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“A Federation for the Eurozone and a Confederation for the rest of the EU”

(Note: The following replaces & corrects earlier version of 7/May)

TWO TREATIES FOR THE EUROZONE AND AN AMENDMENT TO  ONE OF THE EU TREATIES  – ALL RELATED TO EACH  OTHER!

Reply to Dr Gavin Barrett, Senior Lecturer in European Law, UCD, who wrote an article urging a Yes vote in the Fiscal Treaty referendum in the Irish Times on Friday 4 May, by Anthony Coughlan, Director, The National Platform EU Research and Information Centre, 24 Crawford Avenue, Dublin 9; Tel.: 01-8305792

Wednesday 9 May 2012

INTRODUCTION:

AMENDMENT TO ARTICLE 136,  TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION (TFEU)  –

“The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”

– Proposed amendment to Article 136 TFEU of the EU Treaties by which the 27 EU Member States  authorize the 17 Member States of the Eurozone to establish a  Stability Mechanism

The above Art.136 TFEU amendment to the EU Treaties has still to be approved by Ireland in accordance with its constitutional requirements under the “simplified” EU treaty amendment procedure of Article 48.6 TEU.

The European Council “Decision” to insert this amendment into the EU Treaties comes into force on 1 January 2013 if  by that time it has been approved by all 27 EU Member States in accordance with their constitutional requirements.

The ESM Institution which the 17 Eurozone States seek to establish and which Ireland would become a Member of is to be set up by the ESM Treaty for the 17 on the basis of this  Art.136 TFEU authorization  by the 27.  The ESM Treaty states that it is “complementary” to the Fiscal Treaty on which we have a referendum vote on 31 May.

The Government has promised the other 16 Eurozone Governments that it will have the ESM Treaty ratified by July,  but without the necessary constitutional referendum being held on it and on the Art. 136 TFEU amendment which authorizes it.

Q.  BUT WHERE WILL WE GET THE MONEY?

A.   We will get the money by holding a referendum on the Article 136 TFEU amendment and the ESM Treaty that it authorizes. This is constitutionally required in Ireland in order to validate these proposals as they stand, but our supine Government wants to avoid such  a referendum at all costs.  The 16 other Eurozone States will have to persuade us to vote Yes in such a referendum if they are to establish the kind of Stability Mechanism which the ESM Treaty envisages.  They can do this by agreeing to forgive the private bank debt the ECB has insisted should be imposed on Irish taxpayers, plus the Anglo-Irish promissory notes etc.   An Irish referendum on Article 136 TFEU and the ESM Treaty would also be an opportunity to add the voice of the Irish people to the calls across  Europe for the Eurozone authorities to agree a growth strategy instead of the present failed austerity policies.

Q.  WHERE WILL WE GET THE MONEY IF WE VOTE NO TO THE FISCAL TREATY?

A.   Where will the Government get the money to pay the €11 billion the ESM Treaty will require from us –  €1.3 billion up front and €250 million of that this July! –  with an open-ended treaty commitment to pay further sums thereafter without limit?

DEAR DR BARRETT,

It is quite wrong of you to state in your Irish Times op-ed article of Friday 4 May that No-side advocates in the current referendum are “threatening to veto an institution as vital as the ESM”. Regrettably you do not mention in your article the €11 billion which the ESM Treaty requires Ireland to contribute in different forms of capital to the Stability Mechanism the ESM Treaty proposes – with €1.3 billion up front (1.6% of the total) “irrevocably and unconditionally” (ESM Treaty, Art.8).  Nor do you mention the blank cheque in this treaty for the ESM’s Board of Governors to raise further capital sums without limit as they decide may be required in future (ESM Treaty, Art.10).

WHY IRELAND HAS A VETO ON THE ARTICLE 136 TFEU AMENDMENT TO THE EU TREATIES AND THE ESM TREATY WHICH THIS AMENDMENT AUTHORISES

Those on the No-side in our Fiscal Treaty referendum who know what they are talking about are saying that the ESM Treaty and the Article 136 TFEU amendment to the EU Treaties which authorises a “Stability Mechanism” should be put to referendum in Ireland before we can either ratify the ESM Treaty or approve this Article 136 TFEU amendment in accordance with the provisions of EU law and the terms of the Irish Constitution.

