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The Constitutional Performance of Austerity in Portugal

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The aim of this chapter is to analyze how a specific constitutional regime dealt with an impending financial emergency. To assess the constitution’s constraining effects on the legislator’s margin of choice within an economic crisis, we will focus on the Portuguese constitutional case law that has reviewed austerity measures. For this purpose, we define “austerity legislation” as law that was adopted to cope with budgetary deficit reduction following the great recession and that affects individual rights and freedoms. We begin by briefly describing the domestic and international events that lead to the adoption of several packages of austerity and the formal financial rescue program. In section III, we go through the crisis constitutional case law. The Portuguese Constitutional Court (CC) has dealt with financial emergencies since its early days. After reviewing that initial jurisprudence, we analyze the case law on austerity which comprises not only legislation enacted before the bailout, but also the policies required by the formal program.
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constitutions in times of financial crisis
Many constitutions include provisions intended to limit the discretion of governments in
economic policy. In times of financial crises, such provisions often come under pressure
as a result of calls for exceptional responses to crisis situations. This volume assesses the
ability of constitutional orders all over the world to cope with financial crises, and the
demands for emergency powers that typically accompany them. Bringing together
a variety of perspectives from legal scholars, economists, and political scientists, this
volume traces the long-run implications of financial crises for constitutional order.
In exploring the theoretical and practical problems raised by the constitutionalization
of economic policy during times of severe crisis, this volume showcases an array of
constitutional design options and the ways they channel governmental responses to
emergency.
Tom Ginsburg is Leo Spitz Professor of International Law and Professor of Political
Science at the University of Chicago Law School.
Mark D. Rosen is University Distinguished Professor at Chicago-Kent College of Law,
Illinois Institute of Technology.
Georg Vanberg is Professor of Political Science and Law, and current Chair of the
Department of Political Science at Duke University.
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Constitutions in Times of Financial
Crisis
Edited by
TOM GINSBURG
University of Chicago
MARK D. ROSEN
Chicago-Kent College of Law, Illinois Institute of Technology
GEORG VANBERG
Duke University
Cambridge University Press
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Edited by Tom Ginsburg , Mark D. Rosen , Georg Vanberg
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DOI:10.1017/9781108679404
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names: Ginsburg, Tom, editor. | Rosen, Mark D., editor. | Vanberg, Georg, 1971– editor.
title: Constitutions in times of financial crisis / edited Tom Ginsburg, University of
Chicago; Mark D. Rosen, Illinois Institute of Technology; Georg Vanberg, Duke
University, North Carolina.
description: New York : Cambridge University Press, 2019. | Series: Comparative
constitutional law and policy | Includes bibliographical references and index.
id en ti fie rs : l cc n 2019003484 |isbn 9781108492294 (hardback)
subjects: lcsh: War and emergency legislation. | Financial crises – Government
policy. | Global Financial Crisis, 20082009. | BISAC: LAW / Constitutional.
cl as si fic at io n: lc c k 4700 .c665 2019 |ddc 342.009/0511–dc23
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Contents
List of Contributors page vii
Foreword
Gonc¸alo Saraiva Matias ix
i. the role of constitutions in dealing with crises 1
1. Introduction: Liberal Constitutions During Financial Crises
Tom Ginsburg, Mark D. Rosen, and Georg Vanberg
3
2. Financial Emergencies
John Ferejohn
18
3. Rule-of-Law Objections to the Lender of Last Resort
Eric A. Posner
39
4. Balanced Budget Provisions in Constitutions
Tom Ginsburg
58
5. Legislatures and Constitutions in Times of Severe Financial Crisis
Mark D. Rosen
71
ii. courts and crises 93
6. The Place of Economic Crisis in American Constitutional Law:
The Great Depression as a Case Study
Barry Cushman
95
7. Financial Crises and Constitutional Compromise
Georg Vanberg and Mitu Gulati
117
v
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8. Commitment for Cowards: Why the Judicialization of Austerity
Is Bad Policy and Even Worse Politics
R. Daniel Kelemen
146
9. Protecting Fundamental Rights During Financial Crisis:
Supranational Adjudication in the Council of Europe
Eva Brems
163
iii. supranational governance and crisis 185
10. Constitutionalism as Limitation and License: Crisis Governance
in the European Union
Turkuler Isiksel
187
11. The Institutional Origins of Europe’s Constitutional Crises:
Grexit, Brexit and the EU Form of Government
Federico Fabbrini
204
iv. implementing austerity 227
12. The Constitutional Performance of Austerity in Portugal
Teresa Violante and Patrı
´cia Andre
´
229
13. Constitutional Resilience and Constitutional Failure in the
Face of Crisis: The Greek Case
Xenophon Contiades and Alkmene Fotiadou
261
v. the effect of crises on constitutions 283
14. Economic Crises, Political Fragmentation, and Constitutional
Choice: The Agenda-Setting Power of Presidents in Latin America
Gabriel L. Negretto
285
15. Constitutions, Crisis, and Regime Change: Perspectives on
East and Southeast Asia
Bjo
¨rn Dressel
305
Index 327
vi Contents
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Contributors
Patrı
´cia Andre
´is a researcher at CEDIS–NOVA Law School and DINAMIA’CET
–IUL.
