As we have become used to, the outcome of the14th emergency summit organized over the last 20 months is once again highly disappointing. Not only a comprehensive solution is still pending and the can is once again kicked down the road but EU leaders have added a political crisis and legal uncertainty as a new layer to the ongoing economic crisis.
The agreement reached yesterday evening fails to address urgently needed measures showing a clear way out of the crisis, such as a banking license for the EFSF/ESM, increasing the ceiling of the EFSF/ESM, as well as growth enhancing measures or the prospect of the creation of Eurobonds. The ECB itself did not yet commit itself to the measures expected as regards stabilising sovereign bond markets as a counterpart for enhanced fiscal discipline and consolidation.
Overcoming the current crisis needs a comprehensive strategy involving not only measures to reinforce fiscal discipline but also solidarity as well as countercyclical measures, such as an EU-wide far reaching investment plan with Project bonds, to makethe EU economy more resilient and sustainable. Without those measuresEuroperisks spiralling down in a recessionary trap andsanctions will not help to get budgets back in balance.
Furthermore the agreement reached yesterday shows the inadequacy of the provisions of the Treaties to deal with the current complex situation. The unanimity rule does not work: it leads to a situation of paralysation or seeking solutions outside theUnion. A truly ambitious economic, social and fiscal convergence is needed and we should stand ready to address issues that remained hitherto in the domain of Member States so as to come to a democratic system of shared sovereignty over matters that are crucial for our common well-being. This however requires a re-thinking of the structures and policies of the European Union and cannot be done by an intergovernmental Treaty quick-fix, surrounded with legal uncertainty as to its relation with Union rules and competences. Urgency should not mean bypassing democracy which is necessary for the legitimacy of such profound changes. For re-shapingEuropea Convention is needed involving European institutions, as well as national parliaments. The European Parliament should use its right of initiative under the Lisbon Treaty to makeits own proposals before the March Council.
Crisis management measures
In a nutshell:
- The European Financial Stability Facility (EFSF) leveraging will be rapidly deployed, through the two concrete options agreed upon by the Eurogroup on 29 November, however there is no reference to any specific date or to the maximum firepower of the leveraged EFSF. The ECB will act as an agent for the EFSF in its market operations but will not act as a lender of last resort.
- The European Stability Mechanism (ESM) will enter into force as soon as Member States representing 90 % of the capital commitments have ratified it (in principle by July 2012).
- The EFSF will remain active in financing programmes that have started until mid-2013 as provided for in the Framework Agreement; it will continue to ensure the financing of the on-going programmes as needed. However the combined intervention capacity of the EFSF and ESM is capped to a maximum of EUR 500 billion. The adequacy of such an overall ceiling will be reassessed in March 2012.
- Euro area and other Member States will consider, and confirm within 10 days, the provision of additional resources for the IMF of up to EUR 200 billion in the form of bilateral loans, to ensure that the IMF has adequate resources to deal with the crisis. Other parallel contributions from the international community will be welcomed.
- Private Sector involvement will be strictly limited to the established IMF principles and practices which will be enshrined in the preamble of the ESM treaty. However ‚Collective Action Clauses‘ will be included in the terms and conditions of all new euro government bonds.
- Voting rules in the ESM will be changed to include an emergency procedure. The mutual agreement rule will be replaced by a qualified majority of 85 % in case the Commission and the ECB conclude that an urgent decision related to financial assistance is needed when the financial and economic sustainability of the euro area is threatened. This commitment is however subject to a parliamentary reservation in Finland.
- In contrast with the draft intermediate report from Van Rompuy no banking licence is foreseen for the ESM
- In contrast with the draft intermediate report from Van Rompuy it is not question anymore of even opening up the possibility, in a longer term perspective, of moving towards common debt issuance in a staged and criteria-based process, for example starting with the pooling of some funding instruments.
ECB President Mario Draghi earlier spooked financial markets by discouraging expectations that the bank would massively step up buying of government bonds if EU leaders agreed on moves towards closer fiscal union. „I was surprised by the implicit meaning that was given,“ Draghi said during the press conference after the meeting of the ECB monthly meeting of the Council of Governors, without offering an alternative interpretation. Earlier in the day, the ECB announced new extensive and far reaching measures in support of the euro area banking system including a rate cut to 1%, a 36-month loan programme, a cut in the minimum rating requirement for asset backed securities eligible as a counterparty for providing loans, and a cut in the minimum reserve requirement. But the ECB gave no indication that it would step up its bond purchasing programme, let alone set a target.
Economic Governance: a new fiscal compact
In a nutshell, the measures committed go well beyond what was agreed a couple of months earlier in the framework of the economic governance package:
- General government budgets shall be balanced or in surplus; this principle shall be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of nominal GDP.
- Such a rule will also be introduced in Member States‘ national legal systems at constitutional or equivalent level. The rule will contain an automatic correction mechanism that shall be triggered in the event of deviation. It will be defined by each Member State on the basis of principles proposed by the Commission. Member States shall converge towards their specific reference level, according to a calendar proposed by the Commission
- The jurisdiction of the Court of Justice to verify the transposition of this rule at national level.
