A state should be deemed to be enjoying fiscal sovereignty where it is effectively empowered, without pressure or coercion, to make all policy decisions required to run the state machinery and satisfy the fundamental needs of its people (at the very least), both individual and collective. A state’s effective policy and decision-making power is effectively curtailed where: (1) it has been substituted in these functions by a third state or an organ of that state; (2) it is prevented from taking a particular action, such as unilateral default; (3) it is forced to violate fundamental domestic laws, including its constitution or the result of a referendum; or (4) external pressure is exerted against its government and institutions, with the aim of creating volatility and uncertainty concerning its finances so it succumbs to such pressure.

European Union's ‘social constitution’ and bailout measures – Are the bailout measures EU law? – Do the bailout measures create legal obligations? – Legal nature of Memoranda of Understanding – Avenues for challenge – Call for recognition of the EU law nature of bailouts and the costs of such non-recognition