To bail out or not to bail out? The current framework of financial assistance for euro area member states measured against the requirements of European primary law
To bail out or not to bail out? The current framework of financial assistance for euro area member states measured against the requirements of European primary law

Author(s): Rainer Palmstorfer
Subject(s): Law, Constitution, Jurisprudence, International Law, EU-Legislation
Published by: Пловдивски университет »Паисий Хилендарски«
Keywords: European debt crisis; measures; financial stability; European stability mechanism; economic policy
Summary/Abstract: Since 2010 the European Union and its Member States have implemented a series of measures to respond to the European debt crisis. What is striking about these measures is that, for the most part, they have been adopted outside the domain of European Union law. The bilateral loans for Greece, the European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM) and, most recently, the Treaty on Stability, Coordination and Governance (TSCG) are acts under international or, in the case of the EFSF, national (i.e. Luxembourg) law. However the establishment of a European Financial Stabilization Mechanism (EFSM), the adoption of a package of six acts aimed at reforming the Stability and Growth Pact and the introduction of Article 136(3) TFEU by means of Article 48(6) TFEU show that the EU has not remained inactive either. Even though these are not acts under European Union law, these steps nevertheless have to be in conformity with the EMU framework. Apart from competence issues, it is especially the „no-bail-out clause“, that is, Article 125(1) TFEU that raises questions as to the legality of this financial assistance. These legal objections also concern the provision of European Union financial help by means of the EFSM. Here the additional issue of whether the EFSM was based on the appropriate legal base, i.e. Article 122(2) TFEU is raised. In the following, it shall be analyzed whether the bilateral loans for Greece, the EFSF and the EFSM are compatible with these and other Treaty provisions. As far as the course of this investigation is concerned, the starting point will be the competences of the European Union in the field of economic policy. We shall then turn to Article 125(1) and Article 122(2) TFEU.

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