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2020
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IS MUTUAL FINANCIAL ASSISTANCE IN THE FORM OF COMMON ‘CORONA BONDS’ LEGALLY POSSIBLE?
EUROPEAN SOLIDARITY REQUIRES EU TAXES PAGE
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Phedon Nicolaides PAGE
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THE EU’S ECONOMIC EMERGENCY MEASURES AND GERMAN CONSTITUTIONAL CONSTRAINTS
“WHATEVER IS NECESSARY… WILL BE DONE” SOLIDARITY IN EUROPE AND THE COVID-19 CRISIS Ulla Neergaard & Sybe de Vries
Julian Pröbstl
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EU LAW LIVE 2020 © ALL RIGHTS RESERVED
Nº14 · APRIL 24, 2020
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Is Mutual Financial Assistance in the form of Common ‘Corona Bonds’ Legally Possible? Phedon Nicolaides
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Article 122 TFEU states: ‘1. … the Council … may decide, in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, in particular if severe difculties arise in the supply of certain products, notably in the area of energy.
Introduction The nance ministers of the euro area Member States agreed on 9 April 2020 on a ‘comprehensive policy response’ with several innovative components such as a ‘dedicated COVID-19 instrument’. (2)
2. Where a Member State is in difculties or However, the agreement of 9 April did not is seriously threatened with severe difculbridge the gap between northern and soutties caused by natural disasters or exceptiohern Member States on whether common nal occurrences beyond bonds could be issued. its control, the Council Nor did it provide any answer to the question The Treaty on the Functioning of … may grant, under certhe European Union does have tain conditions, Union whether common bonds are legally pos- explicit provisions that allow Mem- nancial assistance to the Member State concersible in the EU frameber States to help each other ned.’ work. As we will see, the answer is ‘yes, but The rst paragraph refers to ‘severe difcul…’. ties’ in ‘the supply of products’ such as energy. But it does not exclude assistance to alleviate bottlenecks in the supply of Treaty provisions on mutual assistance COVID-19-related products such as personal protective equipment. The Treaty on the Functioning of the European Union (TFEU) does have explicit proThe second paragraph connes the assistanvisions that allow Member States to help ce to difculties caused by natural disasters each other. or exceptional occurrences. In either case,
1. Professor, University of Maastricht. Visiting Professor, College of Europe, Bruges, and Luiss University, Rome. I am grateful to Paul Dermine for comments on an earlier draft.. 2. For a review of the various components of the agreement and of other emergency measures to combat the corona virus covid-19, see P. Dermine and M. Markakis, The EU scal, economic and monetary policy response to the COVID-19 crisis, EU Law Live, Weekend Edition No. 11, 28 March 2020.
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would make no sense to take money from Member States in order to return it to Member States.
the assistance must come from the EU. Although Article 122 lays down no restriction on the amount of assistance, in practice there exist two limits, both of which are linked to the size of the EU budget.
Second, even though the EU may not nance its own budgetary expenditure through debt, it can borrow extra money from nancial markets using the 0.23% margin as a guarantee. In that way it can raise a much higher amount to be made available to Member States through loans at favourable rates of interest. A case in point is the European Financial Stabilisation Mechanism (EFSM) which was established in 2010 in response to the nancial crisis that broke out in 2008. The EFSM borrowed from the market and passed on the money to Ireland and Portugal at very favourable rates.
First, Article 311 TFEU requires that the EU budget is kept in balance, but does not impose a limit on the size of the budget. However, the ‘own resources’ Decision 2014/335 and the Multi-annual Financial Framework Regulation 1311/2013 do lay down specic upper ceilings. The ‘own resources’ ceiling for payments is currently set at 1.23% of the EU’s GNI. Given that the 2020 budget accounts for about 1% of the EU’s GNI and since the maximum amount that the EU can draw from Member States for immediate payments is 1.23% of GNI, the EU can ask for 23% more which would raise roughly an extra EUR 37 billion to combat COVID-19. This is a miniscule amount in relation to the needs of Member States. It has been estimated that Member States have already increased their spending by varying degrees ranging from 2% to 15% of their GDP. (3) It follows that if, very conservatively, their collective spending has increased by a mere 5% of the EU’s GDP, then their needs are roughly EUR 700 billion. Moreover, it
Mutualisation of debt? Apart from the fact that the resources that can be mobilised on the basis of Article 122 are limited, two other questions arise. First, does the COVID-19 pandemic constitute a natural disaster or an exceptional occurrence? There is no EU denition of what may be a natural disaster or exceptional occurrence. However, the Commission has recognised several unusual events as being na-
3. See Breugel, The Fiscal Response to the Economic Fallout from the Coronavirus, 8 April 2020.
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Therefore, it is clear that the EU can provide nancial assistance to those Member States that need it. But both the EU and Member States have to comply with Article 125 TFEU, which states that the ‘Union shall not be liable for or assume the commitments … of any Member State’ and that a ‘Member State shall not be liable for or assume the commitments … of another Member State’.
tural disasters such as oods, droughts, earthquakes, avalanches, large forest res. Exceptional occurrences are events that are unforeseen and have an impact that goes beyond the typical losses incurred as a result of normal market uctuations. Such events are, for example, terrorist attacks, large scale industrial accidents or epidemics. The outbreak of the COVID-19 pandemic has already been classied as an exceptional occurrence. (4)
One may argue that a common bond necessarily implies that Member States guarantee each other’s debt or assume commitments Second, and more importantly, is the quesarising from each other’s liabilities. In fact, tion of whether assistance on the basis of the reason for a common bond is to pool risk Article 122 can be granted in the form of a to reduce the interest that has to be paid by common bond. The EFSM mentioned abothe Member States that ve was established by are perceived as more Regulation 407/2010 on the basis of Article The outbreak of the COVID-19 risky. This unavoidably means joint liability 122(2). Article 2 of that pandemic has already been which would be conRegulation provides classified as an exceptional trary to Article 125. that ‘Union nancial assistance for the purpooccurrence The examples of the ses of this Regulation EFSM, the European Fishall take the form of a nancial Stability Faciloan or of a credit line lity (EFSF) and its successor, the European granted to the Member State concerned. To Stability Mechanism (ESM) show that there this end, … the Commission shall be empois a way out of this impasse. The solution is wered on behalf of the European Union to to interject an intermediary between the lencontract borrowings on the capital markets ders, that is, the international nancial maror with nancial institutions’. kets, and the nal borrowers, namely the Member States. The intermediary borrows Although EU loans to Member States are at its own risk but then it lends on to Memgranted on terms which are more favourable ber States on the condition that they pay than those demanded by the market, they are back with interest. Formally, Member Stanot gifts. They have to be repaid and are subtes individually or collectively do not assuject to ‘conditionality’. me the debt of other Member States even though they guarantee the intermediary. 4. See the review of the relevant case law in P. Nicolaides, The Corona Virus Can Infect Banks Too: The Applicability of the EU Banking and State Aid Regimes, European State Aid Law Quarterly, 2020, vol. 19(1), pp. 29-38. P. Nicolaides, State Aid to Combat Covid-19, Policy Brief 13/2020, Luiss University, April 2020..
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Articles 122(2) and 125 TFEU and conditionality
The reason for a common bond is to pool risk to reduce the interest that has to be paid by the Member States that are perceived as more risky. This unavoidably means joint liability which would be contrary to Article 125
Two judgments of the Court of Justice can serve as guidance on whether Member States can offer mutual nancial assistance. The rst is the ruling of 27 November 2012 in case C-370/12, Thomas Pringle v Government of Ireland. The other was delivered on 12 September 2017 in case C-589/15 P, Anagnostakis v European Commission. Both of the judgments dealt with many other issues which are ignored here. (7)
However, the experience with the EFSM, EFSF and ESM also indicates that the loans to Member States are provided on terms that certainly deviate from standard market practice: long pay-back periods, the longest of which is 40 years, several years of grace and low interest rates, the average of which is 0.8%. (5) These favourable terms have resulted in budgetary savings for the borrowing countries ranging from 0.5% to 5.5% of their GDP. (6) The intermediary, and by implication the Member States behind it, bears abnormal risk. But, it is still compatible with EU law because the borrowing Member States must pay back with interest. As we will see below, EU case law has focused on the formality of whether the loans have to be repaid and has ignored whether in reality the loans represent a risk above market levels for the intermediary and, ultimately, the guarantor Member States.
In Pringle the Court of Justice examined rst the kind of assistance that can be provided on the basis of Article 122(2). It stressed that ‘(65) Article 122(2) TFEU confers on the Union the power to grant ad hoc nancial assistance to a Member State which is in difculties or is seriously threatened with severe difculties caused by natural disasters or exceptional occurrences beyond its control’. However, ‘(120) nothing in Article 122 TFEU indicates that the Union has exclusive competence to grant nancial assistance to a Member State’.
The solution is to interject an intermediary between the lenders, that is, the international financial markets, and the final borrowers, namely the Member States
5. See the presentation of the ESM here. 6. See EFSF/ESM Financial Assistance: Evaluation Report, ESM, 2017. 7. For an extensive analysis of the Pringle judgment see P. Craig, Pringle: Legal Reasoning, Text, Purpose and Teleology, Maastricht Journal of European and Comparative Law, 2013, vol. 20(1).
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In Anagnostakis, the Court of Justice reiterated its ndings in Pringle, and added that ‘(75) that provision cannot justify the legislative introduction of a mechanism of nonrepayment of debt’ and that EU assistance cannot cover debt owed by a Member State to the Union or third parties (paragraph 77).
budgetary policy … The prohibition laid down in Article 125 TFEU ensures that the Member States remain subject to the logic of the market when they enter into debt, since that ought to prompt them to maintain budgetary discipline.’ ‘(136) Given that that is the objective pursued by Article 125 TFEU, it must be held that that provision prohibits the Union and the Member States from granting nancial assistance as a result of which the incentive of the recipient Member State to conduct a sound budgetary policy is diminished.’ ‘(137) However, Article 125 TFEU does not prohibit the granting of nancial assistance by one or more Member States to a Member State which remains responsible for its commitments to its creditors provided that the conditions attached to such assistance are such as to prompt that Member State to implement a sound budgetary policy.’
With respect to Article 125 TFEU, the Court of Justice explained in Pringle that ‘(130) that article is not intended to prohibit either the Union or the Member States from granting any form of nancial assistance whatever to another Member State’. ‘(131) If Article 125 TFEU prohibited any nancial assistance whatever by the Union or the Member States to another Member State, Article 122 TFEU would have had to state that it derogated from Article 125 TFEU.’ Moreover, ‘(132) Article 123 TFEU … employs wording which is stricter than that used in the ‘no bail-out clause’ in Article 125 TFEU. The difference in the wording used in the latter article supports the view that the prohibition stated there is not intended to prohibit any nancial assistance whatever to a Member State’.
Therefore, any mutual nancial assistance must be conditional. However, conditionality does not have to require the wholesale reform that was the quid-pro-quo for the bailout packages of the past decade. It only has to ensure that the beneciary Member State remains ‘responsible’ to its creditors and has to implement ‘sound budgetary policy’. Legally, these two conditions are satised when, rst, the beneciary Member State is required to pay back with some interest at some point in time and, second, its budget complies with the EU’s scal rules while taking into account the extra outlays for the payments of the interest and principal of its debt.
Therefore, the Treaty does allow mutual nancial assistance. The question that was tackled next by the Court of Justice in Pringle was the form of that assistance and the conditions it had to satisfy. ‘(133) In order to determine which forms of nancial assistance are compatible with Article 125 TFEU, it is necessary to have regard to the objective pursued by that article’. ‘(135) The aim of Article 125 TFEU is to ensure that the Member States follow a sound
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sume the obligations of other Member States. Presumably this means that the Treaty forbids the EU or Member States from paying the interest or principal of loans on behalf of those Member States who cannot.
