In January 2009, ten years after the single currency had been founded, there seemed ample cause to celebrate in Brussels, the uncrowned capital of Europe, and Frankfurt, home of the European Central Bank (ECB). The euro was a club that other states wanted to join. Starting as a monetary union of eleven, it had expanded to sixteen, with Slovakia the latest to become a member. More important, the euro had withstood the gravest test of its first decade, the financial crisis that came to a climax in late 2008; despite its tender years, the ECB won plaudits for its prompt response when the crisis started in the summer of 2007, whereas the three-centuries-old Bank of England was rebuked for being slow off the mark. In troubled times, the single currency appeared to offer a security sorely needed by European countries that had shunned it, such as the UK whose banking system had come close to collapse. Jean-Claude Trichet, the ECB's president, described the euro as a ‘shield’, saying that in its first ten years it had ‘proven its stability, its resistance to shocks and its resilience in the face of financial and economic turmoil’.

The verdict of the European Commission when publishing a study in May 2008 that examined the decade since the first eleven members of the club had been selected was grandiloquent. Though the findings of the actual report were more nuanced, the Commission proclaimed the euro ‘a resounding success’; the monetary union was ‘an achievement of strategic importance’ not just for the wider European Union but for the world at large in which Europe had become ‘a pole of macroeconomic stability’. A sense of complacency persisted among the euro-zone elite in 2009, even though bond markets signalled alarm early in the year about Greece and Italy. In December, the Commission published a study that surveyed the mostly sceptical views of American economists as the drive to create an economic and monetary union (EMU) gathered momentum in the 1990s. Martin Feldstein, an economist at Harvard University and a former economic adviser to Ronald Reagan, had even speculated that the venture could spur renewed conflicts in Europe. The told-you-so title of the paper was: ‘The euro: it can't happen. It's a bad idea. It won't last.

During 2013 and especially in the first half of 2014, the bond markets decided that the euro crisis was over. Government debt yields generally fell across the periphery in the first few months of 2013, shrugging off the eventful bail-out of Cyprus in March. When global yields rose generally in the ‘taper tantrum’ after the Fed aired in late May the possibility of phasing out its monthly bond purchases, euro-zone states were not immune; but, significantly, spreads between the periphery countries and Germany did not for the most part widen that much and before long started to close further. There were local flare-ups, but they did not persist or cause a wider conflagration. For example, yields spiked in Portugal during a summer political crisis, when the coalition government carrying out the painful measures required under the bail-out programme looked as if it might fall apart. They then subsided when the two governing parties coalesced again after Passos Coelho, the prime minister, gave Paulo Portas, the leader of the junior party, a bigger role.

Politicians in both the core and peripheral countries were keen to declare the crisis over, even if this was imprudent. Ireland threw away its bail-out crutches in December 2013, making it the first crisis country to conclude its rescue programme on time. That ‘clean exit’ was in fact risky since both the Commission and the IMF as well as the ECB considered that Ireland would have done well to get a precautionary credit line with the ESM. The main advantage this would have conferred was eligibility for OMT since such a precautionary programme would require conditionality. That eligibility would have lasted for up to two years because the credit line could be renewed twice for six months after the initial one-year term. The counsel from the troika was disregarded for reasons both of Irish pride and of the German desire to wrap up the embarrassing rescues.

A similar alliance on the periphery and core helped Slovenia avoid the threat of a bail-out that had long hung over the country. Having seen the effects of such programmes elsewhere, the government led by Alenka Bratusek was doing its utmost to avoid becoming the sixth country to require a rescue. It was helped by the fact that Germany also wanted to avoid such an outcome.

Introduction

Each society needs common rules and mechanisms for their production. The concept of legislation is central to all modern societies. Legislation refers to the making of laws (legis).

But what is ‘legislation’? Two competing conceptions of legislation have emerged in the modern era. The formal or procedural conception of legislation is tied to our modern understanding of who should be in charge of the legislative function. Legislation is formally defined as every legal act adopted according to the (parliamentary) legislative procedure. This procedural conception of legislation has traditionally shaped British constitutional thought. By contrast, a second conception defines what legislation should be, that is: legal rules with general application. This material or functional conception of legislation has shaped continental constitutional thought. A material definition of legislation underpins phrases like ‘external legislation’ through international agreements, and ‘delegated legislation’ adopted by the executive.

Which of these traditions has informed European constitutionalism? The Union has traditionally followed a material definition. However, with the Lisbon Treaty, a formal definition of legislative power has been adopted. The Treaty on the Functioning of the European Union now constitutionally defines: ‘Legal acts adopted by legislative procedure shall constitute legislative acts.’

But what are the ‘legislative’ powers of the European Union? And what types of power can it enjoy? This chapter answers these questions in four sections. Section 1 analyses the scope of the Union's legislative competences. This scope is limited, as the Union is not a sovereign State. Section 2 analyses the different categories of Union competences. Depending on what competence category is involved, the Union will enjoy distinct degrees of legislative power. Section 3 analyses the identity of the Union legislator. Various legislative procedures thereby determine how the Union must exercise its ‘legislative’ competences. Section 4 finally scrutinises the principle of subsidiarity as a constitutional principle that controls the exercise of the Union's shared legislative powers.

The Scope of Union Competences

When the British Parliament legislates, it need not ‘justify’ its acts. It is considered to enjoy a competence to do all things. This ‘omnipotence’ is inherent in the idea of a sovereign parliament in a sovereign state. The European Union is neither ‘sovereign’ nor a ‘state’. Its powers are not inherent powers. They must be conferred by its foundational charter: the European Treaties.