paragraph declaring that the provisions of the draft law prevail over any collective agreement, the scientific service underscored that it interfered with articles 22 and 23 of the Constitution on collective bargaining and collective autonomy, interpreted in the light of several provisions contained in international labor agreements ratified by Greece as well as of the European Social Charter. However, according to the report, these interferences could be justified by reasons of public interest, due respect being paid to the principle of proportionality. Finally, concerning the private law working contracts of employees in the public sector, their posterior legislative amendment infringed the economic freedom of the contracting parties (art. 5 par. 1 C). However, according to the case law of Areios Pagos (Supreme Civil and Criminal Court), this infringement could be justified, if it served a public interest and it was compatible with the principles of proportionality, equality and legal certainty. The report, citing the case law of national and international courts, as well as influential Greek scholars, did not provoke many discussions in Parliament. This can be explained by the fact that the emergency procedure followed did not leave a lot of margin for discussion or even for reading the report.
The representative of the Government defended that the austerity measures that the MoU implied were necessary for the rescuing of the country and that the only alternative to the cuts on wages and pensions would be the bankruptcy of the Greek state, which would mean non-payment of wages and pensions. He compared the country’s situation to a state of war. In case Greece ran bankrupt, this would be destructive for the Greek society and would lead to the isolation of the country by its partners. He also stressed that these measures should be accompanied by a social “network of protection”, which he called upon the society and the local authorities to put into place, as well as by a policy of price control, which he admitted was missing from the Government planning at the time.
A similar stance was followed by the representative of LA.O.S., who, referring to the European tax payers, said that Greece could not deny this rescue plan, nor could it only accept its favorable parts concerning social protection and growth. He also stressed that these measures should be accompanied by an investigation into the responsibilities for the situation and the punishment of those responsible. The MPs of LA.O.S. generally criticized the provision on the cuts on pensions and allowances of pensioners, because it was too inflexible and did not take into account the special needs of certain categories. The Government expressed its commitment to render this provision more flexible in subsequent legislation.
The representative of N.D. expressed the opposition of his party to the draft law, except from some provisions concerning social cohesion, welfare for the unemployed, and the liquidity of the banking system. The party of the Opposition disagreed with the management of the crisis by PA.SO.K. and with the fact that the MoU left open the possibility for new austerity measures in the future. The President of N.D. also criticized the fact that these measures would be taken through ministerial decrees, without consulting the Parliament. They criticized mainly the cuts on allowances, on indemnities for lay-offs and the deregulation of labor contracts. The MPs of N.D. stressed that there are alternative measures for the boosting of the economy, more focused on sustainable growth and on the utilization of public property. They stressed that the measures taken would be ineffective and would lead to more economic recession. These measures, moreover, would not even be able to compensate for the increase of the debt because of the high interest rate. They specified, though, that they would comply with the agreements of the country if the loan convention was signed. They rejected any negotiation for restructuring the debt, which would lead to more recession. The MPs of N.D. accused the Government of not having the legitimacy for imposing such measures, which were not included in the political programme on the basis of which it was elected.
K.K.E. and SY.RIZ.A. maintained that the draft law consisted in a violation of fundamental social and labor rights and contained large concessions of constitutional competences to international, imperialistic organizations. Thus, they proposed the application of article 28 par. 2 of the Constitution, which requires a qualified majority of 3/5 of the deputies for the voting of the statute. Their proposition was rejected by the majority of MPs. They proposed that the fiscal problem of the country should be resolved with taxation of the big capital, fight against corruption and cuts in military expenses. They also referred to the European dimension of the problem and that harsh austerity only served the interests of the creditors and of the capital, and not of the Greek state, nor of the Greek people.
The representative of K.K.E., more precisely, said that the measures contained in the draft law constituted the worst attack to the right to life and to decent employment since 1974. These measures, according to the Communist party, served only the interests of the bourgeoisie and of the creditors and were destructive for the Greek popular families and for young people. Mostly, the Communist party reacted to the provisions concerning fiscal discipline, implying cuts on civil servants’, employees’ and pensioners’ revenues, tax increases, massive layoffs in the public sector and privatization of public services, as well as to the structural reforms of the welfare and social security systems. The measures led to a serious infringement of social and labor rights and acquis, to a degradation of public services, to a serious interference with the rights to pension and social security. The representative of K.K.E. also criticized the creation of a Fund of Financial Stability, to which the Greek state would provide 10bn euros according to the Loan Facility Agreement. He suggested that these policy decisions were a necessary result of the capitalist system and were already contained in the Maastricht Treaty; the crisis was only a pretext for their implementation. Other MPs of K.K.E. strongly criticized the fact that the Government cut the allowances for the “heavy and unhealthy” employments.
The representative of SY.RIZ.A. maintained that, with the measures proposed in the draft law, the Greek people was asked to pay for the crisis created by the corrupt political system. He stressed that the MoU, imposing “loan shark” conditions, did not contain any measure for the fight against corruption and tax evasion nor for the taxation of the big capital, for the lowering of prices, for the fight against the cartels or for the public investments. It imposed a neo-liberal policy with the signature of a socialist party, which would lead to deeper recession and to increased unemployment and poverty. He criticized the Government for not negotiating lower interest rates and more time for the debt reimbursement. Finally, he raised an objection of (substantive) unconstitutionality of the draft law. During the discussion, the MPs of SY.RIZ.A. also criticized the fact that the ECB financed private banks with an advantageous interest rate, though under the guaranty of public bonds. They stressed that the Government should propose the same interest rate for public debt as well and it should not provide 10bn of the financial assistance to the Financial Stability Fund. They also suggested that the Government should renegotiate the public debt, which was irrational and odious for the Greek people. They accused the Government of being driven by the markets and the EU, of violating collective agreements and constitutionally guaranteed social and labor acquis, of deregulating the employment contracts, of selling out the country to private enterprises and of transforming it into a protectorate. They characterized the MoUs as “extreme ideological manifesta” of the IMF representatives which violate the Constitution. Finally, they criticized the Government for not bringing the provisions of the MoUs for extended discussion in Parliament and for imposing partisan discipline to the MPs of the Government party, obliging them to vote the law. Generally, they defended that the broad delegations to the executive contained in art. 2 of the draft law circumvented democratic and constitutional legality.
The Minister of Finance responded that the voting of the measures was urgent because the country was under an emergency economic situation, as it needed 10bn for the reimbursement of mature bonds on the 19th of May. He stressed that all over Europe, parliaments were voting to support Greece and that the Greek Parliament should fulfill its duty as well. The onerous measures accompanying the Loan Agreement were required by the creditors in order to guarantee their money. He mentioned that the alternative to the rescue programme was the bankruptcy of the country, which would be irresponsible and destructive. However, the Government chose the difficult way, which would also imply the resolution of the economic and structural problems of the country. This meant that other countries, also running deficits and being attacked by the markets, would lend money to Greece. Thus, according to the Minister, creditors were severe vis-à-vis a country that systematically lied and did not implement reforms. The Government chose, however, despite the political cost, to include in the programme structural reforms concerning the public administration, the tax system, the structural funds, the public expenditure, the budgetary process and the competitiveness of the economy. The MPs of PA.SO.K. further stressed that the mechanism instituted by the EU and the IMF was a negotiating success of the Government. They mentioned that, during the negotiation, they managed to guarantee the 13th and 14th salary in the private sector, as well as certain collective bargaining rights, by using fiscal arguments (on how profitable these measures would be for the revenues of the state), but also legal arguments (especially the ECHR, the European Charter of Fundamental Rights, the case law of the ECJ and the ECHR). They also committed to submit the implementation of the measures to public deliberation with the social partners. The Prime Minister, after strongly accusing N.D. for destroying the economy of the country, said that these emergency measures were imposed in order to gain time for the structural reforms that the country needed, despite the political cost.
Generally, the Government MPs repeatedly stressed the fact that the measures contained in the MoU were not their political choice. Even more, the Prime Minister mentioned that it was not PA.SO.K. that had written the draft law and the accompanying reports, but the “troika”. This was criticized by the MPs of SY.RIZ.A., as well as the deputies of LA.O.S. the next day. The MPs expressed concerns about the loss of sovereignty of the Greek Government and complained for the impossibility of parliamentary scrutiny to the “troika” and the creditors. The MPs of N.D. inversely expressed their doubts and alleged that this policy was also chosen by the Government. The ex-President of the Parliament (member of PA.SO.K.) criticized the fact that public policy was largely determined by the markets. The fact that the private company “Lazard” was hired by the Government for counseling during the negotiations was also criticized by MPs of N.D. and SY.RIZ.A.
The discussion continued the following day, on the occasion of an austerity package included in law 3847/2010, voted following the emergency procedure as well. This package contained cuts on allowances of public pensioners under 60 years old. This draft law was debated in the context of the MoU and the negotiations for the Loan Agreement, since it was presented as a response to the compelling public interest of the effectiveness of the programme agreed with the “troika” as a condition for the rescue package. According to the PA.SO.K. representative, no one wanted to take onerous measures, but it was the only way to save the country. The creation of a rescue mechanism, from which other European countries could benefit as well in the future, was a success of the Prime Minister. He also mentioned that the stance of Germany showed that there is no social cohesion in Europe.
N.D. criticized the Government for the bad management of the crisis, for not excluding certain vulnerable categories from the cuts, for not ensuring the minimum pensions and wages according to the national general collective agreement. According to the representative of N.D., the provisions of this agreement, should be a “red line” that the state should not trespass nor negotiate with the IMF. LA.O.S. held a similar position.
The representative of K.K.E., criticizing the emergency procedure employed by the Government, said that PA.SO.K. was promoting a harsh policy, violently suppressing vital rights. These were economic and social rights, but also political-democratic rights, which had been conquered with the struggles of the people against authoritarian regimes. The Government, according to K.K.E., served the interests of banks, investment groups and others who had bought Greek bonds with excessive yields and who were lending money to Greece in order to buy their arms. Moreover, the banks were making profit, since Greece was indebted with a 5% interest rate; this money was used partly as a guarantee for private banks that put out from the ECB with a more advantageous interest rate, in order to buy Greek bonds. Further, the Communist Party referred to the report of the Advocate General to the Court of Audit concerning the debated draft law. The Advocate General, though politically supporting the voting of the draft law, mentioned that the measures contained in it possibly infringed constitutional, ECHR and ICCPR rights and could provoke massive contestations before national and international courts. Moreover, the Communist Party stressed that, in the Court of Audit report, the Vice-President of the Court and other members expressed the opinion that the age criterion was arbitrary and aleatory and its imposition infringed the principle of equality and legal certainty. The MPs of K.K.E. also criticized the non-exclusion of certain vulnerable categories from the cuts, as well as the projects of lay-offs in the public sector and of privatization of public services. Finally, they criticized the fact that no onerous measures were imposed to ship-owners and other powerful businessmen.
According to the representative of SY.RIZ.A., the measures voted with the MoUs would mean a loss of 20 to 30% of their income for the most vulnerable members of society. This would provoke social and political unrest. He criticized PA.SO.K. and N.D. for not respecting the Constitution and the freedom of conscience of deputies by imposing partisan discipline to their MPs. Referring to the opinion by the Court of Audit and to the report of the scientific service of the Parliament on the MoUs law, he accused the Government of not being sovereign, since even the explanatory report of the law and the content had been written by the “troika”, according to the Prime Minister. Another MP of SY.RIZ.A. later accused the Government of imposing an informal dictatorship, of making the country a colony and a protectorate of its creditors.
The representative of PA.SO.K. repeated the main points of the Government argumentation and added that the proposition of the Left for renegotiation and readjustment of the Greek debt would actually mean bankruptcy that would profit hedge funds and speculators.
The statute was finally voted with a majority of 172 deputies. The MPs of PA.SO.K. and N.D. who did not obey to partisan discipline were deleted from their respective parliamentary groups.
The Loan Agreement was signed with the Eurozone MS on the 8th of May and with the IMF on the 10th of May. They were not discussed in Parliament, since the law 3845/2010 habilitated the Minister of Finance to sign the relevant agreements. Soon, however, it emerged that English law governs the loan facility agreement, something that caused a lot of contention. In the debates on the 25th of June 2010, Alexis Tsipras, the President of SY.RIZ.A. raised a question concerning the content of the loan agreement in the context of parliamentary scrutiny. He asked the Prime Minister if he knew the content of the agreement, why he did not inform the Parliament, if he had given these instructions to the Minister of Finance for the negotiation of the agreement and if he was contemplating of taking initiatives in order for the unacceptable provisions of the agreement to remain inapplicable.
More precisely, he mentioned that the agreement provided for the possibility of concession by the creditors to third parties of rights resulting from the agreement, without providing this possibility to the Greek state. The Prime Minister responded that this provision, which also required the approval of the European Commission, was guaranteeing the Greek interests, in case one state was not able to provide the agreed amount of money. Another matter that provoked the reactions of SY.RIZ.A. is the fact that, according to article 14.5 of the Loan Facility Agreement, Greece resigned from immunities that it might have concerning the forced execution of its obligations under the agreement. According to Tsipras, this provision was putting in danger public property of an invaluable economic and cultural importance. Papandreou responded that this was a provision common to loan agreements, that it allowed forced execution only as far as mandatory law did not exclude it and that it only concerned private property of the Greek state and not property that serves a public objective.
Generally, the Prime Minister criticized Tsipras of being “lost in translation” and said that the agreement was purported to guarantee the interests of all contracting members and that no conspiracy against the interests of the Greek state existed. Note that no official translation of the agreement in Greek existed at the time. Tsipras responded that since the agreement was governed by English law, Greek public property, even serving public purposes, was subject to forced execution, in case Greece could not honour the agreement or its creditors terminated it. He also referred to a relevant article in The Guardian, claiming that it confirmed his allegations. Moreover, he criticized the fact that the expenses for the conclusion of the agreement (lawyers’ payments etc.), reaching an amount of 400mn euros, were charged to the Greek state. The Prime Minister responded by mentioning a Greek law provision that excluded the public property of the state as imperius from forced execution and mentioned that he had already responded to the foreign press and to Angela Merkel that Greek islands were not for sale.
Later on, it became clear that the first bailout agreement was not sufficient, and that a second bailout agreement would have to be agreed between the group of creditors and Greece. Generally, the Government and, after November 2011, the Government coalition perceived every step towards the new rescue mechanism as a negotiation success and a manifestation of European solidarity. The members of PA.SO.K. and N.D. considered that the most responsible political position was one of consensus among the political powers of the country, in order to give a strong message of political stability and decisiveness to the markets and to the creditors. The national debate, at least in the Plenary Sessions, was not developed because there was no thorough information of the Parliament. In several speeches he gave in a central park of Athens, the President of N.D. proposed an alternative economic programme for the country. His propositions focused on possible renegotiations of the agreements and MoUs, in order to obtain less austerity and to obtain growth.
