The EU Financial Crisis – European Law and Constitutional Law Implications

Abstract

The EU Financial Crisis is not only an economic crisis, but also a crisis of the rule of law and of democracy. This paper, which deals with the European Law and the Constitutional Law Implications of the EU Financial Crisis, was presented as a lecture in the Berger International Speaker Lectures Series at Cornell Law School on April 11th, 2012. It outlines the core elements of the crisis and presents the strategies adopted by the EU and the Member States for coping with the crisis. After that, the author turns to the struggle with the rule of law that the crisis has led to and argues that Europe has taken some steps in order to rest the new fiscal policy rules and the rescue mechanisms on a legal framework, but that – on the whole – we are still on the way to reaching a satisfying level of compliance with the rule of law and corresponding clarity again. The great remaining challenge is the challenge of democratic legitimacy. Insofar, it is argued that the ESM can be democratically legitimized, at least in the case of Germany. However, the financial crisis gives rise to further questions regarding the future democratic foundation of the EU and regarding – as the German Federal Constitutional Court put it – the future ability of a constitutional state to democratically shape itself. The decisive question will eventually be whether the fiscal discipline aspect or the bail?out aspect of the current political process will actually shape the Union. Complementing the monetary union by a transfer and debt union would have a detrimental effect on the future development of Europe. Therefore, financial support for a member state has to remain an exception, and it has to be granted under strict conditionality. State insolvency should remain an option.