Paradise lost: can the European union expel countries from the Eurozone?

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Author: Jens Dammann
Date: May 2016
From: Vanderbilt Journal of Transnational Law(Vol. 49, Issue 3)
Publisher: Vanderbilt University, School of Law
Document Type: Article
Length: 18,267 words
Lexile Measure: 1800L

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2. A Fundamental Change in Circumstances?

Even assuming, for the sake of the argument, that the doctrine of rebus sic stantibus is applicable to the question of Eurozone membership, the question remains whether an economic crisis like the one unfolding in Greece qualifies as a fundamental change in circumstances within the meaning of this doctrine. (182)

As provided in Article 62 of the Vienna Convention, the threshold that such a change must exceed is rather high: circumstances existing at the time of the Treaty's conclusion must have changed in a fundamental way. (183) These circumstances must have formed an essential basis for the parties' agreement; (184) and the relevant change must have transformed the extent of the parties' remaining obligations under the Treaty in a radical fashion. (185) Moreover, these requirements have to be interpreted narrowly, as the doctrine of rebus sic stantibus only applies in rare cases. (186)

Can one make the case that an economic crisis like the one holding Greece in its grip satisfies these requirements and therefore allows other member states to invoke the clausula rebus sic stantibus? This seems more than dubious. At most, one might try to argue that, for the other Eurozone countries, the Greek crisis brought the necessity to finance ever new rescue packages in order to prevent a Greek insolvency and that the parties failed to foresee this development. However, such a line of reasoning would be flawed for various reasons. To begin with, application of the clausula rebus sic stantibus requires that change in circumstances has made the parties' existing obligations incurred under the treaty more burdensome. (187) However, nothing in the Treaty on the Functioning of the European Union forces member states to participate in the bailout. (188) In fact, the Treaty is particularly clear on this issue. It even contains an explicit anti-bailout clause in Article 125, which provides that "[a] member state shall not be liable for or assume the commitments of ... another member state." (189) While this provision does not stand in the way of voluntary bailouts, (190) it makes it very clear that no member state is under any obligation to participate in such bailouts. (191)

And indeed, not all member states have participated to the same extent in bailouts. For example, Finland participated in the 2012 bailout, but only after receiving collateral from Greece. (192) The United Kingdom went even further and declined to participate in the first or second Greek bailout on the grounds that it was not part of the Eurozone, (193) though the United Kingdom still ended up having to support Greece indirectly, since the United Kingdom is a member of the IMF. (194)

Any attempt to cast an economic crisis as a fundamental change in circumstances also faces a second obstacle. By general consensus, those changes that the parties anticipated do not justify the application of the doctrine of rebus sic stantibus. (195) According to some scholars, the application of that doctrine is barred even in those cases, where the...

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Gale Document Number: GALE|A459722277