I.1 The Problem

The European Union ‘places the individual at the heart of its activities’.Footnote ¹ So begins the Charter of Fundamental Rights of the European Union. Likewise, the old story of integration through lawFootnote ² tells us that law pushed forward the integration programme, the individual being its main enforcer and beneficiary. The European legal landscape has, on this view, evolved into a uniqueFootnote ³ supranational system that empowered primarily the individual through legal principles such as primacy and direct effect,Footnote ⁴ but also through the case law of the Court of Justice concerning the internal market, EU citizenship, and the protection of fundamental rights. The EU’s response to the Euro crisis challenged that convention, with the focus instead shifting to the Member States. In this book, I reconceptualise legal accountability in a way that replaces the individual at the heart of all activities in the Economic and Monetary Union (EMU).

Introduced in the Maastricht Treaty,Footnote ⁵ the EMU symbolised a step of unprecedented integration, while also witnessing a sharp decline in public support, unlike any previous Treaty revision.Footnote ⁶ The reason for this may be found in the fact that European integration expanded into areas traditionally considered core state powers,Footnote ⁷ resulting in new intergovernmental modes of governance,Footnote ⁸ such as differentiation through opt-outs and the establishment of regulatory agencies.Footnote ⁹ The Euro crisis displayed serious accountability deficiencies, exacerbating these concerns further.Footnote ¹⁰ The emphasis on authority derived from regulatory effectiveness and market prosperityFootnote ¹¹ over democratic accountability has been particularly visible in the ad hoc creation of EU’s economic governance mechanismsFootnote ¹² and in the activities of the European Central Bank (ECB).Footnote ¹³

A common denominator behind these solutions is that they bypass the individual and limit her influence in economic governance decision-making. Judicial review by national and EU courts relied heavily on the principle of equality of sovereign Member States, by protecting the budgetary autonomy of national parliaments through an emphasis on conditionality in financial assistance.Footnote ¹⁴ Yet, these conditions, imposed by the Troika outside the framework of EU law proper, left little to no wiggle room for parliamentary deliberations in debtor Member States.Footnote ¹⁵ Beyond financial assistance, the ECB, through its quantitative easing programmes, became the largest creditor of the eurozone and significantly affected asset prices across different interest groups. Similar to financial assistance, the ECB operates without outside input due to its high level of independence. Consequently, we know very little about how the ECB balances the interests of various socioeconomic groups across the eurozone and the normative considerations that guide its activities.Footnote ¹⁶

Departing from the well-established EU law routes of regulation, these developments were characterised by ‘legal experimentalism’.Footnote ¹⁷ This can, in part, be attributed to the lack of a more coordinated approach to the possibility of a crisis in the Maastricht Treaty and its amendments.Footnote ¹⁸ In essence, as Chiti and Teixeira underline, risk-sharing did not feature in the initial EMU logic, which instead only focused on the mutual benefits of the shared currency area.Footnote ¹⁹ Regarding the EMU as a solidarity area was not present in its original design.Footnote ²⁰ The underlying principle of the EMU framework relies on the equality of Member States,Footnote ²¹ embedded in the protection of national sovereignty in budgetary matters.Footnote ²² This concerns specifically the no-bailout clause in Article 125(1) TFEU, intended to incentivise Member States to follow a sound budgetary policy, which would be jeopardised should the euro area transform into a transfer union.Footnote ²³ Such a focus influenced the division of competences between the EU and the national level in a way that reduced emphasis on solidarity, which I argue ultimately led to a decreased ability of all EU citizens equally to hold EMU decision-makers to account.