It only has to ensure that the beneficiary Member State remains ‘responsible’ to its creditors and has to implement ‘sound budgetary policy’
Sixth, a common bond that provides for risk to be shared directly among issuing Member States is consequently incompatible with EU law.
Conclusions The following eight conclusions may be drawn:
Seventh, the interjection of an intermediary that borrows from the markets and lends to Member States would be compatible with EU law even if its lending to Member States is on more favourable or more lenient terms than those of the market.
First, Member States are not forbidden by EU law to provide mutual nancial assistance to each other. Second, any assistance has to be consistent with Member State obligations under Articles 122 and Article 125, respectively.
Eighth, the intermediary is likely to bear risk above that which is tolerated by the market. This appears not to be contrary to EU law.
Third, any assistance may not weaken the incentive of Member States to maintain budgetary discipline and remain subject to the logic of the market. Fourth, the funding provided so far by the EFSM, EFSF, and the ESM indicate that the terms ‘budgetary discipline’ and being ‘subject to the logic of the market’ are rather vague and fairly exible. Pay-back periods can be longer than those accepted by the market and interest rates can be lower than those demanded by the market. In fact, funding provided under such favourable conditions makes it easier for Member States to pursue ‘sound budgetary policy’. Fifth, what the Treaty clearly prohibits, as stressed by the Court of Justice, is any commitment by the EU or Member States to as-
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The EU’s economic emergency measures and German constitutional constraints Julian Pröbstl
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wers this question based on an analysis of the relevant case law and constitutional principles as well as their implementation into statutory law. In summary, German constitutional law does not oppose the envisaged measures, but it does require parliamentary approval.
The German Federal Constitutional Court (BVerfG) plays an important role within the context of judicial control of European integration. It derived specic constraints for Germany`s participation from the German Constitution, the Grundgesetz (GG), which apply in particular to scal rescue measures: absolute limitations as well as parliamentary participation rights. This became especially apparent during the nancial and sovereign debt crisis in the Euro area, in the course of which the BVerfG delivered several widely discussed and inuential verdicts. Which practical conclusions can we draw from these decisions about the principles and limits set out therein in the current context with regard to the scal elements of the Eurogroup agreement on a rescue package which was endorsed by the European Council on 23 April. The present contribution ans-
Judicial control of European Integration through the BVerfG The BVerfG is a pioneer when it comes to the legal examination of the EU from the national constitutional law perspective, since it has dealt with judicial control of German participation in European integration on multiple occasions. Though the BVerfG is not the only national constitutional court which pronounces on such issues, (2) its rulings arguably have the most transnational repercussions. They attract considerable attention from the European public and academia, as it is the constitutional court of the EU’s biggest Member State by population and share of overall GDP. A long series of landmark judgments from Solange I 1970 over Maastricht 1993 to ESM 2014 bear impressive proof of this fact. The public, political and academic opinion at home as well
The BVerfG plays an important role in shaping national constitutional limitations to European integration
1. Julian Pröbstl is a Research Associate at the Max-Planck Institute for Tax Law and Public Finance in Munich and a PhD Candidate in European Financial Law at the University of Passau. The author would like to thank Sara Dietz, LL.M. (Harvard) and Josef Weinzierl, MJur (Oxon) for their helpful comments on the draft. 2. See for cases of other constitutional courts Huber, The Rescue of the Euro and its Constitutionality, in: Legal Challenges in the Global Financial Crisis, Ringe/Huber (eds) 2014, p. 9.
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proval is a prerequisite for the legality of Germany's participation in scal rescue measures.
as abroad oscillates between favourable recognition and decided criticism and sparked debates in political science about the role of courts as political actors. Regardless of personal opinion, one has to acknowledge that the BVerfG plays an important role in shaping national constitutional limitations to European integration. Its decisions have great inuence – a fact, which has become most evident during the Euro crisis.
Relevant BVerfG case law regarding scal integration and rescue measures The BVerfG has developed the normative foundations and practical specications of the above mentioned constitutional limitations to scal integration and requirements for German participation in several landmark judgments (Maastricht Treaty 1993, Treaty of Lisbon 2009, EFSF 2011, ESM
In its case law the BVerfG interprets the German Constitution, with regard to German participation in European integration. In
Karlsruhe developed the principle of constitutional identity as an absolute limit for German participation in European integration
that respect, it held that the so-called constitutional identity constitutes an absolute limitation to the transfer of sovereign rights from the national to the EU level. From this core principle, it derives specic constraints and requirements for the transfer of scal sovereignty to the supranational level. The German parliament, the Bundestag, must remain in control of the fundamental budgetary decisions. Apart from this absolute limitation, transfer of sovereign scal rights to the supranational level is generally permitted. However, it is subject to participation by the German Bundestag where its overall budgetary responsibility is concerned. Thus, as a rule of thumb, parliamentary ap-
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2012 and 2014). These constraints are also relevant for international mechanisms such as the ESM, which has been established outside the EU legal order through an intergovernmental treaty. In a long line of case law culminating in its Maastricht ruling in 1993, Karlsruhe developed the principle of constitutional identity as an absolute limit for German participation in European integration. However, express or implicit boundaries of such kind are not a German singularity but exist in the majority of Member states. Also, EU law respects the constitutional identity of the Member States as part of their national identities
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The 2009 judgment on the Treaty of Lisbon specied the rather abstract principle of constitutional identity as a limit to integration. It listed policy areas which count towards that core of the constitution. Fundamental scal decisions on public revenues and expenditures are in particular an integral part of the constitutional state's ability to shape its own democracy and are therefore particularly sensitive. The constitution contains an inalienable national budgetary autonomy of the Bundestag, which it cannot transfer to the supranational level even by amending the constitution, because it is part of the constitutional identity. This is the abstract absolute limitation to scal integration.
(Article 4 (2) sentence 1 TEU). Constitutional identity connes a part of sovereign rights as a domaine reservé, which is not open to integration (integrationsfest), to the national level. All measures invading this sphere violate the constitution. This thought is deeply interconnected with the democracy principle (Article 20(1), (2) GG) and is normatively anchored in Article 23(1) sentence 3, 79(3) GG. Changing the constitutional identity requires the adoption of an entirely new constitution by the pouvoir constituant – the German people. Amending the existing constitution through parliament, as part of the pouvoir constitué, would not sufce, see Article 79(3), 146 GG. The BVerfG further held that citizens have an enforceable subjective right in this regard, which stems from the constitutional right to vote (see Article 38(1), (2) GG). The protection of the voters against the loss of substance of their democratic power to rule derives from this. This protects them against the Bundestag transferring tasks and powers, which are part of the constitutional identity, to the supranational level. In the event of a possible violation of this right, citizens may lodge a constitutional complaint with the BVerfG against acts of German public authority. In short, German citizens have an enforceable right to democracy. As we know, this right has been invoked quite often, ever since.
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In several judgments delivered in the course of the euro crisis, the BVerfG further differentiated and explained the budgetary dimension of the constitutional identity and its consequences in the specic context of scal aid measures. From the Constitution, it derived substantive limits as well as procedural requirements for German participation. The rst milestone in this context was the EFSF decision in 2011. Although less well known, it is probably the more signicant judgment compared to the subsequent ESM decisions. Following on from the Lisbon ruling, the BVerfG further specied the importance of parliament’s right to decide on
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Union also does for the closely connected sphere of intergovernmental instruments such as the ESM (in this regard also see the recent BVerfG decision on the German act of approval to the agreement on a Unied Patent Court). In the second, preliminary, ruling, the BVerfG refused to grant a temporary injunction seeking to prohibit the Federal President from signing the German parliamentary act approving the establishment of the ESM. In the subsequent main decision, the BVerfG upheld its preliminary ruling. In essence, it held that because the limitation of liability in Article 8(5) ESMTreaty effectively limits the amount of Germany’s theoretical payment obligations to its share in the authorised ESM capital stock, the amount of payment obligations is not indenite and it does not exceed a threshold which would constitute a violation of budgetary autonomy. Moreover, budgetary autonomy is secured by the fact that additional obligations can only be agreed upon after prior parliamentary approval (Article 10 (1) sentence 3 of the ESM Treaty). Therefore, German constitutional law, specically the Bundestag’s budgetary autonomy as part of Germany’s constitutional identity, was not violated.
the budget as a central element of democratic parliamentarism. The Bundestag ought to make the basic scal decisions on revenue and expenditure in establishing the budget, see Article 110 (2) GG. Parliament cannot give ‘indiscriminate authorisation in a substantial degree to guarantees’. ‘The Bundestag must specically approve every large-scale measure of aid of the Federal Government (…) involving public expenditure on the international or European Union level’. In case ‘supranational agreements are entered into which by reason of their magnitude may be of structural signicance for Parliament's right to decide on the budget, for example by giving guarantees the honouring of which may endanger budget autonomy, or by participation in equivalent nancial safeguarding systems, (…) every individual disposal requires the consent of the Bundestag’. However, the density of judicial control is restricted to manifest violations of budgetary autonomy. Parliament as legislature has a considerable latitude of assessment in the detailed design, especially in the assessment of risks associated with scal aid measures. Through recognising parliament`s margin of appreciation, the BVerfG considerably relativises the very strict abstract requirements for participation in scal aid measures.
Most recently, on 30 July 2019, the BVerfG passed a judgment in a eld closely related to and connected with the Monetary Union: the Banking Union. It dismissed constitutional complaints and held that, ‘if interpreted strictly, the framework for the European Banking Union does not exceed the competences of the European Union’ and therefore is in accordance with the GG.
The second milestone in this regard was the three ESM rulings on 9 June and 12 September 2012 and 18 March 2014. (3) In the rst decision, the BVerfG held that the parliament’s right to be informed by the Federal Government in matters relating to the ESM follows from Article 23(2) GG. What applies to matters concerning the European
3. See for further explanation of these decisions Huber, The Rescue of the Euro and its Constitutionality, in: Legal Challenges in the Global Financial Crisis, Ringe/Huber (eds) 2014, p. 18 et seq.
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simple majority, Sec. 4 (1) ESMFinG. This is particularly the case in decisions on new nancial assistance, on accepting the respective facility agreement and MoU, on changes to the authorised ESM capital stock as well as the establishment of new nancial asRequirements for Germany’s participasistance instruments. The Federal Governtion in ESM pandemic crisis support ment may, through its representative, only vote in favour of a proposed resolution in No. 16 of the rescue package envisages ‘SaESM matters or abstain from voting on it affety Nets’ for sovereigns. Such pandemic criter the Bundestag has passed a decision in fasis-support will be based on the existing vour of it (this requirement is reected in ECCL instrument for precautionary nanArticle 10(1) sentence 3 of the ESM Treaty). cial assistance and adjusted in light of this Without approval, the German representatispecic circumstance in the volume of up to ve must vote against the 2% of the respective proposed resolution. In Member States’ GDP. all other ESM matters, Loans will be available Every decision on an application which affect the Bunto all Member States affor financial assistance as well destag’s budgetary rester assessment by the European institutions as the respective facility agree- ponsibility and in which a decision of the plenary with standardised terms ments and MoU require the under Sec. 4 ESMFinG agreed upfront reecconsent of the Bundestag is not provided for, the ting the current challenbudget committee of ges. The only access rethe Bundestag shall be quirement is that the involved, Sec. 5 money has to be spent ESMFinG. A study by the scientic service on healthcare related costs. of the German parliament shows that similar parliamentary approval requirements In the context of the ESM, the constitutional exist in some other Member States. requirements set out above have been transposed into statutory law. To this end the BunThe envisaged ESM pandemic crisisdestag adopted the Act for Financial Particisupport concerns the overall budgetary respation in the European Stability Mechanism ponsibility of the Bundestag, because new (ESMFinG). It regulates the overall framenancial assistance would be handed out to work for German Participation in the ESM the applying Member States. Therefore, and provides for comprehensive participaevery decision on an application for nantion rights of the Bundestag. cial assistance as well as the respective facility agreements and MoU require the conESM matters which relate to the overall budsent of the Bundestag. getary responsibility require parliamentary approval by the plenary of the Bundestag by IWhich specic requirements apply regarding the scal measures of the rescue package proposed to combat the socio-economic consequences of the COVID-19 pandemic?