Eva Brems is Professor of Law, Ghent University.
Xenophon Contiades is Professor of Public Law, Panteion University of Social and
Political Sciences; Managing Director, Centre for European Constitutional Law.
Barry Cushman is the John P. Murphy Foundation Professor of Law, and
Concurrent Professor of Political Science and History, University of Notre Dame.
Bjo
¨rn Dressel is Associate Professor, Crawford School of Public Policy, Australian
National University.
Federico Fabbrini is Full Professor of EU Law, School of Law & Government,
Dublin City University and Director of the DCU Brexit Institute.
John Ferejohn is Samuel Tilden Professor of Law, New York University.
Alkmene Fotiadou is Dr.iur. and a research associate, Centre for European
Constitutional Law.
Tom Ginsburg is the Leo Spitz Professor of International Law and Ludwig and
Hilda Wolf Research Scholar, University of Chicago Law School, and Research
Professor at the American Bar Foundation.
Mitu Gulati is Professor of Law, Duke University.
Turkuler Isiksel is the James P. Shenton Associate Professor of the Core
Curriculum, Columbia University.
R. Daniel Kelemen is Professor of Political Science and Law, Rutgers University.
Gonc¸alo Saraiva Matias is a member of the Board and Director of Research at the
Francisco Manuel dos Santos Foundation, Lisbon.
vii
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Gabriel L. Negretto is Associate Professor, Division of Political Studies, CIDE.
Eric A. Posner is Kirkland and Ellis Distinguished Service Professor, University of
Chicago Law School.
Mark D. Rosen is University Distinguished Professor of Law, Chicago-Kent College
of Law, Illinois Institute of Technology.
Georg Vanberg is Professor of Political Science, Duke University.
Teresa Violante is a research fellow at the Goethe-University Frankfurt a.M. and
visiting research fellow at the Max Planck Institute for Comparative Public Law and
International Law (Heidelberg).
viii List of Contributors
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Foreword
It is well known that the world financial crisis of 2007 and 2008 posed several
challenges to the constitutions of the affected countries. These challenges were
faced not only by countries which were directly affected and had to implement
austerity measures, but also by countries whose economies were compelled to rescue
others from the economic turmoil. This was particularly evident in Europe. Europe
became, in this sense, a constitutional laboratory, given the effects of the financial
crisis on economies, especially on the sovereign debt markets, on public finance,
and ultimately, on the ability of governments to sustain the welfare state.
Constitutions might be prepared to respond to emergencies, but often the relevant
provisions were drafted to deal with major catastrophes, or acts of war, and focus on
the suspension of rights. In the context of the financial crisis, governments and courts
felt reluctant to use concepts that were designed for very different purposes.
Furthermore, the global nature of the crisis undermined the traditional local
constitutional responses. Protectionism and legal parochialism could not isolate
states from the impact and spillover effects of a crisis that originated transnationally.
One of the first reactions was for countries to distance themselves from those
contaminated: ‘We are not Greece, we are not Ireland, we are not Portugal’ were
expressions often used until they became useless. It was clear that the crisis had
a potential to affect us all, even those not directly harmed by it. Again, in the context
of the European Union – and because of the eurozone, the impact on the euro, and
the absence of a common European debt sovereign market – those spillover effects
were much more evident.
Not only were governments not prepared for the necessity – or perhaps inevit-
ability – of this cross-national dialogue, but courts were even less prepared for it. This
does not mean that courts did not incorporate international or comparative elements
in their decisions, but they were probably unable to fully consider the cross-border
effects of adjudication in their decisions.
