Legal developments in the Economic and Monetary Union during the debt crisis: The mechanisms of financial assistance

Abstract

The Union and its Member States have given a double response to the sovereign debt crisis: the creation of mechanisms of assistance and the strengthening of economic governance. Both responses have contributed to substantially redesign the architecture of the economic and monetary union. This article focuses on the mechanisms of assistance - most of which have been agreed intergovernmentally outside the EU Treaties -, describing them and examining their most significant legal implications. These are their compatibility with the no bail-out clause, the limited revision of the Treaties to include new Article 136(3) TFEU, the use of Article 122(2) TFEU as the only legal basis under the Treaties to provide financial assistance, the relationship between the intergovernmental mechanisms of assistance and the law of the Union and the judgment of 7 September 2011 of the German Constitutional Court on the compatibility of mechanisms of assistance with the German Constitution. Mechanisms of assistance are presented as part of an unavoidable process of further integration of the Member States that share a common good, the euro, a process that might lead to fundamental changes in the EU Treaties, including the creation of a European Treasury, that would go hand by hand with a fiscal federation where budgetary sovereignty of euro area Member States would yield to supranational control.