This is

(a) because a permanent commitment to the ESM as a new Eurozone Institution of which Ireland becomes a “Member”, together with its accompanying  rules and its extraordinary legal and taxation immunities for its Board of Governors and personnel, entails a surrender of  much of what is left of Irish State sovereignty;

and

(b) because if  the amendment to Article 136 TFEU quoted above is lawfully to permit a Stability Mechanism for the Eurozone like that proposed in the ESM Treaty – which would effectively override a number of existing EU Treaty articles –  then a different method of amendment of the EU Treaties needs to be adopted than that being used in the present instance.

It is therefore the No-side people who are seeking  in effect to defend EU law and the integrity of the EU Treaties by pointing this out and calling for  the Article 136 TFEU authorisation and the ESM Treaty which it purports to authorise to be ratified in the only manner which is lawful under the EU Treaties and constitutional  in Ireland –  namely, by way of referendum of the people. It is a pity that your Irish Times article fails to acknowledge this.

WHY UNANIMITY AMONG THE 17 EUROZONE STATES IS REQUIRED TO APPROVE OR RATIFY ANY STABILITY MECHANISM FOR THE EURO AREA COUNTRIES

I am surprised that you do not acknowledge that the express terms of the Article 136 TFEU authorisation quoted above require unanimity amongst the 17 Euro area States for the establishment of any Stability Mechanism which the latter may decide to set up.

If you look at the words of the proposed Article 136 TFEU authorisation, you will see that it does not say that  “Member States whose currency is the euro” –  meaning some of them –  may set up a Stability Mechanism, but “The Member States”, meaning all of them (In French “Les membres” as against “Des membres”).  The proposed ESM Treaty as it stands provides that it can come into force when Eurozone States contributing 90% of the capital have ratified it.  The eight largest of the 17 Eurozone States can do this, thereby bringing the Stability Mechanism into being, even though they would be a minority of the countries of the euro area.

How then can the Stability Mechanism for the 17 that is envisaged in this ESM Treaty be for “the euro area as a whole”, as required by the Article 136 authorisation by the 27 EU Member States quoted above?

There are other, even legally weightier, reasons for unanimity being required for ratification of an ESM Treaty of the kind the Government will be asking the Dáil to ratify in June, once our referendum on the Fiscal Treaty is over, as well as sanction the first €250 million payment to the ESM fund in July, but this is one good reason.

THE ESM TREATY SEEKS TO OPEN THE LEGAL PATH TO THE “FEDERATION FOR THE EUROZONE, A CONFEDERATION FOR THE REST OF THE EU” WHICH NICOLAS SARKOZY CALLED FOR LAST NOVEMBER

The ESM proposed in the ESM Treaty would radically restructure the rules of the Economic and Monetary Union (EMU) which Ireland joined under the Maastricht and Lisbon Treaties.  Having failed to obey the 3% and 60% of GDP “excessive deficit rules” set out in those treaties, Germany and France are now proposing to put the EMU on an entirely different basis than hitherto by means of this new EU Institution, the ESM.  They thereby want to override the “no bailout” rule of Article 125 TFEU which forbids EU loans to Governments in order to enable the proposed ESM for the Eurozone to do this, something which is forbidden under the current EU treaties.

Germany and France are seeking in this way to by-pass the rules of the current EMU and to carve out a legal-political path to what French President Nicolas Sarkozy called for last November: “A Federation for the Eurozone and a Confederation for the rest of the EU”.  The proposed ESM Institution is intended to be the Bank-cum-embryonic-Finance Ministry of the future Eurozone Federation which the ESM Treaty effectively creates the legal path toward.

WHY THE WRONG TREATY REVISION METHOD IS BEING USED TO INSERT ARTICLE 136 TFEU INTO THE EU TREATIES IF THIS PROPOSED AMENDMENT IS TO VALIDATE THE ESM TREATY AS IT STANDS

The 27 EU Member States are of course legally entitled to amend the EU Treaties in order to permit the establishment of a Stability Mechanism for the 17 Eurozone States of the radical kind proposed in the ESM Treaty – as long as they do this by the proper legal method governing the revision or amendment of the Treaties set out in Article 48 TEU.

Majority legal opinion is of the view that if Article 136 TFEU is lawfully to permit an ESM of the radical character envisaged in the proposed ESM Treaty, then the EU Treaties need to be amended by the procedure set out in Article 48.2 of the Treaty on European Union (TEU), the so-called “ordinary” treaty revision procedure,  rather than  by  “simplified” treaty revision procedure of  Article 48.6 TEU which is currently being used.