In the summit meeting on the 21st of July 2011, it was decided that the second financial assistance programme would be provided to Greece through the EFSF and the IMF, while the debt already incurred by Greece in the context of the first bailout agreement was shifted to the EFSF. The new Loan Agreement provided for a loan of € 130 bn and for the voluntary contribution of the private sector (Private Sector Involvement, hereinafter PSI). The same day the ECB reassured the liquidity of Greek banks, since it would accept Greek bonds as guarantees for private banks. These issues were discussed the next day in Parliament. According to the members of the (PA.SO.K.) Government, this summit meeting was a “big step” towards the exit from the “nightmare of loan instalments”, a success in the hard and painful negotiations, owing to the efforts of the Government, but also to the sacrifices of the Greek people. It ensured stability and security for the Greek economy and it provided for growth investments. The solidarity of the Eurozone partners showed that Greece needed to be saved because the Eurozone needed to be saved. According to the representative of N.D., the “selective default”, as he characterized the PSI, as well as other technicalities, were rather dangerous and not a success, but as he submitted, his party would not criticize the content of the statement and would support what is good for the Greek citizens. However, he made clear that his party disagreed as to the effectiveness of the austerity measures imposed by the policy of the MoUs and included in the Medium Term Budgetary Framework voted some days before. The rest of the opposition parties sustained that the statement meant nothing more than a new loan agreement and austerity package for the Greek people.
In a later discussion on the matter, on the 26th of August, the opposition parties accused the Government of being weak in the negotiations during this meeting, since very important obligations of the country had been already adopted with the voting of the MTBO. They accused the Government of not negotiating like the Irish Government and of accepting to negotiate bilaterally with Finland the possibility of imposing guarantees, as paragraph 9 of the statement on the 21st of July shows. The Vice-President of the Government responded that the problems of Ireland were not structural, whereas Greece needed structural reforms. On the possibility of guarantees for the EFSF, the Vice President said that it was impossible to avoid negotiations with Finland and that, in the end, the result of these negotiations (equal treatment of all MS) was not detrimental to the Greek interests.
On the 26th of October 2011, a Euro summit took place, where the details of the Greek programme were discussed. After this summit, the Prime Minister decided to proceed to a referendum in order to advise the Greek people on the forthcoming measures. This decision of Papandreou provoked very strong reactions, both by Eurozone leaders and in the domestic political world. It was criticized by deputies of both PA.SO.K. and N.D. Thus, Papandreou was obliged to scrap the referendum and to step out of the Government. A coalition Government was formed under the Prime Minister Loukas Papademos, supported by PA.SO.K., N.D. and LA.O.S.
The positions of the political parties were expressed during the plenary session of the 12th of February 2012, when the second bailout agreement, together with the relevant MoUs, was submitted for discussion and adoption in the Greek Parliament. The debate was very heated and, except from the content of the financial assistance instruments, it also considered their procedure of ratification (again the Government mobilized an emergency procedure and no qualified majority) and the violent protests taking place outside the Parliament.
Several issues regarding the substantive constitutionality of the agreement were raised by the parties of the opposition, in an objection of (substantive) constitutionality. The representative of SY.RIZ.A., the party who raised the objection, defended that the agreement violated Article 22§2 of the Constitution which safeguards the freedom of collective bargaining, since the government would have the competence to invalidate or amend a collective agreement between social partners. He also defended that the very essence of democracy, the principle of popular sovereignty contained in Article 1§2 of the Constitution, was violated, since these measures, agreed between the Government and the “troika”, were profoundly against public sentiment and had no popular legitimacy. In that context, he also submitted the opinion of several distinguished constitutional law professors who agreed that the agreement constituted a “constitutional deviance” and violated several constitutional provisions. He also referred to the acquittance from any criminal responsibility of persons proceeding to the bond exchanges, saying that these provisions were not proper to a democratic regime. The same stance was generally adopted by the MPs of K.K.E. and LA.O.S. The latter also referred to a negative European acquis that these measures were creating for other countries that would subsequently have recourse to a rescue package.
The MPs of the Governing parties (PA.SO.K. and N.D.), referring also to the scientific report of the Legal Service of the Parliament, invoked reasons of national public interest which allow, according to certain decisions of the Council of State, infringement of the collective labour rights invoked by the members of SY.RIZ.A. They considered that there was no issue of violation of the principle of popular sovereignty. Evaggelos Venizelos, the Minister of Finance at the time, further referred to the historical responsibility of the Parliament to vote in favour of the agreements. None of the unconstitutionality objections was upheld at the end since the majority of MPs voted against.
Generally, concerning the content of the financial assistance instruments, the representatives of the Government defended that the new rescue package and the measures it implied were necessary for the country not to run bankrupt and it was the least worse scenario for the Greek economy. They imputed the situation of the economy to the unwillingness to promote necessary reforms during the Metapolitefsi (period after the fall of the military junta). They referred to the delays and hesitations of the European partners of their country and accused them of having a neo-liberal agenda and of not realizing that there can be no common money without a European state or a Eurobond. According to them, however, no better negotiation was possible in the present situation.
The Government coalition parties suggested that voting in favour of the measures was the only solution for the country to gain again its financial stability and to remain part of the “European family”. The measures had to be voted before the opening of the financial markets the next day. If not, the MPs of PA.SO.K. and N.D. described with dramatic images what the situation of the country would be: no money to the banks, nor food, nor medicines, nor salaries, nor pensions. They accused the opposition parties of populism and they stressed that the choice of the policy of austerity was not one of the European partners but of the domestic political parties. They imputed the responsibility for the situation of the country to the pathologies of the domestic political system but also to the Greek citizens who, in their majority, according to them, had benefited from it. They also referred to the need for structural reforms in order to enhance growth, competitiveness, while at the same time to ensure vital public services to the citizens and the correct allocation of responsibilities for the past.
Certain MPs of PA.SO.K. referred to the policy followed by the Eurozone partners, lacking solidarity and addressed to their national electorate. Recalling the sacrifices of the Greek people, they declared that they would not allow the loss of sovereignty and national dignity, for example through the appointment of a Commissioner for Greece or of supervisors to the Ministries. The Minister of Labour and Social Security referred to the negotiations for the rescue package which was “hard and painful”. According to him, the creditors required more harsh austerity and the Government, especially the Prime Minister in the summit meetings, finally obtained less painful measures (concerning cuts on wages, pensions and the validity of collective agreements).
The parties of the opposition accused the Government of terrorizing the people and of abolishing the social state, public education and health services, of infringing collective and individual labour rights and of “selling out” invaluable property of the country, among others, through the privatization of vital public services. They also referred to the harsh stance of the Eurozone partners. The Communist Party MPs accused the Government of posing false dilemmas: the money devaluation, be it internal to the Euro or external, would be to the detriment of the people and to the benefit of the rich. They accused the Government for imposing severe cuts on salaries, especially for those under 25 years old, and for leading to the replacement of collective labour agreements by individual ones. The MPs of LA.O.S. also criticized the measures and especially the consequences that the PSI would have for small bond owners, among which were many Greek enterprises. According to the MPs of SY.RIZ.A., the new rescue package would be ineffective and, just as the first one, would lead to more recession. The money from the loan, in majority, would go to the creditors and to banks. The PSI could be considered as a credit event. The austerity imposed infringed rights and acquis conquered by the people and sold out public goods. According to them the measures adopted by the Government had no popular legitimacy and the Government should lead the country to elections before adopting them.
The parties of the opposition generally referred to the loss of sovereignty imposed by the measures, comparing the country to a “colony” and the political situation as a “dictatorship of the markets”. Concerning the content of the Loan Agreement particularly, the MPs o SY.RIZ.A. complained about the loss of national sovereignty because it was the English law that applied to the Agreement (LA.O.S. also criticized this point) but also because the Luxembourgish courts were defined as competent for any relevant litigation. They also stressed, invoking an opinion of a Legal Advisor of the State, that Greece and the Bank of Greece waived any immunity they enjoyed concerning their property, even their public property. Finally, concerning the PSI, the MPs of SY.RIZ.A. criticized the Government for “robbing” the social security funds (who had bought Greek bonds some days before) and for acquitting the responsible ones from any criminal responsibility. The Minister of Finance and Vice-President of the Government, Evaggelos Venizelos, responded that English law was the dominant law concerning economic agreements and that Greece could not choose its domestic law, since it was in a weak negotiation position. According to him, after having made a “drastic” use of Greek law in the PSI “haircut”, they could not say to the bond owners that Greek law applied again. Finally, he rebutted fears expressed by some that invaluable cultural sites and goods would be subject to forced execution: it is generally accepted that in matters concerning forced execution it is the law of the country where the execution takes place that applies. Thus Greek law would apply in that case and the Greek jurisdictions would be competent. Finally, he suggested that the matter generally was not legal-technical but a matter of historical responsibility.
The President of SY.RIZ.A. proposed the alternative of moratorium of payments (to the creditors), suppression of a part of the debt and payment of the rest with growth clauses and without MoUs, like it happened with Germany in 1953. He said that money should be dedicated to growth and not to the creditors nor to the banks. The President of LA.O.S. referred to the German indemnities for the 2nd World War.
The Prime Minister, Loukas Papademos, said that what was at stake was the European integration strategy followed during many decades by the country. According to him, the programme had economic growth as a goal, with three intermediary objectives: the fiscal consolidation of the country (structural reforms in the public sector and decrease of public expenditure, tax reform, reform in the social security funds in order for them to become sustainable, while protecting lower pensions); the competitiveness of the country (structural reforms in the labour market and in the market of services and goods, amelioration of the business environment, brief court procedures); and the enforcement of the financial sector, at the same time serving the public interest but also the autonomy of private banks. Then the Prime Minister referred to the lack of alternatives and to the detrimental consequences of a default of the country. He thus called upon the MPs to vote in favour of the statute, despite their political or moral hesitations.
The statute was finally voted and adopted with a majority of 199 deputies. The MPs of PA.SO.K. and N.D. who did not vote in favour were deleted from their respective parliamentary groups. The same was done by LA.O.S. for the MPs who voted in favour of the statute.
The second rescue programme was also discussed on the 20th of March 2012, some days after its signature. Similar arguments were expressed by all the party representatives. Yet, certain new issues were discussed. More precisely, K.K.E. and SY.RIZ.A. raised the subject of the priority of the fulfillment of financial obligations vis-à-vis the creditors. Indeed, the agreement provided for the creation of a special fund to this purpose. LA.O.S. and SY.RIZ.A. raised the issue of an agreement with Finland, hidden by the Government, on the guarantees provided by the Greek state in order for Finland to participate to the rescue programme. The Minister denied the existence of any such agreement.
The content of the amended agreement was also discussed on the 14th of January 2013, with the parties reiterating the main points of their argumentation. SY.RIZ.A. raised an objection of unconstitutionality supported by AN.EL. and Golden Down. According to them the Agreement, accepting the application of English law, the waiver from immunities of the Greek state and the jurisdiction of Luxembourgish courts, was abolishing national sovereignty. Moreover, they submitted that the provision of the Loan Agreement, imposing the content of the opinion of the Legal Advisor to the State concerning the legality of the Agreement, was against democratic legality. As far as the agreement was concerned, the deputies of SY.RIZ.A. invoked article 120 of the Constitution. This article declares: “4. Observance of the constitution is entrusted to the patriotism of the Greeks who shall have the right and the duty to resist by all possible means against anyone who attempts the violent abolition of the Constitution.”
The Government parties (N.D., PA.SO.K. and DIM.AR.) responded that UK law was applicable in almost all loan agreements and financial assistance programmes. They argued that it only regulated the obligations of the Greek state vis-à-vis its creditors, but not the enforcement of these obligations, on which Greek law applied and Greek courts are competent. Finally, concerning the opinion by the Legal Advisor to the State, they answered that this was nothing but an “opinion letter”, common in loan agreements. The MPs of SY.RIZ.A., however stressed that the Greek state was not a private company. In any case, the invocation of article 120 provoked a strong reaction by the Governing parties, which did not consider that the democratic regime was violently abolished.
Finally, on the 23rd of February 2012, the details of the PSI were introduced before Parliament for discussion and voting under the emergency procedure, since the programme would start the next day. While the Government considered the PSI a great success in the effort of saving the Greek economy, the rest of the parties were more moderate and stressed that it would be difficult to regain the confidence of the markets, that Greek enterprises and especially the social security funds were affected by the PSI, that no compensatory provisions were included in the draft law and that, generally, the PSI only served the creditors and the capital without leading to growth or ameliorating the situation of the Greek people.
After the 2015 elections and the formation of a government coalition between SY.RIZ.A. and AN.EL., the Greek Minister of Finance refused to negotiate with the “troika”, since this formation has no institutional status. The agreement on the Greek debt is at the moment the object of hard negotiations between the newly elected Left Greek Government and the creditors of the country, the “institutions”. The Government is facing important problems. First of all the creditors require more stringent austerity measures than the ones it proposes to implement in order to conclude to a deal. Secondly, the Parliament opposition wants to prevent a “Grexit” at every cost. Most importantly, an eventual agreement would meet significant objections from within SY.RIZ.A., since many MPs and members of the party disagree with the concessions that the Government is ready to make to the creditors.
What is the status of the financial assistance instruments in the national legal order (political agreement, international treaty, etc.)?
The financial assistance instruments are the Memorandums of Understanding, containing the conditionality for the signing of the Loan Agreements, the Loan Agreements themselves (between Greece and the Eurozone partners/the EFSF) and the Stand-by Arrangements between Greece and the IMF. There has been an intense debate about the nature of these instruments, which has been repeatedly discussed in Parliament, judicial decisions and scholarship, especially concerning the first rescue programme. To the above instruments, one should add the decisions 210/320/EU and 210/486/EU by the Council which, adopted under the excessive deficit procedure, are however closely connected to the financial assistance programme for Greece, as they reiterate the majority of the measures mentioned in the MoUs and specify certain details.
The status of the MoUs has been debated in Parliament during their “implementation” in the national legal order by law 3845/2010 and during the voting for the law 3847/2010 the next day.
On the 6th of May 2010, the statute “Measures for the implementation of the rescue mechanism for the Greek economy” was debated and voted in Parliament. The MoUs signed on the 3rd of May 2010 were attached to this statute, which contained other harsh measures for the implementation of the economic adjustment programme. In the parliamentary debates, K.K.E. raised a procedural objection concerning the voting of the relevant statute. This objection was supported by SY.RIZ.A. The nature of the MoUs was thus discussed, since it determined the procedure required by the Constitution. According to the Communist Party, the Memoranda constituted international agreements which implied the concession of constitutional competences to organs of imperialistic organizations. Thus, their ratification should be voted by a qualified majority of 180 deputies, according to article 28 paragraph 2 of the Constitution. SY.RIZ.A. also defended that the draft law implementing the MoUs conceded essential parts of national sovereignty to international organizations. Indeed, according to the MPs of the Left, these agreements determined the government and social policy of the country for 3-5 years and would constitute a precedent which would apply for decades. They contained a pension draft demolishing the social security system, a freeze of the minimum wages for 3 years, increases in taxes and in prices of public services, freeze of expenditure and lay-offs for local authorities. According to the MPs, the MoUs were nothing but an ideological manifesto violating the Greek Constitution and imposing a special economic and social policy, without the approval of the Greek people. The MPs of SY.RIZ.A. also mobilized a more juridical argument: they stressed the fact that the draft law itself declared that subsequent agreements and MoUs concerning the application of the rescue programme should be submitted to Parliament for ratification. Thus, logically, according to them, the draft law itself ratified the MoUs (which meant that the MoUs were international conventions needing ratification).
