The purpose of this paper is to discuss the role of the European Law in the crisis. Laws are rules for a crisis. When humans are living together, that has always been accompanied by conflicts. That’s why law was made. It is a preventive guideline for a future ‘crisis’ - in the small sphere between arguing neighbours, but also for big issues. We will examine how the law was followed here.
The example is the European Stability Mechanism (ESM). After a brief explanation on what the ESM is and why it was established, the compliance with European Law will be discussed by going through the ECJ’s judgement in the “Pringle-Case” from November 2012. Secondly the paper will refer to the German Federal Court’s “ESM- judgement”, which was published two months earlier.
Table of Contents
The ESM – A Breach of the Treaties?
A. Introduction
I. Im Nachhinein ist man immer schlauer…
II. Different Interests, different Opinions
1. Cyprus
2. Banking Union
3. OMT
4. Euro Bonds
III. The Law and the Crisis
B. What is the ESM?
I. Overview
II. The idea: No dependence on the market’s rules
III. Legal basis and status
C. Situation before the ESM
D. The ECJ Pringle-Case
I. Correct procedure?
1. Only provisions of Part Three?
a. Monetary Policy
aa. Everything already ‘clear’?
bb. Consultation of the ECB
b. Coordination of the Member States’ economic policies
2. Increases the competences conferred on the Union?
3. Summary
III. Compliance with the other Treaty Provisions
1. Exclusive Union competence
a. Monetary policy
b. Conclusion of international agreements
2. Prohibition by the Treaties
a. Financial assistance by the Union in exceptional cases (Art. 122 (2) TFEU)
b. Art. 123 TFEU
c. No-bailout clause
IV. Conclusion
E. Judgement of the BVerfG of 12 September 2012
I. Overview
1. National Constitutions and European Law
a. Maastricht Judgement (1992)
b. Treaty of Lisbon (2009)
c. Mangold (2010)
d. Financial assistance for Greece and Rescuing of the Euro (2011)
e. Application in practice
II. The BVerfG’s interpretation of the ESM Treaty (TESM)
1. The budgetary power of the Parliament
2. Limited liability
a. Other shares
b. Capital calls
c. Coverage of Losses
d. First requirement of the Court
3. The German Parliament’s right of information
a. Prohibition of Disclosure and Immunity
b. Interpretation
aa. Systematic approach
bb. Spirit and purpose of the Law
c. Second requirement of the Court
4. Ensuring the BVerfG’s interpretation
5. Summary
III. The BVerfG’s opinion on the ECB’s OMT Program
1. Overview
2. The principle of Article 123 (2) TFEU
3. An unlawful avoidance of the principle?
F. Conclusion
Objectives and Research Themes
This work critically examines the compatibility of the European Stability Mechanism (ESM) with the European Union treaties, focusing on the legal validity of crisis management measures within the framework of European law. It explores the tension between political necessity in the Euro-Crisis and the formal constraints of the existing legal order.
- Legal legitimacy of the ESM under European Law.
- Judicial review by the European Court of Justice in the "Pringle-Case".
- Constitutional oversight by the German Federal Constitutional Court (BVerfG).
- Compatibility of the European Central Bank's OMT program with the TFEU.
- The evolution of European Financial Law and the necessity for reforms.
Excerpt from the Book
II. Different Interests, different Opinions
In general there are always two main models, which are always discussed. The first one is the liberal approach. It could be the ‘Darwin-Model’. Nobody cares for anybody, except for himself. There is no financial assistance at all. If a bank or a state fails to pay its debts, it will go bankrupt. The ‘survival of the fittest’-argument is that the failure of a bad bank offers space for a future good bank.
The opposite approach is the ‘Solidarity-Model’. Everybody cares for each other. Banks are rescued by the states, insolvent states are rescued by other states, respectively its tax payers. It is based on Keynes’ belief that putting money into markets is superior to saving money.
The Darwin Model is always, favoured by the solvent states, who do not want be liable for other state’s debts. Of course, these (almost) insolvent states promote the second model. The golden way is probably somewhere in the middle.
Summary of Chapters
A. Introduction: Discusses the overarching conflict between liberal and solidarity-based approaches to the Euro-Crisis and introduces the research focus on the role of European Law.
B. What is the ESM?: Provides an overview of the European Stability Mechanism, its legal basis as an intergovernmental organization, and its function as a permanent crisis resolution mechanism.
C. Situation before the ESM: Analyzes the legal framework regarding financial assistance prohibition and the earlier, contested legality of the Greek Loan Facility and the EFSF.
D. The ECJ Pringle-Case: Evaluates the European Court of Justice’s decision regarding the simplified treaty revision procedure and the ESM's compatibility with monetary policy mandates and Treaty provisions.
E. Judgement of the BVerfG of 12 September 2012: Examines the German Federal Constitutional Court’s ruling on the ratification of the ESM, emphasizing the protection of the German Parliament’s budgetary autonomy.
F. Conclusion: Summarizes the incompatibility of current European Financial Law with crisis instruments like the ESM and argues for the necessity of a new financial constitution for the Euro Area.
Keywords
European Stability Mechanism, ESM, Euro-Crisis, European Law, TFEU, Pringle-Case, BVerfG, OMT Program, Budgetary Autonomy, No-bailout clause, Economic Policy, Monetary Policy, Constitutional Law, Euro Area, Financial Assistance.
Frequently Asked Questions
What is the fundamental subject of this publication?
The book examines the legal validity of the European Stability Mechanism (ESM) within the context of European Union law during the Euro-Crisis.
What are the primary thematic areas covered in the analysis?
The text focuses on the tension between legal constraints in the EU treaties and political crisis management, the judicial review process, and the protection of national constitutional rights.
What is the central research question addressed by the author?
The central question is whether the ESM and similar crisis measures represent a breach of the existing European treaties and if the current European legal order is sufficient for managing systemic crises.
Which scientific methodology does the author apply?
The author uses legal analysis and doctrinal examination, specifically scrutinizing case law from the European Court of Justice (ECJ) and the German Federal Constitutional Court (BVerfG).
What topics are discussed in the main part of the work?
The main part covers the structure of the ESM, the "Pringle-Case" before the ECJ, the "ESM-judgement" of the BVerfG, and a critique of the ECB's Outright Monetary Transactions (OMT) program.
Which keywords define the core content?
Key terms include ESM, Euro-Crisis, TFEU, European Court of Justice, BVerfG, budgetary autonomy, and financial assistance.
How does the author interpret the BVerfG's role as a "border patrol"?
The author describes the BVerfG as a "border patrol" that attempts to define limits for European acts, asserting national constitutional identity against potential overreach by EU institutions.
What specific concerns does the author raise regarding the OMT program?
The author expresses concern that the ECB's "unlimited" purchase of debt instruments on the secondary market risks circumventing the prohibition of direct financing of Member States under Article 123 TFEU.
- Arbeit zitieren
- Lukas Zanzinger (Autor:in), 2013, The ESM. A Breach of the Treaties?, München, GRIN Verlag, https://www.grin.com/document/215125
