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

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. Since 2008, a number of member states have 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 believe that Greece should stay in the European Union but leave the Eurozone, a scenario often referred to as “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 allow the Eurozone to throw out a member state that may no longer be willing to abide by the Eurozone’s austerity-oriented economic policies that aim to limit budget deficits and government debt even in times of economic distress. While the current Greek government is adamantly opposed to leaving the Eurozone, 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 argument 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?  My article “Paradise Lost: Can the European Union Expel Countries from the Eurozone?” analyzes this issue in depth.

As a matter of legal policy, I argue that there are compelling reasons not to take expulsion off the table entirely. In extreme situations, expelling member states from the Eurozone may be necessary in order to protect the functionality of the Eurozone or even the European Union. If a member state declares that it will permanently fail to obey the rules of the Eurozone, that it will ignore any judgments by the Court of Justice, and abstain from paying any fines, then the European Union has very limited options. Such a revolt risks setting in motion a chain reaction that could ultimately destroy the European Union’s legal order. Unlike the federal government in the United States, the European Commission does not have the option of sending federal troops to enforce federal law against recalcitrant states as, for example President Eisenhower did, to ensure the enforcement of a federal desegregation court order in Arkansas.  Theoretically, the European Union might end up suspending the member state’s rights under Article 7 of the EU Treaty. However, the procedural hurdles for invoking Article 7 are next to impossible to overcome, and some of the more obvious sanctions under that provision—such as suspending a member state’s voting rights in the Council—simply may not be all that effective. 

From a policy perspective, therefore, the real question is not whether the European Union should be allowed to expel member states from the Eurozone. Rather, the question is when such a right should exist. This question is more difficult than it may seem. The repeated violation of the rules governing the Eurozone may not suffice to justify a state’s expulsion. After all, frequent violations of EU law are hardly unusual. Even the fact that a member state openly refuses to follow the rules of the Eurozone may not be enough. Those familiar with EU law will recall that such acts of open defiance are hardly unheard of. Famous examples include France’s “empty chair policy” and Germany’s Solange I decision. The challenge, therefore, is to develop a better understanding of when an expulsion remedy should be available.

My article also argues that a right to expel member states from the Eurozone should be recognized as a matter of black letter law. Admittedly, the Vienna Convention on the Law of Treaties does not constitute a suitable basis for an expulsion right. There are good reasons to think that the Vienna Convention is not applicable to the problem at hand, and, even if it were, it would not provide a basis for expelling a member state from the Eurozone while keeping it in the European Union. Article 7 of the Treaty on European Union also fails to provide a sufficient basis for expulsion. Article 7 only allows the temporary suspension of rights. Moreover, it only concerns the suspension of rights, whereas a member state’s membership in the Eurozone comprises both rights and duties. In any case, the procedural hurdles for invoking Article 7 are so demanding that this provision is close to useless. However, I argue that the correct approach is to recognize an unwritten right of expulsion. To the extent that an expulsion right is necessary to preserve the functionality of the Treaty, its existence can be justified on teleological grounds. Those familiar with the history of European Union law will recall that the Court of Justice developed the doctrine of member state liability for violations of EU law in part because existing sanctions had proved insufficient. A similar argument can be made in the case at hand.

Jens Dammann is the William Stamps Farish Professor in Law at The University of Texas School of Law.