The Eurogroup has been criticized for operating in a legal gray area and lacking transparency.
LUXEMBOURG (CN) — The Eurogroup, an informal group of finance ministers in the eurozone, isn’t an official institution of the European Union and therefore can’t be held liable for financial losses, an adviser to the EU’s top court found Thursday.
The power of the group, made up of finance ministers of the 19 EU countries that use the euro currency, is “purely political,” Advocate General Giovanni Pitruzzella wrote in his nonbinding opinion for the European Court of Justice. That case involves depositors and shareholders of Cypriot banks who lost money during the eurozone debt crisis.
In early 2012, several banks based on the divided island nation of Cyprus, requested financial assistance from the Eurogroup during the economic crisis. Beginning in 2009, several EU member states were unable to pay their own debts or bail out failing financial institutions without outside help.
Located in the eastern Mediterranean Sea, the island of Cyprus is partitioned between a Turkish-backed region in the north and a Greek-backed region in the south. The separation occurred after the Turkish military invaded following a Greek-supported coup that took place in 1974. The United Nations patrols a demilitarized zone between the two sections that runs the length of the island.
A bailout agreement was eventually reached with the European Stability Mechanism, an intergovernmental organization that provides financial assistance to EU countries, and the European Central Bank and International Monetary Fund in 2013. While it protected smaller depositors, deposit holders with more than 100,000 euros ($110,000) and investors in the banks lost millions. They demanded compensation at the EU’s lower court in 2018.
The European General Court rejected the complaint, finding it didn’t constitute a “serious infringement of rule of law”, which is the threshold for holding EU entities liable for financial losses. The European Commission, the EU’s executive body, argued the entire case was inadmissible because the Eurogroup isn’t an official EU body. By accepting the complaint, the lower court, which only has jurisdiction over EU law and institutions, tacitly acknowledged the group as a formal institution.
The Eurogroup has been criticized for operating in a legal gray area, as well as for lacking transparency. The 2009 Lisbon Treaty, which amends the two treaties that underlie the 27-member political and economic union, required the eurozone finance ministers to meet informally and elect a president, dubbed Mr. Euro.
The group meets behind closed doors, does not publish any meeting minutes and is wholly unaccountable to the European Parliament. The European ombudsman, who can investigate any EU institution for mismanagement, has opened an investigation into the 19-member group.
In Thursday’s advisory opinion, Pitruzzella said the General Court should have ruled that it did not have jurisdiction to hear the case.
“It follows from all the foregoing that, the Eurogroup being a body outside the institutional and legal framework of the European Union, the EU courts have no jurisdiction to hear actions for damages brought against it,” he wrote.
The deposit holders and investors had appealed to the EU’s highest court, arguing that the lower court was wrong to deny them compensation since it acknowledged the Eurogroup was an official EU body.
Though Pitruzzella found they can’t sue the Eurogroup, he wrote there is nothing preventing them from suing the Council of the European Union or the European Commission instead.
The Luxembourg-based Court of Justice is not required to accept Pitruzzella’s reasoning, but it usually follows the recommendations of its magistrates. It is expected to rule on the case later this year.