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Eurozone Flashcards

1
Q

Scope of issue with economic governance

A

Functioning of the economic and monetary union (single monetary policy aka the Eurozone)

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2
Q

Number of MS in Eurozone

A

19

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3
Q

How to join euro

A

Convergence criteria over 2 years

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4
Q

Formal derogation from Art 130 TFEU

A

Opt out: UK, Denmark
Not currently considering: Sweden, Poland, Czech Republic, Denmark
Currently considering: Croatia, Bulgaria, Romania

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5
Q

Non-participation MS’ contribution

A

National central banks own shares in ECB but paid very small percentage of subscribed capital e.g. French CB pay out is 26.5x higher than English CB

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6
Q

Creation of single market

A

Art 63 TFEU

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7
Q

Introduction of single currency

A

Art 128 TFEU

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8
Q

Exercise of EU level control over national budget deficit

A

Art 126(1) TFEU: avoid excessive government deficits

  • Hard to attain, only Lux and Ireland met requirements, so value targets were relaxed (moving towards 60% rather than strictly 60%)
  • Intervention blocked by Germany and France
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9
Q

Coordination of national economic policies and acceptance of surveillance mechanisms

A

Rationale: single currency

Art 120-121, 128 TFEU

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10
Q

Role of European Central Bank

A

Independence from other EU institutions: Art 130 TFEU

Financial independence: instructed to pursue ‘price stability’

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11
Q

Composition of European Central Bank

A

a) Governing Council (Art 283 TFEU)
b) Executive Board
c) General Council (Art 44 TFEU)

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12
Q

Key tasks of European Central Bank

A

a) Exclusive competence over EU monetary policy
b) Prudential supervision over banks
c) Lender of last resort

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13
Q

Exclusive competence over EU monetary policy

A

Art 282 TFEU

Exception: giving loans (Art 123 TFEU)

Art 127(2) TFEU: some monetary policy decisions can affect and indirectly affect non-Euro countries’ economic and monetary policies

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14
Q

Prudential supervision over banks

A

Rationale: stability of banks key to maintaining Eurozone

Decision-making powers: minimum reserve, level of exposure of risk, liquidity requirement, stress test, non compliance fines

Single Supervisory Mechanism (large banks regulated directly by ECB)
Single Resolution Mechanism (restructuring procedures for troubled banks)

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15
Q

Lender of last resort

A

Since inception

De facto last resort lender for Euro area governments - Outright Monetary Transactions (2012)

Unlimited purchase power of bonds, conditional on beneficiary governments’ compliance with ESFS/ESM programme and other IMF programmes

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16
Q

Problem with being lender of last resort

A

Conflicts Art 123 TFEU

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17
Q

Response by ECB to being lender of last resort

A

While indirectly purchasing bonds, it is not financing any deficit or engaging in fiscal policy

Instead: exercise powers to have appropriate interest rates in the markets

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18
Q

Overview of developments from economic crises

A

a) European Stability Mechanism
b) Enhanced macroeconomic surveillance system
c) Bail out programme

19
Q

European Stability Mechanism - function

A

Provide financial assistance to Euro area MS experiencing or threatened by financial difficulties

How: issue money market instruments and medium and long-term debt

Backed by paid in capital of 80 billion euros
Central body: board of governors made out of Euro-area finance ministers

20
Q

European Stability Mechanism - problem

A

Legal fiction since key EU institutions are central to functions

European Commission, ECB assess assistance requests and terms for granting support

EC/ECB/IMF eventually decides terms of assistance through MoU, in charge of verifying compliance

21
Q

European Stability Mechanism - legal challenge

A

Pringle v Ireland (Irish politician, claim that it contravened the no loan/no bail out Treaty articles)

No loan rule: granting of financial assistance in form of credit line does not imply assumption of debts, but creates a new debt owed to ESM

No bail out rule: buying state bonds does not imply assumption of debt, since recipient MS stills has to repay debts

22
Q

European Stability Mechanism - legitimacy and accountability problem

A

Rule of law: supervision of the organs, including judicial review of decisions unclear

Constraints of EU institutions:
Participating MSs not implementing EU law when setting up ESM
No cover by Charter

23
Q

Enhanced macroeconomic surveillnace system

A

a) European Semester
b) Six Pack
c) Fiscal Compact

24
Q

European Semester - origins

A

Economic policy does not fall within EU competences

Exception: Art 121(1) TFEU: economic policies to be coordinated
Takes advantage of spillover effect where one area of integration necessitates integration in another

