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(No) Haircut for Hellas?

A Short and Critical Reply to Armin Steinbach, ‘The “Haircut” of Public Creditors under EU Law’, 13 EuConst (2016) p. 223

Published online by Cambridge University Press:  07 November 2016

Alexander Thiele
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Abstract

Smouldering European debt crisis: overall public debt ratio as problem – Haircut as possible solution – Greece’s current creditors: public institutions (Member States and European Central Bank) – Insuring a sound budgetary policy as main goal of Article 125 TFEU – Consequences for a haircut by the Member States – The mandate of the European Central Bank and the prohibition of direct purchases of Member State bonds – Consequences for a haircut by the European Central Bank – Haircut as political question open for democratic debate

Type
Debate
Information
European Constitutional Law Review , Volume 12 , Issue 3 , December 2016 , pp. 520 - 537
Copyright
Copyright © The Authors 2016 

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Footnotes

*

Substitute Professor for Public Law at the Free University of Berlin, Germany. Email: [email protected]. The author would like to thank Jan Mertens as well as the anonymous reviewers for very helpful comments.

References

1 See, for a legal analysis, Thiele, A., ‘Der Austritt aus der EU. Hintergründe und rechtliche Rahmenbedingungen eines Brexit’, 51 Europarecht (2016) p. 281 Google Scholar ff.

2 See on the reasons for the European debt crisis Thiele, A., Das Mandat der EZB und die Krise des Euro (Mohr Siebeck 2013) p. 1-11 Google Scholar with further references.

3 For a broad critique on austerity-measures in general see especially Blyth, M., Austerity (Oxford University Press 2013)Google Scholar. For an analysis of under which conditions austerity can work see Batini, N. et al., ‘Successful Austerity in the United States, Europe and Japan’, 12 IMF Working Paper 190 (2012)Google Scholar. On the effects of austerity for soft public investment see Streeck, W. and Mertens, D., ‘Fiscal Austerity and Public Investment. Is the Possible the Enemy of the Necessary?’, 11 MPlfG Discussion Paper 12 (2011)Google Scholar.

4 See Thiele, A., Geisterfahrer Tsipras, oder: Ist der Euro noch zu retten? 2nd edn. (Amazon Distribution 2015) p. 77 Google Scholar.

5 Piketty, T., Das Kapital im 21. Jahrhundert (C.H. Beck 2015) p. 740 Google Scholar.

6 What level of public debt is sustainable (60%, 70% or 80% of gross domestic product?) in the long run is highly disputed. The 90%-rule, established by Carmen Reinhart and Kenneth Rogoff, which played an important role on the political level (see Reinhart, C. and Rogoff, K., ‘Growth in a time of debt’, 100 American Economic Review (2010) p. 573-578 CrossRefGoogle Scholar), has been put into question, see especially Herndon, T. et al., ‘Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff, 322 PERI Working Paper (April 2013)Google Scholar.

7 IMF, Greece, IMF Country Report No. 16/30, May 2016.

8 Steinbach, A., ‘The “Haircut” of Public Creditors under EU Law’, 12 EuConst (2016) p. 223 Google Scholar at p. 224.

9 Sceptical in general regarding haircuts to reduce public debt for instance: Piketty, supra n. 5, p. 740-742.

10 Steinbach, supra n. 8, p. 224, p. 238-239.

11 See Calliess, C., ‘Perspektiven des Euro zwischen Solidarität und Recht – Eine rechtliche Analyse der Griechenlandhilfe und des Rettungsschirms’, 14 Zeitschrift für europarechtliche Studien (2011) p. 213 Google Scholar at p. 218-219; Preunkert, J., ‘Der Staat und seine Gläubiger – Entwicklungen in der Eurozone’, 14 Zeitschrift für Staats- und Europawissenschaften (2016) p. 240 CrossRefGoogle Scholar at p. 255; Häde, U., ‘Die Europawährung in der Finanzkrise’, in N. Witzleb et al. (eds.), Festschrift für Dieter Martiny zum 70. Geburtstag (Mohr Siebeck 2014) p. 891 Google Scholar at p. 892; Pilz, S. Der Europäische Stabilitätsmechanismus (Mohr Siebeck 2016) p. 27-28 Google Scholar.

12 For an overview see Wenz-Temming, A., ‘Intergouvernementalisierung europäischer Verschuldungsinstrumente? Eine Positionierung der Eurorettungspolitik innerhalb der EU-Finanzstrukturen’, 14 Zeitschrift für Staats- und Europawissenschaften (2016) p. 261 CrossRefGoogle Scholar at p. 273-275; Pilz, supra n. 11, p. 30-31.