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IRequirements for Germany’s participation in the nancing of the recovery fund
Conclusion The economic necessity and benets of the envisaged rescue measures are widely recognised. German constitutional law should in principle not stand in their way, however, in the case of the recovery fund in particular, this depends on the concrete form it will ultimately take. Generally, the GG provides for absolute limitations as well as approval requirements in case the overall budgetary responsibility of the Bundestag is concerned. Both the ESM pandemic crisis-support through ECCL, as well as the nancing of the recovery fund concern the overall budgetary responsibility of the Bundestag, and approval is required for German participation.
On 23 April the Council agreed to work on a temporary ‘Recovery Fund’ – as envisaged in no. 19 of the rescue package – to support economic recovery by providing funding through – inter alia – EU Budget programmes.In the absence of taxation competences on the EU level generating sufcient funding, this would probably have to be nanced by ‘innovative nancial instruments’. Several proposals for such instruments have been put forward in recent weeks. E-Bonds could serve as a blueprint for a model within the EU law framework. In this model, funds would be created by issuing bonds through the European Commission, and subsequently be transferred to the Member States via unconditional senior loans. Implementing such seniority structure, regardless of the specic legal instrument ultimately used, would fundamentally alter sovereign debt management as it requires subordination of (almost) all other future creditors. Therefore, this design would concern the overall budgetary responsibility of the Bundestag and require its approval. Bonds with some form of mutual liability would be more problematic. Absolute limitations on the extent of possible nancial obligations apply. Indenite nancial obligations would not be permitted. In any case, participation in such a scheme would concern the overall budgetary responsibility of the Bundestag and therefore require its approval.
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European solidarity requires EU taxes Frans Vanistendael, KULeuven (Belgium), Gianluigi Bizioli, University of Bergamo (Italy), Irene Burgers, University of Groningen (The Netherlands), Francisco Alfredo Garcia Prats, University of Valencia (Spain), Daniel Gutmann, Paris 1 Pantheon-Sorbonne University (France), Peter Essers, Tilburg University (The Netherlands), Werner Haslehner, University of Luxembourg (Luxembourg), Georg Koer, JK University Linz (Austria), Hanno Kube, Heidelberg University (Germany), Adolfo Martín Jiménez, University of Cadiz (Spain), W. Nykiel, U. Lodz (Poland), Pasquale Pistone, University of Salerno (Italy) and WU Vienna (Austria), Ekkehart Reimer, Heidelberg University (Germany), Edoardo Traversa, UCLouvain (Belgium).
Many Europeans want to keep full national control on the nancing of the means that are put at the disposition of the budget of the EU. The main arguments for keeping this full national control are (1) the moral hazard argument of fear of uncontrolled spending by the EU and the Member States, documented by persistent and sometimes large budgetary decits in those Member States claiming this support, (2) the argument of political accountability requiring approval of taxes and the budget by a democratically elected parliament, which in the opinion of these Europeans is a national parliament, and (3) the lack of transparency of measures taken by the European Central Bank and the European Stability Mechanism resulting in widespread scepticism against European solidarity.
Just before Easter the ministers of nance of the European Union reached an agreement on a package of 540 billion euros to ght the Corona-crisis. The victory by the Union of this umpteenth crisis was not a reason for joy or jubilation. Fortunately the deal made money available for the most immediate needs of the health crisis and its economic consequences. But the question of how to rebuild the economy of the Union and the member states in the long run remained unresolved. If nothing changes, the only prospect is that some time down the road there will be another hair raising crisis, in which the Union may muddle through or may be destroyed. The bets are open. Within one decade we have lived a euro-crisis and a Corona-crisis, and many mini-crises in between. As academics, specialists in taxation, we have come to the conclusion that the present way of decision-making in the European Union is a dead alley. The cause for this blockage in decision-making is a fundamental dividing line between Europeans on the way the European Union is to be nanced.
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Many other Europeans want more progress for the Union in economic and social integration, by stressing direct solidarity between European citizens in putting nancial resources in common at the European level.
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The main arguments for this approach are (1) the necessity of an effective common economic and monetary policy for the euro, strengthening the EU as a whole in the increasing competition with other large economic powers in the world, (2) the expectation that this solidarity will help the weaker EU Member States to overcome their structural economic and social handicaps, and (3) the necessity of more democratisation at the European level by transferring part of the decision-making power over taxes and budgets to really democratic EU institutions. These two opposing approaches have been blocking the decision-making process in the EU. The result of this blockage has been uniform economic policy for the whole EU limited to policing of the national budgets of all Member States by the Commission, on the basis of similar criteria. But there has been no common policy project or framework aimed at deeper and effective economic and social integration among the Member States. The current annual budget of the EU does not allow this. It represents about 1% of the total GDP of the EU, while the annual national budget of most of the Member States represents between 40 to 50% of their national GDP. It is clear that compared to the national budgets of the Member States the bazooka of the EU budget is much too small to make any signicant impact for an effective common economic and/or social policy at EU level. In spite of all the previous crises it is possible to reconcile these differences by starting to recognise at the same time (1) the validity of both of the two approaches, (2) and the inadequacy of the current EU budget at 1% of the GDP of the whole EU, in order to make progress in the further economic and social integration of the Member States. At present the EU budget consists for a small part of customs duties (until 2018, also sugar levies), which can be considered as truly EU taxes and levies. But the lion’s share (more than 80%) consists of contributions from the Member States calculated as a percentage of the national VAT base and on a contribution by the Member States calculated as a percentage of Gross National Income. That way of nancing cannot be used to under-
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institutions, that they will be able to tax and spend well in the interests of the Union, which will benet all Member States. If, after more than 60 years, the Member States don’t have enough condence in the institutions of the European Union to meet this challenge, even when this challenge is strictly limited to a few percentage points of their total national tax revenue, certainly the euro-zone, then maybe the whole Union has no future and will muddle through until total disintegration.
take the task of building a more ambitious integrated economic and social union. The moral hazard argument should be recognised by putting (1) a strict quantitative limit on the size of the European budget, expressed as a percentage of the GDP of the Union as a whole, but taking into account the magnitude of the task of further economic and social integration of the Union, (2) by putting a qualitative limit on the nature of the taxes needed to supply this EU budget and nally (3) by closing the back doors of decit spending through side-budgets of the EU, except for debt nancing in absolute emergencies like Corona.
As tax specialists we know that this change involves a lot of technical budgetary details, which need to be elaborated in much more extensive documents. Already, in the past, many studies have been made on the question of which EU taxes would be t to nance the EU budget. This is not a call for higher taxation, but in the rst place for a limited and gradual shift in revenue between the Member States and the Union. This reform is not to be implemented in one big bang, but in a gradual process during a long transition period, like the customs union from 1957 to 1968. To keep the Union together we need that minimal glue of truly European solidarity, not more but surely not less.
Within these limits the solidarity argument should also be fully recognised by transferring unconditionally the power to levy specic taxes and to spend them through democratic institutions of the Union. That is only possible when the present nancing mechanism is replaced by a truly European mechanism of limited solidarity, in accordance with the common European ability to pay. This transfer of powers is not a blank check to free spending Member States, it is a vote of condence in the democratic European
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“Whatever is necessary… will be done” Solidarity in Europe and the COVID-19 Crisis 1
Ulla Neergaard & Sybe de Vries 1
have seen almost unsuccessful pleas for exports of doctors and ventilators from the more privileged countries to the most wounded ones, as well as little success in requests to take COVID-19 patients from the latter kinds of Member States to those countries estimated to have a higher capacity in the health sector. In addition, we have witnessed unsympathetic ‘competition’ between Member States in the purchase, for instance, of ventilators and personal protective equipment such as masks, and Member States’ surprising conscations and export bans of such items, and more. At a more abstract level, the EU has continuously been criticised for its lack of action, and generally, solidarity amongst Member States has been called for, as the Nation State appears to have been strengthened severely at the cost of the EU.
1. Introduction ‘Tedious were it to recount, how among neighbors was scarce found any that showed fellowfeeling for another, how kinsfolk held aloof, and never met, or but rarely; enough that this sore afiction entered so deep into the minds of men and women, that in the horror thereof brother was forsaken by brother, nephew by uncle, brother by sister, and oftentimes husband by wife; nay, what is more, and scarcely to be believed, fathers and mothers were found to abandon their own children, untended, unvisited, to their fate, as if they had been strangers.’
In this quotation from The Decameron, Boccaccio in his frightening description of the state of the stricken city, Florence, during the times of the extremely deadly pestilence rampaging in the 14th century, painfully explains how solidarity among the inhabitants had completely vanished; everyone thinking of only his or herself under the most sorrowful conditions. The aws of human nature during crises such as pandemics is thus not something new, as it instinctively prescribes a large amount of selshness to rule. Somehow conrming such a depiction, we have in Europe during the present COVID19 crisis, on the one hand, for instance, already witnessed individuals’ hoarding of food and thefts from hospitals of essential protective equipment. At the same time, we
However, the picture that Boccaccio describes may well be too bleak to compare to the current situation, as we on the other hand also see how individuals both physically and mentally support each other: from ‘Corona’ couriers in New York and free grocery delivery services in Europe; to citizens standing at their balconies to applaud those risking their health to help others, displaying banners with expressions of thanks, or giving free concerts from their homes. Within the
1. Professor of EU Law, University of Copenhagen, and Professor of EU Single Market Law and Fundamental rights, University of Utrecht, respectively. Developments which have taken place after 23 April 2020 have not been taken into consideration.
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of unity, the cornerstone of European integration; or the ‘pillar of our Union’, according to the letter sent by the President of the
EU we have little by little also, for example, observed how Member States with a higher ICU capacity, particularly Germany, take COVID-19 patients from other Member States, and seen Member States send at least some spare ventilators to those Member States in need thereof. Little by little, we have also witnessed some action taking place at the EU level.
European Council, Mr Charles Michel, to the Italian President, Sergio Mattarella, on 20 March 2020. In consequence, solidarity is viewed as a special and important value and virtue of what Europe – including both
Solidarity – and the claimed presence thereof - has therefore now become one of the most profound themes presently discussed at all levels in Europe
the EU as such and the individual Member States – is about; something which apparently is viewed as positively distinguishing it from other continents.
