There is a very considerable literature on the internal market. It is sophisticated and diverse, and, as might be expected, there are a plethora of views on most central issues. Our chapter on ‘The Euro Area, its Regulation and Impact on Non-Euro Member States’, which is forthcoming in Panos Koutrakos and Jukka Snell (eds), Research Handbook on the Law of the EU’s Internal Market (Edward Elgar, 2016), explores an issue that is in relative terms under-theorised, viz the regulation of the euro area and its impact on non-euro Member States.

The discussion begins with the regulatory foundations of the euro area, the emphasis being on the powers of the key players, viz the Eurogroup, the Euro Summit and the European Central Bank (ECB). The focus then shifts to consideration of legitimacy and democracy. While there has been considerable discussion of such matters in relation to the ECB, there is much less discourse concerning the Eurogroup and the Euro Summit.

We argue that there are two ways that the role of the Eurogroup and Euro Summit might be conceptualised in terms of democracy and decision-making. The positive argument would be that these two bodies could be seen as further extensions of the executive arm of government broadly conceived, with the twin objectives of assisting with surveillance in the euro area, and operating as a forum through which the euro area Member States would have ‘voice’. The Eurogroup would thus be perceived as a natural institutional response to differentiated integration, whereby the concerns of Member States that subscribe to the euro are not identical to those that do not, and thus require a distinct institutional forum. There is, however, a more negative view, which would take the following form. There is a mismatch between what is formally written down in the EU Treaties and the reality of the Eurogroup’s power, more especially in tandem with the Euro Summit. The concern then is an increase in executive power, where the locus of that power is situated in institutions, the Euro Summit and the Eurogroup, which are not subject to the accountability checks that exist when executive power is exercised by the Commission, or by the formal Council configurations.

The analysis thereafter examines fears that regulation of the euro area can have an impact on internal market issues more generally, and that this can be prejudicial to non-euro Member States. We disaggregate a number of such concerns, these being the perceived danger of ‘caucusing’, whereby the euro area states would form a cohesive group that could drive EU legislation suiting the needs of these states; the unease that the alleged commonality of interest between the euro area states could lead, so the argument goes, to discrimination against non-euro states; and the impact of the financial crisis on the EU’s decision-making structure. These concerns are explored, and the measures that might be adopted to counter them are evaluated.

The chapter looks at a range of legal options that could be used to address these concerns. The discussion includes the relevant provisions from the Decision of the Heads of State or Government meeting in the European Council, which is designed to resolve the UK’s desire for renegotiation of its terms of membership. First, the general principle of equality could be used by non-euro area states who contend that regulations are discriminatory. Second, the interests of non-euro area Member States could be safeguarded through appropriate voting arrangements, as evidenced by the voting modalities in the European Banking Authority. Third, EU banking law provides another example of how the relationship between EU/euro area institutions and non-euro area Member States could be structured in a given policy area. More specifically, non-euro area Member States are under no legal obligation to participate in the Banking Union. If they choose to participate in these mechanisms, a ‘close cooperation’ is established between the ECB and the national competent authority of the non-euro area Member State concerned. However, the ECB does not have directly applicable powers over banks established in those States, and there is a two-way mechanism for termination. Fourth, we discuss process reforms affecting the workings of the euro area bodies, the assumption being that euro area Member States would not actively seek to disadvantage non-euro area Member States in the knowledge that information about their deliberations would be readily available to non-euro area governments. Fifth, our analysis considers the emergency ‘break’ which is embodied in the Draft Council Decision included as part of the Decision of the Heads of Government. Sixth, we argue that the Decision of the Heads of State seeks to limit the impact of euro area decisions on non-euro states in a number of ways, which largely affirm existing law.

It should not, moreover, be forgotten that regulation of the euro area can be of very great importance for the states that do subscribe to the euro, and that such regulation can also have effect on more general internal market issues for such states. This issue is considered in the final section of the chapter, which focuses on policy issues pertaining to the single currency, as well as single market issues, the core of the argument being that policy on internal market issues which are not straightforwardly related to the single currency is being shaped in euro area fora. To illustrate this point, we examine the bailout terms for Greece and Cyprus and the EU economic guidance to Germany, and we argue that it is not just the crisis-hit Member States that are undergoing a macroeconomic adjustment programme that are subject to such external influence with respect to single market issues. Last, the chapter looks at a number of more far-reaching proposals to strengthen the economic pillar of EMU, the emphasis being on the Five Presidents’ Report.

Paul Craig is a Professor of English Law at the Law Faculty of the University of Oxford and Menelaos Markakis is a DPhil candidate at the same Faculty.