An overview of legal aspects of risk sharing

Abstract

This paper discusses the legal and institutional aspects relating to risk-sharing mechanisms at EU level. For this purpose, an attempt will first be made to define a “risk-sharing mechanism” and the relevant legal framework, most notably the no bail-out clause included in Article 125 TFEU. Following this, the paper will discuss the core legal and institutional considerations relating to the European Stability Mechanism, prospects for euro-bonds and some variations of fiscal stabilisation mechanisms that have been presented in the discussion. In addition, the brief considers the June 2015 Five Presidents’ Report on Completing Europe's Economic and Monetary Union and the plans it presents for further risk-sharing among the Member States and some of the earlier proposals that have been discussed in this context, even if they have not been included in the Five Presidents’ Report. The brief places these proposals in a broader framework of legitimacy, accountability and “fairness”, which in the context of the recent EMU Reports have usually been approached as separate or additional considerations. The argument made here is, however, that a more stable EMU needs to be broadly experienced as legitimate and fair. Consequently, these questions should be addressed together, as key considerations relating to the broader framework of how decisions are made in the EMU.