Nevertheless, especially at the start of the outburst of the crisis the increase in the preservation of self-interests appeared rather shocking. However, undoubtedly the law can to a large extent compensate for selsh human and state behaviour, and solidarity has long served both as a profound value of and a dominant aim to be pursued by the EU (as expressed in Articles 2 and 3). Thus, criticism of the EU in that regard is indeed quite severe, as solidarity among the Member States has been viewed as a kind of binding glue from the very beginning, playing a fundamental role in dening the identity of the EU. The principle of sincere cooperation, as enshrined in Article 4(3) TEU, and which entails solidarity, to which the Commission refers, constitutes, together with the principle
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Yet, how to transform the general visions of solidarity into concrete action has always been the Achilles heel of the EU, and therefore it is easily an object for criticism. For instance, in recent years the EU has been perceived as appearing quite hopeless in relation to policies requiring a kind of ‘implementation’ of the solidarity principle (in EU asylum policy, for example doing so through an EU system of relocation of asylum seekers throughout the EU, has been particularly difcult if not impossible). In the present COVID-19 crisis, the EU has on-
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The purpose of the following, therefore, is to reect upon the role of EU law in the context of the COVID-19 crisis, ultimately aiming at - in a balanced manner - analysing to what degree solidarity may have been present or lacking, under the assumption that activity/passivity respectively can be considered as indicators thereof (5) In other words, as referred to in the title of this Long Read, it is our intention to analyse to what degree it is detectable that whatever is necessary to support Europeans and the European economy will be done, as has been promised by EU Commission President Ms Ursula von der Leyen (6), and that “… the truth is… that Europe has now become the world’s beating heart of solidarity” (7). More precisely, we will take a bird’s eye view and focus on three of the most pertinent, ultimately interrelated, dimensions: the presence of solidarity with regard to: 1. The health dimension; 2. The economic dimension; and 3. The rule of law dimension. In other words, this choice of focus reects that the handling of the
ce again proven to appear as very fragile in this regard (2). However, if it fails in this regard, Euro-scepticism would be likely to rise further, and the entire project would be severely endangered. Unsurprisingly, solidarity – and the claimed presence thereof - has therefore now become one of the most profound themes presently discussed at all levels in Europe, among others things exposing deep divisions in Europe. Most signicantly, the initially most affected states, Italy and Spain, have accused the much more privileged, northern nations - led by Germany and the Netherlands - of not doing enough (3). Peculiarly, the European institutions, with the European Commission as their frontrunner, keeps on - again and again and in some contrast - to an almost exaggerated degree reassuring everyone that solidarity does indeed prevail. (4)
2. See for instance the Facebook group, “#Eusolidarity Now”, which describes itself as aiming at: ‘a union of people helping one another to face today's challenges’ and states: ‘Invite your friends to this group… let’s show our governments that we want more solidarity now.’ It was established only by the end of March 2020, and on 8 April 2020 it already had 64,897 members. See also this article by Heiko Maas, Federal Minister of Foreign Affairs, and Olaf Scholz, Federal Minister of Finance, ‘A response to the corona crisis in Europe based on solidarity’, published on 6April 2020, in different language versions in Les Echos (France), La Stampa (Italy), El País (Spain), Público (Portugal) and Ta Nea (Greece)), who state that: ‘We EU member states have to act together to this end, in a spirit of European solidarity and with combined forces, in order to strengthen the European Union.’ Finally, it is worth mentioning that Pope Francis on 12 April 2020 (Easter) in his live-streamed speech, rather unusually also pleaded for solidarity within the EU as he said that: ‘Today, the EU nds itself faced with an epochal challenge, on which not only its future but also that of the entire world will depend. Let us not miss the opportunity to demonstrate, once again, solidarity, even by resorting to innovative solutions.’ He also ‘…called for the EU to unite in its response to the outbreak, just as it did after World War II, when the “continent rose thanks to a concrete spirit of solidarity which allowed it to overcome the rivalries of the past”’. 3. See e.g. Katya Adler, Coronavirus pandemic: EU agrees €500bn rescue package, BBC News, 10 April 2020. 4.The European Commission has for example established a webpage entitled: Coronavirus: European Solidarity in action, inter alia stating: ‘Across the European Union, countries, regions and cities are stretching out a helping hand to neighbors, helping those most in need. This is European solidarity in action.’ 5. As a delimitation, we are neither analysing global solidarity, nor acts of solidarity provided from either Member States or the EU to non-Member States. For a general overview of worldwide government responses to the COVID-19, see Oxford COVID-19 Government Response Tracker. 6. See for example the European Commission’s Economy webpage. 7. European Commission, Speech by President von der Leyen at the European Parliament Plenary on the EU coordinated action to combat the coronavirus pandemic and its consequences, 16 April 2020.
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Whereas paragraph 1 of Article 168 TFEU reiterates that a high level of health protection shall be ensured in the denition and implementation of all EU policies and activities, paragraphs 5 and 7 stipulate that harmonisation of national laws to protect and improve human health is excluded, and that management, organisation and delivery of medical care and health services are a matter and responsibility for the Member States. In other words, according to Article 6 TFEU, the protection and improvement of human health belongs to the EU’s supplementary competences. (9)
present crisis essentially takes place in three rather different respects, namely the saving of lives, the saving of economies, and the saving of essential democratic values and rights. Although taking a bird’s eye view, within these three focal points, we selfevidently at times have to limit ourselves to those elements of the most signicant interest. 2. The Health Dimension The most immediate concern of the present crisis is, of course, the protection of people’s health against the impact of COVID19. It is thus not truly surprising that, once the risks of the coronavirus became clear, the EU Member States quite rapidly took all necessary measures to protect the health of their citizens. At rst, they adopted different strategies and measures to contain the spread of the coronavirus, which led many to wonder why there was not a common or at least a more coordinated EU response. The originally poor status of European cooperation to deal with the corona-crisis can to a large extent be explained by the relatively weak legislative powers of the EU in the eld of public health, which appears to make the development of a substantive and targeted approach to COVID-19 difcult. (8)
Meanwhile some Member States closed their borders, others sought to restrict the exportation of protective clothes, face masks and gloves, or to requisition these goods. The fundamental four freedoms, particularly the free movement of goods and persons, constituting the cornerstone of the EU internal market, have been severely restricted. (10) With respect to the free movement of persons, 15 Schengen countries decided
The originally poor status of European cooperation to deal with the coronacrisis can to a large extent be explained by the relatively weak legislative powers of the EU in the field of public health
8. See also the blog by Sybe A. de Vries, ‘How COVID-19 reveals the tensions between the EU’s Single Market and the protection of public health’, Renforce Blog. 9. See also Sybe A. de Vries, ‘Tensions within the Internal Market – The functioning of the Internal Market and the Development of Horizontal and Flanking Policies’, Europa Law Publishing, 2006, pp. 305-307; Kai P. Purnhagen, et al ‘More competences than you knew? The web of health competences for Union action in response to the COVID-19 outbreak’; and Ulla Neergaard, ‘EU Health Care Law in A Constitutional Light: Distribution of Competences, Notions of “Solidarity”, and “Social Europe’’’, in Johan van den Gronden, et al (eds.) Health Care and EU Law, T.M.C. Asser Press/Springer, 2011, pp.19-58. 10. See with regard to the free movement of persons, Sergio Carrera & Ngo Chun Luk, ‘Love Thy Neighbour? Coronavirus politics and their impact on EU freedoms and rule of law in the Schengen Area’, CEPS, 3 April 2020.
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Without really knowing whether the rapid closing of borders would actually work, the instinct of turning inwards and resurge to national egotism (15) is not only legally questionable, (16) but has also in this context put the solidarity principle and thereby the European integration process seriously to the test.
to derogate from the Schengen internal border controls-free area and reintroduce border checks on persons: Austria, Belgium, Czechia, Denmark, Estonia, France, Finland, Germany, Hungary, Lithuania, Norway, Poland, Portugal, Spain and Switzerland. (11) Together with restrictions on various modes of transportation one can but only imagine the impact these measures have had on the free movement of workers and persons within the EU. (12)
Yet Member States have considerable leeway in protecting the health of their citizens within the framework of the internal market, which has been the long-standing case law of the Court of Justice of the European Union. According to one of the classical judgments of the Court, De Peijper (C104/75, paragraph 15), the interest of public health ranks rst amongst the interests mentioned in Article 36 TFEU: ‘Health and life of humans rank rst among the property or interests protected by Article 36 and it is for the Member States, within the limits imposed by the Treaty, to decide what degree of protection they intend to assure […]’. That public health takes a prominent place in EU law is furthermore emphasised by inter alia Article 35 of the EU Charter which states that ‘everyone has a right of access to preventive health care and the right to benet
Furthermore, the European Commission on 16 March 2020 recommended that Member States apply a temporary 30-day coordinated restriction of non-essential travel from third countries into the EU. (13) On 8 April 2020, the European Commission invited Member States and non-EU Schengen countries to extend the temporary restrictions on non-essential travel to the EU until 15 May 2020. (14) These measures, of course, have serious repercussions for third country nationals as well as refugees. There are exceptions for nationals of EU Member States seeking to return home as well as travelers with an essential function or need, like health professions or frontier workers.
11. Sergio Carrera & Ngo Chun Luk, ‘Love thy neighbour? Coronavirus politics and their impact on EU freedoms and rule of law in the Schengen Area’, CEPS, 3 April 2020, p. 2. 12. Ibid. 13. European Commission, Communication from the Commission to the European Parliament, the European Council and the Council. COVID-19: Temporary Restriction on Non-Essential Travel to the EU, COM(2020) 115 nal. 14. European Commission, Coronavirus: Commission invites Member States to prolong restriction on non-essential travel to the EU until 15 May, Press Release, 8 April 2020. 15. Stefan Lehne, How the Coronavirus Is Testing the EU’s Resilience, EU Observer, 25 March 2020. 16. Sergio Carrera & Ngo Chun Luk, ‘Love thy neighbour? Coronavirus politics and their impact on EU freedoms and rule of law in the Schengen Area’, CEPS, 3 April 2020.
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from medical treatment under the conditions established by national laws and practices’. Furthermore, it states that ‘a high level of health protection shall be ensured in the denition and implementation of all Union policies and activities’. This ‘public health integration requirement’ can also be found in Articles 168(1) TFEU, which constitutes the legal basis for health measures, and Article 114(3) TFEU, which is the internal market legal basis.
Member States have considerable leeway in protecting the health of their citizens within the framework of the internal market
Importantly, Article 36 TFEU constitutes the Treaty exception for national measures restricting the free movement of goods, which are prohibited on the basis of the fundamental internal market provisions of Articles 34 or 35 TFEU. Article 35 TFEU prohibits export restrictions by Member States but the Court of Justice in its case law has provided for a more restrictive interpretation than Article 34 TFEU on imports. National measures which have actual effects that are ‘none the less greater on goods leaving the market of the exporting Member State than on the marketing of goods in the domestic market of the Member State’ are prohibited by Article 35 TFEU (Gysbrechts, C-205/07, paragraph 43). This appears to be the case where Member States - for reasons of security of supply - prohibit or restrict the exportation of essential protective equipment and medical instruments like ventilators. (17)
Despite the importance of the public health exception in Article 36 TFEU and the restrictive reading of Article 35 TFEU, Member States do not have a ‘carte blanche’ in shielding their national market with a view to protecting the health of its own population. There are conditions that need to be fullled to prevent the internal market being overly disrupted – although these conditions in times of crisis can be considerably relaxed – and that the health and well-being of all citizens is endangered at the same time. The European Commission as guardian of the Treaties needs to act as a tightrope walker by engaging in a dialogue with Member States and businesses (industry) and by urging mutual solidarity (18). It has meanwhile sought to reinforce national restrictive measures for the benet of pu17. See also Wouter Devroe & Nina Colpaert, ‘Corona and EU economic law: Free movement of goods’, CoRe blog. 18. European Commission, European Coordinated Response on Coronavirus: Questions and Answers, 13 March 2020.
