Legal Changes and Constitutional Adjudication in Portuguese Social Law in Consequence of the European Financial Crisis

Portugal was affected simultaneously by an economic, financial, and budgetary crisis. It is in this context that in 2011 the country signed an MoU on Specific Economic Policy Conditionality with the EU, the ECB, and the IMF, which prescribed cuts on social expenses in wages, pensions, and other benefits of an ‘assistentialist’ nature. The legal measures adopted in this respect focused mostly on the social security scheme and introduced changes in the legal framework for future pensions and unemployment benefits, new contributions for pensions in payment, and former non-contributory benefits, as well as cuts in pensions and benefits. Throughout the years, the President of the Republic, members of the parliament, and the Ombudsman have asked the Constitutional Court to assess many of the rules included in the State Budget Laws, arguing a violation of fundamental social rights and basic principles such as human dignity, equality, and the protection of legitimate expectations. This led to the issuance of new and important constitutional case law in Portugal, concerning mainly the assessment of legislative measures under the fundamental principles of legitimate expectations, proportionality, and ‘equal proportionality’.

The Financial Crisis as a Turning Point for Constitutional Rights Jurisprudence

In 2008, Ireland faced an economic crisis without parallel in its recent history. To address this crisis, a large programme of financial assistance was obtained from the European Union and the IMF, and the Irish government set about the process of reforming the structure and financing of social security benefits and the healthcare system to ameliorate the effects of the crisis. While much can be said about the legislative reforms, their rationale, necessity, and impact, this chapter addresses the legacy of the crisis on the Irish constitutional system and, particularly, on the Irish constitutional protection of social rights (or lack thereof). Following an analysis of the limited case law surrounding the reforms imposed during the economic crisis, it is contended that the economic crisis had the effect of highlighting the lack of explicit constitutional protection of social rights, a deficiency which in turn created an opportunity for the utilisation of other existing and emerging constitutional rights. While the future of social rights in the Irish Constitution is still unclear, it is evident that the economic crisis has left an indelible mark on the Irish constitutional landscape.

Introduction

The chapter introduces the aim of the book, its structure, and its relevance, including an overview of previously published works in the field. It emphasises a double-sided understanding of the constitution of welfare states by way of background to the book, which aims to provide, from a comparative perspective, a detailed analysis of crisis-driven changes in the nine EU Member States that were particularly affected by the financial crisis. As a basis for the subsequent country reports and comparative analysis, this introduction explains different forms and functions of social protection and different dimensions and levels of human rights protection, as well as detailing the time and place of investigation.

The Transition from Welfare to Workfare in Times of Crisis

Many of the serious deficiencies in the Hungarian welfare state pre-date the 2010 political changes and a pronounced anti-poverty policy turn was evidently already on its way in 2008, especially concerning income protection for the long-term unemployed. As if this were not enough, according to the OECD, among the thirty-two OECD member states, Hungary and Greece were the only states where real public social spending had decreased since the onset of the economic crisis. More precisely, Hungary’s social policy answer to the crisis included the introduction of workfare, the diminishment of the second pillar pension, the abolishment of early pensions, the activation of family policy, and the encouragement of citizens’ self-support attitude. Moreover, in 2010 a two-thirds majority in parliament gave the government the possibility to enact fundamental changes to Hungary’s Constitution and legislation as a whole. Confronted with the experience of non-democratic regimes and the individual vision of fundamental rights, after the transition, the Fundamental Law indicates a shift of emphasis from state obligations towards individual citizens to citizens’ obligations towards the community.

Human Rights Obligations of European Financial Assistance Mechanisms

Having been affected by the European financial crisis that erupted in 2008, several EU Member States required financial assistance beyond that available in the financial markets. New financial assistance mechanisms, such as the EFSF and ESM, were created under international law and all financial assistance packages included the participation of the IMF. Despite their differences, these financial assistance schemes all combined supranational and international legal instruments and institutions. The hybrid nature of this European financial assistance raises the question of whether the actors involved in the award of the assistance are bound by EU and international human rights. Against this background, this chapter assesses financial assistance conditionality as applied by the different financial institutions from an EU and international human rights perspective, aiming to respond to the question whether European and international actors are bound by human rights when preparing financial assistance conditions.

