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Treaty of the European Union and Basel III Reforms

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Abstract: First I give a brief overview of Article 107 of the Treaty of the EU(TEU). Next, I give a summation of the issues which have come up for the EU in the last decade which have affected state aid, and the guarantees inherent in the Treaty of the EU. These include the Greek Debt Crisis, as well as extraterritorial measures which have been taken an order to further enhance the quality, and characteristics of the EU Charter. Special consideration is given to Basel III reforms, as well as interterritorial EU regulations enacted since.

In the Treaty of the European Union (TEU) there falls Common Article 107. In this article of the European Union Treaty there is the express exclusion of any outside aid to states which may distort, or manipulate, the common cultural, and trade union established within the main text of the European Union Treaty. The text in Article 107 then goes on to explain the types of aid which shall be available to the E.U. Common Market. Thus included: aid having a social character for individual consumers, aid excepted due to natural disasters, and aid granted to the Federal Republic of Germany, or any of its cohorts. It then details a listing of the types of aid which may be seen as compatible with the common market. These are to include: aid which promotes economic development, or an increase in the standard of living, in countries and regions deemed as being underdeveloped, or in need of structural, economic, or social development. Aid to promote the common interest of Europe or to remedy a social disturbance, Aid to promote cultural heritage or conservation. Aid for the facilitating of economic activities or economic areas. As well as any other type of aid which may be forthcoming as specified by a decision of the E.U. Council, or the E.U. Commission.

Article 107 of the European Union Treaty is at the heart, as well as the periphery of several well defined attitudinal Fiscal, as well as Monetary measures which the European Union has pursued in recent years. Following the 2008 Financial Crisis and Worldwide recession, the contours, shape, and character of the European Union’s existence began to be questioned. This was after all one of the largest common markets ever to be created, after NAFTA. The main disagreements about the future of the European Union rested upon what have become issues of great importance. One, was the misbalancing of aide which was available to member states immediately after the crisis, and the perceived monopoly on talent, as well as physical resources and infrastructure which Western European countries were alleged to have “cornered” in the single currency market. As well as the debate over the Greek financial crisis, and the subsequent bailout for Greece, so that it could remain a part of the E.U. These perceived structural flaws, and also the domination of France, Germany, and the U.K. in any bailout negotiations, caused much consternation, and friction amongst fellow E.U. member states, as well as Eurozone, and potential E.U. member states. Then there was the perceived mismanagement of the accession to the E.U. of several Eastern European states, and the rolling out of the Euro to those states which began to rankle some feathers. These problems were only exacerbated by the financial crisis, as well as upheavals in Brussels, the base of operations of the E.U., which was perceived as being too detached from the everyday lives of the E.U. citizens which it was allegedly beholden too. Throughout all of this, the Greek Debt Crisis, the Financial Crisis, accession talks, as well as the perceived structural flaws, was the fact that these institutions which the foundations of Europe rested upon; The Lisbon Treaty, Schengen, the Treaty of the European Union, the Common Currency, and single market; was the fact that these agreements had only been codified into law and implemented in the last decade or so. There was talk of the invoking of Common Article 7 of the E.U. Treaty (TEU), which would have suspended membership rights of certain member states, thus dealing a blow to the E.U. overall.

These were for all intents and purposes, some of the most trying times Europe had ever seen since the Post-War, Post-Cold War era, and yet there was more. The United States was currently engaged in conflicts around the world in GWOT, or the Global War on Terror. These wars, which were in large part a by-product of the attacks on September 11th, were beginning to become financially all consuming, for not only for the United States, but also, in the case of Iraq, Afghanistan, as well as the ISAF, or International Security Assistance Force, for European governments as well. These fissures in international treaties amongst stakeholders, were present not only in the period immediately during, and following the 2008 Financial Crisis, but also in the years leading up to it. These were heady times for Europe indeed.

However, what was not missing were the Western Institutions which made up these treaty obligations in the first place, namely; Rule of Law, Safe Access to the Seas, Liberal Humanistic Traditions, Liberal Economics, Liberal International Traditions, as well as Europe itself. Some of these laws, institutions, and ideas which had been around since before the Romans, may have been shaken, but they were built on sturdy foundations, and though the Common Articles of the Adopted Treaty of Europe were foundational, they were merely a touchstone when viewed through the long lens of European history. And so, though these were difficult times for Europe, this was not a situation altogether foreign to them, and they had been through far worse, with far less, in other words, the E.U. would survive.

This was the case with the further ratification by the E.U. and its member states of the Toledo Protocols. These protocols which are referred to now as the Basel III reforms, were in part spearheaded by the European Union, which were authorized under Common Article 107, as well as the Establishment, and Standard Procedure Clauses of the Charter of the European Union Treaty. These reforms, which were immediately put into practice at Banks, and Financial Institutions around the World, provided for a common language which the Banks, and Governments could have an order to assess risk, as well as the expansion of ratio reserve requirements. There were treaty obligations standardizing an approach to rating credit risk of individuals, and Institutions. There were new Internal Ratings Benchmarks (IRB’s) which were set. New Valuation Risk Frameworks, Operational, as well as Leverage Ratios which were now implemented. As well as output floors and ceilings, along with transitional arrangements meant to smooth the implementation of new rules. These reforms, which The European Union was able to negotiate and ratify for all treaty bound E.U. states, fall under the Standard Procedure Clauses, of the European Union, Which Common Article 107 falls under, and were immediately adopted by the E.U., as well as the Eurozone making them amongst some of the earliest adopters of this international treaty, and providing durable, and stable foundations for the European Union, in the immediate wake, and aftermath of the 2008 Global Recession. All of this was going on in addition to a number of reforms in the Tax Code of the European Ruling, including reforms to the Parent-Subsidiary Rules. These reforms which elaborated upon General Anti-Abuse Measures, Minimum Holding Requirements, as well as a rearrangement of Hybrid Loan Schemes, have become part of the bedrock of the European Union Treaty Laws governing State Aid, and Taxation.   This comeuppance was much needed by the Bureaucrats back in Brussels and other European Capitals and would serve as a guidepost, and imprimatur for not only what the European Union is capable of, but also, so much more which it is capable of transcending to.

Article 107 which enumerates the specificity of aid for E.U. countries is an integral part of the TEU. It’s whole is part of the broader so-called Standard Procedure Clauses which make up the bulk of the E.U.’s governing powers and authorities. This clause is integral to any decision making in the European Union, as elaborated upon earlier in my essay. The European Union is a major decision maker not only with regards to the continent of Europe, but also as concerns the global reach, and global regard which Europe, and the E.U. see within themselves. While the most troubling crisis of the E.U. experiment have receded, there is still yet more to be done. And while there remains E.U.-United States friction over the overall direction of the E.U. this much is true, that the E.U. is a force for change, and good in the World, and the stated goals and objectives of this nascent organization represent some of the most noble, and highest attainments of mankind, and humanity that we have ever witnessed.