As you know, this “simplified” treaty revision procedure was inserted into the EU Treaties by the Treaty of Lisbon.  It allows the European Council of EU Prime Ministers and Presidents to amend the treaties merely by taking a “Decision” among themselves – such a “Decision” being subject to subsequent constitutional approval by their respective Member States.  See the enclosed copy of the European Council “Decision”, set out in the EU’s Official Journal, on this.

The Prime Ministers and Presidents on the European Council did not sign anything when they took this “Decision” on 25 March 2011. They took their “Decision” collectively among themselves, but it must still be constitutionally approved by their National Parliaments or by referendum of their peoples. The constitutional process of “approving” such a “Decision” is analogous to but not the same as the process of ratification of a treaty following its signature. The “Decision” may well not be constitutionally approved, just as a Treaty may not be ratified even if it has been signed.

This EU “simplified treaty amendment procedure” of Art.48.6 TEU is a form of  legal short-cut meant to deal with minor technical amendments to the EU Treaties which do not really require a full intergovernmental conference to be called,  followed by a lengthy treaty ratification process.  The “simplified treaty amendment procedure” was however never meant to provide for such a radical scheme as the fundamental restructuring of the Economic and Monetary Union which the ESM Treaty as it stands proposes.

This ESM Treaty is tantamount to a German-inspired attempt to organize a legal-political coup to override the EU Treaty provisions on which the existing EMU is based.  Hence the proposed Article 136 TFEU amendment is almost certainly being “approved” in an unlawful way under the  EU Treaties if it is taken as authorizing the ESM Treaty Messrs Kenny and Gilmore want to ratify by July 2012 – even before the Art.136 authorizing amendment comes into force on 1 January next! That is another reason why this step would be unlawful.

I am informed that this is an important issue in the constitutional challenge to the amendment to Article 136 TFEU and the ESM Treaty which has been launched in the High Court by Donegal Independent TD Thomas Pringle.  Thomas Pringle is seeking to defend EU law, the integrity of the EU Treaties and the Irish Constitution by his legal action.  He deserves the support of every democrat and patriotic Irish person. It would be helpful if you would consider in some future Irish Times article the important legal and constitutional issues which Thomas Pringle’s brave challenge raises.

DR GAVIN BARRETT’S CONTENTION THAT THE ARTICLE 136 EU TREATY AMENDMENT IS “UNNECESSARY” FOR THE ESM TREATY’S  STABILITY MECHANISM TO BE ESTABLISHED?

I am truly surprised to see such a distinguished exponent of European law as yourself write in your article that, “It is far from clear that the Article 136 TFEU amendment is really necessary in order to set up the ESM”.

If that is so, why do all 27 EU Member States think it necessary to insert the Article 136 TFEU amendment quoted above into the EU Treaties?  The EU is a Union governed by law.  The Member States do not amend the EU Treaties  unnecessarily.   Why are all 27 EU countries currently going through their constitutional processes for approving the European Council Decision to amend the EU Treaties in order to permit the establishment of a Stability Mechanism for the Eurozone if, as you say in your article, ”it is far from clear” that this is necessary?  Are you really suggesting that the 27 EU Governments and their legal advisers are all wrong  and do not know what they are doing?

You mention in your Irish Times article that the ESM’s temporary predecessor, the three-year EFSF loan fund set up for Greece in 2010 and from which Ireland and Portugal later got their bailouts, was ”successfully set up” under another treaty article – Art.122 TFEU to be precise – but you are presumably well aware that this treaty article  was never meant for such a purpose.

That EU Treaty Article deals with mutual aid between EU Member States in the event of natural disasters. It was clearly never meant to cover sovereign bailouts for Eurozone countries which had got into a financial mess because they failed to obey the 3% and 60% “excessive deficit rules” of the existing EMU.  That is why an entirely new legal provision needs to be inserted into the EU Treaties – namely, the proposed amended Article 136 TFEU – in order to provide a legal base in the Treaties for the proposed permanent ESM loan fund of €700 billion for the Eurozone, together with all the other radical things which this new ESM Institution could do, of which the 17 Eurozone States would become Members.  How does one become a “member” of a “Mechanism” by the way?

