Documents considered by the Committee on 16 March 2011 - European Scrutiny Committee Contents

6 Treaty change



COM(11) 70

Commission Opinion on the draft European Council Decision amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro

Legal base
DepartmentForeign and Commonwealth Office
Basis of considerationEM of 9 March 2011
Previous Committee ReportNone
To be discussed in European Council 24-25 March 2011
Committee's assessmentPolitically important
Committee's decisionCleared


6.1 In May 2010 the Council adopted a Regulation, under Article 122(2) TFEU, to establish a European Financial Stabilisation Mechanism (EFSM), for giving financial assistance to a Member State in the form of loans or credit lines raised from capital markets or financial institutions guaranteed by the EU Budget. The need for the EFSM is to be reviewed every six months and is to be discontinued once the exceptional circumstances cited as justification for it no longer exist. At the same time, and additionally, a voluntary intergovernmental Special Purpose Vehicle, the European Financial Stabilisation Facility (EFSF), was established by and for eurozone Member States. The EFSF can issue bonds or other debt instruments on the market to raise funds needed to provide loans to eurozone Member States. The EFSF is to expire in June 2013.[32]

6.2 The European Council of 28-29 October 2010 agreed on the need for Member States to establish a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole.[33] At the 16-17 December 2010 European Council Member States agreed to amend, in accordance with the simplified revision procedure under Article 48(6) TEU, Article 136 TFEU in order to allow eurozone Member States to establish the proposed permanent crisis mechanism — a European Stability Mechanism (ESM).[34] The ESM would obviate the need for both the EFSM and the EFSF after June 2013. The European Council Conclusions proposed language for this Treaty amendment.[35] A draft Decision to formalise the European Council agreement is due to be adopted the European Council meeting of 24-25 March 2011. Article 1 would add a new paragraph to Article 136 TFEU:

"3. The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality."

6.3 When we considered the draft Decision, in January 2011, we recommended it for debate on the Floor of the House and said we presumed that debate would be held on the basis of a motion under Section 6 of the European Union (Amendment) Act 2008. Some further comments we made were followed up when we considered the matter again later in January 2011.[36]

The document

6.4 Before adopting the draft Decision the European Council is required, in accordance with the simplified revision procedure under Article 48(6) TEU, to consult the Commission. This Opinion is the Commission's formal response to that consultation. In it the Commission considers the draft Decision in the light of the conditions on the use of the simplified revision procedure and sets out its position on the substance of the proposed amendment. In summary the Commission delivers a favourable Opinion, the key elements of which are:

  • the new paragraph proposed will be one of the Treaty provisions specific to Member States whose currency is the euro;
  • the Commission agrees that the conditions for using the simplified revision procedure are met;
  • the proposed Treaty change does not affect the competences conferred on the EU in the TEU and TFEU;
  • it does not involve creating a new legal base which would allow the EU to take action that was not possible before the change; and
  • the proposed change does not reduce the competences conferred on the EU—in particular, it does not affect either the solidarity mechanisms provided for in Articles 122 and 143 TFEU in the event that a Member State is in difficulties or is seriously threatened with difficulties or the EU's competences in terms of coordination and surveillance of the economic and financial policies of the Member States in general and of the Member States whose currency is the euro in particular.

6.5 The European Council is not required to take any action in response to the Opinion, so it is in effect advisory.

The Government's view

6.6 The Minister for Europe at the Foreign and Commonwealth Office (Mr David Lidington) says that the Commission's Opinion is in line with the Government's policy on the Treaty change proposal as outlined to us in connection with the draft Decision, namely that:

  • the change is to one of the provisions, Article 136 TFEU, that applies only to Member States whose currency is the euro and that it does not apply to non-eurozone Member States—since the UK will not be part of the new stability mechanism there can be no transfer of power away from the UK;
  • the change does not affect the competences conferred on the EU in the Treaties and thus does not involve any transfer of competence from the UK to the EU; and
  • once the ESM is established to safeguard the financial stability of the euro area as a whole, Article 122(2) TFEU will no longer be needed for such purposes, and the European Council has agreed that it should not be used for such purposes.


6.7 If receipt of this document and the Explanatory Memorandum on it had been timelier we would have recommended that the Opinion be debated with the draft Directive to which it refers. As it is the draft Directive is being debated later today, so we clear this document from scrutiny. Nevertheless Members may wish to refer in the debate to comments about the draft Directive in both the Opinion and the Explanatory Memorandum, which are already public documents.

32   (31611) 9606/10: see HC 428-i (2010-11), chapter 7 (8 September 2010). Back

33   See, para 2. Back

34   See, paras 1-2. Back

35   See, Annex I. Back

36   (32366) EUCO 33/10: see HC 428-xii (2010-11), chapter 2 (12 January 2011) and HC 428-xiv (2010-11), chapter 1 (26 January 2011). Back

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