- Member States in Excessive Deficit Procedure shall submit to the Commission and the Council for endorsement, an economic partnership programme detailing the necessary structural reforms to ensure an effectively durable correction of excessive deficits.
- The rules governing the Excessive Deficit Procedure (Article 126 of the TFEU) will be reinforced for euro area Member States. As soon as a Member State is recognised to be in breach of the 3% ceiling by the Commission, there will be automatic consequences unless a qualified majority of euro area Member States is opposed.
- The specification of the debt criterion in terms of a numerical benchmark for debt reduction (1/20 rule) for Member States with a government debt in excess of 60% needs to be enshrined in the new provisions.
- The new rules proposed by the Commission on 23 November 2011 on (i) the monitoring and assessment of draft budgetary plans and the correction of excessive deficit in euro area Member States and (ii) the strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area will be swiftly examined and the Council and the European Parliament are asked to rapidly examine these regulations so that they will be in force for the next budget cycle. Under this new legal framework, the Commission will request a revised draft budgetary plan if the Commission identifies particularly serious non-compliance.
- In the longer run the European Council commits to work on how to further deepen fiscal integration. These issues will be part of the report of Van Rompuy in March 2012. They will also report on the relations between the EU and the euro area. A procedure will also be established to ensure that all major economic policy reforms planned by euro area Member States will be discussed and coordinated at the level of the euro area, with a view to benchmarking best practices.
- Some of the measures described above can be decided through secondary legislation. Other measures will be contained in primary legislation. Considering the absence of unanimity among the EU leaders decided to adopt them through an international agreement to be signed in March or at an earlier date. The objective remains to incorporate these provisions into the treaties of theUnion as soon as possible. The Heads of State or Government of Bulgaria,CzechRepublic,Denmark,Hungary,Latvia,Lithuania,Poland,Romania andSweden indicated the possibility to take part in this process after consulting their Parliaments where appropriate.
In the absence of unanimity among Member States to adopt certain of the measures under „A new fiscal compact“ through a (change in) primary legislation, the Euro area Heads of State or Government decided to adopt those through an international agreement to be signed in March or at an earlier date.
It is not yet clear which measures might be enshrined in this intergovernmental Treaty. It may concern the new fiscal rules on annual structural deficit and deficit and debt reduction paths as well as the more automatic correction mechanisms in case of deviation of these adjustment paths.
The provisions that are intended to be laid down in an intergovernmental Treaty between Member States, however with the use of Community institutions, will bypass the Treaties in seeking to deal with matters which are within the competences of the EU and where the EU has exercised its competences.
On the basis of the texts before us it is however difficult to establish whether and, if so to which extent, such rules would be complementary to and/ or overlapping with EU law. It is difficult also to judge in how far such new provisions would affect a transfer of sovereignty over national budgets to a (new) intergovernmental level, since the language used is more open than the interim report by van Rompuy.
The question whether the ECJ can have jurisdiction over the implementation of an international agreement to which the EU is not a party is a question that is currently before the legal service of the EP in connection with enhanced cooperation on creating a unitary patent litigation system. This legal service opinion is expected next week but it is not clear whether this opinion can be used also in this context.
A comparison with the Schengen agreement is not appropriate as Schengen preceded and inspired the creation of procedures for enhanced cooperation. Enhanced cooperation has to respect the normal procedures applicable within the field of the activity in question, respecting thus also Parliaments prerogatives.
How to deal with a phantom institution?
Even if there are elements in the euro area Heads of State or government statement that at first sight may seem to infringe Parliament’s prerogatives and/ or would prejudice Treaty based procedures, it is difficult to envisage how legal action could be taken, at least by Parliament, under the present circumstances. While the EP can bring an action against the European Council when this adopts decisions with legal effects, the problematic decisions have not been taken by the European Council but by a Group of Member States and the Treaty will be a treaty between Member States.
The European Parliament cannot bring actions against Member States. This can only be done by the European Commission or anotherMemberState. Currently the „decisions“ taken do not refer to final decisions with legal effects, but constitute decisions in principle on further action, in which case legal action would be considered premature.
Questions on the status of the Eurosummits and the decisions taken by it or subsequently by Member States need to be further studied in relation to:
a) the question which acts can be subject to review under article 263 TFEU 
b) whether there is a possible breach by (a) MemberState(s)of a Treaty provision under article 258 TFEU )
c) questions surrounding the supremacy of EU law and the compatibility with EU law.
Francisco, Petra, Kjell, Annemieke, 9 December 2011
 The constitutional committee of the Finnish parliament has decided that QM voting in theEMS would be in violation of the Finnish constitution. The committee has a role of partly substituting for the constitutional courtFinland does not have, which means its position will not be easily overruled – and, as Finish ministers have to act in accordance with the mandate they have from parliament when dealing with EU issues
 in Case C-316/91 European Parliament versus Council e.g., the Court held that decisions adopted by Member States acting not as Council but as representatives of their governments and thus collectively exercising the powers of the Member States are not reviewable under article 263
 e.g to see whether there could be a possible ground for a manifest risk that the jurisdictional order laid down in the Treaties and consequently the autonomy of the Community legal system may be adversely affected, see e.g. Court case C-459/03 Commission versusIreland