International law as a tool for strengthening economic governance in the euro area

EU leaders have adopted a number of measures to tackle with the euro sovereign debt crisis. These measures aim to strengthen economic cooperation in the EU and prevent the rise and spread of debt crises in the future. However, instead of relying on the existing EU legal framework, Member States relied mostly on international law and fostered the creation of new intergovernmental institutions. In particular, in order to secure the provision of emergency loans to Member States in difficulty, euro area Member States set up a new international organisation, the European Stability Mechanism (ESM). Complementing the ESM and ensuring that it is used only in emergency situations, 25 EU Member States concluded the Treaty on Stability, Coordination and Governance (TSCG), and thus established a new intergovernmental framework for coordinating their fiscal policies.

The proposed paper argues that the choice of intergovernmentalism as the institutional response to the inefficiencies of the euro area raises significant concerns for the Union legal order. As the ESM and TSCG introduce international law obligations in an area covered by EU law, it is controversial whether these international agreements fit within the existing Union legal framework, and if they are in conformity with EU law. More importantly, the suitability of the EU governance structure is questioned. The conclusion of the ESM and the TSCG as international agreements indicates the mistrust of the Union legal order and the lack of belief on the part of, at least some, Member States in its structures, rules and institutions as appropriate for enhancing economic governance in the euro area. By reverting to intergovernmentalism Member States cast doubt on the welfare effects of European integration, as expressed in the Union legal order, and question the principles and values that underpin the EU legal system.

Within this framework, the proposed paper attempts to identify the benefits and risks raised by intergovernmentalism as a method of strengthening economic cooperation in the euro area. To this end, the proposed paper compares the different governance structures established under Union law on the one hand and under the ESM and TSCG on the other and explores their interaction. It examines which institutions are employed and how they function and cooperate, paying particular attention to the different legal rules and principles that are pertinent to each legal system. In that respect, this paper argues that the ESM and TSCG create a governance structure that is not hindered by the substantive and procedural “barriers” that the Union legal order poses, thus allegedly resulting in more effective governance. However, their intergovernmental nature results in the inapplicability of key principles of Union law, which exacerbates the governance problems that the ESM and TSCG are aimed to resolve, and puts into danger the very foundations of the European integration project.