Paradise Lost: Can the European Union Expel Countries from the Eurozone?

By Dammann, Jens | Vanderbilt Journal of Transnational Law, May 2016 | Go to article overview

Paradise Lost: Can the European Union Expel Countries from the Eurozone?


Dammann, Jens, Vanderbilt Journal of Transnational Law


ABSTRACT

There was a time, not too long ago, when the introduction of the euro was hailed as a tremendous success. Yet the Eurozone now faces an existential crisis. A number of member states have, since 2008, been prevented from defaulting on their sovereign debt only by massive bailouts. Greece has teetered on the verge of insolvency for years despite repeated such measures.

Many observers now belieue that Greece should stay in the European Union but leave the Eurozone, a scenario often referred to as the "Grexit." This would allow Greece to devalue its currency and thereby render its economy more competitive. But just as crucially, from the perspective of Greece's sharpest critics, a Grexit would rid the Eurozone of a member state that may no longer be willing to abide by the Eurozone's austerity-oriented economic policies, which aim at limiting budget deficits and government debt even in times of economic distress. The current Greek government is adamantly opposed to leaving the Eurozone, but this has not put an end to the debate. Rather, a growing chorus of politicians and pundits now argue that Greece should be expelled from the Eurozone.

Of course, this demand raises a fundamental legal question: Is it possible--and should it be--to terminate a country's membership in the Eurozone without that country's consent? This Article argues that in narrowly defined circumstances, a right to expel countries from the Eurozone not only is desirable as a matter of legal policy but also deserves recognition as a matter of black letter law. However, this Article also shows that such an expulsion has to remain an ultima ratio. As of now, Greece does not even come close to satisfying its conditions.

TABLE OF CONTENTS

I.   INTRODUCTION
II.  BACKGROUND
III. LEAVING THE EUROZONE WITHOUT BEING
     EXPELLED
     A. Exit by Treaty Amendment
     B. Withdrawal from the European Union
     C. Withdrawal from the Eurozone
IV.  EXPULSION
     A. The Vienna Convention on the Law
        of Treaties
        1. Applicability
        2. A Fundamental Change in
           Circumstances?
        3. Consequences of a Fundamental
           Change in Circumstances
     B. Suspension Clause.
        1. A Violation of Fundamental
           Values
        2. Expulsion as a Suspension of
           Rights?
     C. The Case for an Unwritten Expulsion
        Remedy
        1. Doctrinal Concerns
           a. Complexity
           b. The Irrevocable Fixing of
              Exchange Rates
           c. The Irreversible Move to the
              Third State of the Monetary
              Union
           d. Penalizing Citizens
           e. The Existence of an
              Exhaustive Regime of
              Sanctions
           f. The Rules on Treaty
              Amendments
        2. Expulsion as a Matter of Legal
           Policy
           a. The Standard Case
           b. The Extreme Case
           c. When Should the Expulsion
              Remedy be Available?
           d. Procedural Safeguards
           e. What about Greece?
V.   CONCLUSION

I. INTRODUCTION

A scenario in which the U.S. government forced one of the fifty states or the District of Columbia to abandon the dollar would plainly be ridiculous. Yet transposed across the Atlantic, where nineteen member states of the European Union now form the Eurozone, such a scenario elicits a mixed response.

The European Commission has traditionally taken the view that no country can or should be forced out of the Eurozone. (1) Those few authors in the legal literature who have addressed the question have generally shared this position. (2) However, at least as a matter of legal policy, this approach is no longer uncontested. German Chancellor Angela Merkel, viewed by many as Europe's most powerful head of state and de facto leader, (3) has made it plain that she believes membership in the Eurozone ought to be contingent on good behavior: in Merkel's view, a member state that persistently breaches the rules governing the Eurozone should be subject to expulsion. …

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