Tag Archives: founding treaties

A Reminder to the Hungarian Government

Via Bloggingportal.eu’s campaign I became aware of the controversial new media law in Hungary that seems to introduce mechanisms that elicit media censorship. A lot can be said about this law and its compliance with ECHR and the founding principles of the European Union. But I would like to take a different approach. Instead of providing some legal analysis I will take the liberty (sic) to remind the Hungarian government a poem they should know better. The poem is written by the Hungarian poet and revolutionary Sándor Petőfi in 1847, 2 years before his death.

Szabadság, Szerelem!

E kettő kell nekem

Szerelmemért föláldozom

Az életet,

Szabadságért föláldozom

Szerelmemet.

Freedom, Love!

These two I need

For my love I sacrifice life

For freedom I sacrifice my love.

The Technicalities of Eurozone Breakup

The concept of eurozone breakup is not new, and I have mentioned it before. But now more and more voices warn of this threat. One important observer of European affairs, Gideon Rachman, says that the single currency will indeed eventually break up – and that the euro’s executioner will be Germany. On the other hand a prominent US economist, Barry Eichengreen, says that the euro is an example of a path-dependent historical process that is unlikely to be reversed. None other than Angela Merkel said that “if the euro fails, then Europe fails”. But is this really true?

The markets signal mistrust. Even Mrs. Merkel admits that the eurozone is facing “an exceptionally serious situation”. In any case the possible breakup of the eurozone is a matter of speculation.

That being said, there’s not much discussion on the technicalities of the eurozone breakup, and that is a hugely important aspect. It is very important mainly because of the legal basis of the eurozone and its structural place in the legal framework of the European Union.

Barry Eichengreen again is probably the only person who wrote a whole scientific paper on the subject, claiming that the technical difficulties would be quite formidable. He notes that redenomination in national currencies may pose some real difficulties, especially in determining the scope of redenomination. But his analysis focuses mainly on the exit of a single country or a group of countries from the eurozone, and not on the breakup of the eurozone as a whole.

More recently Wolfgang Münchau and Susanne Mundschenk have written an analysis for Eurointelligence that considers the legal implications of both the exit of a single country from the eurozone, and the breakup of the eurozone altogether. The authors note that the European Treaties have no provision for an exit clause from the euro area, just as there is no provision for an exit from the CAP. They claim that it is virtually impossible for a member state to leave the euro area, devalue, and remain in the EU. They also dismiss the argument that Germany’s persistent trade surplus will eventually cause the collapse of the euro area. But in their paper they do not consider the technicalities of a possible breakup if it occurs.

The truth is that the breakup of the eurozone goes through a Treaty amendment. This may be a simplified procedure (art. 48, para. 6 TEU) since the provisions on economic and monetary policy are in part III of TFEU, and the breakup of the eurozone does not increase the competences conferred on the EU. Such a breakup is only possible through a unanimous decision of the European Council, though. That means that all member States must agree on the dissolution of the Economic and Monetary Union in its present form. The real challenge will be to agree on initial redenomination rates.

However unlikely that is, I would like to point out that there is, indeed, a legal mechanism for the breakup of the eurozone. This breakup will only happen if all Member States agree that the euro is not a sustainable currency. To me it sounds much easier to prevent this breakup from happening in the first place. But should Member States fail to act on the euro crisis, a breakup of the eurozone remains legally and technically possible.

As for the claims that if the euro fails, then Europe fails, I disagree. It is better to have limited, but consensual integration process, than to have secession or atrophy.

 

 

New Consolidated Versions of the Founding Treaties

The new consolidated versions of the founding Treaties can be found in the Official Journal. They include the Treaty on European Union, Treaty on the functioning of the European Union, the Charter of fundamental rights of the European Union and the Treaty establishing the European atomic energy community.

Does the EMF Require a Treaty Revision?

Angela Merkel says that a European Monetary Fund (EMF) could not be created without treaty changes. The reasoning is in the no-bailout clause (art. 125 TFEU). The exact wording is:

“The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.”

Now, some (such as Daniela Schwarzer) claim that another clause – art. 122 TFEU – should apply:

“Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned.”

The initial proposers of the EMF say that the drafters of the Maastricht Treaty had failed to appreciate that, in a context of fragile financial markets, the real danger of a financial meltdown makes a ‘pure’ no-bail-out response unrealistic.

The question is deadly serious – should we create the EMF on the current legal basis or should we amend the treaties?

To my opinion we definitely should amend the treaties first. In both Mrs. Schwarzer’s, and Mr. Gros’s and Mr. Mayer’s opinions we do not encounter any serious legal analysis of the no-bailout clause. They say that the urgency of the situation justifies the amendment, albeit circumventing, in a way, the TFEU.

The problem from my perspective lies in art. 122 TFEU in particular. The phrase “beyond its control” to me means that we should assess – case by case – the causality of the exceptional occurrences. It is clear to everyone that maintaining budget discipline IS in the control of national governments. Any interpretation of the current financial crisis as a force majeure is not convincing, since it would imply a systemic event has incapacitated the fiscal governance abilities of some (but not all) Member States.

The urgency of the situation is a different matter. It may well be true that without a bailout a bigger crisis might emerge. But we need to ask ourselves what is that we value more – a community based on law or something else.

The Treaty of Lisbon Enters into Force

The newest revision of the founding treaties – the Treaty of Lisbon, has entered into force. This is a good day for the European integration after a very difficult period of debate.

So what will change now?

  • Few main changes may be outlined:
  • The European Union becomes a legal entity;
  • The three pillars (European Community, Foreign and Security Policy, Justice and Home Affairs) are merged together;
  • A new rule of double qualified majority in the Council (from 2014);
  • Co-decision becomes the ordinary legislative procedure;
  • Early-warning system allows national parliaments of the Member States to indicate when the subsidiarity principle may have been violated;
  • Creation of the post of President of the European Council (for 2.5 years);
  • Creation of a High Representative of the Union for Foreign
  • Affairs and Security Policy who is also a Vice-president of the Commission;
  • Right of citizens’ initiative, etc.

During the next few days I will attempt to summarize more information about the most important reforms.