13 For an overview see Herrmann, C., ‘Wirtschaftsverfassung und Wirtschaftsregierung in der Europäischen Union’, in T. Giegerich (ed.), Herausforderungen und Perspektiven der EU (Duncker & Humblot 2012) p. 51 Google Scholar at p. 67-69; Manger-Nestler, C., ‘Ménage à trois? – Zur gewandelten Rolle der EZB im Spannungsfeld zwischen Geldpolitik, Finanzaufsicht und Fiskalpolitik’, 49 Europarecht (2014) p. 621 Google Scholar at p. 632-634; Häde, U., ‘Rechtliche Bewertung der Maßnahmen im Hinblick auf eine “Fiskalunion”’, in C. Calliess (ed.), Europäische Solidarität und nationale Identität (Mohr Siebeck 2013) p. 193 Google Scholar at p. 201-205; Wenz-Temming, supra n. 12, p. 275-277. For details see Pilz, supra n. 11 passim.

14 Häde, U., ‘Article 119 AEUV’, in C. Calliess and M. Ruffert (eds.), EUV/AEUV (C.H. Beck 2016) p. 1572 Google Scholar at p. 1577; Calliess, supra n. 11, p. 219-220; A. Thiele, supra n. 2, p. 10-11; Preunkert, supra n. 11, p. 255-256.

15 As a consequence, Greece’s creditors continuously shifted from private to public.

16 See Pilz, supra n. 11, p. 28. The conditions themselves were laid down in the ‘Loan Facility Agreement’, agreed upon between Greece and the euro area Member States.

17 See, for instance, Siekmann, H., ‘Missachtung rechtlicher Vorgaben des AEUV durch die Mitgliedstaaten und die EZB in der Schuldenkrise’, Institute for Monetary and Financial Stability, Working Paper Series No. 65 (2012)Google Scholar; Ruffert, M., ‘Der rechtliche Rahmen für die gegenseitige Nothilfe innerhalb des Euroraums’, Berliner Online Beiträge zum Europarecht Nr. 64, p. 4-10 Google Scholar; Kube, H. and Reimer, E., ‘Grenzen des Europäischen Stabilisierungsmechanismus’ 63 Neue Juristische Wochenschrift (2010) p. 1911 Google Scholar at p. 1912-1913; Streinz, R., ‘Europarecht (C.F. Müller 2016) p. 453-454 Google Scholar; Kempen, B., ‘Art. 125 AEUV’, in R. Streinz (ed.), EUV/AEUV 2nd edn. (C.H. Beck 2012) p. 1524 Google Scholar at p. 1525. Häde, supra n. 13, p. 204-205, however, sees no violation of Art. 125 TFEU. For a full discussion with further references see Heun, W. and Thiele, A., ‘Verfassungs- und europarechtliche Zulässigkeit von Eurobonds’, 67 Juristenzeitung (2012) p. 973 CrossRefGoogle Scholar at p. 978-980 and Pilz, supra n. 11, p. 37-39.

18 This at first glance rather strange quotation – Art. 125 TFEU is a norm very complex and not easy to understand – obviously intended to show how ‘openly’ European law was breached by the euro area Member States and thus to support upcoming public outrage due to the alleged severe burdens of the ‘German tax payer’ connected to the aid programs. And this strategy was not unsuccessful. Until today a clear majority of the German population believes that the aid programs violated the ‘no-bail-out-clause’. That the ECJ decided otherwise in 2012 is more or less ignored completely or simply unknown.

19 ECJ 27 November 2012, Case C-370/12 Pringle v Ireland (henceforth: Pringle case), para. 130.

20 In such a case the overall debt ratio of the indebted member state remains unchanged.

21 See Heun and Thiele, supra n. 17, p. 979.

22 See Arts. 130 and 282 para. 3 TFEU and Manger-Nestler, supra n. 13, p. 625; C. Ohler, Bankenaufsicht und Geldpolitik in der Währungsunion (C.H. Beck 2015) p. 51-55. For the economic and legal background of this independent status of the European Central Bank see Thiele, A., ‘Die Unabhängigkeit der EZB. Gründe, Grenzen und Gefährdungen’, in M. Kröger and A. Pilniok (eds.), Unabhängiges Verwalten in der Europäischen Union (Mohr Siebeck 2016) p. 195-219 Google Scholar with further references.