An example of that impact was the jurisprudence of the Portuguese
Constitutional Court on the reduction of pensions and salaries, at the same time
that the German Constitutional Court was adjudicating decisions on the Outright
ix
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Monetary Transactions (OMT) program announced by the European Central
Bank. At least psychologically, the OMT program would enhance the likelihood
that Portugal could return to the markets and eventually pay the pensions and
salaries that the government was cutting, as it later happened. Deeply intertwined
decisions, with direct impact on one another, were taken as if they were totally
independent. In that sense, the German Constitutional Court was wise enough to
defer the case to the Court of Justice of the European Union, thus at least acknowl-
edging the due relevance of the application of European law. In any event, it seems
clear that little or no inter-court dialogue was undertaken at the time.
Awareness of constitutional constraints was also limited. This is not to say that the
drafters of the austerity programs, especially those negotiated with the European
Union and the IMF, ignored the constitutional risks of such programs. But these
risks became more evident as the programs were implemented and sometimes
amended. It is possible that the designers were not aware of the risks to the extent
of acknowledging that they could jeopardize the programs as a whole, and thus the
stability of the neighboring countries.
Again, this was the case with Portugal, where several regular evaluations nearly
failed due to legislative measures rejected by the Constitutional Court. Only in
extremis decisions by the government and parliament enabled the country to comply
with international demands.
Fundamental constitutional concepts such as sovereignty, fiscal autonomy,
human rights, and the welfare state were disputed during the crisis. Of course, to
discuss these concepts in the first place, a country must have sound finances and
financial independence. The discussion alternated between those who claimed that
a country could only be independent with financial stability, and those who argued
that sovereignty was lost from the moment a state asked for international rescue, and
accepted the implementation of an austerity program. Perhaps there was a need for
a middle ground between these positions, simply recognizing the inevitable impact
of sovereign decisions from one state to another, and thus the need for supranational
regulation and harmonization.
***
Portugal was deeply affected by the financial crisis, having undergone a very harsh
adjustment program, from which it has now been able to recover completely, having
returned to the sovereign debt markets in an autonomous fashion. In that way, it can
be pointed to as an example of success. But the Portuguese people suffered greatly
along the way, so we must all learn from the past, not only from the achievements,
but also from the difficulties.
The mission of the Francisco Manuel dos Santos Foundation is to promote and
improve knowledge about Portuguese reality, thereby contributing to the develop-
ment of society, the consolidation of citizens’ rights and the improvement of public
institutions. By supporting the publication of this book, the Foundation advances
xForeword
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one of its goals. Not only does the book dedicate a chapter to the constitutional
performance of austerity in Portugal, but it also allows for a contextualization of the
constitutional reaction to the crisis in a broader sense, analyzing several aspects of its
impact, through very thorough research and extremely interesting taxonomies.
I hope the book will become a reference work of the field for many years to come,
so that it will help us all to better prepare for the constitutional impact of future
crises. If nothing else, it will contribute to open, free and informed debate, which is
so much needed in an age of toxic and fake news. Promoting such a debate is, after
all, precisely the mission of the Francisco Manuel dos Santos Foundation, and we
are pleased to present this volume.
Gonc¸alo Saraiva Matias
Foreword xi
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Article
Full-text available
The 2008 financial crisis reflected on the realization of several social rights that were severely affected by the austerity measures adopted by the Europeans countries. Such measures were taken tothe appreciation of the Constitutional Courts. Observing the case law of the period, the article aims to investigate whether the Courts of Italy, Spain and Portugal, decisions contributed to endorse the austerity measures adopted in declaring the constitutionality of the rules that establish austerity policies. The hypothesis raised is that this judicialization movement aimed to legitimize these public policies, which are often considered unpopular.
Article
The European Union’s response to the crisis of Economic and Monetary Union (EMU) has been met with intense criticism. Critics highlight that both the reforms of the EMU legal framework and national austerity measures implemented under Memoranda of Understanding have limited national governments’ discretion in shaping national policies to an unprecedented degree. National actors in many member states therefore challenged EMU crisis response before national courts. While courts are considered reluctant to interfere with momentous legislative decisions, especially in a sensitive field like that of budgetary and fiscal rules, some judgments did indeed strike down individual crisis measures. The EMU case therefore allows us to better understand court behaviour in times of economic crises. Drawing on the literature on courts as veto players, the article analyses when, and under what conditions, national constitutional courts exercise their veto powers in the constitutional review of EMU reforms.
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