At the same time, existing accountability mechanisms in the Treaties were no longer appropriate for such novel legal developments. For example, political accountability of the Council and Parliament was overshadowed by the dominance of the Euro Group and the Commission in the decision-making processes concerning financial assistance.Footnote ²⁴ Furthermore, legal accountability as the task of the Court of Justice was reduced in effect as it could not extend the responsibility of the Euro Group beyond the letter of the Treaties.Footnote ²⁵ The idiosyncrasies of the regulatory approach to the financial crisis were further strongly reflected in the review of financial assistance measures and the European Stability Mechanism (ESM), which the Court of Justice initially did not assess against the standards of the Charter of Fundamental Rights.Footnote ²⁶ In monetary policy, the ECB’s constitutionally entrenched independence removed it from the traditional routes of political and administrative accountability found in national contexts. It was likewise shielded from legal accountability, as the Court of Justice applied a lax standard of review of its monetary policy decisions.Footnote ²⁷ In effect, accountability structures originally devised in the Treaties were not efficient in the EMU and brought about a diminished capacity of EU citizens to hold decision-makers to account after the financial crisis.Footnote ²⁸

National constitutional courts, except for the Portuguese Constitutional Court,Footnote ²⁹ have not called into question the austerity measures that formed part of the conditionality requirements attached to financial assistance. Both EU and national courts focused on conditionality as a way of protecting creditors and ensuring the sound budgetary policy of debtor states. In that sense, the principle of equality of Member States has taken centre stage. Solidarity was acknowledged solely to the extent that it does not intrude on the budgetary prerogative of national parliaments,Footnote ³⁰ causing a disregard of the major redistributive effects that financial assistance,Footnote ³¹ as well as monetary policy measures,Footnote ³² have had in the eurozone, in particular by increasing wealth inequality. Such effects do not follow Member State lines, but rather socioeconomic ones, and have so far not been accounted for by the relevant decision-makers on the supranational level.Footnote ³³ Solidarity, although a common soundbite in political discourse of that time, made no impact in regulatory design or judicial review.

At the end of this story comes the Next Generation EU (NGEU): a package of instruments allowing the EU, for the very first time, to borrow money on capital markets in unprecedented amounts and use portions of it for transfers to Member States in the form of non-refundable grants. Thus, ‘in a spirit of solidarity between Member States, in particular for those Member States that have been particularly hard hit’,Footnote ³⁴ coherent and unified measures are exceptionally necessary to address the ‘significant disturbances to economic activity which are reflected in a steep decline in gross domestic product and have a significant impact on employment, social conditions, poverty and inequalities’.Footnote ³⁵ The constitutional justification of the NGEU framework laid bare debates, old and new, on the flexibility of Treaty rules as well as the accountability mechanisms embedded in this exceptional, and at present temporary, experiment. These developments, then, inevitably invite us to consider how best to ensure that decision-makers meet their duty to deliver the common interest, ensuring that all EU citizens can demand so under equal conditions.

I.2 The Argument

Accountability has been the object of legal and political science research alike. In both, accountability was conceptualised predominantly as a procedural mechanism, relying on the principal–agent model.Footnote ³⁶ This model takes different shapes. First, political accountability relies on representative institutions that are obliged to deliver the mandate given by their constituents and suffer political loss in the next election cycle should they fail to make good on their promises. Legal accountability rests, by contrast, on the ability of citizens to seek courts to review the actions of the legislator, the administration, and the executive in the exercise of their tasks. Finally, it is important to add administrative accountability, whereby specialist bodies, through their knowledge, authority, and publicity, exert other types of pressure on the actor to deliver sound policy within the exercise of its mandate.Footnote ³⁷ These varieties of accountability can be exercised either on procedural or substantive grounds.

Most famously expressed by Bovens,Footnote ³⁸ a procedural concept of accountability leaves out any reference to normative content but rather focuses on a procedural checklist. Once met, it means that the agent has been held accountable in one way or another by the principal. While useful in terms of generalisability, Bovens’s and similar procedural frameworks may be misused by decision-makers and reduced to a box ticking exercise.Footnote ³⁹ They fail to capture conceptually and structurally diverse relationships of any given polity and cannot be used as a Procrustean bed to accommodate the diverse world of supranational governance. Substantive accountability, by contrast, surpasses a mere evaluation of the process that led to a certain decision, focusing instead on its content and compliance with the mandate conferred by the principal on the agent.Footnote ⁴⁰ Attempts at substantive conceptualisations of accountability, however, focus predominantly on the nation-state as the role model. For example, legal accountability introduced by OliverFootnote ⁴¹ has been used as a basis for further research of accountability and legitimacy in the EU.Footnote ⁴² Yet, the EU has famously created an institutional system that often sits uneasily with these categories.Footnote ⁴³ For example, it is difficult to locate the principal of the ECB, given that its Treaty-granted mandate and independence escape any meaningful control.

