The legal basis of measures adopted by the Eurosystem to deal with sovereign debt-crisis in the Europe
"…Every person is a much better judge of what is good for him than any President, Governor or Congressman. When the government starts telling people what they should do with their money, they are telling people how to mind their own business. This will make a bigger mess than that which they tried to correct…" ADAM SMITH, THE WEALTH OF NATIONS PREFACE
The current financial crisis has fundamentally challenged the predominant economic orthodoxy of "laissez faire-laissez passer" by unearthing rather turbulently its structural weaknesses. Contrary to the rosy expectations cultivated systematically all over the world in order to encourage every single individual to live his own myth based on the systemic practice of excessive borrowing by any possible means, the absolute dedication to that dogma has led to a massive financial bubble, culminating in a striking and shocking failure. Unfortunately, in the very same vein, states have been infected by the overborrowing virus as well and thus entangled in a vicious circle of constantly swelling their deficits, which has constituted the Achiles’ heel of their public finances. So, unconsciously they literally committed their suicide by laying the foundations of the current sovereign-debt crisis, unprecedented in depth, which the vast armadas of EU’s bureaucracy miserably failed to predict. Against this grave threat, Eurozone was taken utterly unawares despite the supposedly powerful preventive protection established by the Stability and Growth Pact (1) , which at last however was reduced to being a worthless piece of paper. Hence, after the first shock and the full realisation of all the dimensions of the current crisis, Eurozone has strived to recover its prestige by re-designing its defences on the basis of a series of newly conceived financially supportive mechanisms, forming the so-called "new Eurozone governance". In this framework, the aim of this paper is twofold: in first place, to expose the legal basis for providing financial relief to EU Member States in order to assess at a second level the legitimacy of the specific measures undertaken under this construction.
(1) The SGP is adopted by two Council Regulations: Regulation 1466/1997, as amended by Regulations 1055/2005 and 1175/2011 and Regulation 1467/1997, as amended by Regulations 1056/2005 and 1177 /2011. Its primary goal has been to preserve fiscal discipline of Eurozone Member States in order for excessive deficits to be avoided. Given the current sovereign debt crisis, it is obvious that the SGP has been de facto discredited
* The paper at hand was submitted as coursework in the course ʺEuropean Economic Law II‶ of the LL.M. of the International Hellenic University, taught by Mr Apostolos Gkoutzinis, market-leading international capital markets and finance lawyer, in the academic year 2014-2015. It maintains its original form.
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