1. Constitutional Resilience in Times of Crisis The Responses to the Eurozone Crisis and their Implications on EU and National Constitutional Law Martina Augustin Tbilisi, 01.07.2016

2. Outline The European Economic and Monetary Union (EMU) Evolution and design Responses to the Eurozone Crisis Increase of budgetary control and financial assistance Constitutional Implications EU and national constitutional law What’s next for the EMU? Reform plans and future scenarios 2

3. The European Economic and Monetary Union Design the EMU The Monetary Union The Economic Union The Monetary Union Single currency overseen by the European Central Bank Art 3(1) lit c) TFEU: exclusive power of the EU in monetary policy The Economic Union MS retained power over economic policies Although within certain limits: Art 121(1) TFEU: MS ‘shall regard their economic policies as a matter of common concern […]‘ System of cooperation Multilateral surveillance procedure Excessive deficit procedure 3

4. EU Crisis Law 4 EMU before the Crisis “Soft” system of cooperation Excessive deficit of several MS: EU rules proved to be ineffective Sovereign debt crisis Economic Health of single MS affected the whole Union Interconnection between the two sides of the EMU  Asymmetric design of the EMU showed shortcomings The Responses 1)Increase of Budgetary Control Mechanisms a)Within the EU framework b)In intergovernmental law 2)Financial Assistance a)Loan facilities & Stability Mechanisms b)The Intervention of the European Central Bank

5. EU Crisis Law (I) Budgetary Control Mechanisms 1.Increase of controls at the EU level “Six Pack” (2011) Aim = increase control over budgetary policies, strengthening of sanction procedure, increase of macroeconomic surveillance “Two Pack” (2013) MS have to submit budgetary plans, obligation to create national independent fiscal councils Legal basis for reforms = Art 136 and 121(6) TFEU 2.Increase of controls at the intergovernmental level The Treaty on Stability, Coordination and Governance (Fiscal Compact) Adoption of debt brake rules Escape into intergovernmental law 5

6. EU Crisis Law (II) Financial Assistance Bilateral aid: rescue packages to Greece International Monetary Fund (IMF) The European Financial Stability Mechanism (EFSM) The European Financial Stability Facility (EFSF) Not enough to ensure the markets The European Stability Mechanism (ESM) International Organisation in Luxembourg Permanent rescue mechanism for Eurozone Members in financial difficulty Element of conditionality: Fiscal Compact Compatibility with Art 125 TFEU? ( ECJ Pringle ) 6

7. Implications on EU Law The Crisis law had an impact on the EMU legal framework 1. Financial Assistance Mechanisms Conditionality of ESM-help 2.Increase of Budgetary Surveillance Stricter sanction mechanisms 3.Conclusion EMU has been strengthened on the cost of MS autonomy Shifts of power to the Executive (Commission, ECB, European Council) Increasing use of intergovernmental Treaties However, there is still no European Economic Union  Asymmetry of EMU remains 7

8. Implications on National Constitutional Law EU membership required constitutional changes Transfer of competences MS ‘shall’ remain the “Master of the Treaties“ Certain Constitutional Courts adopt “EU friendly” jurisdiction “Principle of openness towards EU law” Limits to further integration ‘German Bundestag may NOT transfer its budgetary responsibility‘ National budget autonomy = essential competence of a national state Information and approval rights of national parliaments 8

9. The future EMU (I) What’s next for the EMU? Response of EU Institutions: 2012 Commission’ blueprint for a deep and genuine EMU Full banking, fiscal and economic Union 4 Presidents Proposal ‘A Genuine Economic and Monetary Union’ EU decision-making on national budgets 2015: ‘5 President’s Report’ Builds on the former reform plans, but is more cautious By 2025 joint decision-making on national budgets & economic policies Commission takes steps to strengthen EMU White paper in 2017: advisory European Fiscal Board, complete the Banking Union 9

10. The future EMU (II) What’s next? Possible future scenarios 1.Further integration on the cost of nation states 2.Unlimited autonomy of the MS in managing budgets and spending Effective EU control over national spending >< the parliament’s budgetary autonomy How is it possible to reconcile the two conflicting sides? ‘ How can we limit national spending without limiting national democracy?’ 10