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07 July 2015

Euractiv / Duff: How to leave the Euro more or less legally

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(7th July) If continued Greek membership of the euro zone proves to be impossible, a managed exit could and should be done by reversing the process that applies to joining the euro.


Avoiding madness

Both such lines of enquiry, in my view, indicate madness. Yet it remains the case that it is difficult to leave the single currency, whose establishment was deemed to be irrevocable (Article 140(3) TFEU) in an orderly manner. There is no provision in the treaties to ditch the euro, although thanks to the Lisbon treaty a state can negotiate to secede from membership of the European Union as a whole (Article 50 TEU).

A decision to extricate Greece from membership of the euro while remaining a member state of the EU could possibly be engineered under Article 352 TFEU. This legal base is the famous ‘flexibility clause’ that allows ‘appropriate measures’ to be taken to attain the EU’s objectives in cases where ‘the Treaties have not provided the necessary powers’. The frustrated objective here would be the consolidation of ‘an economic and monetary union whose currency is the euro’ (Article 3 TEU), on the assumption that Grexit would help things along.

There are two big problems, however, with the use of Article 352. The first is that unanimity is required in the Council, so Greece (or anyone else) could veto the plan. The second is that several national parliaments now insist on taking a vote on all Article 352 legislation. Needless to say, those national parliaments include the House of Commons whose members are probably in no mood to agree to any fix on Grexit independently of a decision on Brexit. But David Cameron will not be the only EU leader desperate to avoid being held hostage on this critical matter by his or her own parliament.

Avoiding unanimity

So is there a way for Greece to exit the euro by QMV? Here the logical thing to do is turn to the decision-making process that applies to joining the euro, and reverse the thrust.

When a state joins the currency, a decision is taken by the full Council of Ministers by QMV according to the provisions of Article 140(2) TFEU. Because all member states (except the UK) are presumed to join the euro once they have fulfilled the Maastricht convergence criteria, admission to membership is technically the abrogation of the transitional derogation from membership. The Council decides on the basis of a proposal of the Commission, after consulting the European Parliament, after a instigating a discussion in the European Council – and after having received a recommendation from 55% of the eurozone states (that is 11), representing 65% of the population of the eurozone.

On the basis of such a Council decision, Greece would be relegated to the status of a state ‘with a derogation’ as laid down in Article 139. Relegation would liberate Greece from the coercive disciplines of the broad economic policy guidelines, the excessive deficit procedure (no more troika!), the macro-economic imbalances procedures, and the governance of the European Central Bank. Of course Greek banks would lose the possibility of being bailed out by the ESM and of receiving liquidity assistance from the ECB, but the Greek state would be liable to receive EU ‘mutual assistance’ (Article 143) and to take ‘protective measures’ (Article 144).

Would this reverse procedure be acceptable to the European Court of Justice in the very probable instance that it had to address the constitutional issue? Precedent suggests that the Luxembourg Court is fully capable of tolerating unorthodox measures of the EU institutions when taken by way of expedient crisis management – as long as the proper democratic procedures have been observed and so long as the wider and essential interests of the Union are protected. Doubtless the judicial eyebrow would be raised and a stern admonition would be added to the effect that the position of an errant state leaving the currency under the pressure of force majeure should be rectified in primary law at the time of the next treaty revision.

So be it. If continued Greek membership of the euro proves to be impossible, a managed exit from the euro could and should be done this way.

Full article on EurActiv


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