The Predominance of a ‘Strong’ Economy over a ‘Weak’ Social Constitution

In Spain, the economic crisis has generated a series of restrictive reforms, slashing the level of pensions, healthcare, long-term care, unemployment, social assistance, and family benefits. The majority of reforms do not stem from the Spanish parliament, but from the government, which has resorted to the systematic use of the royal decree-law as a legislative instrument to implement not only temporary reforms but also eminently permanent structural reforms. Spain’s Constitutional Court has validated the government’s use of the royal decree-law on very permissive grounds. This has led to the fracturing of the separation of powers and the distortion of the natural mechanisms for creating legislation, contending that extraordinary measures must be taken with extreme urgency. Furthermore, the Spanish Constitution was reformed in 2011, introducing the principle of budgetary stability. After this constitutional reform, the Spanish constitutional panorama is one where social and economic provisions coexist, but economic provisions prevail, creating an imbalance between the social and the economic. This predominance of a ‘strong’ economic constitution over a ‘weak’ social constitution was clearly manifested during the crisis, when all reforms in social law were subordinated to the economic rationale of controlling the budget deficit.

A ‘Bail-In’ of Social Rights? The Cypriot Experience of the Financial Crisis

The chapter first analyses the events that led to the collapse of the Cypriot banking sector and to the conclusion of the agreement with Troika to provide €10 billion in the unprecedented form of a ‘bail-in’. It also examines the uncertain legal nature of the MoU in the Cypriot legal order, in the sense that the legislator ratified it as an international treaty as per article 169 of the Constitution; yet, it is doubtful whether the MoU could come under that provision. Moreover, the chapter provides a general overview of the national social security and healthcare system and analyses in depth the structural reforms and cuts in the social system which resulted, directly or indirectly, from the financial crisis. The chapter then turns to the parliamentary process for adopting these reforms and examines whether it was affected by the MoU. Finally, the chapter examines the limited number of applications that were adjudicated by the Administrative Court (or the Supreme Court), which challenged the constitutionality of some reforms introduced due to the financial crisis.

Upholding the Welfare State During the Financial Crisis

In Romania, the social security benefits were influenced by the global economic crisis that occurred in 2008. This chapter presents the background of the reforms implemented in Romania in the context of the global crisis and reveals the reasons for their introduction, the specific legislative measures adopted, the reaction of the Romanian Constitutional Court to the measures, as well as the influence of the Court’s decisions on the implementation of the measures. Overall, the decisions of the Constitutional Court were observed by all the stakeholders and national institutions. Also regular courts, when deciding on cases referring to pension rights, were in line with the rules of interpretation adopted by the Constitutional Court. Hence, the Romanian constitutional doctrine was not significantly altered during the financial crisis and national constitutional law was able to restrict the pressure put on the national welfare state.

Conclusions from a Comparative Perspective

The chapter provides a summary of the findings of the country reports and an analysis of both social protection reforms during the financial crisis and constitutional adjudication from a comparative perspective. It elaborates on different reasons for social protection reforms in different fields of social protection (old-age pensions, health, unemployment and family benefits, social assistance), and it puts emphasis on a differentiation between short-term cuts of, and in, benefits, on the one hand, and long-term structural changes, on the other. It analyses the case law of national courts with a view to the constitutionality of social protection reforms from the angle of subjects as well as of legal bases and results, including its relation to the jurisprudence of the ECtHR.

Salus Rei Publicae Suprema Lex Esto? Welfare State Reforms Before the Greek Courts

Having been seriously hit by the financial crisis, Greece was forced to implement reforms in the public social security system, aiming at securing the future financing of social policy measures, at reducing the public expenses through cuts of benefits, and at saving administrative costs by rationalising the management of social policy institutions. In the last years of the financial crisis a general reform took place aiming at stabilising the social security system. Given the cuts experienced by big parts of the population, several applications of annulment were brought before the Council of State. The jurisprudence of the court shows a gradual shifting: in the years 2012–2014 it upheld the constitutionality of the imposed measures, which were viewed as part of the general framework aiming to curb the public deficit. But in 2015 the ruling, in the face of the cumulative force of reductions on people’s income, was that the legislator must not only preserve a subsistence minimum but a decent standard of living for the citizens. Essentially, it was a signal that while the reduction of the public deficit remained mandatory, it was high time that the legislation sought other alternatives than minimising the welfare state.