Grexit Daily News – 11 July 2015

grexit daily news


11 July 2015  — Bring on the Lawyers

Steve Peers published in his EU Law Analysis Blog a piece on legal challenges to ECB restrictions on Greek bank accounts (see here).

Many EU citizens have watched with sympathy and concern as Greek citizens have been limited to withdrawing €60 a day in the last two weeks. This restriction results from a restriction imposed by the European Central Bank (ECB) on the emergency liquidity assistance which it provides to Greek banks.

Apart from the human impact, there are grave legal, political and economic doubts about the ECB’s action. One of the central purposes of a central bank is to function as a lender of last resort to banks – and the ECB is signally failing to do that here. Also, the ECB’s actions give the impression that it is trying to influence the Greek political debate on austerity and membership of the Eurozone – a role which is well outside the Bank’s remit. The banking restrictions obviously damage the Greek economy, and so limit its ability to pay back its creditors in future.  They have nothing to do with the Bank’s task of fighting inflation, and they undermine its broader role in supporting the EU’s economic growth. (For a fuller critique, seehere (paywalled); on the legal background, see here). Arguably these restrictions – or further restrictions which the ECB might impose – could lead toward a de facto ‘Grexit’ from monetary union, which is ruled out by EU law (see my discussionhere).

It’s possible to challenge the ECB’s actions via the national courts, which can refer the issue to the CJEU, such as in the recent Gauweiler case (discussed here). They can also be challenged in the EU courts, such as in the UK’s recent successful challenge (discussed here). The case law takes a broad view of what ECB acts can be challenged, except where it acts as part of the ‘Troika’ which negotiates bailout conditions, when neither the Bank nor the Commission can be challenged in the EU courts. But the ECB’s restriction of assistance to Greek banks did not fall within the scope of its role in the Troika.

National governments such as Greece can go directly to the EU courts to challenge ECB actions. Other challengers besides the EU institutions would have satisfy standing rules: ‘direct and individual concern’, or (if they are challenging a non-legislative act which does not entail implementing measures) ‘direct concern’. Arguably it would be easy for a Greek bank to satisfy those rules.

In the absence of a legal challenge from a Greek bank or the Greek government, an individual depositor has brought a legal challenge to the ECB’s recent actions before the EU General Court. You can find the full text of the claim here. The ECB might restore assistance if there is a deal in the near future, but it is still worth challenging its actions, so it cannot do this (or threaten to do it) in future.

This is very interesting and I am currently doing some work on the issue of challenges to ELA related decisions in courts and investment tribunals (See here for an ELA related ICSID action)

I do not see this initiative as having much future. My problem is causation. There is a narrative that has the ECB intervening to restrict avenues of funding for Greece (I have already written about this and it is true). Nonetheless, the causal flow in relation to capital controls is the opposite from what the claim asserts.

There had been a slow motion bank run since elections were called in December 2014. This became a full scale bank run with small depositors trying to withdraw every last cent, after Tsipras announced the referendum. The imposition of capital controls was a defensive measure taken by the Economic Stability Council at the BoG and was not an ECB mandated action.

Capital controls are there to protect the integrity of a banking system under pressure. The ECB could not have increased ELA for Greece after 1.7.15 as it was without a support programme. We need to distinguish of course support for the government from support of the banking system, but still, blaming capital controls for being means of pressure against the Syriza government is not a legally substantiated point.

I will write a post fully explaining this once I have some time to think it through.

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@iGlinavos

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3 thoughts on “Grexit Daily News – 11 July 2015

  1. When I started to read I tought: “Huh? Wasn’t it the Greek governement who decided a Bank Holiday?”, but reading further I see I’m not wrong.
    Unfortunately I do not read or understand Greek, therefore I had to look for an English translation published somewhere.
    I found it here http://www.thetoc.gr/eng/news/article/the-full-text-of-the-decree-establishing-capital-controls-in-greece

    One question: In this translation point 2 says “The extraordinary circumstances of an urgent and unforeseen need to protect the Greek financial system and the Greek economy in general by the lack of liquidity caused by the decision of the Eurogroup of 27 June 2015 to refuse the extension of the loan agreement in Greece.”
    Is this translation correct (I hope you have access to the original text)?

    If this is a correct translation, may I ask you what you think about the words “caused by”?
    I ask because you say that the bank run began after the referendum announcement (June 27th) and the decree is dated June 28th and that ELA could not be extended further because there was no support programme.
    To me this looks like demagogy

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    • My understanding of the situation is that the BoG made repeated requests to increase ELA in the week before the referendum. The ECB did not increase it as the negotiations had broken down on that Friday, and then came the announcement of the referendum, which offered no reason to the ECB to support an increase in ELA. In a way Greece should be thankful it was not pulled completely (but this would run counter to the ECB’s mandate to maintain monetary stability). There is no reason to blame the ECB for having kept ELA frozen.

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      • Thanks for your answer Mr. Glinavos.

        One thing is sure. If Europe ever will become a real Federation of States, it will happen because of what is going on now.

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