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Furthermore, the Irish Supreme Court sought to ascertain whether the promulgation and ratification of the ESMT was compatible with numerous provisions of European law, including the “no bailout” clause contained in Art 125 TFEU.⁷ The European Court of Justice (ECJ) held that the treaty amendment merely confirmed the competence of the Member States to conclude a treaty such as the ESMT, though it sought to ensure the compatibility of that Treaty with EU law through the imposition of strict conditionality.⁸ The ECJ also held that the Member States had not otherwise conferred any powers to the Union to establish a mechanism such as the ESM, and hence retained the power to do so themselves.⁹ The ECJ further ruled that the ESMT was compatible with EU law, interpreting the “no bailout” clause as allowing grants of financial assistance to Member States in need when the stability of the euro area as a whole is at risk and so long as a grant of financial assistance does not diminish the incentive of the beneficiary state to conduct sound budgetary policies.¹⁰

6 See ESM Issues Bonds for the Recap of the Spanish Banking Sector, European Stability Mechanism, http://www.esm.europa.eu/press/releases/ESM%20issues%20bonds%20for%20recap%20of%20Spanish%20banking%20sector.htm.Google Scholar

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