MONETARY POLICY FOR THE EURO AREA IS AN “EXCLUSIVE EU COMPETENCE” AND NOT SOMETHING AN EU SUB-GROUP OF 17 EUROZONE STATES CAN ARROGATE TO THEMSELVES

It is regrettable that your uncritical political commitment to further Eurozone integration should lead you to try to sidestep such a basic principle of EU law as Article 3(c) TFEU, which provides that anything to do with monetary policy for Member States whose currency is  the euro is an “exclusive competence” of the supranational EU as a whole. This competence cannot lawfully be arrogated to themselves by a sub-group of EU Member States, namely the 17 countries  of the Eurozone, just because that is what Germany wants, with France tagging along.

It is an ABC principle of the EU Treaties that the Eurozone States must abide by the existing provisions of EU law as regards anything they might desire or propose which would affect monetary policy for the euro area, because this is an “exclusive EU competence”.  The establishment of an entity such as the proposed ESM with its associated  €700 billion permanent fund for lending directly to sovereign governments would certainly affect monetary policy for the Eirozone.

Germany, France and the other Eurozone Members cannot lawfully do whatever they like with the EMU – although that essentially seems to be what they are seeking to do by means of this legally flawed ESM Treaty.

THE ECJ DECIDES ON EXISTING EU TREATY LAW, NOT ON PROPOSALS FOR FUTURE LAW

The statement in your article that “The European Court of Justice has never said” that setting up a  €700 billion Stability Mechanism for the Eurozone requires an EU Treaty amendment such as Article 136 TFEU is surprising.  How could the ECJ have possibly made any judgement of this kind when Article 136 TFEU is a proposed amendment to the Treaties and not an actual Treaty Article?  This proposed Article 136 TFEU amendment will not  have legal force until next January, if by then it has been constitutionally  approved by all 27 EU Member States.

The ECJ has therefore no jurisdiction with regard to it. It is a matter for the Irish Supreme Court to rule on if the Supreme Court chooses to exercise its constitutional powers – which of course include protecting the integrity of the provisions of the EU treaties as these now form part of Irish law.

I put it to you that the above considerations make it clear why we need to have a constitutional referendum in Ireland on the ESM Treaty and on the Article 136 TFEU on which the proposed ESM Treaty as it stands is legally dependent.

USING IRELAND’S VETO THROUGH A REFERENDUM WOULD  PUT US IN A POWERFUL BARGAINING POSITION VIS-À-VIS THE EUROZONE AS NOTHING ELSE CAN POSSIBLY DO

Those who want an ESM like that proposed in the ESM Treaty wish for it to be established in the legally and constitutionally right way, for it would profoundly affect our Constitution and it requires a referendum here.

A referendum on the Article 136 TFEU amendment and the ESM Treaty would nonetheless be an opportunity for Ireland.  It would be a real chance for us to get radical relief on our State debts. It would put Ireland in a powerful bargaining position vis-a-vis  the Eurozone if  the other Eurozone Governments wish to press ahead with  the kind of radical new ESM Institution with enormous powers which is envisaged in the ESM Treaty as that stands at present.

Standing by the Irish Constitution in face of German-led pressure and exercising Ireland’s veto in defence of EU law and the EU Treaties would of course require some gumption from Messrs Kenny, Gilmore and their fellow Ministers.  Holding a referendum on Article 136 TFEU and the ESM Treaty would put Ireland in a powerful bargaining position by means of which we could rid ourselves of the burden of the enormous private banking debt and all that that entails.  Would we not be mad to fail to take advantage of that?

May I therefore invite you to join me and my colleagues in calling for such a development.  Let us exercise the Veto that we have on Article 136 TFEU and the ESM Treaty and make our politicians stand up for Ireland and the Irish people who elected them, while at the same time defending EU law and the EU Treaties against Germany’s and France’s takeover-bid for the Eurozone.

With best regards,
Yours sincerely

Anthony Coughlan
Director
(Associate Professor Emeritus in Social Policy, TCD)

First published online @ http://www.indymedia.ie/article/101805 (Please note: this page replaces and corrects original Indymedia – and any other online publication – version)

Filed under: Anthony Coughlan, austerity treaty, ESM, Fiscal Compact Treaty, Irish Economy, Myths & Misrepresentations, Referendum | Tagged: Article 136 TFEU, Dr Gavin Barrett, Fiscal/Stability Treaty, irish times, promissory notes, veto |