How the financial crisis has affected constitutions

–Dr. Alkmene Fotiadou, Centre for European Constitutional Law (Athens, Greece)

In the comparative chapter of the book Constitutions in the Global Financial Crisis by Xenophon Contiades (ed.), we attempted to trace how the financial crisis impacted formal and informal constitutional change based on data and analysis provided in the book by constitutional scholars from Greece, Hungary, Iceland, Ireland, Italy, Latvia, Portugal, Spain the UK and the USA. Four types of constitutional reaction towards the financial crisis were detected: adjustment, submission, breakdown and stamina, that is, constitutions confronted with the crisis either adjusted to the new circumstances, or became submissive but still went on living, or suffered breakdown under the strain, or managed to remain intact.¹ Criteria used for the assessment of constitutional reactions are the occurrence of formal constitutional change ranging from total revisions to modifications and adjustments, transformations of the party system, informal change brought about by novel judicial interpretations of the constitution, and changes in the functions of the constitution affecting constitutional normativity and constitutional faith.

Although no direct link seems to exist between constitutional endurance and financial crises,² constitutions have been deeply affected by the current crisis, which accelerated the pace of constitutional change, in the direction of the four aforementioned distinct paths. Adjustment to the requirements of the crisis takes place through the combination of formal and informal change, when the constitution evolves to keep up with developments so that it can continue to perform the functions it is designed to perform. Adjustment is a slow process marked by pragmatism, where the constitution is used as a tool to tackle the crisis. The UK, Ireland, Spain Italy and Latvia followed the path of adjustment and adaptation through a series of constitutional changes that allowed the constitution to retain its meaning and perhaps even strengthen its symbolic power.

Conversely, constitutions may become submissive to whatever the crisis demands, conveying the impression of being overcome although they continue to perform the task of providing the basic framework of the polity. The absence of formal change in combination with enormous lawmaker-driven informal change, often undermining constitutional normativity, erodes the functions of the constitution. While stringent formulas may contribute to constitutional inertia, it is also the stance of the judiciary that determines how the constitution is perceived by the people. In Greece and Portugal constitutional immobility in the face of major changes, occurring due to the financial crisis, express submission. Future constitutional revisions and changes in jurisprudence may come too late to reverse the initial reaction.

Constitutional breakdown corresponds to major reversals in all functions of the constitution. Financial crises may trigger or provide the context for constitutional replacement, total revision or establishment of a new constitutional order. What is of major importance is who decides on constitutional change, that is, whether the people themselves are responsible for it. Hungary and Iceland experienced different aspects of constitutional breakdown. A sequence of events correlated to the financial crisis and the creation of a ruling party supermajority led to a total change in the constitutional landscape in Hungary, which has become bleak. In Iceland the old Constitution lost its prestige through the much celebrated yet probably unsuccessful experiment in ‘crowd-sourcing’ the writing of a new Constitution, which was triggered by the crisis.

Constitutions demonstrate stamina if they prove able to respond to the demands of the crisis and yet remain intact. Nothing changes in the constitution and the relationship between state organs remains the same. In the United States problems such as the debt-ceiling crisis and the bank bailouts were addressed within the unaltered constitutional framework.³ The Constitution went through the recession unscathed, since neither its normativity nor its symbolic meaning was compromised.

Because of the financial crisis, the vulnerabilities and strengths of each constitutional order surfaced as the executive, the legislature and the judiciary were challenged to redefine their role and operational scope. Narratives of constitutional reform emerged either leading to formal constitutional changes or to intense constitutional dialogue. More strikingly, crisis-induced legislation has led to a large amount of case-law addressing the permissibility of fundamental rights limitation in light of the financial emergency. Changes in the application of principles such as proportionality, equality, and legitimate expectations, through their adaptation to the crisis, will inevitably have far-reaching implications. The extensive analysis of the crisis case-law suggests that the scope of judicial self-restraint is being reassessed and the backlash against the crisis jurisprudence will have transnational impact, as courts in all crisis-hit legal orders are faced with similar dilemmas.

Beneath questions of constitutionality with regard to the infringement of constitutional rights lie changes in the manner in which the limitations are imposed. The remarkable acceleration in the pace of law-making has led to hastily drawn legislation. Moreover, fast-track legislation often corresponds to the increased use of decree laws, wherein the Parliament has limited opportunity for either elaboration or debate.

During the past few months, developments have confirmed the multifaceted effects of the financial crisis on constitutions. In Italy the most important budgetary reforms have been carried out through decree-laws. The practice employed is that such decree-laws are turned into legislation through votes of confidence, effectively ensuring their passage. In Spain, decree-laws are widely used for adopting urgent fiscal measures, whereas in Portugal limitations on the right to work and the right to health were imposed by decree-laws. In Greece the executive makes extensive use of Acts of Legislative Content that must be subsequently ratified by Parliament despite the constitutional dictate that they must only be employed under extraordinary circumstances of urgent and unforeseeable need. An even more striking deviation from normal law-making processes was the conversion into law of the third Memorandum of Understanding between Greece and its international lenders. Law 4093/2012 is composed of one single article 160 pages long, thus evading the constitutional process of debating and voting bills first in principle and then by article and as a whole.

As the financial crisis continues to unfold, it is challenging to verify the way in which each constitution responded to the crisis and to identify changes in the initial response. Recent developments in Iceland, Hungary, Greece, Portugal, Italy, Spain etc., are in line with the classification of countries in accordance to their response to the shock of the crisis. Still, every new constitutional amendment and every new judgment on the constitutionality of austerity measures entails the potential to surprise.

Suggested citation: Alkmene Fotiadou, How the Financial Crisis Has Affected Constitutions, Int’l J. Const. L. Blog, July 22, 2013, available at: http://www.iconnectblog.com/2013/07/how-the-financial-crisis-has-affected-constitutions/

Footnotes

1. X. Contiades/A.Fotiadou, “How Constitutions Reacted to the Financial Crisis”, in X. Contiades (ed.), Constitutions in the Global Financial Crisis: A Comparative Analysis (Ashgate 2013).
2. As suggested in Z. Elkins, T. Ginsburg, J. Melton, The Endurance of National Constitutions (Cambridge University Press 2009).
3. M.Tushnet, “The United States Constitution and the Great Recession”, in X. Condiades (ed.), op.cit., 287