In an attempt to address this gap in the study of legal accountability beyond the state, this book brings together works from sociology and philosophy in order to move beyond the principal–agent relationship as the determinant characteristicFootnote ⁴⁴ of approaches that theorise accountability across the social sciences.Footnote ⁴⁵ In addition, I argue that we should abandon the formal reading of equality of states that pervades the intergovernmental logic of supranational polities by arguing instead for a substantive reading of equality. To achieve this, adding solidarity to the mix is indispensable. The two principles will then be brought together to offer a theory of accountability beyond the state, where instead of being marked by a clear representational relationship between the principal and the agent,Footnote ⁴⁶ accountability is achieved by decision-makers acting in the common interest of all citizens. Such a normative approach regards accountability as a virtue in itself, rather than as a pure responsiveness mechanism.Footnote ⁴⁷

An attempt to conceptualise legal accountability through political equality of citizens will provide a basis for further study into legal accountability in transnational contexts. I will approach this under-researched topic from a more general perspective of constitutionalism beyond the state.Footnote ⁴⁸ At the moment, legal accounts of post-crisis EMU governance focus on the institutional context and analyse accountability as imagined in the nation-state.Footnote ⁴⁹ This book will offer an original conceptualisation of legal accountability, while addressing the idiosyncrasies of EU post-crisis economic governance. My emphasis on legal accountability will shed new light on the individual, an approach currently missing in the literature.

What about other forms of accountability? I do not argue that legal accountability is the only route that would guarantee that decision-makers act towards achieving the common interest. I also do not consider that courts are the platform for democratic deliberation and participation, and they cannot provide legitimacy to decisions taken in democratically deficient procedures. Instead, focusing on courts is based on two ideas. First, by focusing on the common interest that underpins all Union action, they are able to provide remedies to affected individuals through the award of damages or annulment of decisions that depart from values underpinning the common interest. Their second important function is creating legitimate expectations not only for individuals but also for decision-makers. By insisting on a high duty of care and an extensive obligation of giving reasons in line with the common interest, courts can, to a certain extent, shape the behaviour of decision-makers in the future.

While political and administrative mechanisms constitute essential components of accountability, they remain outside the scope of this book for two reasons. First, political accountability in the EMU post-crisis has been extensively researched and yielded important contributions that pertain more generally to research on the empowerment of the European Parliament and national parliaments.Footnote ⁵⁰ By contrast, the literature on legal accountability in the EMU, in particular post-crisis, is less about theorising accountability in a supranational context and more about analysing the quality of judicial involvement using traditional nation-state benchmarks of accountability.Footnote ⁵¹ This book thus aims to contribute to our understanding of legal accountability from a novel perspective.

The second reason for narrowing the focus to legal accountability is the exceptionally court-centred nature of the EU’s functioning. The central role of the Court of Justice in the development of the EU’s constitution and the contestation of that authority by national courtsFootnote ⁵² makes courts crucial accountability actors, especially given that they are the only institution that provides direct access to individuals. Coupled with the low democratic legitimacy of EMU decisions in the political sphere, where the individual lacks space for expressing her preferences, courts are the institutions capable of providing that space. Having said that, whenever other forms of accountability intersect with legal accountability, this will be acknowledged and addressed.

