On the 12th of February we were excited and pleased to attend a Jean Monnet Module by Judge Constantinos Lycourgos addressing the “Measures taken in order to tackle the Euro Crisis and the case law of the EU Courts”. The event took place in Nicosia, Cyprus at Cleopatra hotel, followed by a lovely reception where the guests could discuss the presented matters, as well as speak to the Judge himself.
This article focuses on the first part of Judge Lycourgos’ speech.
Judge Lycourgos began his speech by highlighting the fact that the European Union was not prepared to face the economic crisis that started from the USA in 2008 and stoke the EU as a sovereign debt and banking crisis. The Treaties may have created a Monetary Union, but at that point there was no Common Economic Policy or Financial control mechanisms. As a result, since ‘Necessity is the mother of invention’, new measures were adopted by EU leaders to reinforce the Economic and Monetary Union (EMU). The main measure taken was the creation of ESM (European Stability Mechanism), adopted outside the scope of EU law, as it is based on International Agreement between member states. The ESM Treaty was signed on the 2nd of February, 2010 by Eurozone countries. This created an International Financial Institution to support member states in dire financial situation. According to Art.136 of the Treaty of Functioning of the EU, a country can apply for financial help but will be put under strict control. Article 13 of the ESM states that when a member of the ESM applies for stability support, the European Commission and the European Central Bank (ECB) make an assessment whether there is a risk for the stability of the Eurozone and the Member States, and if the public debt of that country is sustainable. Then, the ESM decides if the country will be assisted. If stability support is accepted, the European Commission, the ECB and the International Momentary Fund (IMF) will negotiate with the country a memorandum of understanding.
Within the scope of EU Law, a number of measures had been taken, namely the creation of new agencies and strengthening of the ECB. One of the agencies created is the European Security and Market Authority (ESMA). The ECB emerged reinforced from the crisis, its President Mario Draghi stated that the ‘’ECB was intended to do whatever it takes to save the Euro area’’. During the crisis the ECB had to deepen the regulation of the financial and banking sector and combat the sovereign debt crisis. Article 137 of the TFEU enables the Council to give special tasks to the ECB. Therefore the ECB was given the power to supervise financial institutions and play a prominent role in the resolution mechanisms for failing banks. In the Summer of 2012, the ECB introduced the Outright Monetary Transactions (OMT), which included purchasing bonds of Eurozone countries from secondary markets which are in financial difficulties, in hope that market conditions would improve, on the requirement that the particular member state shall participate to a reform program.
As a result of the crisis, multiple constitutional issues have arisen. The cases of Pringle (C-370/12 – Pringle) referred by the Irish Supreme Court and Gauweiler (C-62/14 – Gauweiler and Others) referred by the German Constitutional Court address the limitations between of the Economic and Monetary policy.
In Pringle the CJEU ruled on the validity of the ESM. In particular the Irish Supreme Court doubted if member states could establish by an International Agreement, the ESM, while the EU had exclusive competence over monetary policy. The CJEU focused on the objective pursued by the ESM, which is the stability of the Euro Area as a whole. This is different from ensuring price stability, which is the goal of the EU’s monetary policy. Also, the financial assistance to a member state fell outside the scope of monetary policy. The ECJ concluded that since no Article in the Treaties provided for a mechanism like the ESM inside EU Law, Eurozone members could establish it outside EU Law. However they are still bound by EU Law.
In Gauweiler the ECJ examined the boundaries between financial and economic policies, as well as the validity of the ECB monetary transaction programs. The German Constitutional Court had doubts as to the compatibility of the OMT with competences of the ECB and Article 123 of the TFEU that prohibits the ECB from granting credit facilities to the member states. The CJEU ruled that the ECB was not acting ultra vires. The main objective was to ensure price stability, which fell in the scope of monetary policy. Overall, in both cases of Pringle and Gauweiler the measures were held by the CJEU to be in accordance with EU Law.
There has also been an extensive judicial review of compliance of the EU Legal order in various countries, which included the legality of measures and litigation in member states following economic adjustment programs. Discussing the cases of Portugal and Greece, Judge Lycourgos referred to the July 2012 decision of the Portugal Constitutional Court which struck down cuts for public servants which were part of the memorandum of understanding for financial policies. It was held that the greater the effort of citizens, the higher the demand of equality. As for Greece, the Council of State found that the first memorandum of understanding was not in accordance with the conditions of the Greek Constitution, since the measures imposed were part of larger measures.
Concluding, Judge Lycourgos mentioned that Member states and the EU have taken measures to tackle the financial crisis within the Union. Because of the existing legal basis in the EU about these issues and the lack of political will to create one, some measures were taken outside the scope of EU Law. He also stated that effective judicial protection is needed.
Written by the Editorial Team