PA.SO.K., in Government at the time, responded that we should not stick to procedures and technicalities. According to the Prime Minster, the voting of the MoUs was not a matter of qualified majority but of political responsibility. The draft law should be voted with the normal majority of 151 deputies, in order for the MPs to have a clear conscience and to fulfil their international obligations. The members of PA.SO.K. seemed thus to consider that the political legitimacy of the Government and the Parliament were at stake, that the voting of the statute reflected a historical responsibility vis-à-vis the creditors and the Greek people. Thus, according to them, there was no space for formal democracy but only considerations of substantial democracy should count.
According to LA.O.S., the MoUs did not imply any concession of constitutional competences, since it was nothing but an agreement with the support mechanism adopted through a draft law; thus, it was an economic agreement, just like the ones concluded between the country and its market creditors, when the country had still access to the markets. A similar argumentation was presented by N.D., which did not consider that the relevant agreements had a legal nature at all.
The next day, on the 7th of May 2010, in an austerity package affecting public pensioners, the Government brought a last-minute amendment to the statute voted the day before. This amendment concerned the validity and procedure for the adoption of agreements and memoranda: it delegated their signature to the Minister of Finance and provided that these instruments were valid from their signature and that they were brought to Parliament only for discussion and briefing. This amendment, as well as the fact that it was brought the last minute before voting, provoked strong reactions by all the parties of the opposition (including N.D. and LA.O.S. whose MPs had disagreed as to the nature of the financial assistance instruments as legal international conventions). The Government defended that it concerned only the “legal-technical formulation” of the provision voted the day before. According to them, the amendment was necessary in order for the Loan Agreement, signed some days later, to be valid immediately and in order for Greece not to run bankrupt. The MPs of the opposition, however, considered that this amendment demonstrated the legal nature of the international agreements voted the day before, and that they should thus have been ratified. Even more, according to the MPs of SY.RIZ.A. and K.K.E., they were international agreements conceding constitutional competences to international organizations; this implied that they should have been voted under the procedure of article 28 par. 2, thus with a qualified majority of the 3/5 of the deputies.
The nature of the First Loan Agreement itself was not discussed in Parliament at the time. Statute 3845/2010 delegated to the Minister of Finance its signature, together with other agreements and memorandums concerning the application of the rescue programme. During the debates on the 7th of May 2010, the Minister of Finance committed that the Loan Agreement would be brought to Parliament for voting, despite the amendment which provided only for discussion and briefing. The Agreement was indeed brought for ratification in a draft on the 4th of June, but was never discussed in the Plenum because the relevant Parliamentary Commission considered that ratification was not necessary, according to the amended article 1 paragraph 4 of law 3845/2010.
Paradoxically, article 93 of the law 3862/2010, voted on the 5th of July 2010, explicitly provides for the legal nature of loan agreements as international conventions which are brought to Parliament for ratification and are valid only after the publication of the relevant law in the Official Gazette. Yet, according to article 94 of the same law, this provision is retroactively valid only from the 1st of June 2010; it thus does concern the First Loan Agreement. The same article reiterates that the rest of the agreements and memoranda of understanding relevant to the participation of the country in the EFSF are brought before Parliament only for discussion and briefing. According to the representative of the Government, this provision allowed the Minister of Finance to sign any MoUs, conventions and loan agreements with the Commission, the MS of the Eurozone and the ECB and to proceed to any necessary act for the participation of the country in any legal person created with the EFSF agreement. The MPs of the Government party, PA.SO.K., stressed that the provisions of article 93 were required by the “troika” in order to ensure a political consensus on the loan agreements.
During the voting of the second rescue plan, certain information on the decision of the Council of State (declaring the constitutionality of statute 3845/2010) had leaked in the press. Therefore, the debate did not so much concern the nature of the instruments but their content. The title of the statute implementing the financial assistance instruments illustrates the uncertainty and incoherence of practice on the subject: the statute is entitled “Approval of the Drafts of Loan Facility Agreements between the EFSF, the Hellenic Republic and the Bank of Greece, the Draft Memorandum of Understanding between the Hellenic Republic, the European Commission and the Bank of Greece and other urgent provisions for the decrease of the public debt and the saving of the national economy”. Thus, its voting took place before the signature of the relevant agreements and the statute habilitated the Minister of Finance and the President of the Bank of Greece to represent the country and to sign the approved agreements, which were valid from their signature. The Minister of Finance argued in the competent Parliamentary Committee that the approved agreements were “staff level” agreements. However, article 1 paragraph 6 of the statute 4046/2012 declares that certain provisions of the Memorandum of Understanding on the Specific Conditions of Economic Policy “are perfect legal rules of direct application”.
On the 14th of March 2012, the day before the signing of the second Loan Facility Agreement, the Greek Government enacted an administrative act of legislative content, again approving the draft of the agreement and delegating to the Minister of Finance, the President of the Bank of Greece and the President of the Hellenic Financial Stability Fund its signature. After its signature, the Minister should introduce the agreement to Parliament “for briefing”. The act was voted in Parliament on the 20th of March 2012. Thus, in this way, the Parliament retroactively voted the approval of the agreement and the delegation to the Minister to sign it. The voting took place after the actual signing of the agreement. The same procedure was followed for the Amendment of the Agreement, which was finally voted in Parliament on the 14th of January 2013. The use of legislative decrees and its ratification through an emergency procedure provoked strong reactions by the parties of the opposition. Especially concerning the circumvention of the procedure for the ratification of the agreement, the strongest reactions came from the MPs of AN.EL.
The nature of the MoUs has been discussed thoroughly in the decision 668/2012 by the Symvoulio tis Epikrateias (Council of State), published on the 20th of February 2012. According to the plaintiffs, this statute ratified an international treaty that transferred constitutional competences to international organizations. Thus, it should have been voted by a qualified majority of at least 180 deputies in the Greek Parliament, a condition that had not been satisfied by the majority of 172 deputies that had actually voted in favour of the law (article 28 paragraph 2 of the Constitution). The Court replied that, even though a result of negotiations and agreement between Greece and international or supranational institutions, the Memorandum (meaning the MoUs) did not constitute an international treaty binding the Greek Government, but only the political programme of the Government for the confrontation of the economic problems of the country through the European rescue mechanism. This programme defined certain general goals for the next three years, the means for their achievement and the time-line of the measures that had to be taken; this, independently from the obligations that the country assumed with the subsequent Loan Facility Agreement. With its attachment to statute 3845/2010, the Government only solemnly publicized the content of this program, already contained in the Stability and Growth Programme 2010-2013. Therefore, as a political program, the Memorandum did not result in the transfer of competences to international authorities, it did not create legal rules and it did not possess a direct effect in the domestic legal order, given that, for its application, the constitutionally competent organs had to enact some implementing measures. Indeed, some of the measures announced in the Memorandum were enacted with other provisions of statute 3845/2010. The fact that the Memorandum had been written in English and signed by the representatives of the Greek state and by the representatives of the MS of the Eurozone, moreover, did not mean that it was a convention. Even more, the IMF did not sign the Memorandum and, generally, the settlements for the financial assistance to states by the IMF are not international conventions. Moreover, the signatory states did not assume legal obligations and no legal measures or sanctions were contained in the MoUs in order to enforce their application. Finally, the subsequent Council decision 210/320/EU, enacted in the framework of the excessive deficit procedure, which determines which measures should be taken by the Greek Government, was an indication that the signatory parties of the MoUs did not want to assume legal responsibilities through its signature: the Eurozone creditors wanted the Council to enact a relevant decision before they provided financial assistance to Greece. Thus, according to the majority, any legal obligations for the Greek state did not result from the MoUs themselves but from the Loan Facility Agreement or from the Council decision. However, statute 3845/2010 had been published before the signing of the Agreement and the Council decision, and thus provided the legal basis for the administrative acts attacked by the plaintiffs (point 28).
According to a concurring opinion of three judges, the Memorandum produced legal consequences and was an international treaty, since it had been concluded between international law subjects, who had the intention to assume binding responsibilities. More precisely, the contracting parties had agreed on some conditions, whose fulfillment would be monitored by a special organ, on which the reimbursement of tranches of the loan provided to the Greek state depended. These conditions constituted a political programme and covered a wide range of public policies. On all the subject matters that they covered, the MoUs defined measurable goals that would be achieved through the adoption of concrete measures under a specific time-line. The Greek state had assumed the obligation to adopt these measures with acts issued by its authorities. This programme had been attached to and ratified with statute 3845/2010, which had provided a secure legal framework for the contracting states, in order to sign subsequently the Loan Agreement. However, the Greek state had not conceded constitutional competences to international or supranational authorities through the MoUs, nor did it result from the agreements that this had been the intention of the contracting parties. Thus, the qualified majority of article 28 par. 2 of the Constitution was not required for ratification of the statute (point 28).
Another concurring opinion of three judges concludes to the same result but distinguishes itself as to the nature of the agreements. According to this opinion, the MoUs produced legal consequences. They had been written with the objective to correct the financial imbalances of the Greek economy, and in order to obtain the loan that the MS of the EU had bound themselves to provide (through the statements and declarations of the Heads of States and Government), though they had no such obligation under EU law. Thus, according to these judges, the MoUs constituted a preliminary agreement for the subsequent bilateral loan agreements (point 28).
Three dissenting opinions were expressed on this matter – nine judges (out of a total of 55). According to one of the Vice Presidents of the Council of State, the legal nature of the Memorandum was indicated by what preceded it and what succeeded it, as well as by its content itself. First of all, according to this judge, one must take into account official declarations by the creditors and especially by Germany, having a de facto hegemonic role among them. Generally, the legal nature of an agreement does not depend on the will of the contracting members or on the fulfillment of the procedure defined in the Vienna Convention, this convention not being hierarchically superior to future conventions. It only depends on whether there has been a concurrence of will between subjects of international law and on whether this will contains the production of binding rules. Besides, the use of the term Memorandum was not even an indication that no will to create obligations existed. Concerning the stage before the signing of the Memorandum, the judge mentioned the most important events and stressed that the MoUs had been required in order for the creditors to provide financial assistance to Greece. The Memorandum was concluded between the representatives of the contracting parties. The day of its conclusion, the Minister of Finance and the President of the Bank of Greece provided written confirmation that Greece would fully comply with the policies defined in the relevant Council Decision and the MoUs. Therefore, the Memorandum constituted an intergovernmental convention (despite the role of the Commission), which contained specific terms, on which the reimbursement of the tranches of the bilateral loans depended. In order to support his opinion, the judge provided as evidence the explanatory report of the relevant German statute of the 8th of May 2010 and a declaration made by Merkel in the Bundestag on the 5th of May 2010. According to the judge, the conditions defined in the MoUs contained obligations for the Greek state, which concerned a very broad range of matters in economy but also in public policy, as well as the structure of public administration, the scope and quality of the social state and the property rights of the Greek state. The MoUs imposed actions by the legislative power in all these domains and a specific time-line for these actions. The fulfillment of these conditions would be certified by the “troika” and their non-sufficient fulfillment would result in the suspension of the financing of the Greek state. This “programme” was attached to and ratified with law 3845/2010 and thus ensured a secure legal framework for the signature of the subsequent Loan Facility Agreement. This agreement explicitly declared that its application depended on the compliance by Greece with measures defined in the MoUs. Moreover, the judge referred to many assertions, found in introductory reports to statutes implementing the MoUs, but also to the statute ratifying the 2011 budget, as well as in parliamentary debates. These assertions showed the conviction of the legislator that the Memorandum created binding obligations for the Greek state as an international treaty. This conviction of the political world was also manifested in subsequent “adjustments” to the program and in letters sent by the Minister of Finance and the President of the Bank of Greece to the President of the Eurogroup, to Commissioner Olli Rehn and to the President of the ECB, where they enumerated in detail the measures already taken for the application of the program and they announced the measures that would be taken in the future (point 29).
Another dissenting opinion was supported by 6 judges, who sustained that the Memorandum was an international convention which created specific binding obligations and whose non-application incurred legal consequences. Its binding character, according to this opinion, was explicitly mentioned in many excerpts of the Memorandum. With this text Greece was obliged to enact measures in broad domains of state action and with exceptional detail on the content and the time-line of these measures. The Memorandum itself referred to “obligations”, “close observation of the program”, “measures” that would be taken if needed for its observance, “application” of its provisions. Moreover, the financing of the Greek state depended on the fulfillment of these conditions. Finally, the binding legal character of the MoUs was also indicated by the fact that the Greek Parliament voted successively many statutes to their application. The signature of the Memorandum shows that there was a concurrence of will between the contracting parties. Therefore, the Memorandum was an international convention. Besides, the eventual will not to attribute legal consequences by the contracting parties or the lack of sanctions was of no importance as to the legal nature of the agreement, nor was the subsequent Council Decision, since the EU is not part of the convention. According to this opinion, then, the convention containing the three MoUs referred to taxation, economic collaboration or concessions, thus matters personally burdening the Greek people and should have been ratified according to article 36 par. 2 of the Constitution. Since these conventions were not part of EU law, they should have been ratified by a legal statute. Even more, since the Memorandum conceded constitutional competences to international institutions, it should have been voted with a qualified majority of the 2/3 of the deputies (180 votes). The attachment of the draft of the Memorandum to law 3845/2010 (without the signatures of the contracting parties) did not constitute ratification. Besides, the statute was not voted with the required majority. Therefore, the relevant obligations had not been validly assumed by the Greek state and the enactment of measures for their application was contrary to the Constitution (point 29).
Finally, using similar arguments to the above opinion, two judges defended that the Memorandum had all the characteristics of international agreements: A) it had been concluded between subjects of international law. However, according to them it was between Greece and the EU that the MoUs had been concluded, since the only legal existence of the Commission is that of an EU institution (the eventual incompetence of the Commission to conclude such an agreement is a matter of EU law and cannot be monitored by Greek courts). B) It had recognized constitutional competences to the Commission as an EU institution. These were especially the determination of the general policy of the state, which according to article 82 of the Constitution is a competence of the Government. The MoUs determined compulsively and in detail measures that should be enacted by the Greek state. These measures concerned taxation, social security, health, structural reforms etc. and did not enter the scope of competences of the EU, but belonged to the exclusive competences of the MS. The provisions of the Memorandum exceeded thus the Council Decision, also because the consequences of its non-fulfilment exceeded the measures available to the EU institution in case of noncompliance under the excessive deficit procedure. Thus the MoUs constituted an expansion of the EU competences which was isolated and concerned only the Greek state. Independently from their validity from an EU law point of view, these agreements should have been ratified by law (article 36 par. 2) voted by a qualified majority (article 28 par. 2). Thus, statute 3845/2010, not voted under this procedure, as well as all administrative acts having this statute as a legal basis, was unconstitutional and invalid (point 29).
The question of concession of sovereignty with the MoUs was also thoroughly discussed in the decision. Article 28 paragraph 3 of the Constitution declares that “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.” The judges examined if this article had been respected in the voting of the statute 3845/2010. The majority of judges rejected the claim of the plaintiffs, even if the provision of article 28 paragraph 3 does not only concern territorial restrictions of sovereignty, but also substantial restrictions. According to them, the MoUs were a political programme of the Government and did not result in the concession of constitutional competences concerning financial and economic policy to supranational/international institutions, nor did they result in restrictions to national sovereignty. The Greek government retained its competence to determine the general policy of the state, according to article 82 paragraph 1 of the Constitution (point 32).
