The article analyzes the legal framework of economic policy in the EU in light of the innovations introduced in EU primary law by the Lisbon Treaty. As it suggests, the constraints, and potentials of the Lisbon Treaty have not been fully explored due to the Euro-crisis, which exploded at the same time in which the Treaty was entering into force. By adopting a constitutional reading of EU primary law, however, the article maintains that the Lisbon Treaty should be seen as limiting the authority of the member states to conclude international agreements outside EU law – and simultaneously as enlarging the competence of the EU institutions to run an economic policy at supranational level. Both these elements of constraining and enabling constitutionalism are relevant in the efforts to overcome the asymmetry of EMU, which was largely at the roots of the Euro-crisis.

SOMMARIO:

I. Introduction - II. Constitutional limitations to treaty-making - III. Constitutional empowerment to legislation - IV. Conclusion - NOTE

I. Introduction

The aim of this article is to discuss the scope of action of the European Union (EU) institutions in the field of economic policy. For the purpose of this article, the concept of economic policy will be read in a broad sense, as encompassing all those actions through which public authorities can govern and manage the business cycle in its macro-economic dimension. This reading of the term is consistent with the common meaning which is attributed to the concept at national level, where commentators usually speak of economic policy to describe the actions undertaken by state governments to steer and stimulate the national economy. The article will address this question from a constitutional perspective, taking into account the changes brought about by the Lisbon Treaty. Although the Lisbon Treaty has entered into force already in 2009, this article claims that its constitutional implications on Economic and Monetary Union (EMU) have not been fully appreciated. The reason has likely to do with the Euro-crisis: exactly as the Lisbon Treaty was entering into force, the Euro-crisis erupted, creating a major emergency for the EU. Member states and EU institutions have responded to the Euro-crisis by enacting a swath of legal measures [1]. Yet, in these exceptional circumstances, limited thought has been given to the constitutional constraints, and also to the constitutional potentials, offered by the legal framework of the Lisbon Treaty [2]. After almost seven years since the eruption of the crisis, and the entry into force of the Lisbon Treaty, however, the time seems ripe to reflect anew on the constitutional scope of action of the EU in the field of economic policy. [3] The core argument of the article is that the Lisbon Treaty, despite introducing only minor changes to the EMU chapter, carried other innovations in the EU constitutional system with important implications on the scope of action of the EU in the field of economic policy, broadly intended. In fact, although the member states have repeatedly acted to respond to the Euro-crisis outside the framework of EU law, there are actually strong constitutional arguments that can be derived from the Lisbon Treaty both to limit the authority of the member states to act in the international realm – and simultaneously to enlarge the competence of the EU institutions to run an economic policy at supranational level. As is well known, the Maastricht Treaty had [continua ..]

II. Constitutional limitations to treaty-making

Since the eruption of the Euro-crisis, member states’ governments have followed what Jean-Paul Keppenne has termed a «semi-intergovernmental» approach, recurrently resorting to international treaties to overcome the weaknesses of the economic pillar of EMU [11]. As an extensive literature has pointed out, although several reforms of EMU have been undertaken within the framework of EU law, key elements of the new EMU constitutional architecture – such as the constitutionalization of budgetary constraints, and the creation of a new permanent mechanisms to provide financial assistance for countries, or banks – have been achieved by the EU member states by concluding intergovernmental agreements outside the EU legal order [12]. The use of international agreements in the field of economic policy may appear at first the simple reflection of the long-standing asymmetry characterizing EMU, in which economic policy was left to the decentralized action of the member states, including action outside the framework of EU law. Nevertheless, this state of affairs must be reassessed in light of the constitutional rules introduced by the Lisbon Treaty, notably with regard to the EU legislative process [13]. On the one hand, the Lisbon Treaty has enshrined in EU primary law the so-called «Community Method» [14]. Pursuant to Article 289 TFEU, the ordinary procedure whereby the EU adopts legislation requires the approval of both the Council and the EP – while situations whereby the Council can pass EU laws without the need to involve the EP are defined as «special legislative procedures» and considered as exceptional occurrences. On the other hand, the Lisbon Treaty has given formal recognition to the principle of institutional balance [15]. Art. 13 TEU now proclaims that «[t]he Union shall have an institutional framework which shall aim to promote its values, advance its objectives, serve its interests, those of its citizens and those of the Member States, and ensure the consistency, effectiveness and continuity of its policies and actions,» and vests specific powers in each of the institutions it lists. By imposing bicameralism as the default process for enacting legislation in the EU, and by conceiving the EU institutional architecture as a system of checks and balances which cannot be altered, or sidestepped, at states’ will, the Lisbon Treaty has brought [continua ..]