With this starting position, my aim will be to determine the position of the individual and her ability to make use of existing routes of legal accountability in the EMU post-crisis through a novel approach to legal accountability. I argue that the current institutional set-up of EU economic governance, and specifically the idiosyncratic legal nature of anti-crisis mechanisms, caused political inequality between EU citizens. The design of anti-crisis mechanisms is premised on the principle of equality of Member States and is heavily anchored in conditionality. However, this creates disparities among EU citizens in terms of their influence on the decision-making process and access to accountability mechanisms: first, given the decreased ability to use accountability mechanisms at the EU level, and second, due to the variety of accountability mechanisms at the national level. In that sense, the book will answer the question: what is the influence of the individual in holding decision-makers in EU economic governance to account through judicial review?

In addition, the book aims to propose a framework of legal accountability for EU’s economic governance that reasserts the centrality of the individual in its institutional framework. As will be argued, the equal ability of all EU citizens to access mechanisms of legal accountability and hold decision-makers in the EMU accountable can be achieved through a balanced application of the principles of equality and solidarity. On this view, accountability is the glue that ties the public institution to the common interest. To achieve it, these institutions have a duty to maintain a balance between the principles of equality and solidarity. Seen in this way, all institutions are under an obligation to consider the interests involved and balance them in a way that best serves the common interest. This approach moves beyond the constraints of the nation-state and lends itself to multilevel polities beyond the state, where traditional routes of legitimation are more difficult to identify in a straightforward manner. To reimagine legal accountability in this way, I put forward a normative proposal concerning the relationship between equality and solidarity of political units, with the aim of achieving the equality of every person in pursuing the common interest.

I further argue that courts are and should be the institutions where individuals enforce the duty of policymakers to act in the common interest. The EMU is an area characterised by high redistributive effects coupled with a wide discretion on the part of decision-makers. Under these conditions, courts are, unlike political institutions, in the perfect position to ensure that such decisions meet the Treaty-entrenched objectives in the common interest.Footnote ⁵³ To do so successfully, I claim that judicial review of decisions in the EMU entails two duties. First, the starting point for courts must be an assumption of a full review, which is an expression of their duty to safeguard the common interest, as expressed in the Treaties and in the norm granting competence to the decision-maker in question. Second, the decision-makers for their part have an extensive duty of giving reasons for their decisions and thus put to the court the arguments on the nature of their discretion and how they used it. In this way, courts become the public platform for discussing the extent of the power given to an institution and deciding on the way it has contributed to the common interest.

In every case that comes before a court, the presumption should be that it is to perform a high standard of review. This includes an intensive examination of all the factual, legal, and political considerations that went into reaching the decision under review. Decisions in the EMU carry high redistributive effects, which should be an important concern in judicial scrutiny. By the same token, the legitimacy structure behind the granting of discretion to the decision-making body is relevant: what limitations and conditions are attached to the granting of discretion and what accountability duties in other spheres (e.g., political and administrative) were or are in store for the decision-maker. The burden then shifts to the parties to demonstrate not only who should win the case, but also, preliminarily, what the appropriate standard of review and all the necessary evidence should be. I propose that the parties in the litigation carry the responsibility to present a rich evidentiary basis that is to serve as ammunition aimed at endorsing or rebutting the presumption of full judicial review. This judicial activity should be shared between national and EU courts, as is done in other areas of EU law. How this book will reach these conclusions is what I turn to next.

I.3 Structure of the Book

The central concern of this book is determining how individuals can hold decision-makers in the EMU to account before EU and national courts. In addressing the problems presented in this introduction, the analysis in this book will embark on an expedition across theory (Chapters 1 and 2), practice (Chapters 3–5), and back – to reach its destination with conclusions on what sort of legal accountability is necessary to achieve political equality of citizens in the EMU (Conclusion and Epilogue). To achieve this, the book will look at three case studies in EU economic governance during and after the crisis: the financial assistance mechanisms; the monetary policy mechanisms of the ECB; and the Single Supervisory Mechanism (SSM). These case studies capture diverse contexts of post-crisis economic governance: the ESM operates outside the legal framework of EU law and operates on the basis of strict conditionality; monetary policy, on the one hand, and the SSM, on the other, represent distinct roles of the ECB. In the following passages, I will present how this journey will play out.

