Ad impossibilia nemo tenetur. Does this brocard apply to the strict conditionality clause of art. 136(3) TFUE when a country is hit by an exogenous and symmetric shock?
Of the €3.4 trillion mobilized by the EU to prevent adverse macro-financial feedback loops and to support the healthcare sector, up to €240 billion are provided by the ESM Pandemic Crisis Support Credit Line (PCSCL).
This institution was created as extrema ratio to address the crisis of sovereign debt but, as every safety net, it has been criticized for being apt to generate moral hazard. To solve this problem, the economic policy conditionality became the underlying principle of the ESM’s Memorandum of Understanding, thus espousing the tutelary state pillar of welfare conditionality or ‘coercive welfare’.
Originally, some Northern European countries believed the ESM should have had strict fiscal conditionality with more country-specific provisions, while Southern European countries, that are also the worst-hit by the virus, asked for a looser conditionality. In the last Eurogroup press release, they were highlighted two aspects: first, that the only requirement for obtaining the ECCL credit line, is to commit its use to the coverage of costs, directly and indirectly incurred, concerning the pandemic; secondly that in the long-term ‘euro area Member States would remain committed to strengthen economic and financial fundamentals, consistent with the EU economic and fiscal coordination and surveillance frameworks, including any flexibility applied by the competent EU institutions’.
Apertis verbis, we can reasonably assume that the conditionality formerly applied in the form of a macroeconomic reform programme will be removed and substituted with the only requirement of devoting the amounts to direct and indirect expenditures related to public healthcare, under the Troika monitoring. The stigma, that asking for help would create for a single country, would no longer stand because all the euro member states will be benefited. Nevertheless, within some members, there are political forces worried about the consequences that recurring to the PCSCL would imply.On the one side, it is argued that the size of 2% of each member’s GDP is an insufficient amount. It certainly will cover the short-term costs, but it will not be sustainable in the long-term. Additionally, the lack of information about the issuing strategy, the loan maturity (the longer, the easier the recovery for borrowers), and the seniority does not permit to quantify the measure’s overall impact on the economy. At the same time, according to some estimates, the interest savings from the PCSCL will not be substantial. What concerns the most are the effects delineated by the UN General Assembly with regard to the economic adjustment programs on human rights. According to its report, Greece assisted to a demolishing of the Welfare state with measures undermining social justice, leading to a higher unemployment rate, to cuts in the healthcare sector which led to an increase in HIV infections and to the reappearance of illnesses already eradicated such as malaria, and to security measures against protests which compromised freedom of association.
On the other side, the adoption of the ECCL would save a lot of time since it is already available and in full compliance with the CJEU direction. Members would be granted access to a relatively big amount under the best possible financing terms; cheaper funding will intensify the annual budgetary savings. Even if in Greece the austerity policies were hard to sustain, we assisted in an improvement in competitiveness and in an unprecedented fiscal adjustment: from a budget deficit of 15.1% in 2009 to a surplus of 0.6% in 2017.It would also represent the legal cover the ECB needs to activate its unused OMT program, which would lead to the potentially unlimited purchase, in the secondary market, of the euro area sovereign bonds.
Inter alia, it has been challenged that the ratification of the ESM Treaty could circumvent the constraints laid down in Articles 123 and 125 TFEU. In this regard, the CJEU stated that ‘Article 123 TFEU is addressed specifically to the ECB and the central banks of the Member States’, and that ‘ the grant of financial assistance by one Member State or by a group of Member States to another Member State is therefore not covered’ by the art.123 TFEU prohibition’. Referring to the ‘No-Bailout’ Clause of art.125 TFEU, the Court declared that it ‘does not prohibit the granting of financial assistance by one or more Member States to a Member State which remains responsible for its commitments to its creditors provided that the conditions attached to such assistance are such as to prompt that Member State to implement a sound budgetary policy’. It becomes clear that the essence of the support, indispensable to safeguard the financial stability of the Eurozone, lies in the strict conditionality clause enshrined also in art.136 (3) of the ESM Treaty.
Thus, the initial question arises.
Anna Lia Soddu
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