According to the concurring opinion of two judges, the Memorandum, being a preliminary agreement for the subsequent intergovernmental loan conventions (see above), did not result in a restriction to national sovereignty. These judges considered that the granting of a loan of 80 bn was not connected to any concession of national sovereignty. More precisely, they submitted that the creditors had reasonably connected the reimbursement of tranches to the fulfilment of certain goals, whose achievement would be monitored on a three month basis. The matter of an eventual de facto limitation of national sovereignty was not a legal matter and fell out of the competence of the Council of State to examine (point 32). Two other judges expressed the concurring opinion that article 28 paragraph 3 refers only to territorial concessions of sovereignty and thus was not applicable in the case at hand, which concerned constitutional competences (point 32).
Three minority opinions were expressed on this matter. According to the opinion of one of the Vice-Presidents of the Court, the Memorandum, being an international convention (see above the minority opinion by the judge on this matter) which set calculable objectives, specific measures and a specific time-line for their enactment and for the achievement of the objectives, imposed to the legislator to act, especially to vote legal statutes, which would execute the MoUs and would be subordinate to it. The content and the application of these statutes would be monitored by the “troika”, with the non-reimbursement of loan tranches as a sanction. This content and consequences of the Memorandum convention infringed, according to the judge, the autonomy of the legislator, by determining the content and the time-line of legislative initiatives. The autonomy of the legislator is a fundamental democratic principle, resulting from articles 3 par. 3 (principle of popular sovereignty), 26 par. 1 (legislative power), 60 par. 1 (freedom of conscience, opinion and vote of deputies) and 110 (eternity clause) of the Constitution. This principle imposes the freedom of action of the legislator and of the particular institutions having legislative power. According to this judge, this principle is particularly important when programmatic commitments are agreed by the executive with other countries and create obligations to the Greek state. Thus, the MoUs and their ratification statute were invalid, as infringing on fundamental democratic principles in violation of article 28 paragraph 3 Constitution (point 33).
According to the minority opinion of 6 judges, the Memorandum was an international convention (see above the opinion by the same judges), through which the Greek state had assumed the obligation to enact specific measures, according to a specific time-line. These measures concerned a wide range of domains of state action and their content and deadlines for implementation were described with exceptional detail. Though this convention had not been ratified by a legal statute (see above the opinion of the same judges) and had not acquired the supra-legislative status according to article 28 par. 1, some of its provisions were implemented through statute 3845/2010. Thus, according to these six judges and one judge (who agreed with the opinion only on this point), Greece had not “freely” conceded parts of its national sovereignty as article 28 par. 3 Constitution imposes, since the content of the legal statute was dictated by the Eurozone partners. Further, nor had the substantial conditions set by paragraph 3 been respected, since the attacked provisions were violating human rights, especially the principle of equality (the same judges expressed a minority opinion on the compatibility of the substantive content of the statute and the MoUs to fundamental rights.) Therefore, statute 3845/2010 was in violation of article 28 paragraph 3 of the Constitution and was invalid (point 33).
Finally, according to the minority opinion of one judge, article 28 par. 3 of the Constitution refers to territorial concessions, especially of temporary nature. However, the power to freely exercise public policy by the constitutional authorities of the state is also, a minore ad maius, part of national sovereign powers. When article 28 par. 2 Constitution is not applicable, the constitutional legislator set very strict substantial conditions for the concession of such sovereign powers, whose fulfilment is subject to judicial review. Since, according to the majority opinion, statute 3845/2010 did not concede constitutional competences according to article 28 par. 2, it entered the scope of article 28 par. 3. Indeed, according to this judge, this statute was limiting the exercise of national sovereignty by conceding to the Commission, the Member States of the Eurozone, the IMF and the ECB constitutional competences concerning the planning and implementation of the general policy of the state in crucial matters, like economic and financial policy, but also in domains affecting fundamental rights, like human dignity, social security, health and welfare. According to the judge, the measures included in the statute were infringing the core of these rights, since they were endangering the decent way of life of the weaker economic classes and their right to vital public services. Though the legislator invoked the compelling public interest of correcting the deficit of the Greek state and of preserving the economic and financial stability of the Eurozone, it was not clearly and in detail demonstrated why recourse to a loan agreement under these conditions was the only solution for avoiding bankruptcy, neither why these measures were appropriate and necessary, following the principles of equality and proportionality. Such an analysis would require a comprehensive economic study. Therefore, statute 3845/2010 conceded national sovereign powers without proving that the substantial conditions set by article 28 par. 3 were respected and was thus invalid as unconstitutional (point 33).
The European nature of the texts was discussed in another decision by the Plenum of the Council of State, published some days later. In this case, the plaintiff alleged that the pension and allowance cuts imposed by law 3845/2010 were violating article 34 of the European Charter of Fundamental Rights. The Court responded that this text is applicable only when Member States are applying EU law; thus it was not applicable to the case at hand, since the contested measures were measures of purely internal policy, taken by the national authorities according to domestic law provisions. The participation of the EC or the ECB in the drafting of the domestic economic programme did not incur the application of the Charter (points 20-1).
Academic opinions on the matter diverge considerably as well. Concerning the Memorandums of Understanding, Chrysogonos has argued that they constitute “simplified agreements” in the sense of article V statute IMF. Therefore, they are not binding legal texts, since Greece has the possibility to opt-out, nor are they restricting national sovereignty. Katrougkalos comes to the same conclusions; according to this author, the MoUs are not international conventions, because of the lack of creation of binding rules and of the will for legal consequences by the signatory parties. They are often characterized as a “draft programme” or an “action plan” in their text itself. In the IMF legal order, they are preparatory texts, which are not part of the loan agreement. Their attachment to law 3845/2010 gives them a formal legal status, though they do not produce substantial legal rules, since they only contain programmatic declarations. However, Katrougkalos submits that it would be compatible with the spirit of the Constitution to apply article 28 par. 2 as regards the voting procedure, since they impose important de facto limitations to national sovereignty. According to Gerontas, the MoUs constitute the explanatory reports to law 3845/2010, justifying the measures contained in this statute. Their voting is part of the interna corporis of Parliament and is not subject to judicial review. On the contrary, Marias accepts the legal nature of the MoUs as international conventions.
Concerning the Loan Agreements, on the contrary, most authors agree on their legal nature and consequences. According to Chrysogonos, they are international conventions, which need to be ratified under article 36 of the Constitution. Since they infringe upon the core of national sovereignty and the foundations of democracy, however, they do not respect the conditions set by article 28 of the Constitution. Their ratification would not be possible even after a constitutional amendment, since article 110 Constitution forbids the infringement of national sovereignty and of fundamental democratic principles (eternity clause). Katrougkalos also submits that the Loan Agreement is an international convention, which has a binding legal force and should be ratified by law, according to art 36 par. 2. Pavlopoulos stresses that, “even under the strictest legal view”, the Loan Agreements are “a complex of rules and future international conventions”, entering the scope of article 36 Constitution, thus needing ratification. The same opinion is expressed by Giannakopoulos. However, concerning the loan agreement with the IMF, this scholar defends that it is not a convention that should be ratified, but an activation of rights and obligations resulting from the already ratified participation of Greece to the IMF. Bredimas considers that the agreement with the IMF is not legal, since the IMF at least does not consider it binding, but it could be a “soft law” instrument.
Kasimatis, not distinguishing between the agreements and the MoUs, defends that these texts are international conventions entering the scope of article 36 par. 2 Constitution. Thus, they should have been ratified by law. According to this author, this is a condition for their validity from an international law point of view. However, he also mentions that in international practice the condition of ratification is often not fulfilled. Independently from their international law validity, article 28 Constitution declares that ratification is needed in order for the agreements to be valid in the domestic legal order. Kasimatis mobilizes many arguments to support that the agreements concede constitutional competences of all branches of power to supranational institutions. Since these powers belong to the exclusive competences of MS, they should have been ratified with the qualified majority defined in article 28 par. 2 Constitution.
Certain scholars propose a more holistic view of the “web of texts” constituting the rescue programme for the Greek economy.
Manitakis says that this web of texts has both EU and international character and a public international economic character. The rescue mechanism is a sui generis formation, a precursor of the European financial integration, at the boundaries of EU and international legality. The MoUs constitute an “informal international convention”, a simplified agreement with programmatic character which does not create legal rules, nor does it provide for legal sanctions for its enforcement. According to this author, even after their attachment to law 3845/2010, the MoUs were not ratified, since they do not need ratification. However, they have a legal nature; they are “soft law” rules oriented to the achievement of certain goals. Independently, the MoUs also constitute the programme of the Greek Government and an explanatory report to law 3845/2010, justifying the austerity measures that it contains. This author submits that, despite their “soft law” and programmatic character from an internal point of view, the MoUs are binding for the Greek state vis-à-vis the signatory states, from an international law point of view. Their respect is also a condition for the Loan Agreement, thus their validity in international law is associated to their application in national law. 
As far as the Loan Agreements are concerned, Manitakis defends that they are sui generis international agreements with a European and international nature. According to constant constitutional practice, economic agreements are not ratified by law. However the Loan Agreements create burdens for Greek citizens and thus they might enter the scope of article 36 par. 2 Constitution. In any case, the matter is contested; therefore the agreements are not invalid. Besides, the obligation for ratification is a governmental obligation, not subject to judicial review and not affecting the legal bindingness of the texts. That is, except from certain provisions which would be applied by Greek courts, such as the waiver of any immunity by the Greek state.
Botopoulos defends that the Memorandum is a “sui generis international convention”. He considers, however, that no matter of application of article 28 par. 2 Constitution is raised, since there is no concession of constitutional competences. The MoUs, according to this author, create a national obligation to fulfil the generally agreed rules of international law.
Antoniou, finally, accentuates the European dimension of the matter and maintains that the “web of texts” constituting the first rescue mechanism is part of an on-going transformation in the process of European integration and of the creation of a European rescue mechanism. Thus, the MoUs and the Loan Agreements were de facto amending the European treaties and lead to a further concession of constitutional competences and sovereign powers to the EU. This, she submits, should have been approved by the Greek Parliament according to par. 2 and 3 of article 28 of the Constitution, thus respecting both the qualified majority requirement and the substantial conditions set by this article. The European dimension of the texts is also stressed by Marias and Giannakopoulos.
Transposition national legal order
Considering the status of the financial assistance instruments, what procedure does the constitution prescribe for their adoption/transposition into the national legal order?
The procedure required by the Constitution for the adoption and transposition of the financial assistance instruments into the national legal order depends on their nature.
Concerning their signature, article 36 declares:
“1. The President of the Republic, complying absolutely with the provisions of article 35 paragraph 1, shall represent the State internationally, declare war, conclude treaties of peace, alliance, economic cooperation and participation in international organizations or unions and he shall announce them to the Parliament with the necessary clarifications, whenever the interest and the security of the State thus allow.
2. Conventions on trade, taxation, economic cooperation and participation in international organizations or unions and all others containing concessions for which, according to other provisions of this Constitution, no provision can be made without a statute, or which may burden the Greeks individually, shall not be operative without ratification by a statute voted by the Parliament.
3. Secret articles of an agreement may in no case reverse the open ones.
4. The ratification of international treaties may not be the object of delegation of legislative power as specified in article 43 paragraphs 2 and 4.”
Thus, the Constitution declares that the representation of the country and the signature of treaties is an exclusive competence of the President of the Republic. However, a general simplified practice has prevailed (a constitutional custom), according to which the representative of the state in the relevant negotiation can also sign the treaties. This simplified procedure was also employed in the signing of the MoUs (if one accepts their legally binding nature) and the Loan Agreements (most scholars accept their legally binding nature; decision 668/2012 by the Council of State also seems to accept this): the agreements were signed by the Minister of Finance and the President of the Bank of Greece (and, in the second rescue programme, by the President of the Hellenic Financial Stability Fund).
Concerning the ratification, article 36 requires, in order for a treaty to be operative, a statute voted by the Parliament for all “[c]onventions on trade, taxation, economic cooperation and participation in international organizations or unions and all others containing concessions for which, according to other provisions of this Constitution, no provision can be made without a statute, or which may burden the Greeks individually”.
Article 28 defines the validity and (hierarchical) status of international and supranational law in the national legal order. It declares:
“1. The generally recognised rules of international law, as well as international conventions as of the time they are ratified 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 ratifying 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.
** Interpretative clause: [added in the 2001 constitutional amendment]
Article 28 constitutes the foundation for the participation of the Country in the European integration process.”
When European treaties are amended, scholars accept the possibility of “tacit” constitutional amendment through article 28 of the Constitution. However, according to the dominant opinion, in order for this to happen, the special procedure and the substantial conditions set by paragraphs 2 and 3 of this article must be respected.
The obligation for ratification of the financial assistance instruments, the procedure that must be followed and the normative status of these instruments in the national legal order, depends on their nature (legally binding or not, European or not) and legal consequences (affecting domains for which a statute is required – like fundamental rights or taxation, creating burdens for Greek citizens, conceding competences, restricting the exercise of national sovereignty, infringing fundamental rights, the principle of equality or fundamental democratic principles etc.). This subject and the consequences of an eventual lack of ratification of an agreement are debated in Greece.
Another procedure for the signature and ratification of agreements and memoranda for the application of the support mechanism has been instituted by crisis legislation. Article 1 paragraph 4 of statute 3845/2010 delegated to the Minister of Finance the power to sign conventions and agreements relevant to the support mechanism. It declared that they should be brought to Parliament for ratification. However, law 3847/2010, voted the next day, amended this provision, which now declares that these conventions and agreements are “operative from their signature” and that they are brought to Parliament for “discussion and briefing”.
This amendment, as well as the fact that it was brought in the last minute before voting, provoked strong reactions by all the parties of the opposition (including N.D. and LA.O.S. whose MPs had disagreed as to the nature of the financial assistance instruments as legal international conventions). The Government defended that it concerned only the “legal-technical formulation” of the provision voted the day before. According to them, the amendment was necessary in order for the Loan Agreement, signed some days later, to be valid immediately and in order for Greece not to run bankrupt. The MPs of the opposition, however, considered that this amendment demonstrated the legal nature of the international agreements voted the day before, and thus they should have been ratified. Even more, according to the MPs of SY.RIZ.A. and K.K.E., they were international agreements conceding constitutional competences to international organizations; this implied that they should have been voted under the procedure of article 28 par. 2 Constitution, thus with a qualified majority of 3/5 of the deputies.
The same provision, as far as the MoUs are concerned, is reiterated in article 93 of statute 3862/2010, voted on the 5th of July 2010. However, the same article provides for the ratification of Loan Agreements by Parliament after their signature, thus recognizing their legal nature. This provision, having a retroactive force from the 1st of June 2010, and thus not encompassing the First Loan Agreement, was asked by the creditors in order to ensure consensus in the Greek Parliament on future Loan Agreements.