In Chapter 1, I present the theoretical framework of legal accountability grounded in the common interest, ensuring the political equality of citizens in their ability to hold decision-makers to account. This framework will draw on sociological and philosophical approaches to solidarity and the cosmopolitan literature on equality, to present a conceptual understanding of political equality of citizens. The framework put forward is based on an equilibrium between the principles of solidarity and equality that better provides for the political equality of citizens. I then apply this normative framework to the EMU, addressing more specifically the ways in which courts can contribute to the political equality of citizens through procedural and substantive routes.

Chapter 2 zooms in on theorising judicial review in the EMU. I first turn to the most problematic examples of non-accountable decision-making that recently took place in the EMU. The purpose here is to offer a sneak-peek preview of what went wrong, how (the lack of) judicial review contributed to this problem, and why traditional arguments against judicial review do not work in this context. Next, I theorise the role of courts in respect of executive discretion more generally, to move away from seeing courts as undemocratic institutions, most notably drawing on the work of Dworkin and Ely. On this basis, I present a framework of judicial review, placed in the context of the EMU. This chapter also proposes a division of labour between national and EU courts by advancing an argument for their closer cooperation and the management of their possible conflict.

Moving to the empirical part of the book, Chapter 3 analyses in detail the practice of legal accountability in respect of financial assistance mechanisms during the Euro crisis. After a brief description of financial assistance measures, I present how judicial review of the ESM and the resulting Memoranda of Understanding took place before national and EU courts. In both these levels of analysis, I focus on the procedural (access and remedies) and substantive aspects (interpretation of equality and solidarity) of the existing case law. This chapter closes with a reflection upon the influence that judicial interactions between EU and national courts have on the improvement of legal accountability in financial assistance.

Chapter 4 turns to the ECB in its conduct of monetary policy. In the first step, I present the legal framework of monetary policy within the system of the European System of Central Banks and explain in more detail the quantitative easing programmes of the ECB. Here, I also provide a summary of the back-and-forth litigation on the limits to monetary policy between the Court of Justice and the Bundesverfassungsgericht (in Gauweiler and Weiss). Against this backdrop, I conduct a further in-depth analysis of these decisions. Both these sections follow the same structure: they focus, first, on access to courts and remedies, and second, on the ways in which the courts under analysis approached the principles of equality and solidarity for the purposes of achieving the common interest. The last section is concerned with judicial interactions between EU and national courts and the role these play in the legal accountability of the ECB.

Chapter 5, the last one with an empirical approach, deals with the SSM. It presents the legal framework of the SSM and the solutions chosen for its organisation and operation. This exercise both aids our reading of the case law to come and highlights several accountability distortions that are problematic for the political equality of citizens. I then focus on judicial review concerning the SSM before EU courts and repeat this exercise in respect of national courts. I follow the approach taken in the previous two case studies by looking at how the courts have approached questions of access, remedies, and any possible interpretation of the principles of equality and solidarity. This chapter closes by again reflecting upon the role that judicial interactions play in delivering accountability within the SSM.

The Conclusion of the book then joins the theoretical propositions from the first two chapters with the empirical findings in Chapters 3–5. It is here that an assessment is made of how legal accountability has so far been able to ensure that decision-makers in the EMU are held to account by politically equal citizens. Turning to the future, the Conclusion makes proposals on how the theory of legal accountability from Chapters 1 and 2 can be meaningfully achieved. The book ends with an Epilogue that looks into the future: still in its infancy, the NGEU is the perfect guinea pig for testing my theoretical propositions, taking into account the lessons learned throughout the case studies. The Epilogue starts by presenting the legal framework of the NGEU and the way it has been grounded in the Treaties. I then turn to the used and possible avenues of judicial review before national and EU courts, to close the book with some final thoughts on what awaits individuals when holding the decision-makers in the EMU to account before courts.