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ter alia, for health professions so that the brain drain and export of nurses from some Member States can be curtailed and by facilitating the free movement of doctors, nurses and other health professionals (22). Other, internal market related, measures concern the setting-up of a voluntary joint public procurement scheme between Member States for the purchase of medical equipment (23). Interestingly, the President’s Conclusions of the European Council’s video conference held on 23 April 2020 also mention the production of essential goods in Europe as of utmost importance. It would be interesting to see how this policy should be made concrete in different Member States and in an internal market without internal borders (24).
blic health on the one hand and mitigate their effects on free movement where possible on the other. Examples are border management measures to protect health and to ensure the availability of goods and essential services at the same time, as well as guidelines on so-called ‘green lanes’ to ensure speedy and continuous ow of goods across the EU and to avoid bottlenecks as key internal border crossing points. (19) Nevertheless, the COVID-19 crisis reveals that the project of the internal market, which is one of the four key areas dened by the European Council in its response to the pandemic (20) and which even Euro-sceptic politicians still seem to cherish, and its foundational principles are much less solid and more fragile than we previously thought. The picture is, however, not as bleak as Boccacio’s grim description of Florence. Because the internal market also constitutes the avenue, the breeding ground for the EU and its Member States to address at least part of the health crisis and economic disruption, despite the limited powers of the EU in the eld of public health on the basis of Article 168 TFEU. (21) Along with the measures mentioned above, proposals have been made to boost the resilience of Europe by converging fair working conditions in Europe, in-
20. Conclusions of the President of the European Council following the video conference of the members of the European Council, 23 April 2020. 21. Sybe A. de Vries, ‘Tensions within the Internal Market – The functioning of the Internal Market and the development of Horizontal and Flanking Policies’, Europa Law Publishing, 2006; and Kai P. Purnhagen, et al, ‘More competences than you knew? The web of health competences for Union action in response to the COVID-19 outbreak’. 22. Compare e.g. Claire Dhéret & Simona Guagliardo, ‘Boosting Europe’s resilience with better health systems: Lessons from the COVID-19 crisis’, EPC. 23. European Commission’s Coronavirus response webpage; and European Commission, Communication from the Commission. Guidance from the European Commission on using the public procurement framework in the emergency situation related to the COVID-19 crisis’, 2020/C 108 I/01. See also Benjamin Fox, Why search for a role you’ve already found?, Euractiv, 15 April 2020. 24. Conclusions of the President of the European Council following the video conference of the members of the European Council, 23 April 2020.
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vel due to the lockdowns of societies and the nancing of the heavily increased costs in the health sectors, is also of huge importance. The responses to this challenge have already taken place both at the national and the EU levels. In what follows, these two aspects will therefore be considered.
In conclusion, despite the different containment strategies of the Member States with their unprecedented disruptive effects on the functioning of the EU Single Market, in the course of the corona-crisis we can increasingly discern acts of solidarity within the EU. The Commission and EU legislators have furthermore adopted a whole range of measures which seek to endorse Member States’ efforts to protect the health of their citizens. The EU Single Market may thereby constitute a perfect breeding ground to, albeit within limits, strengthen the face of health of the EU.
Regarding the responses at the Member State-level, these have most signicantly taken place in the shape of different national aid programmes aiming at preserving jobs and undertakings and eventually facilitating a sound economy of the Member State in ques-
tion. Already by now, impressive sums of money have in many Member States been channeled into the systems either as loans or as direct aid, however in principle largely of relevance only to the Member State in question itself (rather than serving as transnational solidarity shaped as direct help to other Member States) (25).
3. The Economic Dimension Beyond any doubt, the saving of lives currently is – and must be - the absolute top priority. However, the observed wounded state of the European economies, which is already considered being at a tremendous le-
25. For an overview of national measures by country: European Commission, Policy measures taken against the spread and impact of the coronavirus, 6 April 2020. Also, according to Council of the EU: ‘Report on the comprehensive economic policy response to the COVID-19 pandemic’, Press Release 223/20, 9 April 2020, Paras. 5-6: ‘To date, the aggregate amount of Member States’ discretionary scal measures amounts to 3% of EU GDP, a threefold increase since 16 March, on top of the signicant impact of automatic stabilisers. Furthermore, Member States have so far committed to provide liquidity support for sectors facing disruptions and companies facing liquidity shortages, consisting of public guarantee schemes and deferred tax payments, which are now estimated at 16% of EU GDP, up from 10% on 16 March.’
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or tax advantages; 2. Aid in the form of guarantees on loans; 3. Aid in the form of subsidised interest rates for loans; 4. Aid in the form of guarantees and loans channelled through credit institutions or other nancial institutions; and 5. Short-term export credit insurance (28).
Elements in such aid programmes are, in principle, often in need of approval by the EU, namely under the regime of State aid law. In that regard, the European Commission has seemingly worked quickly and exibly to decide whether such concrete national measures constitute lawful state aid measures or not. One tool of relevance is Article 107(2)(b) TFEU, which is applicable, when Member States need to be able to compensate specic companies or specic sectors for the damages directly caused by exceptional occurrences, precisely as currently being witnessed. The rst approval took place on 12 March 2020, when the European Commission announced that it, within 24 hours of notication, had greenlighted a Danish aid scheme of €12 million to compensate organisers for the damage suffered due to the cancellation of large events or of events targeted at risk groups due to the COVID-19 outbreak (26).
Thus, the general exibility demonstrated and the speed in the handling of cases, which so far has been the response to the current emergency situation with regard to State aid, appears to be rather appropriate. The responses at the EU level to the economic crisis are, after all, of much larger importance for the analytical perspective taken here. Demonstrations of solidarity in that context is - at the end of the day - a matter of more than an expression of emotional sympathy, as it essentially is a matter of a willingness to transfer money from some Member States to others. In the context of the Economic and Monetary Union (EMU) and the problems it has previously faced, among others due to a lack of solidarity among Eurozone countries, the famous, Nobel prizewinning economist, Stiglitz, has crucially pointed out that:
Also, a Temporary Framework for approval had been adopted by the European Commission on 19 March 2020 to enable Member States to use the full exibility foreseen under State aid rules to support their economy and help overcome the extremely difcult situation triggered by the coronavirus outbreak (27). It is based on Article 107(3)(b) TFEU. It distinguishes between the following ve categories of national aid: 1. Aid in form of direct grants, repayable advances
‘When a group of countries shares a common currency, success requires more than just good institutions … For reforms to work, decisions have to be made, and those decisions will reect the understandings and values of the decision-makers. There
26. Commission grants its rst approval of State aid to compensate damage caused by COVID-19 outbreak, EU Law Live, 13 March 2020. 27. European Commission, Communication from the Commission. Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, C(2020) 1863, 19 March 2020 (amended on 3 April 2020). 28. See further e.g. Andrea Biondi, ‘Op-Ed: “State Aid in the Time of COVID-19’, EU Law Live, 25 March 2020; Alfonso Lamadrid de Pablo & José Luis Buendía, ‘A Moment of Truth for the EU: A Proposal for a State Aid Solidarity Fund’, EU Law Live, 1 April 2020; and José Luis Buendía & Angela Dovalo, ‘State Aid Versus COVID-19. The Commission Adopts a Temporary Framework’, European State Aid Law Quarterly, 2020, pp. 3-7.
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seemingly been manifold, among other things including questions such as whether the help should be provided within the EU, namely by involving all Member States, or only taking place within the Eurozone; whether the Member States in need of economic aid should receive it unconditionally as grants or rather, for example, in the shape of loans with conditions attached to them; and whether the idea of ‘Eurobonds’, now in new disguises and often referred to as ‘Coronabonds’ or ‘Recovery bonds’, should be revitalised and realised, which could have the potential to become a construction based on a new version of solidarity (30). In what follows, we will elaborate further on the actual steps already taken or envisaged.
EU Finance Ministers finally reached agreement on a 540 billion euro package to support Member States, companies and workers have to be common understandings and values of the decision-makers of what makes for a successful economy and a minimal level of ‘solidarity’, or social cohesion, where countries that are in a strong position help those that are in need. Today, there is no such understanding, no real sense of social cohesion. Germany says repeatedly that the Eurozone is not a ‘transfer union’ – that is, an economic grouping in which one country transfers resources to another, even temporarily in a time of need.’ (29)
The critique here appears to be widely acknowledged, and in relation to the present COVID-19 crisis the difculties referred to have once again shown their ugly face as the core of the problems. It has appeared to be challenging to reach consensus as to whether solidarity in the sense of explicit obligations of the stronger Member States to help those in need by transfers of economic resources should eventually prevail.
At the absolutely general level, it has (as also referred to in the title of the paper and briey mentioned in Section 1) been pronounced by Commission President von der Leyen, that whatever is necessary to support Europeans and the European economy will be done. (31) She has also expressed that the EU’s next long-term budget should be a key instrument in the recovery plan to confront the huge economic consequences of the COVID-19 crisis, and has in that context made reference to an EU Marshall Plan to be laid under the Multiannual Financial Framework (MFF), the EU’s long-term budget
Despite the opposing views as to the depth of trans-national solidarity, by now certain responses to the crisis have already taken place. The considerations behind them have
29. Joseph E. Stiglitz, ‘The Euro and Its Threat to the Future of Europe’, Penguin Random House, 2016, p. 22. 30. According to Markus K. Brunnermeier, Harold James & Jean-Pierre Landau, ‘The Euro and the Battle of Ideas’, Princeton University Press, 2016, p. 111, it was already during the euro crisis that a debate about Eurobonds emerged: ‘However, the introduction of Eurobonds was not linked with a budgetary transition of power to Brussels. Eurobonds without the transition of budgetary power would have undermined the two-pillar strategy of the Maastricht Treaty and Stability Growth Pact: rst, market discipline through credible enforcement of the no-bailout rule should (1) through interest rate responses provide member states the right incentives to contain public debt levels and (2) further rules to limit budget decit and debt levels.’ These authors make it clear (at p. 224 et seq) that Eurobonds have over the years been proposed in many different forms, but essentially their introduction would include some kind of debt mutualisation with joint liability, by many considered too risky. Simply speaking, the idea could be said to be that the Eurozone-countries would borrow money together, which would then be directed to those countries in need thereof. 31. European Commission, Speech by President von der Leyen at the European Parliament Plenary on the EU coordinated action to combat the coronavirus pandemic and its consequences, 16 April 2020 ..
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ment on a 540 billion euro package to support Member States, companies and workers (37). The press release on the matter uses direct references to solidarity, as it in the introductory part is stated that ‘[w]e are committed to do everything necessary to meet this challenge in a spirit of solidarity’, and in the concluding part it is pronounced that ‘[w]e will act together in solidarity and we will deliver’ (38). The package thus includes, more specically, a massive safety net of 540 billion euros for Eurozone Member States via the ESM (about 2% of the Eurozone’s GDP (240 billion euros) will be available), for companies in all EU Member States through the EIB, and for workers in all EU Member States via the European Commission’s new instrument ‘SURE’ (39).
(32). This has, however, not yet been laid, but
the European Commission is planning to present an updated proposal by the end of April 2020 (33). It is intended to be playing a central role in the economic recovery (34). At the more concrete level, many responses have already been launched; at times under the yoke of challenging negotiations (35). Most signicantly, a critical moment occurred just before Easter. Thus, on 7 April 2020 an important teleconference of the Eurozone nance ministers (the Eurogroup) took place. However, although lasting until the next day, it was on that occasion not possible to reach an agreement on the next economic package (36). The difculties of reaching an agreement could be seen as a sign of the hesitance of some Euro-States to exercise genuine solidarity with and trust in others that were more in need, but not necessarily so. It could also be a demonstration of economic accountability despite the prevailing times of despair and panic.
The European Central Bank has assessed that up to 1.5 trillion euros would be needed this year to tackle the economic crisis
Anyway, on the evening of 9 April 2020, the EU Finance Ministers nally reached agree-
32. See e.g. Beatriz Rios, Von der Leyen: EU budget should be the Marshall plan we lay out together, Euractiv, 2 April 2020. 33. Jorge Valero, Commission to put forward updated MFF by end of April, Euractiv, 7 April 2020. 34. Council of the EU, Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release 223/20, 9 April 2020, para. 20. Also see the Conclusions of the President of the European Council following the video conference of the members of the European Council, 23 April 2020, in which it is emphasised that the MFF will need to be adjusted to deal with the current crisis and its aftermath. 35. For an overview of events, see e.g. the European Commission’s Timeline of EU action. 36. See e.g. Jorge Valero, Eurogroup fails to progress on economic response to pandemic, Euractiv, 8 April 2020 . 37. See e.g. Jorge Valero, Eurogroup agrees on €540 billion corona-package, Euractiv, 10 April 2020, and Council of the EU: Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release 223/20, 9 April 2020. 38. Council of the EU, Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release 223/20, 9 April 2020, paras. 1 and 22. 39. Council of the EU, Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release, 9 April 2020.