25
European Semester - through greater coordination under the exception of Art 121(1) TFEU
6 month cycle where economic and budgetary polciies are streamlined
26
Effects of European Semester
EU can pressure states and influence other areas of law where they lack competence e.g. labour law Example: a) CSR 2012: dismissal protection system in France b) CSR 2012-214: flexibility of wage-setting system in Belgium
27
Six Pack
Reform package of 6 legal acts reforming the Pact for Stability and Growth - more teeth Prevention and correction of macroeconomic imbalances Non-compliance: possible economic sanctions - imposition of interest-bearing deposit on MS or even annual deposit in case of repeated failures Example: Italian populist government
28
Critique of EU institutions in macroeconomic goals (Six Pack)
Focus on low deficit may cause recession No argument for increasing government borrowing during cooling economy
29
Fiscal Compact
Procedure for controlling budget policy of MS intensified via intergovernmental treaty Required to balance national budgets, avoid government deficits for more than 0.5% of GDP
30
Implications of Fiscal Compact
Separate from Treaties: can pull out EU not directly making decisions, only coordinating decision-making by MS Such fiscal policy decisions interdependent Some areas not within EU competence are now within indirect purview of EU law since MS cannot act in a way that would compromise the project
31
Bail out programme
Financial assistance programmes agreements for MS worst affected by sovereign debt crisis from 2010 More like a loan agreement than a bail out programme Diverse for legal nature/basis of mechanisms used so far
32
Diversity of legal nature/basis of mechanism
1st loan to Greece: Bilateral agreement between MS and Greece, complemented by IMF standby agreements Ireland, Portugal: EFSM (emergency funding programme using EU budget as collateral) - Based on Art 122(2) TFEU - Replaced by EFSF due to lack of funds 2nd loan to Greece: EFSF Cyprus: ESM that replaced EFSF
33
Content of loan agreements
Condition on MoU (reforms to achieve public deficit reduction measures) e..g. increasing speed and depth of privitisation, lowering minimum wage
34
Assumption of proposed reforms
Deregulation, right-wing solutions will stimulate growth by technocratic bodies
35
Implementation of loan agreement
Progress on implementing reforms regularly reviewed by bodies e.g. Ireland, EU officials in finance ministry Possible benefit for governments who use EU influence as excuse for new policy implementation Undermines national sovereignty
36
Legal status of bail out agreements
Kilpatrick: questions legality of the reforms suggested If no money to fulfil socio-economic policy, should other states give money to do so -- limited solidarity (McCrea) e. g. Slovakia (poorer, unwilling) vs Greece (rejected loan conditions, wanted unconditional loan) - Moral hazard - Eurozone created interdependence without corresponding rise in solidarity
37
Possibility of legal challenge to bailout agreements (not EU treaties)
CJEU refused to accept, measures were "national measures" (even though they were carried out to meet the conditions) (ADEDY v Council) Use of preliminary ruling also fruitless (Sindicato dos Bancarios, Corpul National al Politisitilor)
38
Effect of no legal challenge
Legal gap where EU institutions make reforms conditional for MS to attain loans, but don't assume responsibility for consequences of implementations
39
Acceptance of EU institutions' lack of liability for damages for actions within ESM framework
Ledra Advertising (Cyprus bail out)
40
Challenge to Outright Monetary Transactions - Peter Gauweiler
a) Economic or monetary policy? Monetary policy, within powers of ECB, aimed at securing 'single' nature of monetary policy and effectiveness of transmission mechanisms (NOT ECONOMIC POLICY) b) Overdraft? OMT not overdraft, increased MS' impetus to follow sound budgetary policy and circumvent the objective pursued by prohibition of monetary financing, that it affects macroeconomic policy was indirect and incidental Critical reception by GCC: weak intensity of review, but held that programme did not manifestly intensify ECB's competences
41
Challenge to Outright Monetary Transactions - Weiss
a) Quantitative easing was ultra vires, deficit financing? - Not deficit financing, since bond buying was indirect - Pursues monetary policy goals - But no clear line - Limitation on programme, conditionality provided limit on exposure b) Programme's compatibility with Germany core constitutional identity
42
Proposals for future of Eurozone - 2012 Four Presidents' Report
a) Banking union b) Integration of budgetary policies c) Strengthening of democratic legitimation, accountability Begg: only banking union in progress
43
Proposals for future of Eurozone - 2015 Five Presidents' Report
Contentious components dropped, only vague call to fiscal stabilisation Begg: extent of political resistance to economic integration led Presidents to cease aiming for measures that were seen as vital only few years earlier

EU Law (9 decks)

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