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Lecture 1 - Internal Market and the crisis

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Luca Pantaleo

on 17 February 2018

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Transcript of Lecture 1 - Internal Market and the crisis

Several crises
Empty chair crisis (1965)
Arab oil crisis (1973)
Danish referendum (1992)
French and Dutch referenda (2005)
Learning objectives:

Analyse and assess the novelties to EMU governance during Euro crisis;
Evaluate the legacy of the crisis and assess it against the broader background of the European integration process.
Empty chair crisis led to the ECJ developing concepts such as primacy and direct effects
Oil crisis gathered consent on Single European Act (SEA)
Danish referendum launched era of Treaty 'opt-outs'
Rejection of Constitution made Treaty of Lisbon possible
The Euro crisis was possibly the most severe one.

It led to a legitimacy crisis of the European integration process.
Two options available:
Disintegration vs. more integration
Two scenarios:
Triggered by weak countries (contagion)
Triggered by strong countries (Brexit = domino effect)
The idea is that the internal market can only achieve full integration if the MS implement similar economic and monetary policies
The core of EMU is Art. 119 TFEU


3 guiding principles:
stable prices;
sound public finances and monetary conditions;
sustainable balance of payments.
Monetary Union
The Eurosystem (ECB + NCB of Eurozone countries) is responsible of the monetary policy of the EU.
Economic Union
Multilateral Surveillance Procedure (MSP) complemented by the Stability and Growth Pact (SGP)- the preventive arm
1) 3% deficit/GDP rule

2) 60% debt/GDP rule
The Excessive Deficit Procedure (EDP) - the corrective arm
A decision concerning the existence of an excessive deficit is taken by the Council upon proposal from the Commission.

Action may follow, such as recommendations and punitive measures.
European Financial Stabilisation Mechanism (EFSM)
Based on Article 122(2) TFEU.

It is managed by the Commission and has limited funding (60 billion €).
European Financial Stability Facility (EFSF)
Private company established under Luxembourgish law (
société anonyme

440 billion € market capacity.
European Stability Mechanism (ESM)
1) Intergovernmental organisation created by Euro-countries.

2) Linked to EU by Article 136 TFEU as reformed.

3) Subscribed capital of 700 billion €.

4) Bail-out clause?
Fiscal Compact (FC)
Main novelties:
1)balanced budget rule,
2) structural deficit.
International agreement concluded by all EU MS except UK, Czech Republic and Croatia.
Assistance under ESM conditional on ratification of FC.
Full transcript