This procedure was discussed in the Council of State decision on the First Memorandum (668/2012). A point raised by the plaintiffs was the broad delegation to the Minister of Finance to represent the Greek state and to sign memoranda and loan agreements for the application of the rescue program. According to them, this delegation was invalid, because it was contrary to article 36 par. 2 of the Constitution. The majority of judges rejected the cause as inadmissible, as the attacked administrative acts were not connected to this provision, which referred to future conventions and agreements (point 30). A minority of two judges, on the contrary, accepted to consider the complaint. According to them, the Memorandum and the Loan Agreement were international conventions and entered the scope of article 36 Constitution. Thus, the President of the Republic was competent for their signature (article 36 par. 1) and they should have been ratified by law. They maintained, thus, that article 1 par. 4 of law 3845/2010 set rules that were contrary to the Constitution for the signature and ratification of international treaties and was invalid. Further, the MoUs, which had been signed and ratified according to article 36 Constitution, were invalid and so were their implementation provisions in the statute 3845/2010 (point 31).
Constitutional law scholars agree as to the unconstitutionality of this provision, which circumvents the constitutional procedure for the ratification of international conventions, since article 36 par. 3 Constitution explicitly forbids delegation of the power to ratify treaties by the legislator.
What is the actual role of Parliament with regard to the adoption/transposition into the national legal order of the financial assistance instruments?
Generally, none of the financial assistance instruments has been ratified by a legal statute. Concerning the first rescue programme, the MoUs have been argued to be the political programme of the Government. They were attached to law 3845/2010, containing also some implementation measures, and voted through the normal procedure on the 6th of May 2010. The Loan Agreement has been argued to be an economic agreement for the financing of the country, not needing ratification according to constant constitutional practice. Yet, the First Loan Agreement was introduced to Parliament for ratification on the 4th of June 2010. However, this procedure was considered unnecessary by the competent parliamentary commission, since article 1 par. 4 of statute 3845/2010, as amended by the statute 3847/2010, provided that loan agreements are brought to Parliament only for discussion and information.
Concerning the second rescue programme, argued to be a simplified (“staff level”) agreement, the signature of the relevant texts had been preceded by statute 4046/2012, voted on the 12th of February 2012. The voting of this statute constituted their approval by Parliament and delegated their signature to the Minister of Finance, the President of the Bank of Greece and the President of the Hellenic Financial Stability Fund.
For the adoption and implementation of the financial assistance instruments the frequent use of emergency instruments and procedures has been justified by the Government as connected to the saving of the economy or the regular application of the rescue programmes.
The day before the actual signing of the Loan Agreement and the MoUs the Government issued an administrative act of legislative content, again approving the draft of the agreement and delegating to the Minister of Finance, the President of the Bank of Greece and the President of the Hellenic Financial Stability Fund its signature. After its signature, the Minister should introduce the agreement to Parliament “for briefing”.
Article 44, paragraph 1, of the Greek Constitution declares:
“1. Under extraordinary circumstances of an urgent and unforeseeable need, the President of the Republic may, upon the proposal of the Cabinet, issue acts of legislative content. Such acts shall be submitted to Parliament for ratification, as specified in the provisions of article 72 paragraph 1, within forty days of their issuance or within forty days from the convocation of a parliamentary session. Should such acts not be submitted to Parliament within the above time-limits or if they should not be ratified by Parliament within three months of their submission, they will henceforth cease to be in force.”
The act was voted in Parliament on the 20th of March 2012. Thus, in this way, the Parliament retroactively voted the approval of the agreement and the delegation to the Minister to sign it, without however ratifying the agreement. The voting took place after the actual signing of the agreement.
The same procedure was followed for the Amendment of the Agreement, which was finally voted in Parliament on the 14th of January 2013. In the same draft law, except from the act approving the second rescue package, the Government proposed the ratification of another five non-related acts of legislative content, as well as certain other provisions, not related among them. Some of the acts and provisions of the statute imposed new austerity measures. The emergency procedure was employed, implying a one-day discussion in the competent committee of the Parliament and one day of discussion and voting in the Plenary Session (3 days between the first submission and the final vote). The use of a legislative decree and its ratification through an emergency procedure provoked strong reactions by the parties of the opposition. They accused the Government of degrading the role of the Parliament and of circumventing democratic procedures, the Constitution and the Standing Orders. Especially concerning the circumvention of the procedure for the ratification of the agreement, the strongest reactions came from the MPs of AN.EL., who stressed its unconstitutionality. The use of this atypical procedure allowed the rebuttal of arguments concerning the application of article 28 of the Constitution.
Even when legislative decrees have not been employed, emergency procedures were still mobilized by the Government. It is illustrative that both the statutes 3845/2010 and 4046/2012, introducing for the first time in Parliament the MoUs for the first and the second rescue package respectively, were discussed following the emergency procedure of articles 76 par. 4 of the Constitution and 109 of the Standing Orders of Parliament. So was statute 4050/2012, introducing the details of the PSI, where the Government invoked the “national responsibility” to proceed rapidly to the procedure. Article 76 par. 4 declares: “4. A Bill or law proposal designated by the Government as very urgent shall be introduced for voting after a limited debate in one sitting, by the Plenum or by the Section of article 71, as provided by the Standing Orders of Parliament.” According to article 109 of the Standing Orders, the competent Parliamentary Committee, if it accepts the bill’s urgent character, discusses and votes on it in one sitting. Therefore, no more than three days separated the submission and voting of the relevant statutes.
The mobilization of the emergency procedure has caused strong reactions by the opposition parties. MPs have constantly complained about not having the time to read the discussed texts, which are long and contain many technical details. Moreover, the opposition parties and independent MPs have complained about not having the time to express the opinion in the 10 hours provided for discussion by article 109 of the Standing Orders. They generally accused the Government of artificially creating the urgent character of these measures in order to silence parliamentary opposition. MPs of SY.RIZ.A. have referred to a “dictatorship of the markets”. Even a Minister of the PA.SO.K. Government of 2010 admitted that he had not had the time to read the First Memorandum, something that caused a lot of criticism inside and outside the Parliament. The Government has responded to these accusations by repeating the economic emergency in which the country is and by invoking the political and moral responsibility of the Government as opposed to the procedural issues raised by the opposition parties. On the 12th of February, the Minister of Finance (and professor of Constitutional law) Venizelos argued that this procedure has been commonly used for very important issues that have been discussed for many days in the media and of which the MPs should be aware. The complaints of the opposing parties have had as only consequence the nominal ballot at the end of the procedure, since it is the Government, with the approval of the competent Parliamentary Committee, who decides on the urgent character of the bill.
The role of Parliament is further degraded by the common practice of voting the relevant issues in one article. This actually equalizes the general discussion on the statute to its article by article discussion and imposes the acceptance or rejection of the relevant text as a whole. This practice, oriented to avoiding disagreements internal to the Governing parties, is connected to the partisan discipline imposed by the Presidents of the parties before the voting of the relevant statutes. Partisan discipline is a more general characteristic of the Greek parliamentary regime. During the voting of the financial assistance instruments it has led to the suppression of many MPs of the governing parties from their parliamentary groups. The parties of the opposition have argued that partisan discipline violates article 60 of the Constitution, ensuring the freedom of conscience of deputies. To these “informal” constraints to parliamentary discussion, one should add the frequent departure of the discussion from the financial assistance instruments themselves, since, usually, the voting of the relevant statutes takes place during or after violent protests and terrorist events.
The fact that there had been no extended discussion in Parliament raised a lot of suspicion and poisoned the national debate on some financial assistance instruments. In many cases, MPs have been informed about the content of these instruments, especially the First Loan Agreement, by international media (Financial Times or The Guardian). Finally, the MPs of SY.RIZ.A. accused the Government that there had been some errors in the translation of the MoUs as annexed to law 3845/2010. These errors had resulted in the omission in the Greek version of certain austerity provisions which existed in the English original, as published on the IMF website. The Prime Minister denied the existence of these translation errors.
Describe the relevant content of the financial assistance instruments.
The financial assistance instruments of the first bailout programme for Greece are a Loan Facility Agreement between Greece and the Euro area Member States (80 bn), a Stand-by Arrangement between Greece and the IMF (30 bn) and an annex containing three Memoranda of Understanding. The MoUs “are living documents and are modified at every programme review, based on implementation of previous commitments and identification of new ones.” They are drafted jointly by the “troika” and the Greek authorities. In 2010, the MoUs have been accompanied by letters of intent written by the Minister of Finance and the President of the Bank of Greece, expressing their commitment to full compliance with the programme. (An Intercreditor Agreement regulates the relationship between creditors). The policies described in the MoUs are subsequently adopted in Council Decisions, after recommendation of the Commission, under the excessive deficit procedure of article 126 TFEU.
The Memorandum of Economic and Financial Policies describes the recent developments leading to the burst of the Greek debt crisis, sets the general objectives of the programme: to correct fiscal and external imbalances and restore confidence and competitiveness after an adjustment period. In its third part, the MoU defines specific economic policies in order to achieve the objectives declared in the second part. These are important tax increases including housing taxation, wage and pension cuts, reform of the social security and pension system, bank supervision and structural reforms in the public sector and in the job market, loosening labour law protection. Among the specific austerity measures provided by the MoU are the elimination of the 13th and 14th pensions and salaries in the public sector, while protecting the lowest incomes; the replacement of only 20% of the retiring employees in the public sector; the financial consolidation of local authorities; reforms in the health sector (accounting and management); cuts in the discretionary public spending; changes in the budgetary process (with the technical support of the IMF and the Commission); structural reforms concerning the Greek Statistics Authority; the creation of a Financial Stability Fund for the banking sector; modernization of the administration (reorganization of the recruitment procedures, introduction of a simplified remuneration system, independent and external functional review); flexibilization of labour protection and reform of the protective framework for wage bargaining; opening up of restricted professions; tariff increases in public transportation. The MoU sets very detailed quantitative targets (the impact of the measures on the budget) and a specific time-line for their implementation. An explanation of every measure along with its “logic” and its aim was also included in the annex of the agreement. At the end of the annex there was a schedule of all the actions needed to be taken by the government or the legislator along with the deadline for their implementation. The text also provides for the review of the implementation of the programme on a three-month basis.
The Technical Memorandum of Understanding contains definitions of the technical terms of the first MoU and defines the methods and criteria for monitoring the implementation of the programme.
Finally, the Memorandum of Understanding on Specific Economic Policy Conditionality declares that “[t]he quarterly disbursements of bilateral financial assistance from euro area Member States will be subject to quarterly reviews of conditionality for the duration of the arrangement.” It also imposes the consultation of the IMF, Commission and ECB, and their information considering government policies covered by the programme. The authorities provide a “compliance report” prior to the disbursement of the loan instalments. Then the text enumerates the specific legislative and administrative measures that should be taken on a three month period basis (until the end of 2011) in each of the economic policies mentioned in first Memorandum (tax increases, structural reforms etc.), as well as their expected financial impact. It also includes more specific provisions concerning the data that should be provided by the Greek authorities and the time-line for their provision, and the structure and functioning of the Financial Stability Fund.
The First Loan Agreement declares in its Preamble: “Measures concerning the coordination and surveillance of the budgetary discipline of Greece and setting out economic policy guidelines for Greece will be defined in a Council decision on the basis of Article 126(9) and 136 of the Treaty on the Functioning of the European Union (the “TFEU”), and the support granted to Greece is made dependent on compliance by Greece with measures consistent with such decision and laid down in [the Memorandum] … (as may amended and/or supplemented from time to time).” (para 6). The release of the first installment was conditional on the signing of the MoUs and on the entering into force of the agreement. The release of following installments was defined conditional on the favorable decision of the Eurozone partners, after consultation of the ECB and the Commission (following an evaluation report by the “troika”, as determined in the MoUs). The terms that provoked public discussions were:
– The possibility for the lenders to assign or transfer their rights and obligations to third parties, under certain conditions (art. 2(4)-(6)), while such a possibility is excluded for the Greek state (art. 2). See also art. 13 (information of the Commission, no need of prior consent of other lenders).
– The fact that the lenders’ obligations have been defined as subject to the reception by the Commission of the legal opinion which is satisfactory to the lenders (concerning the conformity of the programme to national law). This opinion is issued by Legal Advisors to the State and its specific form and content is described in Annex 4 (a model-opinion is provided) (art. 3(4)(a)). The Greek state should confirm the opinion (art. 3(5)(a), art. 4(2)). A similar opinion is needed in order for the agreement to enter into force (art. 15(1)(a)).
– The fact that the lenders’ obligations have been defined as subject to “the Commission having received confirmation from the Lenders (i) that they are satisfied that the conditions to drawdown under this Agreement are satisfied, and (ii) of the terms on which they are willing to make a Loan to the Borrower;” (art. 3 (4)(e)).
– The guarantees to the creditors provided in article 4, especially the obligation not to undertake securities on public property and not to grant priority to any other lender.
– The high interest rates and the service fee payable to all creditors in order to cover operational costs under article 5.
– The fact that any prepayment shall be made together with accrued interest on the amount prepaid and subject to the Borrower indemnifying Lenders in respect of any costs, expenses or fees they suffer (including broken funding and broken hedging costs) as a consequence of such prepayment. Accrued interest shall be payable at the Interest Rate determined for the relevant period; (art. 6)
– Article 7(6) declares: “If the Borrower shall pay an amount in relation to any of the Loans which is less than the total amount due and payable under this Agreement, the Borrower hereby waives any rights it may have to make any appropriation of the amount so paid as to the amounts due.”
– The matter that caused the most of contention is the application of English law and the jurisdiction of the ECJ. Article 14 also declares that the enforcement of the agreement is a competence of Greek courts and that Greece “irrevocably and unconditionally waives all immunity to which it is or may become entitled, in respect of itself or its assets, from legal proceedings in relation to this Agreement, including, without limitation, immunity from suit, judgement or other order, from attachment, arrest or injunction prior to judgement, and from execution and enforcement against its assets to the extent not prohibited by mandatory law.” (art. 14(5)).
The agreement further provides that, in case the ECJ or a national constitutional court declares the agreement illegal, though the agreement is immediately and irrevocably cancelled, it does not accelerate the payments of the outstanding loans (art. 6(6)). Moreover, the lenders may cancel the loan and declare the disbursed amounts immediately due and payable in cases where the borrower is in default to comply with its obligations, included the case where a national court declares the agreement illegal (art. 8). In such a case the Greek state must reimburse all interest rates. The Greek state must generally provide information on the application of the programme and the Commission has control and audit rights in relation to the management of the loan (art. 9-10)
A similar format and content was followed for the second economic adjustment programme. The undisbursed tranches of the previous loan, as well as a new 130 bn aid was provided by the EFSF (in financial assistance or in other facilities) and the IMF. This time, the ‘Master Financial Assistance Facility’ provides for the jurisdiction of Luxembourgish courts, which has been set for the benefit of the EFSF only (art. 15(2)). The parties gave a lot of importance to the non-complication of the programme implementation by Greek national law: according to article 4(3)(g), in order to provide financial assistance, the EFSF must be “satisfied that no litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which may prejudice the Beneficiary Member State’s performance of the MoU, this Agreement or the transactions contemplated herein … or which, if adversely determined, would be reasonably likely to have a material adverse effect on the Beneficiary Member State’s ability to perform its obligations … have been started or threatened in writing against the Beneficiary Member State;”. Under paragraph 10 of the same article, in case the EFSF has no access to market funding, it is not under an obligation to disburse any instalment of the loan. The Hellenic Financial Stability Fund (HFSF) irrevocably and unconditionally guarantees the payment of the loan if the Greek state does not pay, or if the loan becomes “unenforceable, invalid or illegal” (art. 13). Article 5(4) declares that, under request of the EFSF, the HFSF grants to the EFSF valid first ranking security over all of the HFSF’s rights and interests in and in relation to the Greek Bank Instruments.
