The Crisis Response in Europe's Economic and Monetary Union: Overview of Legal Developments

Abstract

The WP analyses the changes to the law of Economic and Monetary Union (EMU) in response to the crisis, and discusses these major changes, their legal form, and the judicial challenges to them. The adaption of economic governance of the EU resulted in incisive regulation of Member States’ budgetary soundness and prudence, and further EU oversight of national economic policies. The European Central Bank (ECB) introduced unconventional monetary policy measures and played a novel role in economic policy setting under the ‘conditionality’ of emergency funding to Member States. The ECB also became the central supervisor in a Single Supervisory Mechanism for the Euro Area’s commercial banks under ‘banking union’. The ‘no bail-out’ clause of the Treaty on the Functioning of the European Union (TFEU) did not prevent the creation of arrangements for the provision of funding to Member States (ESFS, EFSM, ESM). At Union and at Member State level, there were numerous judicial challenges to the crisis response of policy makers. The WP critically analyses the crisis innovations. It calls for further study on the interplay between Member State and Union law, and on international and EU law.

Keywords: economic and monetary union, banking union, unconventional monetary policy measures, European central bank, stability and growth pact, European stability mechanism, outright monetary transactions, Euro area economic governance, equal application of EU law, flexible enforcement

JEL Classification: K33