In Chapter 1, the editors introduce the content of the volume and explain its structure
Alberto de Gregorio Merino
This chapter provides an overview of the institutional architecture for macro-economic governance in the EMU, analysing the role of the EU supranational and intergovernmental institutions and explaining their reciprocal interactions. Specifically, the author analyses the tasks of the Council, the Commission, the Eurogroup - including when this acts as the board of governors of the European Stability Mechanism (ESM) - as well as the European Council and the Euro Summit, reflecting the complexity of coordination of economic affairs in the EU. Moreover, he details the limited powers of the European Parliament in EMU, and underlines the narrow justiciability of acts adopted by the intergovernmental institutions - as reflected in the case law of the European Court of Justice on crisis-response measures. As the author emphasizes, the inter-governmental response to the euro-crisis significantly affected the EU inter-institutional balance in economic governance, but this created challenges, including on the relation between the European Council and the Council, which will need to be addressed over time.
Chapter 3 focuses on the fiscal rules of economic governance, mapping the procedures in place to ensure that member states conform to sound budgetary policy. In particular the author distinguishes between mechanisms of control which operate externally, at the level of the EU, from those entrenched internally, within the member states themselves. With regard to the external controls, he analyses in depth the Stability and Growth Pact (SGP) and its recent revisions through the so-called ‘Six Pack’ and ‘Two Pack’ and details the functioning of both its preventive and the corrective arms. Moreover, he discusses the sanctions mechanisms applicable in the Excessive Deficit Procedure, as well as the growing role of the European Commission in policing states’ budgets in the framework of the European Semester. With regard to the internal controls, then, the author emphasizes the importance of the obligation to constitutionalize a balanced budget amendment in national law resulting from the Treaty on Stability, Coordination and Governance in the EMU and refers to the possible future developments in this area, including the possible domestication of the Fiscal Compact in EU law.
Chapter 4 zooms into the mechanisms of financial assistance that were established in response to the euro-crisis and the threat of sovereign default in a number of Eurozone member states. While the author considers both the European Financial Stability Mechanism - a temporary support tool established through a Council regulation - and the European Financial Stability Facility - a private vehicle incorporated under Luxembourg Law - he mostly focuses on the ESM - an international institution set-up by the Eurozone member states through an intergovernmental treaty in 2012. The author, in particular, explains the main administrative features of the ESM and discusses in detail the Pringle judgment of the ECJ, which confirmed its compatibility with the EU legal framework. As this chapter explains, the establishment of the ESM modifies the original understanding of the ‘no-bailout’ provision enshrined in the EU treaties but reflects the growing awareness for financial stability as a common concern in the Eurozone. Nevertheless, the author identifies challenges in the ESM and cautions against the pressure to re-incorporate it within the EU legal framework without major amendments.
The chapter analyses the proposals in favour of establishing a fiscal capacity – that is a budget of the euro area that can be used as a counter-cyclical tool for stabilization purposes in cases of asymmetric shocks. As the chapter explains, the fiscal capacity remains a missing link in the constitutional structure of EMU: the Maastricht Treaty did not foresee any supranational mechanism to handle asymmetric busts, and the responses to the crisis so far have not led to the creation of such an instrument. Yet, the author underlines that growing awareness exists on the need for such a fiscal capacity and he reviews the proposals advanced, among others, by the European Parliament, the European Commission and jointly by the French and German Governments for a euro area budget, suggesting that a consensus may be building in this direction. In fact, Fabbrini claims that there are adequate legal bases in the current EU treaties to set up such a stabilization tool, but he emphasizes that a successful fiscal capacity must be based on own resources – rather than state transfers – and subject to adequate governance and accountability mechanisms to ensure executive effectiveness and democratic legitimacy.