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a) Mobilisation of the EU budget and the European Investment Bank to save people’s jobs and to support companies hit by the crisis:
This last-minute package was unsurprisingly received with both compliments and criticism. Under all circumstances, the European Central Bank has assessed that up to 1.5 trillion euros would be needed this year to tackle the economic crisis caused by the pandemic, which is a strong indication that more is needed (as the agreement reached only constitutes one third thereof) (40). It is thus of importance to note that further steps are already being considered. Among these, focus for the leaders seem to be to discuss the recovery plan to relaunch the economy once the pandemic starts receding, and the possibility of reaching agreement as to issuing the abovementioned, politically extremely sensitive ‘Coronabonds’ (41). The intention is then that the European Council takes this work forward (42).
·· The Commission’s SURE instrument, which protects jobs and people at work (‘The Commission put forward Temporary Support to mitigate Unemployment Risks in an Emergency – SURE – to help people keep their job during the crisis. SURE provides funding to Member States of up to €100 billion by covering part of the costs related to the creation or extension of national shorttime work schemes.’) ·· Liquidity measures to help hard-hit SMEs (‘The EIB Group will aim to create an additional €20 billion of investment in small and medium-sized businesses, partly using its own capital and partly backed by the EU budget. The Commission will make available €1 billion in an EU budget guarantee to the European Investment Fund (EIF), so it can provide liquidity to SMEs, mobilising €8 billion in all to help at least 100,000 companies.’) (44)
By now, then, many different responses have already been launched. According to the European Commission, as announced in the beginning of April 2020, the following economic measures, besides State aid, are the essential ones (43):
40. See e.g. Francesco Guarascio, ECB urges measures worth 1.5 trillion euros this year to tackle virus crisis – sources, Reuters, 8 April 2020. 41. Jorge Valero, Eurogroup agrees on €540 billion corona-package, Euractiv, 10 April 2020. It is regarding these bonds explained by Daniel Gros, ‘EU solidarity in exceptional times. Corona transfers instead of corona bonds’, CEPS in Brief, that: ‘The simplest way would be for the EU to issue “eurobonds” and then make a large transfer to Italy or other countries in need. But that is not possible because the Treaty stipulates (Art. 310.1) that the EU budget has to be in balance. This is why a number of proposals have been made to nd a way around this prohibition of a decit via guarantee schemes, sometimes involving the ESM.’ Also see e.g. Matthias Goldmann, The Case for Corona Bonds. A Proposal by a group of European Lawyers, Verfassungsblog, 5 April 2020, or European Finance Minister Ponder Coronabonds, The Economist, 9 April 2020. 42. European Council, Statement by the President of the European Council Charles Michel following the agreement of the Eurogroup, Press Release, 10 April 2020. 43. European Commission, COVID-19. EU Coronavirus Response, 2 April 2020. For an overview, see also Council of the EU, Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release, 9 April 2020. 44. According to the European Commission: ‘This will go towards bridging loans, credit holidays and other measures designed to alleviate liquidity and working capital constraints for SMEs and mid-caps. The European Investment Bank Group, including the European Investment Fund, which specialises in support for small and medium-sized enterprises, will work through nancial intermediaries in the Member States and in partnership with national promotional banks. The proposed nancing package consists of: Dedicated guarantee schemes to banks based on existing programmes for immediate deployment, mobilising up to €20 billion of nancing; Dedicated liquidity lines to banks to ensure additional working capital support for small and medium-sized enterprises and mid-caps of €10 billion; Dedicated asset-backed securities purchasing programmes to allow banks to transfer risk on portfolios of small and medium-sized enterprise loans, mobilising another €10 billion of support.’
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to help national governments nancially support healthcare systems and businesses, and to keep people in employment during the crisis.’ (45)
b) The Coronavirus Response Investment Initiative (‘The Commission tabled an investment initiative to provide Member States with immediate liquidity. It consists of unspent cohesion policy funds. The initiative also includes a 100% nancing rate by the EU for measures to ght the crisis, so Member States don’t have to frontload money. New methods under the Fund for European Aid to the Most Deprived to reach the most vulnerable, such as home deliveries and the use of electronic vouchers to reduce the risk of contamination. Flexibility to redirect funding between programmes and regions to fund corona-related actions. Support to shermen and farmers.’)
e) The European Central Bank’s response to coronavirus emergency (‘The Commission’s economic measures will complement the European Central Bank’s €750 billion Pandemic Emergency Purchase Programme of private and public securities during the crisis, in addition to the €120 billion programme decided earlier.’) (46)
c) EU Solidarity Fund (‘The EU Solidarity Fund can provide support to Member States affected by public health crises like the one caused by the coronavirus.’)
f) Screening of foreign direct investment (‘On 25 March, the Commission issued guidelines to help Member States screen foreign direct investments and acquisitions of control or inuence. The aim is to protect critical European assets and technology in the current crisis.’)
d) Flexibility of the European scal framework (‘The European Commission has triggered the 'escape clause' to allow exceptional scal support. This will allow applying the maximum exibility to our budgetary rules
It is nally worth mentioning that on 17 April 2020, the European Parliament voted in favour of a rapid implementation of a number of Commission proposals to tackle the coronavirus crisis (47). Also, at the much
45. This step is intended to enable national governments to better support the national economies as the budgetary rules have been signicantly relaxed. In other words, the activation should take place, so as to enable ‘a coordinated and orderly temporary deviation from the normal requirements for all Member States in a situation of generalised crisis caused by a severe economic downturn either in the Euro Area or the EU as a whole;, cf. Dionyssis G. Dimitrakopoulos & Georgette Lalis, COVID-19: how has the EU reacted so far?, LSE Blog, 3 April 2020. As also stated by these authors, it is thus intended to give much more room to pursue scal policy measures commensurate with the scale of the crisis. Also see Council of the EU, Statement of EU ministers of nance on the Stability and Growth Pact in light of the COVID-19 crisis, Press Release, 23 March 2020; and European Commission, Coronavirus: Commission proposes to activate scal framework’s general escape clause to respond to pandemic, Press Release, 20 March 2020. Furthermore, see Eurogroup, Report on the comprehensive economic policy response to the COVID-19 pandemic, Press Release, 9 April 2020, para. 8, where it is stated: ‘On 23 March, Ministers of Finance agreed with the assessment of the Commission that the conditions for the use of the general escape clause of the EU scal framework, a severe economic downturn in the euro area or the Union as a whole, are fullled. This offers the exibility necessary to the national budgets to support the economy and to respond in a coordinated manner to the impact of the COVID-19 pandemic. Overall scal guidance will be provided within this framework and as part of a streamlined European Semester exercise.’ 46. Also, see the European Central Bank’s press release, ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP), 18 March 2020; and Dionyssis G. Dimitrakopoulos & Georgette Lalis, COVID-19: how has the EU reacted so far?, LSE Blog, 3 April 2020. 47. European Commission, Coronavirus: Commission welcomes Parliament’s quick green light for proposed new resources to protect lives and livelihoods, Press Release, 17 April 2020. It is stated that: ‘The votes today allow for: an unprecedented redirection of cohesion policy funds to address the effects of the public health crisis (CRII+ Initiative); an additional €3.08 billion of EU funds for healthcare (the Emergency Support Instrument) and emergency medical capacity (rescEU); additional funding for the European Centre for Disease Prevention and Control; and a number of other support measures. The Parliament's green light follows the swift approval by EU Member States in the Council for the majority of these initiatives; the CRII+ Initiative and the postponing of the Medical Devices Regulation still require approval by the Council.’
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The Eurogroup in an inclusive format will continue to closely monitor the economic situation and prepare the ground for a robust recovery.
awaited videoconference of the members of the European Council, which took place on 23 April 2020, the following main elements were decided upon: (48)
We remain committed to giving the necessary impetus to work on the recovery fund as well as the MFF, so that a balanced agreement on both can be found as soon as possible.’ (49)
‘We welcomed the Joint Roadmap for Recovery. It sets out some important principles, such as solidarity, cohesion and convergence. It further denes four key areas for action: a fully functioning Single Market, an unprecedented investment effort, acting globally, and a functioning system of governance.
Thereby, the abovementioned agreement reached by the Eurogroup on 9 April 2020 was, importantly, endorsed. However, the exact future of a possible recovery fund is still unsettled and the most crucial issues are still left unsolved in that regard. Therefore, it is still too early to assess it as to how it may constitute an expression of solidarity, but it seems to be of signicance that it is, after all, stated that there is agreement of working towards its establishment. Under all circumstances, the EU responses in the economic area are so far , in principle, many and manifold, but many more - and especially the recovery fund – are essential to add (50). In general, the EU responses in total are nevertheless more than simply an expression of solidarity, namely in fact a demonstration of a certain degree of genuine transnational solidarity.
It is of utmost importance to increase the strategic autonomy of the Union and produce essential goods in Europe. Following the meeting of the Eurogroup in an inclusive format on 9 April 2020, we endorsed the agreement on three important safety nets for workers, businesses and sovereigns, amounting to a package worth 540 billion euros. We called for the package to be operational by 1 June 2020. We also agreed to work towards establishing a recovery fund, which is needed and urgent. This fund shall be of a sufcient magnitude, targeted towards the sectors and geographical parts of Europe most affected, and be dedicated to dealing with this unprecedented crisis. We have therefore tasked the Commission to analyse the exact needs and to urgently come up with a proposal that is commensurate with the challenge we are facing.
In sum, the many reactions both nationally and at the EU level ultimately to save the European economies from an immediate economic disaster already appear by now to be quite impressive and quite in contrast to anything ever experienced before. The national
The Commission proposal should clarify the link with the MFF, which in any event will need to be adjusted to deal with the current crisis and its aftermath.
48. Conclusions of the President of the European Council following the video conference of the members of the European Council, 23 April 2020 <consilium.europa.eu/en/press/press-releases/2020/04/23/conclusions-by-president-charles-michel-following-the-video-conference-withmembers-of-the-european-council-on-23-april-2020/>. 49. Regarding the mentioned Joint European Roadmap for Recovery, see the Council’s press release. 50. European Commission’s Economy webpage.
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sufciently quickly, are enough and are the best of all available choices is still too early to assess, but a spirit of solidarity with respect to the economic dimension is denitely detectable.
responses are, however, in general obviously only of interest internally in a given Member State and thus do not serve as a demonstration of transnational solidarity, but it is still of interest here that the European Commission has reacted very quickly and exibly within the area of State aid law. Also worth stressing is that certain limitations in the room for manoeuvre at the EU level are caused by an unwillingness of some Member States to transfer the necessary competences – as well as money (51). However, whether the initiatives were initiated
4. The Rule of Law Dimension As Professor of Political Science and Law, R. Daniel Kelemen, has tweeted: “The pandemic will eventually end; the economy will eventually recover. But democracy, once lost, may never come back. And we’re
51. Fundamentally, the design with regard to the distribution of competences contains strong tensions as monetary policy for the Eurozone Member States is the exclusive competence of the EU, whereas the national economic policies can only be coordinated by the EU, as these as a point of departure are in principle the responsibility of the Member States.