23 For an overview see Pilz, supra n. 11, p. 35-36.

24 Preunkert, supra n. 11 at p. 256.

25 Dunne, P. et al., ‘The expanded Asset Purchase Programme – What, Why and How of the Euro Area QE, 7 Quarterly Bulletin Articles (2015) p. 61-71 Google Scholar.

26 Ruffert, supra n. 17, p. 11; Siekmann, supra n. 17, p. 37-39; Streeck, W., Gekaufte Zeit. Die vertagte Krise des demokratischen Kapitalismus’ (Suhrkamp 2013) p. 227 Google Scholar; Kerber/S. Städter, M. C., ‘Ein Beitrag zum Individualrechtsschutz gegen Rechtsverstöße der EZB’, 22 Europäische Zeitschrift für Wirtschaftsrecht (2011) p. 536 Google Scholar at p. 537-538; Frenz, W. and Ehlers, C., ‘Europäische Wirtschaftspolitik nach Lissabon’, 56 Gewerbe Archiv (2010) p. 329 Google Scholar at p. 334; Frenz, W., ‘Anmerkung zu BVerfG, 2. Senat, Beschluss vom 14.1.2014’, 129 Deutsches Verwaltungsblatt (2014) p. 451 Google Scholar at p. 452. See also Pilz, supra n. 11, p. 39-42.

27 BVerfGE 134, 366 (398-411). For a critical discussion of this decision see Thiele, A., ‘Friendly or Unfriendly Act? The “Historic” Referral of the Constitutional Court to the ECJ Regarding the ECB’s OMT-Program’, 15 German Law Journal (2014) p. 241-264 Google Scholar and Heun, W., ‘Eine verfassungswidrige Verfassungsgerichtsentscheidung – der Vorlagebeschluss des BVerfG vom 14.1.2014’, 69 Juristenzeitung (2014) p. 331-337 CrossRefGoogle Scholar.

28 BVerfGE 134, 366 (411-415).

29 ECJ 16 June 2015, Case C-62/14, Gauweiler and Others v Deutscher Bundestag (henceforth: Gauweiler case). Not agreeing with this decision, however, Pilz, supra n. 11, p. 39-42.

30 BVerfG, 21 June 2016, 2 BvR 2728/13.

31 See Gauweiler case, paras. 97, 101.

32 See Gauweiler case, para. 103 ff.

33 Several kinds of such debt relief measures are currently being debated with respect to Greece, see Steinbach, supra n. 8, p. 225.

34 See Steinbach, supra n. 8, p. 237.

35 See Steinbach, supra n. 8, p. 237.

36 See Louis, J.-V., ‘Guest Editorial: The no-bailout clause and rescue package’, 47 CMLRev (2010) p. 971 Google Scholar; Palmstofer, R., ‘To Bail Out or Not to Bail Out? The Current Framework of Financial Assistance for Euro Area Member States Measured against the Requirements of EU Primary Law’, 37 ELRev (2012) p. 771 Google Scholar; Steinbach, A., ‘The compatibility of the ECB’s sovereign bond purchases with EU law and German constitutional law’, 39 Yale Journal of International Law Online (2013) p. 15 Google Scholar; Heun and Thiele, supra n. 17, p. 979; Häde, supra n. 14, p. 1598-1599.

37 See Steinbach, supra n. 8, p. 225.

38 See Steinbach, supra n. 8, p. 226, 232.

39 See Steinbach, supra n. 8, p. 231 ff.

40 See Steinbach, supra n. 8, p. 231.

41 See Steinbach, supra n. 8, p. 232.

42 See also Pringle case, para. 133: ‘Accordingly, in order to determine which forms of financial assistance are compatible with Article 125 TFEU, it is necessary to have regard to the objective pursued by that article’.

43 Pringle case, para. 130: ‘It must be stated (…) that that article is not intended to prohibit either the Union or the Member States from granting any form of financial assistance whatever to another Member State’. See also Pilz, supra n. 11, p. 39; Heun and Thiele, supra n. 17, p. 979.

44 See Heun and Thiele, supra n. 17, p. 978.

45 Pringle case, para. 139.

46 Pringle case, para. 136.

47 Heun and Thiele, supra n. 17, p. 979. See also Pilz, supra n. 11, p. 39.

48 See Thiele, supra n. 4, p. 76 ff.

49 That is, by linking the financial aid to effective and implementable conditions.

50 See Heun and Thiele, supra n. 17, p. 980.

51 See Altmaier, P., ‘Die Ergänzung der Währungsunion durch die sogenannte “Fiskalunion”: Europapolitischer Irrweg oder europäische Notwendigkeit’, in Calliess, supra n. 13, p. 174 Google Scholar.