III. Constitutional empowerment to legislation

In the previous section I have argued that a constitutional interpretation of the Lisbon Treaty binds the member states, limiting their freedom to act outside the framework of EU law whenever the EU has the competences to act in a given field. This element of constraining constitutionalism, however, is compensated by a new element of enabling constitutionalism – empowering the EU institutions to take action in the field of economic policy. In other words, notwithstanding the strategy followed in the aftermath of the Euro-crisis, there are constitutional arguments to claim that the member states have lost their freedom to act at will outside the EU legal order to reform the economic pillar of EMU. And yet this argument does not imply a paralysis: as a constitutional reading of EU primary law reveals, the treaties endow the EU institutions (including the member states as represented in the Council) with a significant amount of power to take economic policy measures through EU legislation. To begin with, the EU treaties already permit the domestication via standard EU legislation of the intergovernmental agreements concluded outside EU law. In fact, each of these EMU-related agreements could have been adopted through EU law in the first place. In particular, as the Legal Service of the Council had made clear [54], the SRF Agreement could have been based on Art. 114 TFEU – and this provision should be used to domesticate the Agreement within EU law by 2026 [55]. Equally, in my opinion, Art. 121-126 TFEU would have sufficed to enact the most important substantive provision of the Fiscal Compact: the obligation to constitutionalize a balanced budget rule at the domestic level [56]. Although it has been suggested that an EU secondary act cannot compel an amendment to a national primary act [57], there is nothing in EU law that prohibit this [58]. Given the obligation by the contracting parties of the Fiscal Compact to bring back the content of the Treaty within the framework of EU law by 2018 [59], the EU institutions could resort to the legal bases mentioned above, combined with the use of enhance cooperation, to reach this goal. A more controversial issue instead is whether EU law permitted the establishment of the ESM within the framework of EU law [60]. As is well known, while Art. 122 TFEU allows the Council to grant financial assistance to a member state facing exceptional occurrences beyond its [continua ..]

IV. Conclusion

The birth defect of EMU laid in the asymmetry between its monetary and its economic pillar. While the Maastricht Treaty established a supranational monetary policy centered on the ECB, it left economic policy decentralized in the member states. The Euro-crisis dramatically proved the unsustainability of such an institutional architecture. Nevertheless, the responses to the Euro-crisis have largely been driven by this asymmetric logic. Following a semi-intergovernmental approach the member states have repeatedly acted outside the framework of the EU legal order to reform the EU architecture of economic governance, strengthening budgetary constraints, creating new mechanisms of financial stabilization, and providing the means for the resolution of failing banks through intergovernmental treaties, rather than through EU law. This article has endeavored to provide a critical reading of these developments in light of the constitutional innovations introduced by the Lisbon Treaty. Concluding a decade of constitutional debates, the Lisbon Treaty brought about important changes to the EU structure of powers, as well as to the division of competences between the EU and the member states. And in my view important constitutional consequences follow from a comprehensive and systematic reading of the reformed EU primary law. The implications of the Lisbon Treaty were somehow frozen by the explosion of the Euro-crisis, which triggered a swath of emergency responses. But the amended treaties – as the constitutional documents on which the EU is founded – should now, after a few years, be rediscovered for what they entail in the field of economic policy, broadly intended. As this article has argued, in particular, the Lisbon Treaty makes untenable the claim that the member states remain free to conclude intergovernmental agreement in the field of EMU at will. Considering the complex but balanced bicameral procedure designed by the treaty to adopt legislation, which involves on par the EP and the Council, a clear constitutional argument can be advanced to prevent the member states from circumventing the constitutional status of the EP. Hence, whenever the EU is vested with the competence to legislate in a given field, a constitutionally-oriented reading of the treaty implies that the states cannot act outside the EU legal order. In other words, the EU treaties introduce constitutional limitations on the states’ treaty-making power, with important [continua ..]

NOTE