CYIL 2014

EMIL RUFFER CYIL 5 ȍ2014Ȏ had the power to conclude between themselves an agreement for the establishment of a stability mechanism such as the ESMTreaty provided that the commitments undertaken by the Member States who were parties to such an agreement were consistent with EU law. The ESM is not concerned with the coordination of the economic policies of the Member States but rather constitutes a financing mechanism. 32 Furthermore, the strict conditionality to which all support is subject and which can take the form of a macro-economic adjustment programme does not constitute an instrument for the coordination of the economic policies of the Member States but is intended to ensure that the activities of the ESM are compatible with, inter alia , the ‘no bail-out’ clause in Art. 125 TFEU and the coordination measures taken by the EU. In addition, the ESM Treaty does not affect the competence of the Council to issue recommendations to a Member State in which an excessive deficit exists, in accordance with Art. 126(7) and (8) TFEU. 33 The Court then elaborated on the relationship with Art. 122(2) TFEU, which contains the competence 34 of the Council to grant EU financial assistance to a Member State which is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control. This provision, in the CJEU’s view, did not preclude the Member States from establishing a stability mechanism such as the ESM, provided that, in its operation, such mechanism complied with EU law and, in particular, with measures adopted by the EU in the area of coordination of the Member States’ economic policies. The ESM Treaty contains provisions [Art. 13(3) and (4) ESM Treaty] which are intended precisely to ensure that any financial assistance granted by the ESM would be consistent with such coordinating measures. 35 Another issue which needed to be addressed was the prohibition on the ECB and the central banks of the Member States from granting overdraft facilities or any other type of credit facility to public authorities and bodies of the EU and of Member States and from purchasing directly from them their debt instruments (Art. 123 TFEU). That prohibition is also safeguarded, since it is addressed specifically and exclusively to the ECB and the central banks of the Member States. The grant of financial assistance by one Member State or a group of Member States to another Member State, directly or through the ESM, is therefore not subject to that prohibition and does not constitute an infringement of Art. 123 TFEU. 36 One of the central and most difficult elements of the challenge was the ‘no bail out’ clause under Art. 125 TFEU, which provides that neither the EU nor a Member State are to be liable for the commitments of another Member State or assume those

32 Ibid. , paras. 109-110. 33 Ibid. , paras. 111 and 113.

34 Not an exclusive competence, though: “Further, nothing in Article 122 TFEU indicates that the Union has exclusive competence to grant financial assistance to a Member State.” (C-370/12 Pringle , para. 120). 35 Ibid ., para. 121. 36 Ibid ., paras. 125-126.

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