52 Häde, supra n. 36, p. 1596 at p. 1597.

53 For an overview see A. Thiele, Europarecht 13th edn. (Niederle Media 2016) p. 143-145.

54 See Thiele, supra n. 2, p. 24-33; Häde, supra n. 14, p. 1623-1624; Ohler, supra n. 22, p. 61-66.

55 Gauweiler case, para. 46: ‘The Court has held that in order to determine whether a measure falls in the area of monetary policy it is appropriate to refer principally to the objectives of that measure’. See also Sauer, H., ‘Doubtful it stood…: Competence and Power in European Monetary and Constitutional Law in the Aftermath of the ECJ’s OMT decision’, 16 German Law Journal (2015) p. 971 Google Scholar at p. 978-979; Thiele, supra n. 2, p. 66-72; Thiele, A., ‘Die EZB vor Gericht’, 27 Zeitschrift für Bankrecht und Bankwirtschaft (2015) p. 295 CrossRefGoogle Scholar at p. 303; Thiele, A., ‘Die EZB als fiskal- und wirtschaftspolitischer Akteur’, 25 Europäische Zeitschrift für Wirtschaftsrecht (2014) p. 694 Google Scholar at p. 694-696. Critical Klement, J. H., ‘Der geldpolitische Kompetenzmechanismus. Sind die Outright-Geschäfte der EZB zugleich rechtmäßig und rechtswidrig? – Zum Urteil des EuGH vom 16.6.2015’, 70 Juristenzeitung (2015) p. 754 CrossRefGoogle Scholar at p. 759-760.

56 Gauweiler case, paras. 49 ff, 55. See also Thiele 2014, supra n. 55, p. 694-696.

57 See Steinbach, supra n. 8, p. 236.

58 See Manger-Nestler, supra n. 13, p. 623; Thiele, supra n. 2, p. 33-36; Ohler, supra n. 22, p. 66-68; Simon, S., ‘Direct Cooperation Has Begun: Some Remarks on the Judgment of the ECJ on the OMT Decision of the ECB in Response to the German Federal Constitutional Court’s First Request for a Preliminary Ruling’, 16 German Law Journal (2015) p. 1026 Google Scholar at p. 1029.

59 See for instance Siekmann, supra n. 17, p. 39 ff. and Ruffert, M., ‘The European Debt Crisis and European Union Law’, 48 Common Market Law Review (2011) p. 1777 Google Scholar at p. 1788.

60 BVerfGE 134, 266 (404-405). For a generally critical discussion of this decision see Thiele, supra n. 27, and Heun, supra n. 27.

61 Thiele 2015, supra n. 55, p. 302.

62 Simon, supra n. 58, p. 1033; Thiele, supra n. 2, p. 44-45.

63 See Steinbach, supra n. 8, p. 236.

64 See also Thiele, supra n. 2, p. 45.

65 Gauweiler case, para. 100 ff. See also Simon, supra n. 58, p. 1034.

66 See Gauweiler case, para. 104: Secondary market interventions could ‘have an effect equivalent to that of a direct purchase of government bonds (…), if the potential purchasers of government bonds on the primary market knew for certain that the ESCB was going to purchase those bonds within a certain period and under conditions allowing those market operators to act, de facto, as intermediaries for the ESCB for the direct purchase of those bonds from the public authorities and bodies of the Member State concerned.’ This is nothing less than the above-mentioned purchase guarantee. See also Sauer, supra n. 55, p. 981 ff and Simon, supra n. 58, p. 1035-1038.

67 Gauweiler case, para. 106: ‘In this respect, the draft decision and draft guidelines produced by the ECB in these proceedings indicate that the Governing Council is to be responsible for deciding in the scope, the start, the continuation and the suspension of the intervention on the secondary market envisaged by such a programme.’ Market participant could thus not be sure whether the ECB would purchase bonds at all, under which conditions and to what extent. See in detail Thiele, supra n. 2, p. 63-67. See also Sauer, supra n. 55, p. 981 ff.

68 As long as such intentions are not made public they would have no influence on the behavior of private market investors and would thus have no effect on the Member States’ budgetary policy.

69 Such a statement, of course, is not the equivalent of a legal ban on participation. Or, in other words: A haircut could not be deemed illegal simply because of such a statement.

70 Gauweiler case, para. 109.

71 For the reasons why such a public debate is essential for pluralistic democratic entities see Thiele, A., Verlustdemokratie. Die drei Verlustebenen der Demokratie (Mohr Siebeck 2016) p. 45-47 Google Scholar and p. 106-109.