Special Part: The Constitutional Consequences of the Financial Crisis

Question 1

What is globalization, and how has it affected States and markets?

Answer 1

• Globalization: The strict relationship between all parts of the world regarding institutions and economic affairs
• States lose much sovereignty but gain access to global economic institutions that have their own sources and norms
• In response, States may try to withdraw and regulate the transnational market
• States become incentivized to (1) cut labor costs, (2) reduce taxes on capitals, and (3) decrease the size and scope of the welfare state
• Markets require quicker regulations for moving goods and capital around the world in a short time scope
• Market rules need to become soft (non-binding)
• Necessities of the market then start playing a role in parliamentary decisions
• The legal concept of lex mercatoria emerges, providing norms governing property, contract and dispute resolution through which the domestic application of transnational commercial law is enabled

Question 2

What are the main constitutional implications of economic crisis?

Answer 2

1. Implicit transfer of sovereignty to the European institutions
2. Marginalization of the role of national European Parliaments
3. Strengthening of the executive at the expense of legislative power
4. Downgrading of social rights protection

Question 3

What was the case of the Trichet-Draghi letter addressed to Italy (2011)?

Answer 3

• The ECB sent a letter to Italy urging the State to implement policies to restrict its deficit and public debt, as well as to provide a credible reform strategy
• Technically, the ECB is not a representative institution of the EU and does not have the official right to dictate policy choices to EU member States
• Yet, when the ECB issues recommendations, they cannot be ignored
• The letter represented to Italy an informal but effective interference in policy decisions
• The letter followed the principle of soft law, and thus was perceived by the Italian government as a binding act

Question 4

How does the crisis show the limits of the contemporary constitutionalism and its way of making laws?

Answer 4

• When conflicts arise between nation States and Eurozone interests, the weakness of contemporary democracies unveils and the power of the Parliament become marginalized
• When the cost of EU countries compared to national cost of debt is high, nations become under pressure
• The constitution loses its effectiveness and becomes replaced by the necessity of member States to be competitive in the context of globalized economies
• Technocracy begins to replace democracy

Question 5

What is the case of the balanced budget rule in Italy?

Answer 5

• Constitutional reform (2012) added balanced budget rules
• The reform was perfectly legitimate as it was approved by a parliamentary majority, but could be seen as caving to EU pressure
• However, the reform had potentially profound effects the people’s social rights
• This is an example of the approval of constitutional amendments without the legitimacy in the public opinion

Question 6

What is the case of emergency government powers during crisis, and how does it effect Parliament?

Answer 6

• Situation where the government centralizes political decisions with lesser involvement of the Parliament
• The government makes more questionable and extensive uses of law decrees
• Parliament’s role in the legislative procedure becomes reduced and the constitutional systems of checks and balances becomes altered, in favor of government
• Parliament’s decision-making powers became squeezed between the decisions of the national government and those of international organizations
• Core democratic institutions remained in place, yet political decisions were no longer determined by citizens and their representatives
• Governments’ increased interest in aligning with EU institutions rather than national Parliaments led to the introduction of the European Semester, in which member States would align their budgetary and economic policies with the objectives agreed at EU level
• Members of the Eurozone saw a constraint in their national policy choice due to the Treaty-based conditions of the EU

Question 7

What is the Macroeconomic Imbalance Procedure (MIP)?

Answer 7

• Under the MIP, the European Commission assesses States’ national reform programs on a yearly basis to verify potentially harmful macroeconomic imbalances which could adversely affect the economic stability in a particular EU country and also the Eurozone
• When a country has excessive imbalances, they are subjected to enhanced monitoring (Excessive Imbalance Procedure; EIP)
• The EIP issues recommendations for national reform
• The Commission may also impose a corrective action plan, and in extreme cases, sanctions forcing the State to adopt the reform recommended

Question 8

What is Rodrix’s Trilemma?

Answer 8

The trilemma addresses the issue that the coexistence globalization, state sovereignty and democracy is not possible