With the Treaty of Maastricht the EU Member States set up a common monetary policy at Union level. Economic and fiscal policies, even if closely linked to the monetary system, remained a national competence and are only coordinated and under rule based surveillance at EU level. The crisis, whatsoever, revealed the weakness of such economic governance regime and challenged the functioning of the Eurozone system as a whole.

Actions that confronted those challenges were taken under considerable time pressure. They impacted the economic governance framework and the interpretation and application of underlying treaty rules. The establishment of a permanent European Stability Mechanism (ESM) is a fitting example in this context because it is the systemically most crucial and controversial development of the European Monetary Union (EMU). The ESM is a financial emergency assistance instrument for Member States suffering from solvency and liquidity problems and was created outside the EU framework, however with strong links to it, both substantially and institutionally. It was in this context that a respective Treaty amendment was adopted, in fact the only one undertaken in the course of the crisis.

The introduction of the third paragraph in Article 136 TFEU was claimed to be necessary to ensure legal certainty. The CJEU, by contrast, qualified the legitimizing amendment of Article 136 TFEU as only declaratory and approved the legality of the ESM Treaty already before the entering into force of Article 136(3) TFEU. What is more, fundamental legal concerns on the compatibility of the ESM Treaty with the EU Treaties as well as national constitutional laws materialised in judicial appeals, both at national constitutional and EU level. In the end, all rulings legitimized almost all hotly debated aspects and thereby contributed to avoid legal collapse.

It must be noted that this resulted in essential changes in the reading of the underlying rules, such as the no-bailout rule, without according adaption of the primary law. One guiding principle for the stability of the euro area is outlined as the obligation and responsibility for Member States to effectuate sound public finances and sustainable balance of payments. It is assumed that financial markets would, through eventually imposing high interest rates as ‘sanctions’ for excessive annual deficits and overall debts, exert sufficient pressure into the direction of sound Member States’ budgets. The Treaties only foresee Union financial support for Euro area members under certain conditions in case of exceptional occurrences beyond the Member State’s control as outlined in Article 122(2) TFEU.

The shortcomings of the EMU architecture were addressed by means of secondary law, intergovernmental treaties and political agreements, and a complex system of economic governance emerged. Both substantial as well as institutional changes were adopted. Quick solutions were found, however, arguably at the price of circumventing the EU legal framework or exceeding the given EU rules. The fear of tackling Treaty reforms led to stretching the law to the outmost, sometimes neglecting, sometimes violating it, but neither properly enforcing nor amending it, as it should be. This puts the rule of law, a fundament of the EU Treaties under stress and creates remarkable uncertainty, as reflected in the numerous constitutional challenges before national and EU courts.

It is widely recognised that further developments are needed to ensure a robust framework for the currency area. However, the same pattern of avoiding Treaty revision can be witnessed in the communications and reports for EMU reforms tabled by EU officials. The assumption prevails that the transformation of the ESM into a European Monetary Fund is fully in line with the existing treaty framework.

The resulting danger is obvious: Refraining from proposing amendments of EMU-related Treaty provisions leads to half-hearted reforms. They may not achieve the ‘completion’ of the EMU, which is the goal of those reform undertakings. They might stretch or even overstretch the legal fundaments. Instead of bringing the desired stabilisation founded on a solid legal basis, a destabilising ‘muddling-through-policy’ prevails.

The rigidity of the Treaty amendment process, requiring all Member States’ consent and ratification according to the national laws is a ‘constitutional’ deadlock for further integrative steps in the field. Thus, the existing constitutional system must be addressed and advanced in order to terminate mechanism of facile blockage for each Member State, such as a majority decision-making rule for Treaty amendment.

The very detailed but limited economic governance provisions in the EU Treaties should be replaced by more flexible legal basis, which allows for swift action in times of crises and the option of policy adjustments without immediately triggering the need of a Treaty change.

The public debate about changing the rigid and limiting current Treaty framework as such must start now in order to achieve the explicit objective to complete the EMU by 2025 and before the next crisis hits the Union hard.


See the authors’ accompanying Policy brief “Who is afraid of Treaty reforms?”