The second adjustment programme was accompanied by the voluntary participation of private bond owners (PSI), who exchanged their bonds for new ones at 31.5% of their nominal value, governed by English law, and having a maturity of up to 30 years. The procedure was completed in spring 2012 and led to the exchange of 197 bn of bonds. An additional 15% of the nominal value of bonds was paid by the Greek state to the bond owners in notes. For the costs of the PSI, 35.5 bn of the EFSF loan was used. Another 35 bn was used in order to put in place a buy-back scheme of Greek debt instruments from national central backs, in order to avoid default because of the PSI. Finally, another 23 bn was used by the Hellenic Financial Stability Fund in order to ensure the stability of the banking sector. For each of these amounts, a separate agreement, with separate maturity period and interest rate, was signed. All this was agreed in a MoU, followed by letters of intent by the Presidents of the two most important (at the time) political parties, PA.SO.K. and N.D. The rest of the political parties were pressured to provide such letters as well, but refused.
After the 2015 elections and the formation of the SY.RIZ.A.-AN.EL. government coalition, the Minister of Finance refused to cooperate with the “troika” and required an institutional interlocutor. In the Eurogroup of February 20, 2015, Greece asked for an extension of the Master Financial Assistance Facility Agreement, in order to obtain the remaining tranche of 7.2 bn. and time for the negotiation of a new arrangement between Greece and its creditors. Negotiations are still ongoing.
What legal changes, if any, had to be made to accommodate ‘troika’ review missions, post-programme surveillance missions, etc?
No specific legal changes had to be made to accommodate “troika” review missions. Indeed, the role of the “troika”, defined in the financial assistance instruments, has been informally accommodated by the Greek legal order, constituting a new “turning point” of the Greek political regime, without the need of constitutional or even legal change. It could be mentioned to this respect, however, that statute 3845/2010, implementing the support mechanism, contains broad authorizations to the executive and especially to the Minister of Finance and other competent Ministers to take the measures required for the application of the programme. This is related to the “troika” missions, since it is the executive who participates in meetings with the “troika” and negotiates existing and future policies of the Government. The opposition parties and especially the MPs of LA.O.S. objected to this broad authorization in the relevant debates and did not vote this article, though they voted in favour of the MoUs. The constitutionality of this provision has been contested by constitutional law scholars. Article 43 of the Constitution delimits the delegation of powers to the executive. It declares:
“1. The President of the Republic shall issue the decrees necessary for the execution of statutes; he may never suspend the application of laws nor exempt anyone from their execution.
2. The issuance of general regulatory decrees, by virtue of special delegation granted by statute and within the limits of such delegation, shall be permitted on the proposal of the competent Minister. Delegation for the purpose of issuing regulatory acts by other administrative organs shall be permitted in cases concerning the regulation of more specific matters or matters of local interest or of a technical and detailed nature.
* 3. [Paragraph 3 repealed by the 1986 Amendment].
4. By virtue of statutes passed by the Plenum of the Parliament, delegation may be given for the issuance of general regulatory decrees for the regulation of matters specified by such statutes in a broad framework. These statutes shall set out the general principles and directives of the regulation to be followed and shall set time-limits within which the delegation must be used.
5. Matters which, as specified in article 72 paragraph 1, belong to the competence of the plenary session of the Parliament, cannot be the object of delegation as specified in the preceding paragraph.”
The Memorandum, affecting broad domains of governmental policy, cannot be considered “more specific matters or matters of local interest or of a technical and detailed nature” as par. 2 imposes (since the delegation is not made to the President of the Republic; note that presidential decrees require a more complicated procedure, including an opinion of the Council of State). Nor is statute 3845/2010 valid as a “framework-statute”, as defined in par. 4, because according to constitutional law scholars, the formal conditions for such a statute to be valid are not fulfilled.
Moreover, the same statute, in its article 1 par. 4 delegates the Minister of Finance to sign any memorandum of understanding and agreement for the application of the economic adjustment programme. The same delegation is reiterated in article 93 of law 3862/2010. On this issue and the reactions it provoked, see the previous question X.6.
The MoUs and the “troika” recommendations are invoked in order to justify virtually all measures having economic and fiscal consequences proposed by the Government. They are also invoked for the justification of the use of emergency procedures and instruments. In general, the “troika” review missions have not been welcomed by the public opinion. At least during the first review missions of the “troika”, the trade unions were organising massive protests and rallies in the centre of Athens. Newspapers have been frequently reporting on incidents that involved Ministers and members of the missions that demonstrated –in their view- the arrogance and/or disrespect of the “technocrats” in charge of the programme. In Parliament, the loss of national sovereignty, the loss of legislative autonomy, the degradation of the role of Parliament caused by the “troika” review missions, as well as the lack of political responsibility and parliamentary scrutiny of the members of the “troika”, are constant sources of contention. Academics also agree on the loss of national sovereignty caused by the “troika” review missions, others accepting that Greece had already agreed to it with its participation in the Eurozone, while others strongly objecting to it.
Case law international instruments
Have there been direct or indirect legal challenges against the financial assistance instruments before a national (constitutional) court?
There is no constitutional Court in Greece. Review of constitutionality is diffusely exercised by all the Courts, but actually concentrated into the Supreme courts, Areios Pagos (civil and criminal jurisdiction), the Council of State (administrative jurisdiction) and the Court of Audit. The Council of State’s case law is more important in the constitutional review of legislation, especially because of the possibility of direct demand of annulment of general administrative acts executing legal provisions. It is under this procedure that most matters of constitutionality of the financial assistance instruments have incidentally arisen. Note that the claimants cannot actually seek to annul any piece of legislation directly, but they can ask the Court to annul the specific administrative decisions and declare that their legal basis does not produce any legal effect in this specific case because it is unconstitutional (it would cause an inter partes and not an erga omnes effect). However, an eventual unconstitutionality decision would be important for the general application of the statute as well, as it would create a precedent, which, albeit not legally binding (in Greece there is no stare decisis rule), would be likely to influence subsequent case law.
The argumentation of the parties is accessible only through the judicial reasoning, except from rare cases where it is published. The Council of State in many cases refers to the argument to which it responds.
Decision 668/2012 by the Council of State Plenum, 20 February 2012
- Name of Court: Supreme Administrative Court (Council of State, Συμβούλιο της Επικρατείας), Plenum.
- Parties: Athens Bar Association (DSA) and several individual lawyers, the Supreme Administration of the Public Employees’ Unions (ADEDY), the Greek Confederation of the Civil Pensioners (POPS), the Journalists’ Union (ESHE), the Technical Chamber of Greece (TEE), the Federation of Workers’ Executives and many other trade union associations, together with private individuals (32 applicants in total) against the Minister of Finance and the Minster of Employment and Social Security.
- Type of action/procedure: Action for annulment of several (regulatory, general and individual) administrative decisions legally based on law 3845/2010, implementing the measures under the Memorandum of Understanding. Incidentally, the claimants contest the constitutionality of statute 3845/2010, as a statute ratifying the MoUs, as well as the austerity measures included in this statute.
- Admissibility issues: Many of the requests were declared inadmissible, either because it was judged that the decisions attacked were enacted by private moral persons on which the Court was not competent (point 5), or because the attacked decisions were considered as not introducing a new rule and thus not being enforceable (point 15-6), or because the attacked decisions did not create legal consequences affecting personally the claimants, since they only contained directions to the competent authorities for the application of the relevant provisions (point 17), or because the plaintiffs-trade unions did not have the necessary legal interest in bringing the proceeding as far as it regards certain acts, since they did not affect their members (point 25 and 26). Some plaintiffs asked the direct examination of the relevant legal provisions, since, according to them, they were directly applicable without needing the intervention of executive acts. They invoked article 20 par. 1 of the Constitution (access to court) and article 6 par. 1 of the ECHR. The Court rejected their claims as inadmissible, since the statutes were regulating issues of legislative nature and needed execution through administrative acts (point 18). – For the rest, the legal interest of the trade unions and associations was accepted by the Court (points 21 f.), that decided to issue a judgment even on matters of the competence of ordinary administrative courts (point 20).
- Legally relevant factual situation: The attacked administrative acts were imposing cuts on the revenues (wages and pensions) of the plaintiffs in application of statute 3845/2010 (point 3).
- Legal questions: Voting procedure of the statute 3845/2010, containing measures for the implementation of the support mechanism; delegation to the Minister of Finance to sign memorandums of understanding, conventions and loan agreements for the application of the economic adjustment programme; procedural and substantial conditions for according restrictions to the exercise of national sovereignty – applicability in the case at hand; violation of constitutional rights and principles and of ECHR rights (**note that fundamental rights claims were addressed against national measures implementing the MoU policies and included in specific articles of law 3845/2010. The MoU was attached to law 3845/2010); delegation to the executive and conditions set by article 43 par. 2 of the Constitution (**note that this issue concerns the national measures implementing the MoU)
- Arguments of the parties: The recourse of the plaintiffs is published by the Athens Bar Association. The plaintiffs alleged that: statute 3845/2010, ratifying the MoUs and recognizing constitutional competences to international organizations, should have been voted under article 28 par. 2 of the Constitution (qualified majority of 180 deputies); that the delegation to the Minister of Finance to sign memoranda and agreements violated articles 36 par. 2 and 28 par. 1 of the Constitution on the ratification of international treaties; that the measures were disproportionately infringing article 1 of the First Additional Protocol ECHR; that the measures were violating articles 22 par. 2 and 23 of the Constitution (collective bargaining and collective labour rights), International Labour Conventions ratified by Greece, as well as article 8 of the International Covenant for Economic, Social and Cultural Rights, in combination with the principle of proportionality; that the measures were contrary to article 2 par. 1 (human dignity), 4 par. 1 (principle of equality) and par. 5 (equality before public charges), 5 par. 1 (economic liberty), 17 par. 1 (right to property) and 25 par. 1 (principle of proportionality) of the Constitution and the legitimate expectations of the plaintiffs. The plaintiffs generally reproached the general and automatic character of the measures, their retroactive force in some cases, the fact that they had a permanent nature, the fact that it was not sufficiently established that they serve the general interest and the fact that they were putting in danger the elementary conditions of decent life of the affected persons. They alleged that the delegation to the executive included in law 3845/2010 did not respect the conditions of article 43 par. 2 of the Constitution, since it concerned the restriction of fundamental social rights. Finally, they demanded a preliminary ruling by the ECJ on the compatibility of the national measures and of the Council Decision 2010/320/EU to European law.
- Conclusion and reasoning of the court: The reasoning of the Court starts with a very long exposition of the European treaties and of the process of European integration of the country until the economic crisis, as well as of the relevant international conventions (especially IMF). The examination of the arguments of the plaintiffs only starts at point 27. Concerning the violation of article 28 par. 2 of the Constitution, the Court replied that, even though it was a result of negotiations and agreement between Greece and certain international authorities, the Memorandum did not constitute an international treaty binding the Greek Government, but only the program of the Government for the confrontation of the economic problems of the country. Therefore, as a political program, the Memorandum did not result in the transfer of competences to international authorities, it did not create legal norms and it did not possess a direct effect in the domestic legal order, given that, for its application, the constitutionally competent organs had to enact some implementing measures (point 28) [minority opinions]. Concerning the obligation of ratification of international treaties, the Court replied that the delegation to the Minister of Finance was not connected to the issuing of the contested administrative acts and rejected the claim as inadmissible (point 30-1). The Court also examined the eventual restriction to the exercise of national sovereignty, which would require the procedural and substantial conditions of article 28 par. 3 of the Constitution. According to the majority, even if this article applies to non-territorial concessions, the MoUs do not have legal consequences, thus they cannot result to such restrictions (point 32) [minority opinions]. Concerning the disproportionate violation of their right to property, guaranteed by the First Additional Protocol to the ECHR and by article 17 par. 1 of the Constitution, as well as of the principle of legitimate expectations, the Court referring to the Strasbourg case law, stated that, even though the right to an income and to a pension is protected by the rules and principles invoked, these provisions do not nevertheless guarantee any right to a certain income or a certain pension, except of the case where the decent way of living of the citizens is at risk. Thus, the legislator can adjust the amount of pension according to the circumstances and can impose, through general legislative or administrative rules, restrictions to pension rights, when it is justified by a general public interest, such as the sustainability of social security funds or the facing of a particularly serious financial problem. Judicial review on the assessment of the public interest or on the policy choices of the legislator for its achievement is marginal. The restriction to property must be appropriate, necessary and not disproportional to the interest pursued. The Court engaged in a proportionality test and concluded that the cuts in the salary, the allowances and the pensions of the public sector employees were justified by the compelling public interest of consolidation of the public finances, which was also the common interest of the Eurozone member-states. The judges considered that these cuts were not manifestly inappropriate or unnecessary for this purpose, according to the reasonable appreciation of the legislator. The measures were part of a general economic programme planned by the Government for the confrontation of the present economic crisis, thus the complaints of the applicants for the lack of any study concerning less onerous measures were rejected. In addition, the contested measures did not result in an elimination of the rights invoked but only to a restriction to their protection, respecting the principle of proportionality (art. 25 par. 1) (point 35). Concerning the alleged violation of the right to the respect of human dignity (article 2 par. 1 of the Constitution), the Court rejected the claims of the plaintiffs because they did not invoke or prove any risk for their decent way of living caused by the questioned measures, which would constitute an offense to human dignity (point 35) [minority opinions]. Concerning the equality before public charges, and the principle of national and social solidarity (article 25 par. 4 of the Constitution), the Court found that these principles were not violated by the ‘fiscal amnesty’, instituted by law 3888/2010, which stipulated the conclusion of certain fiscal differences between the state and private persons, since it led to a short term augmentation of the public incomes (points 37-38) [minority opinions]. The Court further declared the conformity of the contested measures to the principle of equality (article 4 par. 1 of the Constitution), since the application of the allowance cuts to all the public sector employees whose monthly income does not exceed 3000 euros, and to all the pensioners of less than 60 years old whose monthly income does not exceed the amount of 2500 euros, did not result in an equal treatment of different situations. According to the Court, the increased needs that justified the adoption of such allowances existed for all the employees and pensioners, independently of their monthly income. The age threshold of 60 was justified by the need of social welfare towards the aged persons. Besides, statute 3845/2010 had a quasi-transitional character, by virtue of a subsequent statute defining the 65th year as retirement age and the 60th year as early retirement threshold age (point 40) [minority opinions]. Concerning the delegation to the executive, the Court rejected this argument as inadmissible, because presented for the first time at the discussion of the case, while it declared that the matters covered by the delegation were matters of detail, for which delegation was allowed by the Constitution (point 42). Finally, concerning the alleged violation of economic freedom and collective bargaining and labour rights, the Court replied that the relevant claims were inadmissible, since the contested provisions had not been applied through the attacked administrative acts (point 43).
