European Bonds for the European renaissance: with or without Germany?

an interview of Ezio PERILLO (Former judge at the General Court of the European Union)

Why are all these legal skirmishes still going on in the European Union Headquarters?
It’s true. Given the present situation, everyone would expect a Union with a human face and less technical attitudes. Instead, even at times like these, the Union seems to get entangled in legal harness and, above all, to suffer the diktats put forward by certain States which claim to be entitled to keep control, at least indirectly through the ESM’s condionality, on the expenses of the others Member States.
This was not the spirit with which in 1952, in the aftermath of the end of a horrible war,  the first European community was born. In the preamble to the ECSC Treaty (1952), the six founding States sought the establishment the “ of a broader and deeper community between peoples for a long time divided by bloody conflicts, and to lay the foundations for institutions – and I like to emphasise this passage – which will give direction to a destiny henceforward shared».


What is needed today?
We must regain these common aims. The ECB, the EIB and the Commission are certainly making massive efforts to tackle the current health emergency and a recession that is already upon us.They do so, however, with the resources and means they normally have, without daring, instead, to take the vital step that is required to face exceptional circumstances, in particular when they are caused by natural terrible factors.Public opinion cares very little about the technicalities of the ESM or the news that the provisions on the euro-stability have been suspended for some time, a suspension, by the way, which makes superfluous the possible ESM bailouts.
On other continents, also affected by the corona virus, nobody cares about the stability of the US dollar, the Chinese yuan or the Japanese yen. What really matters is to introduce as soon as possible the appropriate instruments to tackle the present situation, instruments that everyone can see and understand, citizens as businesses. 


Are you referring to European bonds?
Yes, but not to « eurobonds”, that where those designed only to ensure the stability of the euro. Today, European securities are needed exclusively to ensure the stability of the economy of the whole Union, in order to avoid the economic recession also in the area of non-euro Member States , such as Denmark, Sweden or Poland .Instruments that, like most of the bonds of this kind, will create fresh liquidity to be put in to the different circuits of the production and the trade. In short, securities in order to revive the economy of an entire continent and which we could therefore call, with true community sense, European Renaissance Bonds.


But, to issue them don’t we need the agreement of all the Member States?
Not at all. If Germany, like any other Member State, cannot help without the Union, the Union, on the other hand, does not always and necessarily need Germany or Holland to go ahead, certainly not in order to establish European debt securities.
The EIB, which has the legal and technical competences to issue securities of this type, takes its decisions by qualified majority.
Moreover, the Lisbon Treaty (2009) provides for the possibility, for nine Member States, the possibility to create, between them, an enhanced cooperation,  which  « shall aim to further the objectives of the Union, protect its interests and reinforce its integration » and which can be established quite rapidly. It is sufficient that the nine Heads of State or Government, the same as those who signed the letter of 25 March last, agree to submit a request accordingly. The authorisation is then granted by the Council, subject to the approval of the European Parliament, a condition which therefore legitimises the democratic basis for the issuance of these securities. Germany and Holland would obviously be welcome but, at this point, it would be up to them alone to decide whether or not to get on the train of European anti-recession solidarity.


But, funds will still be needed to secure these European bonds. Who puts them on?Certainly, the States affected by the pandemic cannot be asked to make other financial contributions to the Union for this purpose. For this same reason, the European budget does not appear to be the right financial support either. It is in fact an expenditure budget, largely made up of financial contributions provided by the States.

Could the funds from the ESM then be used?

First of all, let me recall that the ESM is not an EU body but an intergovernmental organization created by the euro area States.The ESM, however, is not the only instrument aimed to protect the stability of the euro. In fact, Article 136 TFEU provides that euro area States « can »  establish a stability mechanism, which means that they do not have the exclusive prerogative.
In any case, in order to change the operating conditions of the ESM (in particular that of a “strict conditionality” to which the granting of any financial assistance by the ESM must in any case be subject in any case) it is necessary to modify the said article of the Treaty, a procedure which requires the unanimity of the Governments involved and then the subsequent ratification by all the States concerned. In short, biblical times, compared to the emergency of a recession now at the doors.
Of course, every State, as it joined the ESM, can also unilaterally withdraw from it, taking back the money it paid to this fund. However, I am convinced that facing the European public opinion, Germany will not want to reach this latest ratio, so to oblige the nine States to leave the Mechanism. A Mechanism, in hindsight, which is by now not so useful and functional to the stability of the euro and to the recovery of deficits. Under the terrible blows of the coronavirus storm, which forced us all to stay on the same boat with equal rights and equal duties, the time has perhaps come to “scrap” this obsolete intergovernmental financial vehicle, in order to change it, as the European Parliament already wished in 2011,  into « a mechanism of the Union », structured upon community criteria  and operating through community procedures and on whose board the ECB and the Commission are not just, as now, simple « observers » .

When Adenauer went to the Bundestag immediately after the signing of the Treaties of Rome (1957) he said to the elected members of that assembly: « in Rome we signed a treaty not to make a German Europe but to move towards a European Germany » .

The problem of bonds aimed at revitalise the European single market and its economic  is undoubtedly also a political problem. In this perspective, I am also convinced that, as already widely voiced by many political figures, Germany is and will remain European. As Commissioner Gentiloni has rightly said, we still have to «bet »  on Germany. France, like Italy, Spain and the other signatory States of the letter of March 25, will do their part in this regard.
The path of enhanced cooperation, legally practicable also in this delicate matter, as it has already been for the creation, currently underway, of the European Public Prosecutor, seems to be the only one that is the most adequate and the quickest to effectively combat the looming recession. With the creation of the ECSC, the six founding States de facto abandoned the Marshall Plan’s method, to walk faster on the path of their economic recovery, and with their own legs.
All Member States, meeting in the European Council, could then instruct the Commission to submit to the Parliament and the Council a legislative proposal based on Article 5 TFEU, concerning the complementary competences of the Union in the field of close coordination of the economic policies of the Member States (articles 119, 121 and 136.1, TFEU), in order to create, on the pattern of the old one, a new European Union Stability Mechanism, completed by specific and distinct actions in the field of coordination of employment policies (Articles 145 and 149 TFEU) and social policies (article 155 and following TFEU) of the Member States in response to the pandemic crisis 2020.
Virtus unita, fortior.

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