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since COVID-19 has spread over Europe. The containment measures have had a huge impact on the daily life of EU citizens and their right to movement (54). Most severe have been the measures impacting the elderly, who have to stay in their homes or are conned to care homes, and may not receive visitors. Furthermore, national parliaments have reduced the number of their meetings as well as the number of parliamentarians allowed in the parliamentary premises. Courts have been closed down for most hearings. And most signicantly, in an increasing number of states across the globe and the EU, governments have been granted emergency powers to address the corona-crisis (55) and combat COVID-19, which, as is the case in Hungary, may even last for an indenite period of time (56). With respect to these emergency powers the European Commission, through a statement by its President, on the one hand recognises the need for necessary tools to act rapidly and effectively to protect the health of citizens, but on the other hand also emphasises the fundamental values and principles that cannot be set aside just like that. This is particularly so where the freedom of the media and freedom of expression are undermined and measures are not limited, necessary or strictly proportionate. (57)
much closer to losing our democracy than many people realize.” (52) The sad relevance of this reection is that legal steps in many Member States have been taken in the shadow of the COVID-19 crisis, which challenge the prevailing rule-of-law ideals in Europe. According to Article 2 TEU, the EU is, inter alia, founded on the values for democracy, the rule of law and fundamental rights. In a number of pivotal judgments the Court of Justice of the European Union has emphasised that Member States under the principle of loyal cooperation, of which solidarity is a concrete expression, have the obligation to comply with the value of the rule of law as enshrined in Article 2 TEU. In the ASJP case, for instance, the CJEU held that Article 19 TEU ‘gives concrete expression to the value of the rule of law’ enshrined in Article 2 TEU. This latter provision directly produces obligations for Member States further to the principle of sincere cooperation as enshrined in Article 4(3) TEU. (53) But fundamental rights such as the right to move freely, the right of equal access to health services, the right of respect for private life, the right to family life, the freedom of assembly and of association, data protection (apps controlling the movements of citizens), and so on have been severely limited
52. R. Daniel Kelemen: twitter.com/rdanielkelemen/status/1248591730502504448> (last accessed on 20 April 2020). 53. Associação Sindical dos Juízes Portugueses, C-64/16, para 34; see also Commission v Poland, C-619/18. 54. See also Joint European Roadmap towards lifting COVID-19 containment measures. 55. See in general: Christian Bjornskov & Stefan Voigt, The State of Emergency Virus, Verfassungsblog, 19 April 2020. See with regard to, for instance, Sweden: Ester Herlin-Karnell, Corona and the Absence of a Real Constitutional Debate in Sweden, Verfassungsblog, 10 April 2020. 56. See also Anna Katharina Mangold, How Corona Aggravates the Crises of the European Union and Threatens Its Existence. Call for European Democratic Solidarity, Verfassungsblog, 6 April 2020. See also Jennifer Rankin, ‘Hungary's emergency law incompatible with being in EU’, say MEPs group, The Guardian, 31 March 2020. 57. European Commission, Statement by President von der Leyen on emergency measures in Member States, 31 March 2020.
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As a matter of fact, the presumed conict To closely monitor the situation, as the Eurobetween the protection of public health on pean Commission says it does, will in the the one hand and other fundamental rights end not at all be sufcient. Strikingly, the Euand public interests on the other is an apparopean Commission avoids mentioning sperent contradiction. If we take the WHO’s decic Member States, particularly Hungary, nition of public health as our starting point, and nor did the 13 Member States name it in which stipulates ‘health is a state of complea joint letter expressing their concern about te physical, mental and social well-being the impact of emergency measures on the ruand not merely the absence of disease or inle of law (58). Once the COVID-19 crisis has rmity’, the protection of the rule of law and overcome its peak, we will have to wait and fundamental rights see whether the legal should be important vatools, including the Artilues in the ght against cle 7 TEU procedure, or Individual Member States call in COVID-19 as well. nancial measures will tech companies to ask directly and can be used, and are for data, with little public clarity Other fundamental in any case sufcient to on what exactly is being provided rights-concerns have enforce democracy and been raised about the rule of law values as enspossible use of apps, hrined by Article 2 TEU which in the exchange of data, track the (59). Meanwhile the Secretary General of the spread of the virus, ultimately with a view to Council of Europe, Marija Pejčinović Buunderstand its course and to contain it. Sorić, presented a toolkit for respecting human me individual Member States call in tech rights, democracy and the rule of law during companies to ask directly for data, with little the COVID-19 crisis (60). But the President public clarity on what exactly is being proof the European Council’s conclusions fovided. Some governments even rushed out llowing the video conference on 23 April do apps that apply individual-level location not refer to the Rule of Law or fundamental tracking to enforce quarantine measures rights’ aspects of the Member States’ res(61). Despite their potentially positive efponse to COVID-19 at all. The ongoing weafects, using these apps may constitute imkening of the Rule of Law in some EU Memportant drawbacks, particularly where the ber States will ultimately undermine the key protection of personal data is concerned. An principles of solidarity and cohesion in the app is not a ‘wand’, which could combat an EU. epidemic just like that, as data may not al-
58. Statement by Belgium, Bulgaria, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Portugal, Romania, Spain, Sweden, on the Dutch Government’s website, 1 April 2020. 59. See with regard to the situation in Hungary in particular Kees Cath, ‘Not letting the COVID-19 crisis go to waste, ensuring the effective enforcement of the European value of the rule of law in Hungary during times of Corona’, Renforce blog, forthcoming. 60. Council of Europe, Coronavirus: guidance to governments on respecting human rights, democracy and the rule of law, 8 April 2020. 61. Natasha Lomas, Call for Common EU approach to apps and data to ght COVID-19 and protect citizens’ rights, TechCrunch, 8 April 2020.
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of the Rule of Law in a number of Member States is further reinforced through the emergency measures, but must be put to a halt as part of the exit strategy and lifting of the containment measures. Furthermore, the principle of loyal cooperation requires Member States to nd a balanced approach between different, conicting fundamental rights. The relatively strong EU data protection regime is crucial here.
ways be reliable and conclusions may well be wrong (62). Important legal safeguards should be introduced and scientic reliability should be guaranteed with a view to protect the value of the rule of law. Meanwhile the European Commission published a recommendation on 8 April 2020 on ‘a common Union toolbox for the use of technology and data to combat and exit from the COVID-19 crisis, in particular concerning mobile applications and the use of anonymised mobile data’ (63). According to the recommendation, the European Commission’s approach aims ‘to uphold the integrity of the single market and protect fundamental rights and freedoms, particularly the rights to privacy and protection of personal data’. Its purpose is to set up a process for developing a common approach, such as a Toolbox, to use digital means to address the crisis. But throughout the recommendation much emphasis is laid on justication and proportionality to address data protection and privacy concerns. Also here, Member States are under the obligation to cooperate loyally and to show solidarity in nding an approach that balances health protection, free movement and other fundamental rights, like the protection of personal data and privacy.
5. Conclusions To conclude – inevitably at this stage only on a preliminary basis - many minds are currently evaluating the ability of different models of society to cope with the crisis. In that ‘competition’, the citizens in rich and sophisticated welfare states appear to be the winners - all parameters included - as they are living in the most responsible and safe societies, in which solidarity internally is present through law almost in the tiniest details, including universal health care systems, social safety nets and help packages for economic actors, and where democratic guarantees and the respect of fundamental rights are capable of surviving. We would, however, also have a lot of hope in the EU as a model of society, as it has, after all, within the prevailing limits done quite well already. The reactions were at rst far too slow, which had extremely tragic consequences in some of the Member States, and could have been avoided. In fact, we are all forever left with terrifying images of the
So, the COVID-19 crisis causes severe challenges for the Rule of Law and fundamental rights of EU citizens, and thereby ultimately also for the key EU principles of loyal cooperation and solidarity. The backsliding
62. Maxim Februari, ‘Gruwelijk misverstand: ‘privacy’ is het punt niet’, NRC Handelsblad, 12 April 2020. 63. European Commission, Commission Recommendation on a common Union toolbox for the use of technology and data to combat and exit from the COVID-19 crisis, in particular concerning mobile applications and the use of anonymised mobility data, 8 April 2020, C(2020) 2296 nal.
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ge challenges prevailing, we would as our nal statement simply refer to the following words of Albert Camus in ‘The Plague’ as a request to all of us: ‘[W]e should go forward, groping our way through the darkness, stumbling perhaps at times, and try to do what good lay in our power.’
times when COVID-19 arrived in Northern Italy, and of the despair and far too many deaths that followed (64). Later, the reactions came little by little and often in a piecemeal manner, and were severely troubled by certain legal powers likely to be far too limited for the needs as well as the existence of rather opposing views as to the way forward. Nevertheless, to us it does not seem fair to say that solidarity in the shape of action is not there at all. Some of the explanation, as it has been explained, is to be found in the fact that Member States have formerly not been willing to transfer the necessary competences. That framework will undoubtedly eventually have to be reconsidered, but would often require fundamental Treaty amendments. However, we must all learn, being as we are in a kind of a social experiment - constituting probably the largest challenge to the EU since its foundation that no one has ever experienced before, where human wisdom, responsibility and solidarity is to be so strongly called for. Improvements are to be expected, as there still is a long road ahead of us, but it did not after all begin too badly considering the frightening and almost paralysing circumstances at the time of the outbreak of the pandemics. However, only time will tell whether the steps taken are sufcient. Despite much undergoing signicant change and hu-
64. Accordingly, the EU offered Italy an apology; see European Commission, Speech by President von der Leyen at the European Parliament Plenary on the EU coordinated action to combat the coronavirus pandemic and its consequences, 16 April 2020 , in which it was said: ‘You cannot overcome a pandemic of this speed or this scale without the truth. The truth about everything: the numbers, the science, the outlook – but also about our own actions. Yes, it is true that no one was really ready for this. It is also true that too many were not there on time when Italy needed a helping hand at the very beginning. And yes, for that, it is right that Europe as a whole offers a heartfelt apology. But saying sorry only counts for something if it changes behaviour. The truth is that it did not take long before everyone realised that we must protect each other to protect ourselves.’ Also see the regret expressed by President of the European Council, Mr Charles Michel, voicing “…that Europe’s way of working, also evident during the coronavirus crisis, is ‘too slow’ and called for more solidarity with countries that have been hard-hit by the pandemic, like Italy and Spain.” See e.g. Michel: EU’s way of working is ‘too slow”, Euractiv, 20 April 2020.
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News Highlights Week 18-25 April 2020 Appointment of Allan Rosas as Chair of the EU panel assessing judicial appointments to the CJEU Monday 20 April
New President of the European Court of Human Rights Monday 20 April
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Robert Spano, the Judge in respect of Iceland, was elected as the European Court of Human Rights’ (ECtHR) new President. He will be taking over from LinosAlexandre Sicilianos, Judge in respect of Greece, on 18 May 2020.
Ofcial publication was made of Council Decision 2020/539 of 15 April 2020. By this decision, and following the initiative of the President of the Court of Justice of 6 March 2020, former long-term Finnish member of the Court of Justice Allan Rosas was appointed Chair of the Article 255 panel for the remainder of the previous Chair’s term of ofce until 28 February 2022.
Europe’s environmental footprints exceed several safe limits, according to EU and Swiss environmental agencies
Overview of policy measures taken in response to COVID-19: European Systemic Risk Board Monday 20 April
Monday 20 April
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Pending action against non-renewal of chlorpyrifos-methyl as an active substance authorised for the placing of plant protection products on the market
Commission’s Notice on the application of EU rules on maximum vapour pressure for petrol in the COVID-19 crisis
Monday 20 April
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Ofcial publication was made of the action for annulment (T-77/20) brought against the Commission before the General Court by Ascenza Agro and Afrasa, two companies seeking the annulment of Commission Implementing Regulation 2020/17 concerning the nonrenewal of the approval of the active substance chlorpyrifos-methyl for the placing of plant protection products on the market.