- Legal effects of the judgment: The judgment rejected the claims of the plaintiffs and confirmed the constitutionality of statute 3845/2010 and of the implementing administrative acts. Though the statute can be incidentally attacked again in a subsequent decision, the relevant administrative acts enjoy a presumption of legality, since the deadline for their contestation has expired.
- Main outcome and broader implications: The content of the judgment was “leaked” to the press long before its official publication. It has been used by the governing parties in order to constitutionally justify new austerity measures, as well as the non-ratification of agreements and conventions under the second economic adjustment programme. It creates a non-binding precedent followed by lower administrative courts and by civil jurisdictions. The judgement also stressed the deficiencies of the incidental judicial review from the point of view of the rule of law and of the right of access to court.
The text of decisions 1283/2012, 1284/2012, published on the 2nd of April, is identical to decision 668/2012. The decisions were discussed in the Plenum on the 23rd of November 2010, the same day with decision 668/2012, after recourse by other professional associations.
Case law implementing measures
Is there a (constitutional) court judgment on national policy measures adopted in relation to the Memoranda of Understanding?
There is no constitutional Court in Greece. Review of constitutionality is diffusely exercised by all the Courts, but actually concentrated into the Supreme courts, Areios Pagos (civil and criminal jurisdiction), the Symvoulio tis Epikrateias (Council of State – administrative jurisdiction) and the Court of Audit. The Council of State’s case law is more important in the constitutional review of legislation, especially because of the possibility of direct demand of annulment of general administrative acts executing legal provisions. It is mainly under this procedure that matters of constitutionality of the financial assistance instruments have incidentally arisen. Note that the claimants cannot actually seek to annul any piece of legislation directly, but they can ask the Court to annul the specific administrative decisions and declare that their legal basis does not produce any legal effect in this specific case because it is unconstitutional (it would cause an inter partes and not an erga omnes effect). However, an eventual unconstitutionality decision would be important for the general application of the statute as well, as it would create a precedent, which, albeit not legally binding (in Greece there is no stare decisis rule), would be likely to influence subsequent case law.
The argumentation of the parties is accessible only through the judicial reasoning, except from rare cases where it is published. The Council of State in many cases refers to the argument to which it responds.
Since the majority of austerity and structural measures since 2010 have been justified by the Government as imposed by the economic adjustment programmes, it is impossible to include here a complete analysis of all the cases brought before the Greek courts contesting their constitutionality. Only the most important among the cases in direct relation to the Memoranda of Understanding will be examined.
A. Decisions 668/2012, 1283/2012 and 1284/2012 by the Council of State Plenum examined in the previous question X.8, concerned partly the compatibility of national policy measures with the Constitution and international conventions.
B. Decision 1285/2012 by the Council of State Plenum, 2 April 2012
1. Name of the Court: Supreme Administrative Court (Council of State, Συμβούλιο της Επικρατείας), Plenum.
2. Parties: A union of pensioners of the Public Electricity Enterprise (DEH AE) as members, against the Minister of Finance and the Minister of Employment and Social Security.
3. Type of action/procedure: Action for annulment of a common ministerial decree, legally based on law 3845/2010. Incidentally, the claimants contested the constitutionality of austerity measures contained in the law.
4. Admissibility issues: The recourse was rejected as inadmissible for some of the claimants that did not appear or nominate a representative before the Court.
5. Legally relevant factual situation: The pension rights of the members of the association were negatively affected by the administrative decision, issued in application of law 3845/2010 (note that the decision concerns the same provisions as decision 668/2012).
6. Legal questions: Principle of equality (4 par. 1 C); principle of equal participation before public charges (4 par. 5 C); especially in the fulfilment of the principle of social security (22 par. 5 C); economic burdening of categories of citizens in an economic crisis; respect of human dignity (2 par. 1 C); duty of social and national solidarity (25 par. 4 C)
7. Arguments of the parties: The claimant alleged that the principle of equality (4 par. 1 C) was infringed, since the criterion of age (60 years old) under which beneficiaries were deprived of their pension allowances was manifestly arbitrary, since it was not connected to any characteristic of the affected persons or with any public interest reason; that the legislator should have proceeded to a gradation of pension cuts for the beneficiaries over 60 years old, according to the amount of their pension; that the principle of equal contribution to public charges (4 par. 5) was infringed since the contested measures transposed the burden of fiscal consolidation of the economy to a specific group of citizens without demanding from other groups to contribute as well according to their means; that the principle of social security (22 par. 5 C and 70 par. 3 Part XII of the 1964 Convention on the European Code of Social Security) was infringed since the legislator did not take into account the specific economic situation of each social security fund through scientific studies when generally imposing the cuts on pensions and allowances, and thus did not ascertain the necessity of the measures and the lack of less harmful alternatives; that the right to property (art. 1 First Additional Protocol ECHR and 17 par. 1 C) of its members was infringed, since already established rights to pension revenues were affected, without being justified by real reasons of public interest, assessed through a determined procedure and without being accompanied by compensatory measures; that the need for confrontation of the economic crisis, be it acute and urgent, cannot justify the restrictive measures, since it is part of the accounting interest of the state (not accepted as a public interest under constant previous case law) and since this interest could have been achieved through other less restrictive measures; that the principle of proportionality (art. 25 par. 1) was infringed, since the measures did not have a temporary character, since the application authorities did not have the possibility to strike a fair balance in every individual case; that the measures were contrary to the prohibition of inhuman and degrading treatment (article 3 ECHR) and the principle of human dignity (art. 2 par. 1 C); that articles 12, 30 and 31 of the European Social Charter were infringed; that articles 2, 9 and 11 par. 1 of the International Covenant of Economic, Social and Cultural Rights were infringed; that article 34 of the European Charter of Fundamental Rights was infringed; that the delegation to the executive by law 3845/2010 to regulate the matters at hand was unconstitutional (art. 43 par. 2 C) since it concerned restriction of fundamental rights; that collective bargaining rights (22 par. 1 C) were infringed.
8. Conclusion and reasoning of the court: The Court generally repeatedly stressed the broad powers of the legislator on the matters and the exercise of a marginal judicial review. Concerning the principle of equality (art. 4 par. 1 C), the Court responded that the criterion of age was objective and relevant to the subject matter. It was justified by the concern of welfare to more aged persons as well as by the objective of sustainability of the social security system through the restriction of early pensions. The subsequent statute 3863/2010 had imposed 60 as the age limit for early pension. In virtue of the new rules on the matter, the provisions of law 3845/2010 had acquired a quasi-transitional character (point 10). Moreover, concerning the lack of gradation, the Court responded that the increased needs that justify the adoption of such allowances existed for all pensioners, independently of their monthly income. Concerning the principle of equal contribution to public charges according to each citizen’s means (art. 4 par. 5 C), the Court rejected the claim of the plaintiff as indeterminate (point 10) [minority opinions]. Concerning the principle of social security (art. 22 par. 5 C), the Court responded that this principle imposes the right of citizens to social security and the sustainability of social security funds; it imposes scientific studies before imposing burdens to such funds but it does not presuppose such studies before imposing cuts of general application in pension revenues. Law 3845/2010 was not restructuring the pension system as a whole but rather imposing cuts on allowances in the framework of a complex of measures for the fiscal consolidation of the country. It was thus a measure included in the economic adjustment programme of the country, justified by the compelling public interest of preserving the sustainability of social security funds, achieving determined financial targets and of restricting the deficit of general government. Concerning the Convention on the European Code of Social Security, the Court responded that the invoked articles contain orientations for adjusting domestic legislation to the Convention, through the provision of periodical scientific studies ensuring the sustainability of social security funds. They impose such studies in case of modification of the contributions through which these funds are financed. The contested measures were not violating the relevant articles because they were not violating article 22 par. 5 of the Constitution, which was in conformity with the Convention (points 12-3) [minority opinions]. Concerning the right to property (17 par. 1 C and 1 First Additional Protocol ECHR), the Court, referring to the Strasbourg case law, stated that, even though the right to an income and to a pension is protected by the rules and principles invoked, these provisions do not nevertheless guarantee any right to a certain income or a certain pension, except for the case where the decent way of living of the citizens is at risk. Thus, the legislator can adjust the amount of pension according to the circumstances and can impose, through general legislative or administrative rules, restrictions to pension rights, when it is justified by a general public interest, such as the sustainability of social security funds or the facing of a particularly serious financial problem. Judicial review on the assessment of the public interest or on the policy choices of the legislator for its achievement is marginal. The restriction to property must be appropriate, necessary and not disproportional to the interest pursued. The Court engaged a proportionality test and concluded that the cuts in pensions and allowances of the public sector employees were justified by the compelling public interest of consolidation of the public finances, which exceeded the accounting interest of the state and was also a common concern of the Eurozone member-states. The judges considered that these cuts were not manifestly inappropriate or unnecessary for this purpose, according to the reasonable appreciation of the legislator and rejected the claims of the plaintiff to the contrary since it had not provided relevant evidence. The measures were part of a general economic program planned by the Government for the confrontation of the present economic crisis, thus the complaints of the applicants for the lack of any study concerning less onerous measures were rejected. Concerning the principle of proportionality (art. 25 par. 1 C), the Court responded that it was not infringed by the permanent character of the measures because the legislative purpose consisted not only in the facing of the economic crisis but also in the fiscal consolidation of the country for the future. Further, a balance had been achieved, since the measure had not completely deprived the plaintiffs from their pension rights, while at the same time the legislator had provided for certain allowances to lower pensioners, and had exempted persons aged over 60 and vulnerable groups from the application of the measures. Given the public interest pursued, the legislator was not obliged to leave the striking of a fair balance to the discretion of the implementing authorities. Since no total deprivation of the right had taken place, the lack of indemnity was not infringing constitutional or ECHR provisions. Thus, since the claimant did not allege that the measures put in hazard the decent way of life of its members, the Court rejected the claims of violation of the right to property and of the principle of human dignity (art. 3 ECHR and art 2 par. 1 C) (points 15-6) [minority opinions]. Concerning the European Social Charter, as well as the International Covenant of Economic, Social and Cultural Rights, the Court rejected the claims of the plaintiff as indeterminate, since it had not invoked specific errors of the attacked acts (points 18-9). Concerning the European Charter of Fundamental Rights, the Court responded that this text was applicable only when MS were applying EU law; thus it was not applicable to the case at hand, since the contested measures were measures of purely internal policy, taken by the national authorities according to domestic law provisions. The participation of the EC or the ECB to the drafting of the domestic economic programme did not incur the application of the Charter (points 20-1). It declared inadmissible the allegations of the claimant for unconstitutionality of the delegation to the executive (43 par. 2 C), because they were presented for the first time at the discussion of the case, while it declared that the matters covered by the delegation were matters of detail, for which delegation was allowed by the Constitution. For the same reason, it declared inadmissible the claims for violation of collective bargaining rights (art. 22 par. 1 C), while it declared that they were not connected to the attacked ministerial decree, imposing cuts on pension rights (point 22).
9. Legal effects of the judgment: The judgment rejected the claims of the plaintiffs in their totality and confirmed the constitutionality of statute 3845/2010 and of the implementing administrative acts. Though the statute can be incidentally attacked again in a subsequent decision, the relevant administrative acts enjoy a presumption of legality, since the deadline for their contestation has expired.
10. Main outcome and broader implications: The judgment did not change importantly the national political debate. It only confirmed the constitutionality of the policy measures connected to the economic adjustment programme in light of constitutional social state provisions. It also stressed the deficiencies of the incidental judicial review from the point of view of the rule of law and of the right of access to court.
C. Decision 1286/2012, Council of State, 2 April 2012, issued following an action concerning the same administrative act. The text of this decision is identical to the one of 1285/2012; the only difference concerns the legitimate interest of the applying trade union, because its members were not pensioners: the majority accepted however a legitimate interest to introduce the proceedings, since the purpose of the union was to protect and promote the “general economic, labour, social security and professional interests” of its members, thus also their pensions rights (point 3) [minority opinion].
D. Decision 1972/2012 by the Council of State Plenum, 25 May 2012
1. Name of the court: Supreme Administrative Court (Council of State, Συμβούλιο της Επικρατείας), Plenum.
- Parties: An individual citizen against the Minister of Finance.
- Type of action/procedure: Action for annulment of a ministerial decree in application of law 4021/2011; incidentally the plaintiff contested the constitutionality of the legal statute.
- Admissibility issues: No.
- Legally relevant factual situation: The statute (art. 53) had imposed a tax on property supplied with electricity, the amount of which depended on the size of the property. The ministerial decree concerning its execution declared that this tax was collected through electricity bills and that in case of non-payment, the Public Electricity Company (or alternative suppliers) cut off electricity supply.
- Legal questions: Legal character of the levy; urgent character of the measure; principle of tax certainty, determination of the elements concerning the tax by legal statute (art. 78 par. 1 and 4 C); reference of the statute to other statutes and administrative acts for the exact determination of elements of the tax; principle of equality before the law and of equality before public charges (art. 4 par. 1 and 5 C); real property taken as taxable good, without taking into account revenue or profit; right to property and principle of proportionality (1 First Additional Protocol ECHR and 17 par. 1 C, 25 par. 1 C); multiple taxation of the same object because of the series of financial measures since 2009; principle of separation of powers and exclusive power of the state to ascertain the liable person and the amount of tax obligations and to collect taxes (art. 26 par. 1 and 3 C); delegation to the Public Electricity Company or alternative providers of the competence to draft the lists of liable persons and to collect the tax through electricity bills; economic freedom (art. 5 par. 1 C) and human dignity (art. 2 par 1); cutting off of electricity in case of non-payment of the tax.
- Arguments of the parties: The claimant alleged that the principle of tax certainty was infringed, since legal statute 4021/2011 did not sufficiently define the elements of the tax; that the principle of equality and of equal contribution to the public charges according to one’s means was infringed, since it was not revenue or profit that was taken into account for the calculation of the tax, but the value of property as this had been determined according to general administrative acts for every district; also, since the legislator had not followed for this levy the same form and principles as for other real property taxes; that his/her right to property had been infringed, since the levy resulted in the multiple taxation of the same object and constituted a disproportionate burden; that the principle of separation of powers was infringed by the delegation of the power of the state to ascertain the liable person and the amount of tax obligations, as well as the collection of the tax, to private persons (the Public Electricity Enterprise DEH, a joint-stock company, and alternative suppliers); that the cutting off of electricity supply in case of non-payment of the levy was infringing his/her economic freedom, since it constituted an intervention in a private contract; also, that it did not respect his/her human dignity, since it deprived him/her from a vital good.
