Asymmetric parliamentary powers: the case of the third rescue package for Greece

In his blog post, Valentin Kreilinger provides an overview of the participation of national parliaments on the third package for Greece. He shows that parliamentary power in the euro area is distributed asymmetrically. Only the German Bundestag votes on the start and the result of negotiations. In Estonia, Finland and Austria, deliberation and voting is confined partly or entirely to committees. Other national parliaments play an even smaller role, or none at all. 

In accordance with national procedures, negotiations between the “institutions” and the recipient country of a European Stability Mechanism (ESM) rescue package are closely controlled through parliamentary votes in eight national parliaments, in some instances both before the start of the negotiations (ex ante) and after the conclusion of negotiations (ex-post). In these countries, the respective government representative on the Board of Governors of the ESM cannot agree to any financial assistance unless a parliamentary committee or the plenary gives its explicit go-ahead. Such parliaments are therefore powerful, while others can only watch helplessly.

The path to an ESM rescue package

The individual steps to an ESM bailout are clearly defined: Following a country’s request for stability support on the basis of Article 13 (1) of the ESM Treaty (step 1), the Eurogroup and the ESM Board of Governors have to agree to launching negotiations. Prior to this decision, some national parliaments have to grant a mandate to the representative of their government (step 2). Only then the negotiations between the “institutions” and the recipient country can start (step 3). Once they reach an agreement, some national parliaments have to authorise it (step 4). It is not before these approvals that the ESM Board of Governors can give its go-ahead (step 5) and the programme starts. In parallel to steps 2 to 4, the recipient country must implement some measures in advance (“prior actions”) and consent to the agreement with the institutions (“Memorandum of Understanding”).

A tight schedule until August 20, 2015

The Latvian and the Finnish Parliament have already given their consent (ex-post). This also happened in Austria, Estonia and Spain on 18 August. In Germany and the Netherlands, parliaments vote on the mandate for approving the outcome of the negotiations on 19 August. In the remaining euro area countries the government does not need a mandate from the parliament to approve the outcome of the negotiations. As can be seen from the table, six governments received a mandate from their parliament to start negotiations on a new rescue package (ex-ante).

Among the eight parliaments that vote on the third Greece package, meetings of budget or special committees are as common as plenary sessions, but the latter receive far more public attention. It should also be noted that the ex-ante plenary debate and vote in France were neither required nor legally binding, but should indicate parliamentary support for the government’s policy.

The third Greek bailout package also shows that all four countries that voted both before and after the negotiations (or will vote on them) can be counted among the “Northern European creditor countries” (Germany, Estonia, Finland and Austria), which try to control the emergency loans and their conditionality closely.

Are there only unanimous decisions in the ESM?

The voting rights of Member States on the Board of Governors of the ESM correspond to their share of capital and guarantees. For example, Germany accounts for 27%, France for 20%, the Netherlands for 5.2%, Slovakia for 0.8% and Estonia for 0.2%. Although decisions are generally taken by consensus and this principle has been upheld so far, the ESM treaty provides for an emergency voting procedure that merely requires a qualified majority of 85% of the votes cast if “failure to urgently adopt a decision to grant or implement financial assistance […] would threaten the economic and financial sustainability of the euro area” (Article 4 (4) ESM Treaty). In this case, the national parliaments of smaller states are no longer veto players – only Germany, France and Italy (18%) could block a bailout on their own.

Fundamental institutional problems of euro area governance

Regardless of the tactics of individual actors in the negotiating process and of slow reform efforts for the incomplete Economic and Monetary Union the third rescue package illustrates two basic institutional governance problems of the ESM: Firstly, national procedures have created powerful and powerless parliaments and secondly, small countries can be outvoted in the Governing Council under the ESM treaty’s emergency voting procedure. If there was such a situation in the future and paid-in capital from (formerly national) budgets was used without the consent of all stakeholders as a loan to a recipient country, this would likely put excessive strain on solidarity within the euro area. Money would flow, but with what kind of legitimacy? Even if each of the 19 national parliaments had as far-reaching powers as the German Bundestag, that would be no solution. Strengthening collective forms of inter-parliamentary cooperation and the transfer of control and decision-making powers to an inter-parliamentary committee based on Article 13 of the Fiscal Treaty is getting more and more necessary.