Ofcial publication was made of a Commission Notice on the application of Article 3 of the Fuel Quality Directive 98/70 with regard to the maximum vapour pressure for petrol, in relation to the measures to be adopted to handle the unforeseen stocks of petrol resulting from COVID-19 lockdown measures. The Commission also invited Member States to submit information on petrol stocks by 15 May 2020.
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The European Environment Agency and the Swiss Federal Ofce for the Environment published a joint report exploring key questions related to Europe’s long-term sustainability goals and concluding that Europe is not yet living within its share of the global safe operating space.
Information on the policy measures taken in response to COVID-19 by a wide variety of actors – Member States, the EU institutions, and national authorities – was published by the European Systemic Risk Board.
Monday 20 April
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Commission’s ban of halogenated flame retardants in dispute before the General Court
ECtHR’s President Statement on challenges posed to human rights protection by COVID-19
Monday 20 April
Tuesday 21 April
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Ofcial publication was made of the application in BSEF v Commission (T-113/20), an action for annulment concerning Commission Regulation 2019/2021 laying down ecodesign requirements for electronic displays pursuant to Directive 2009/125, insofar as it bans halogenated ame retardants.
Ofcial publication was made of the application in BSEF v Commission (T-113/20), an action for annulment concerning Commission Regulation 2019/2021 laying down ecodesign requirements for electronic displays pursuant to Directive 2009/125, insofar as it bans halogenated ame retardants.
EU Budget opened up to fight COVID19: amending Decisions published
Global Report on Food Crises: EU and other organisations warn of impact of COVID-19
Tuesday 21 April
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Wednesday 22 April
Three EU budget Decisions, made specically to free up funds to tackle the COVID-19 pandemic, were published in the Ofcial Journal. These include two Decisions on the ‘Flexibility Instrument’ and a third on the mobilisation of the ‘Contingency Margin’ 2020.
The Global Network Against Food Crisis launched in 2016 by the EU, the Food and Agriculture Organization, and the World Food Programme and facilitated by the Food Security Information Network published its fourth global report on food crises in 2019. It is the result of consensus and analysis involving 16 international humanitarian and development partners, including the EU.
Coronavirus Response Investment Initiative Plus adopted Wednesday 22 April
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Commission approves new Italian State aid schemes for the agricultural, forestry, fishery and aquaculture sectors to face COVID-19 crisis
The Council of the EU gave its approval and therefore made possible the adoption of a Regulation providing exceptional exibility for the use of the European Structural and Investments Funds in response to the COVID19 outbreak. The measure, known as ‘Coronavirus Response Investment Initiative Plus’ (CRII+), was greenlighted by the Council by written procedure, less than three weeks after the European Commission put forward the proposal, and following the European Parliament’s approval on 17 April.
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Wednesday 22 April
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The European Commission approved two State aid schemes notied by Italy and by the Region of Friuli Venezia Giulia in the agricultural, forestry, and shery sectors in the context of the COVID-19 crisis. The nationwide scheme also covers the aquaculture sector. Both schemes were approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020 to support the economy in the context of the COVID-19 outbreak, as amended on 3 April 2020.
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Agri-food sector: Commission announces exceptional COVID-19 support Wednesday 22 April
Fishery and aquaculture sector: Council adopts COVID-19 rules to help fishermen
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Wednesday 22 April
A package of measures in the face of the health crisis caused by the COVID-19 pandemic was announced by the European Commission, for private storage aid (PSA) in the dairy and meat sectors; the authorisation of self-organisation market measures by operators in hard hit sectors and exibility in fruits and vegetables, wine; and some other market support programmes.
Amendments to both the European Maritime and Fisheries Fund Regulation and Common Market Organisation Regulation were adopted by the Council (further to a vote by written procedure) to mitigate the impact of the COVID-19 pandemic on the shery and aquaculture sector.
General Court to rule on countervailing duty on imports of biodiesel originating in Indonesia Wednesday 22 April
Court of Justice extends the scope of anti-discrimination in employment and allows enforcement even in the absence of an identifiable victim
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Thursday 23 April
Ofcial publication was made of two actions for annulment (T-138/20 and T-140/20) brought before the General Court against Commission Implementing Regulation 2019/2092 imposing a denitive countervailing duty on imports of biodiesel originating in Indonesia.
Coronavirus: The EU and 21 other WTO Members pledge to ensure wellfunctioning global food supply chains
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AG Pikamäe delivered his Opinion in the urgent preliminary ruling case FMS and Others (joined Cases C924/19 PPU and C-925/19 PPU), advising the Court of Justice to rule that Hungary is in breach of the Asylum Procedure Directive and the Reception Conditions Directive, by refusing to examine the asylum applications of four applicants who have also been unlawfully detained by it in the Röszke transit zone.
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The Grand Chamber of the Court of Justice gave its judgment in Associazione Avvocatura per i diritti LGBTI (C507/18), ruling inter alia that homophobic statements made during an audiovisual programme constitute discrimination in employment and occupation when they are made by a person who has or may be perceived as having a decisive inuence on an employer’s recruitment policy.
Hungary breached EU law in failing to examine asylum applications and unlawfully detained applicants in the Röszke transit zone: AG Pikamäe’s Opinion Thursday 23 April
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Thursday 23 April
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The signatories of the joint statement agree that ensuring the well-functioning global agriculture and agrifood supply chains should be considered as a priority. The statement calls for any emergency measures related to agriculture and agri-food products to be targeted, proportionate, transparent, temporary and consistent with WTO rules.
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Nº14 · APRIL 24, 2020
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EBA provides further guidance on the use of flexibility in relation to COVID19 and calls for heightened attention to risks Thursday 23 April
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The European Banking Authority issued two statements and published a new document on regulatory technical standards. In this way, it provided further guidance on how additional exibility will guide supervisory approaches in the context of the COVID-19 crisis in relation to prudential supervision of market risk, the Supervisory Review and Evaluation Process (SREP), recovery planning, digital operational resilience and ICT risk and securitisation. The EBA also recalled the need for stringent attention to be paid by supervisors and nancial institutions in relation to key risks in these areas.
Court of Justice’s ruling on the principle of a true and fair view of the annual accounts of companies Thursday 23 April
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The Court of Justice gave its judgment in Wagram Invest (C-640/18), a preliminary ruling requested by the Court of Appeal of Mons, Belgium, on the interpretation of Directive 78/660 (the Fourth Council Directive on the annual accounts of certain types of companies).
Court of Justice sets out interpretation of shape-related grounds for refusal or invalidity of trade marks under Directive 2008/95 Thursday 23 April
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In its judgment in Gömböc (C-237/19), concerning the interpretation of Directive 2008/95 to approximate the laws of the Member States relating to trade marks, the Court of Justice claried, rstly, how the fact that ‘the shape is necessary to obtain the technical result sought’ must be assessed under Article 3(1)(e)(ii) of the Directive and, secondly, whether this provision is applicable to signs consisting exclusively of a shape but enjoying the protection conferred on designs by virtue of their individual character or whose aesthetic appearance alone gives the goods any kind of value.
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European Parliament publishes external Study on improving SSM and SRB accountability mechanisms Thursday 23 April
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The European Parliament published a Study by Professor René Smits, outlining ideas for improvements in the accountability mechanisms of the European Central Bank (ECB) and the Single Resolution Board (SRB), within the currently applicable legal framework of the Treaty and the SSM and SRM Regulations.
Court of Justice further clarifies criteria for ascribing transport to a certain supply in a sales chain under the VAT Directive Thursday 23 April
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The Court of Justice handed down its judgment in Herst v Odvolací nanční ředitelství (C-401/18), a preliminary ruling requested from the Regional Court of Prague on the rules governing the common system of value added tax (VAT). The case focuses on whether a transaction in a cross-border supply chain with multiple transactions is to be regarded as an exempt intraCommunity supply in the case that there is only one physical movement of goods.
Court of Justice clarifies Member State’s obligations to pay compensation and interests for infringements of the VAT Directive Thursday 23 April
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The Court of Justice handed down its judgment in SoleMizo and Dalmandi (joined cases C-13/18 and C126/18), concerning the scope of the right to be compensated for a failure of a Member State to full its obligations under EU law, in particular concerning obligations arising from the common system of value added tax (VAT) Directive 2006/112.
Nº14 · APRIL 24, 2020
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AG Sharpston: the meaning of ‘successive assignments’ designed to circumvent equal treatment under Directive 2008/104
Commission Report on the impact of the COVID-19 pandemic on global and EU Trade Friday 24 April
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The Directorate General for Trade of the European Commission published an in-house analysis that attempts to estimate how international trade will be affected by the reduction in economic activity in the context of the coronavirus outbreak. To conduct this analysis, projections of GDP estimated before and after the pandemic were compared in order to estimate the impact that the COVID-19 crisis will have on trade ows.
AG Kokott: treatment of EU officials cannot exclude considerations relating to gender equality Friday 24 April
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Advocate General Kokott issued her Opinion in EEAS v Hebberecht (C-93/19 P), advising the Court of Justice to rule that, in the case of individual decisions regarding EU ofcials, the appointing authority is bound by considerations relating to sex, which must be weighed with the other relevant interests in the given case.
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Friday 24 April
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Advocate General Sharpston gave her Opinion in KG (Missions successives dans le cadre du travail intérimaire) (C-681/18), a preliminary ruling case on whether, in circumstances in which a worker is hired by a temporary work agency and assigned as a temporary agency worker to the same user undertaking by eight successive contracts for the temporary supply of work and 17 extensions, there have been successive assignments designed to circumvent the provisions of the Directive.
AG Bobek: the scope of application of the Utilities Directive 2014/25 and the Public Sector Directive 2014/24 Friday 24 April
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Advocate General Bobek handed down his Opinion in Pegaso and Sistemi di Sicurezza (C-521/18), a case on whether a contract notice aimed at establishing framework agreements for caretaking, reception and access control services for the premises of Poste Italiane and of other companies in its group falls within the scope of application of the Utilities Directive 2014/25 or of the Public Sector Directive 2014/24.
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Nº14 · APRIL 24, 2020
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Analyses & Op-Eds ‘Whatever is necessary… will be done’ – Time for a Less One-Sighted View on Solidarity in Europe in the Shades of Covid-19
European Solidarity Requires EU Taxes By Frans Vanistendael, Gianluigi Bizioli, Irene Burgers, Francisco Alfredo Garcia Prats, Daniel Gutmann, Peter Essers, Werner Haslehner, Georg Kofler, Hanno Kube, Adolfo Martín Jiménez, W. Nykyel, Pasquale Pistone, Ekkehart Reimer, and Edoardo Traversa. READ MORE ON EU LAW LIVE
By Ulla Neergaard & Sybe de Vries
Proposal of a group of distinguished tax lawyers on how to rebuild the economy of the EU and the Member States in the long run when the coronavirus pandemic subsides. In light of the blockage of EU decision-making arising from the diverging views on how the EU is to be nanced, they call for a gradual transfer to the EU of the power to levy specic taxes and to spend them.
Editorial Opinion explaining why the presence of solidarity within the EU is so crucial and how it relates to three of the most pertinent dimensions of the COVID19 crisis, namely the health and internal market dimension, the economic dimension and the rule of law dimension.
Library - Book Review ISABELLE BOSSE-PLATIÈRE AND CÉCILE RAPOPORT (EDS.)
By Johanna Jacobsson
Elgar Publishing, 2019, 328 pp.
The Conclusion and Implementation of EU Free Trade Agreements: Constitutional Challenges READ ON EU LAW LIVE The EU needs to invent appropriate answers to the constitutional challenges that it still faces in its external trade relations to preserve its credibility on the international scene. This book gives a comprehensive overview of those challenges and some of the solutions that can be adopted, such as the division of the EU’s trade and investment agreements into two along the lines of competences
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