- Conclusion and reasoning of the court: Concerning the legal characterization of the levy, the Court stated that its imposition was dictated by the imperative need to take exceptional and urgent measures in order to achieve the targets of correcting the deficit for 2011 and 2012. Thus, it did not constitute retribution for a specific service but a general public purpose. Therefore, the levy had the character of a tax and not a retributory character, even though, according to the explanatory report to the statute, the real value of the burdened property completely depended on the achievement of the financial targets mentioned (point 7). The Court further considered that the rules contained in the attacked statute, including the temporary character of the measure, as well as the explanatory report and the relevant parliamentary debates, show its urgent character (point 8) [minority opinion]. Concerning the principle of tax certainty, the Court rejected the arguments of the plaintiffs and responded that the elements of the tax were sufficiently determined by the statute (points 9-13) [minority opinion]. Concerning the principle of equality before the law and equal distribution of public charges, the Court stated that the legislator is free to determine the various forms of economic charges for the covering of public expenses, while it must respect certain general constitutional principles. In the present situation, the legislator had adopted a series of financial measures since 2009 for correcting the deficit. Real property is by itself a source of richness and thus taxable, without it being necessary that it be profitable. Besides, the levy did not constitute a new fixed tax but an urgent measure and thus the legislator was not obliged to follow the form and principles established in other real property taxes. Therefore, the legislator applied general and objective criteria (area of the property, value of the district, age of the property) and did not violate the principle of equality (points 14 and 16) [minority opinion]. Concerning the infringement of the right to property, and the principle of proportionality, the Court stated that the relevant articles recognize a very broad power to the legislator to interfere with the right to property by imposing taxes, while they imply the fair balance between the public interest and the infringed right, a proportionate relationship between means and ends. Taxation should not constitute an excessive burden or result in the radical deterioration of burdened citizens (point 15). In the present case, the tax was imposed as an urgent measure for the pursuing of a very compelling public interest according to the assessment of the legislator. It could not be judged as disproportionate, taking into account its temporary character, its amount, the provision of exceptions for vulnerable groups, the repeated taxation of revenue, the value of private real property (mentioned in the explanatory report of the statute) and the urgent goal of covering the additional deficit in a context of financial crisis. Moreover, it did not result in a seizure of property together with the other taxes and levies imposed though indeed it resulted in the impoverishment of the tax payers (point 15 and 16) [minority opinions]. Concerning the principle of separation of powers, the judges considered that the statute preserved the exclusive competence of the state to ascertain and collect taxes, since the Head of the Local Financial Service was competent, even though the relevant lists were drafted by DEH and the tax was collected through electricity bills. This was because, according to the judges, the public authorities were still competent to exempt persons from the levy and because the code of collection of public revenues was applicable. The collection of taxes by private persons, like banks, is possible insofar as these persons are not invested with the power to enforce the relevant tax obligations (points 19-20 and 22) [minority opinion]. Concerning the mode of collection of the tax and especially the sanction of cutting off of electricity, the Court stated that it constituted an inadmissible infringement of economic freedom and of contractual freedom. The principle of proportionality could justify such an intervention only if it was connected to a compelling public interest connected to the object of the contract, which was not the case in the litigation. A concurrent opinion of 14 judges also found a violation of the principle of human dignity, since a vital good was used as a means of pressure for the fulfilment of tax obligations (points 24-25).
- Legal effects of the judgment: The Court annulled the provisions of the ministerial decree concerning the collection of the tax and declared unconstitutional the relevant statutory provisions.
- Main outcome and broader implications: The judgment was discussed in the media since it was the first judgment by a Supreme Court declaring unconstitutional a policy measure connected to the crisis. It was used by both the government and the opposition in political speeches. The 4th Section of the Supreme Civil Court (Areios Pagos) judged on February 2014 that the same tax was unconstitutional, not only for the way it was collected but also for its particular elements. The final decision will be taken by the Plenum of the Court. In case of contradictory decisions between the Council of State and Areios Pagos, the Supreme Special Court is competent (article 100 of the Constitution).
E. 1st Special Sitting of the Plenum of the Court of Audit on the 20th of February 2012
- Name of the court: Court of Audit (Elegktiko Synedrio, Ελεγκτικό Συνέδριο), Plenum.
- Parties: N/A
- Type of action/procedure: Obligatory opinion by the Court of Audit to bills proposed by the Minister of Finance concerning pensions before their submission to Parliament, according to article 73 par. 2 of the Constitution.
- Admissibility issues: N/A
- Legally relevant factual situation: The draft law “Cuts on public pensions” contained a single article imposing a 12% cut on monthly pensions, with a retroactive effect from the 1st of January.
- Legal questions: Concerning the content of the bill, the legal question was whether the relevant article was compatible with the right to property, as guaranteed by art. 1 First Additional Protocol (FAP) ECHR.
- Arguments of the parties: N/A
- Conclusion and reasoning of the court: The Court stated that the retroactive imposition of the cuts might create a matter of compatibility with hierarchically superior provisions and especially article 1 FAP ECHR (point 5) [minority opinion].
- Legal effects: Legal opinions of the Court of Audit are not binding under this procedure.
- Main outcome and broader implications: The bill was finally introduced to Parliament with certain unimportant modifications, together with “other urgent measures implementing the MoU of law 4046/2012”. The relevant statute was voted under the emergency procedure.
- F. 4th Special Sitting of the Plenum of the Court of Audit on the 31st of October 2012
- Name of the court: Court of Audit (Elegktiko Synedrio, Ελεγκτικό Συνέδριο), Plenum.
- Parties: N/A
- Type of action/procedure: Obligatory opinion by the Court of Audit to bills proposed by the Minister of Finance concerning pensions before their submission to Parliament, according to article 73 par. 2 of the Constitution.
- Admissibility issues: N/A
- Legally relevant factual situation: The draft laws “Public pension matters” and “Modifications to pension schemes” regulated matters of pensions for elective offices when concurring with other pensions or salaries, increased the threshold age for retirement and for eligibility for certain pension allowances, starting from the 1st of January. These measures also affected judges and Legal Advisors of the State. Further, they imposed severe cuts on public pensions (gradation of cuts, starting from 5% on lower pensions, reaching 15% to pensions over 2.000 euros), abolished Christmas and Easter allowances for public employees, and imposed cuts on the pensions of “unmarried and divorced daughters” of army pensioners.
- Legal questions: Compatibility of the measures concerning the retirement age with the principle of legitimate expectations; compatibility of the measures concerning judges with article 87 C and with the principle of functional and personal independence; compatibility of the cuts with art. 1 FAP ECHR, with the principle of human dignity (art. 2 par. 1 C), with the principle of equality in the distribution of public charges (art. 4 par. 5 C), with the principle of proportionality (art. 25 par. 1 C) and with the duty of social security (art. 22 par. 4).
- Arguments of the parties: N/A
- Conclusion and reasoning of the court: The Court stated that matters concerning the pensions for elective offices when concurring with other pensions or salaries, as well as the cuts on the pensions of “unmarried and divorced daughters” of military servants were justified, in view of the explanatory report of the law, invoking the exceptional financial situation of the country [with certain minority opinions on specific matters]. Concerning the increase of the retirement age the Court declared that it was contrary to the principle of legitimate expectations, especially since no transition measure was applied for persons close to their moment of retirement (the measure was applicable immediately from the 1st of January). Concerning the application of the increased age threshold to judges, the judges stated that it was contrary to their functional and personal independence. When already established pension rights were affected, the Court declared the measure contrary to art. 1 FAP ECHR. Concerning the cuts on public pensions, the Court observed that the Constitution and the ECHR do not guarantee a concrete amount of pension or salary. However, legislative cuts in revenues should not endanger the decent way of life of economically weaker classes and should pursue a legitimate aim and should respect the principle of equal distribution of public charges and proportionality. The cuts examined by the Court, being the fifth time cuts were imposed to public pensions since 2010, without a temporary character and without taking into account the rest of economic burdens imposed in the meantime, could affect the decent way of life of a broad category of affected pensioners. Moreover, though it could not be contested that the measures pursued the public interest of restricting financial deficits, no specific elements were brought before the Court to justify or prove the appropriateness or the necessity of the imposed restrictions, or the lack of alternative measures, in order to avoid the burdening again of the same category of citizens. Further, no gradation was provided inside the defined legal categories of pensioners, causing a disproportionate burden in some cases. Concerning the complete deprivation of the Christmas and Easter allowances, the Court observed that it might be incompatible with art. 22 par. 4 (social security) and 2 par. 1 (human dignity) of the Constitution, especially since it did not provide measures for lower pensions [with minority]. The same was observed for the increase of the age threshold in order to receive the social solidarity allowance to lower pensioners from 60 to 65 years.
- Legal effects: Legal opinions of the Court of Audit are not binding under this procedure.
- Main outcome and broader implications: The opinion provoked a lot of reactions in the press, since it was the first time a Supreme Court declared the unconstitutionality of the content of austerity measures. The bill was finally introduced to Parliament with certain modifications, sometimes concerning matters that the Court had considered justified. The cuts in pensions and allowances remained as they were despite the above opinion. The bill “Approval of the Medium Term Budgetary Framework 2013-2016 – Urgent Measures for the Implementation of the law 4046/2012 and of the Medium Term Budgetary Framework 2013-2016” was finally voted under the emergency procedure.
- G. 2st Special Sitting of the Plenum of the Court of Audit on the 27th of February 2013
- Name of the court: Court of Audit (Elegktiko Synedrio, Ελεγκτικό Συνέδριο), Plenum.
- Parties: N/A
- Type of action/procedure: Obligatory opinion by the Court of Audit to bills proposed by the Minister of Finance concerning pensions before their submission to Parliament, according to article 73 par. 2 of the Constitution.
- Admissibility issues: N/A
- Legally relevant factual situation: The draft law “Provisions for the modification and amelioration of pension, financial, administrative and other provisions by the Minister of Finance” contained a chapter on public pensions, especially imposing retroactive cuts on special wage-scale pensions (judges, army and police servants, Legal Advisors of the State, university professors et al.) and on artists.
- Legal questions: Compatibility with article 1 First Additional Protocol ECHR, with the principle of equality and equal contribution to public charges (article 4 par. 1 and 5 C), with the principle of proportionality (article 25 par. 1 C) and with the principle of human dignity (article 2 par. 1); retroactive character of the measure.
- Arguments of the parties: N/A
- Conclusion and reasoning of the court: The Court stated that the retroactive imposition of the cuts was contrary to article 1 FAP ECHR, since they violated the already established and legally recognized right of the affected pensioners to non-restriction of their pension, without justifying the retroactivity of the measure by reasons of public interest. Nor was it invoked that the measure respected the principle of equality and of equal distribution of public charges (art. 4 par. 1 and 5 C) or the principle of proportionality, while the measures only affected a specific category of citizens. Concerning the artists more particularly, the retroactive limitation of their pension to the amount of 720 euros, apart from the fact that it might endanger the decent way of life of the beneficiaries, interfered with article 1 FAP ECHR. However, there was no obvious imperative reason of public interest justifying this violation, given the limited number of pensioners of this category and the small financial profit expected from this measure. Nor was the appropriateness and the necessity of the relevant cuts justified, thus violating the principle of proportionality.
- Legal effects: Legal opinions of the Court of Audit are not binding under this procedure.
- Main outcome and broader implications: The opinion provoked reactions in the press. The provisions were however adopted. The Court of Audit is expected to issue a decision as a jurisdiction on the matter (according to article 98f: the trial of disputes concerning the granting of pensions is within the competence of this Court). The report of the Advocate General of the Court has suggested the unconstitutionality of the statute.
Bond purchases ECB
Describe the political, economic and legal situation leading up to the moment where the European Central Banks started buying government bonds on the secondary market (through the Securities Markets Programme, SMP).
The creation of the SMP was actually a result of the Greek debt crisis and of the fears of contagion to other Eurozone countries.
The rise of Greek bond yields is connected to the burst of the global financial crisis and started in September 2008. The lack of liquidity in the market led to the rise of the Greek bond yields and to their decoupling from those of other Eurozone countries (the rise of the “spread”). This situation was aggravated from November 2009 and the Greek state became unable to access credit in financial markets in April 2010, when it requested the activation of the Commission/ECB/IMF rescue package. Financial assistance was provided through the Loan Facility Agreement, signed on the 8th of May and imposing strict conditions agreed between the Greek authorities and the representatives of the creditors. Eurozone leaders agreed to create the EFSF on the 9th of May, as a mechanism for facing subsequent economic shocks.
One day after the agreement on the creation of the EFSF, on the 10th of May, the ECB announced the creation of the SMP as a way to address “severe tensions in the financial markets”. In the press release, the ECB noted: “In making this decision we have taken note of the statement of the euro area governments that they “will take all measures needed to meet [their] fiscal targets this year and the years ahead in line with excessive deficit procedures” and of the precise additional commitments taken by some euro area governments to accelerate fiscal consolidation and ensure the sustainability of their public finances.” In general, the ECB’s intervention had been expected by the Greek political parties and was considered necessary for facing the crisis and for creating a stronger fiscal union in the Eurozone. Members of SY.RIZ.A. proposed at the time that the ECB should finance directly the Greek state with interest rates comparable to the ones imposed to private banks.
Initially the SMP purchases were mainly composed of Greek debt purchases, with Portugal and Ireland being the next biggest beneficiaries. Spanish and Italian bonds were also purchased in smaller amounts. This, however, changed over time and Italy and Spain became the biggest beneficiaries by the end of 2012.
This operation was not sufficient to lower the borrowing costs of Greece, due to the severity of the country’s debt crisis. Instead, according to The Financial Times, in 2013 the ECB had a 9bn profit from the purchase of Greek bonds. This information was reproduced in the Greek press and led to criticism in Parliament. Reactions were also raised to the fact that the bonds bought by the ECB were not subject to “haircut”, during the second bail-out programme.
Conditionality bond purchases ECB
What national policy measures have been requested by the ECB in exchange for the acquisition of government bonds on the secondary market? How have these requests been subject to debate in light of their implications for (budgetary) sovereignty, constitutional law and the budgetary process?
No known additional policy measures have been publicly requested independently by the ECB. The ECB was an indispensable member of the “troika” and, as such, it has the opportunity to participate in the design of the bailout programme for Greece and insist on the inclusion of several measures. In the press release concerning the creation of the SMP, the ECB states: “In making this decision we have taken note of the statement of the euro area governments that they “will take all measures needed to meet [their] fiscal targets this year and the years ahead in line with excessive deficit procedures” and of the precise additional commitments taken by some euro area governments to accelerate fiscal consolidation and ensure the sustainability of their public finances.”
What other information is relevant with regard to Greece and financial support?
Trade unions, associations and private persons have introduced proceedings against measures implementing the financial assistance instruments before international authorities and courts. To this respect, the decision Koufaki et ADEDY c. Grèce by the ECHR has been the sequence of decision 668/2012 by the Council of State. In this decision, the Strasbourg court largely adopted the reasoning of the Greek Supreme Administrative Court to reject the claims of the plaintiffs as manifestly unreasonable. The General Court of the EU was also asked to assess the legality of the Council Decisions 210/320/EU and 210/486/EU, through an action for annulment brought by ADEDY and two civil servants. However, it refused to do so, declaring the action inadmissible, since the Council Decisions were not of direct concern to the plaintiffs.
Yet, institutions specialized in the protection of social rights have been more aggressive. See for example the 365th Report by the ILO Committee on Freedom of Association, the Report by the ILO High Level Mission to Greece on September 2011, the Mission Statement of the UN Independent Expert on debt and human rights on April 2013 and the decisions of the European Committee of Social Rights, declaring the violation of certain articles of the social charter by austerity measures adopted by the Greek state during the crisis.