Phoebus L. Athanassiou
Chapter 6 presents the institutional role of the ECB, as well as the new functions it has acquired since the beginning of the euro-crisis. The author explains the organization and independence of the ECB and the national central banks comprising the Eurosystem and details the ECB powers in conducting the single monetary policy of the Eurozone. Moreover, the author underlines the new tasks that were assigned to the ECB in response to the euro-crisis - notably the functions of micro- and macro-prudential supervision in the framework of the Single Supervisory Mechanism - and discusses the impact on its mandate and independence. At the same time, the author reviews the role that the ECB played in managing financial support programmes as part of the so-called troika. As this chapter points out, the ECB emerged as one of the most powerful institutions of EMU in the aftermath of the crisis, acting as the stop-gap to remedy the design flaws of the EMU, but with great power comes greater responsibility, and it is therefore unsurprising that its action are increasingly subject to judicial scrutiny.
Katerina Pantazatou and Ioannis G. Asimakopoulos
Aikaterini Pantazatou and Ioannis Asimakopoulos overview the conventional and unconventional monetary policies that the ECB has deployed to pursue its mandate as the central bank of the Eurozone. The authors underline how the EU treaties assign to the ECB the primary task of maintaining price stability, and explain the traditional toolkit to achieve this goal, including interest rates changes, open market operations, standing facilities, i.e., the deposit and the marginal lending facilities, and minimum reserve requirements for credit institutions. At the same time, they underline how conventional monetary policy came under pressure in context of the euro-crisis, where interest rates policy reached its lower bound and the transmission of monetary policy came under pressure, forcing the ECB to develop new instruments, such as targeted long-term refinancing operations, securities market programme, outright monetary transactions (OMT) and - finally - public assets purchase programmes, otherwise known as quantitative easing (QE). As this chapter explains, the deployment of unconventional monetary policy confirms that the ECB enjoys powers analogous to other central banks, but also raises legal challenges to the ECB actions.
Chapter 8 has the legality of the ECB at its heart and examines judicial review of ECB measures. The author refers to older ECJ cases on ECB independence, and the more recent national challenges to ECB monetary policy, but her analysis mostly focuses on two major rulings delivered by the ECJ - on preliminary references made by the Bundesverfassungsgericht (the Constitutional Court of Germany) - on the legality of the OMT and the QE programs: the Gauweiler and Weiss judgments. As the author explains, the fact that the ECB has been subject to so many legal actions is unusual in comparative perspectives, since in most other constitutional democracies action by central banks tend to be shielded from judicial review on standing grounds. Nevertheless, she stresses that the ECJ has fully validated the action of the ECB, effectively adopting a deferential standard of review, which is consonant with the greater technical expertise that the ECB has compared to the other EU institutions.
Chapter 9 examines the adjustment programmes devised to support EU member states facing fiscal challenges, discussing also the role of the ECB in designing and monitoring such programmes. As the author explains, after losing accessing to the bond markets, five Eurozone countries - Greece, Portugal, Ireland, Cyprus and Spain - received financial assistance from the ESM and its predecessors. Nevertheless, pursuant to the principle of conditionality, financial support was subject to the national implementation of structural reforms, including in the pension, labour market and tax sectors. The author, in particular considers the case of Ireland as an example to assess the efficacy of the adjustment programmes and even though the Irish case is often taken as a success story, he emphasizes how the a number of the requirements originally set by the international creditors were actually lost in translation due to national political opposition. The author then reflects on the impact of adjustment programmes on the protection of social rights, and reviews the growing case law by national and European courts in this field, making the conclusive case that financial support programmes should give greater attention to the disparate social impact resulting from economic adjustment at the domestic level.
Chapter 10 starts with a discussion of the so-called Single Rulebook (SR) and the European Banking Authority, summing up the state of the art and critically examining the most recent developments. As the author shows, the Single Rulebook is not truly an example of maximum harmonization and is not really a ‘single’ document, but is rather a ‘multi-tiered’ structure. Several of the Directives composing the SR leave, in fact, wiggle room to Member States, and in any case local rules might create different regulatory environments in which the shared EU rules apply, with sometimes relevant effects on substantive harmonization. The chapter also analyses how the role of the European Banking Authority (EBA) should be strengthened to facilitate a more effective and harmonized rule-making activity.