3 February 2011
D E C I S I O N
At a session held on 3 February 2011 in proceedings to review constitutionality instituted following a petition by a group of deputies of the National Assembly of the Republic of Slovenia, the Constitutional Court
decided as follows:
The Act on Guarantees of the Republic of Slovenia for the Purpose of Maintaining Financial Stability in the Euro Area (Official Gazette RS, No. 59/10) is not inconsistent with the Constitution.
1. A group of thirty-seven deputies of the National Assembly (hereinafter referred to as the applicants) requests a review of the constitutionality of the Act on Guarantees of the Republic of Slovenia for the Purpose of Maintaining Financial Stability in the Euro Area (hereinafter referred to as the AGMFSEA). The applicants allege that the challenged Act is inconsistent with Articles 2 and 3, the second paragraph of Article 120, and Articles 148, 149, and 153 of the Constitution. The applicants allege that a special act should be adopted for every guarantee granted in the framework of maintaining financial stability in the euro area, unlike in the case under consideration, where only the AGMFSEA, which determines only the total amount and duration of guarantees while not providing for other elements mandatory for guarantees, was adopted for all future guarantees. The AGMFSEA is therefore allegedly inconsistent with Article 149 of the Constitution, which allegedly requires that all guarantees be precise and permitted on the basis of law. The challenged Act also allegedly encroaches upon the position of the National Assembly and violates the principle of the separation of powers determined in Article 3 of the Constitution and the principle of proportionality determined in Article 2 of the Constitution, as its role is allegedly excessively reduced to merely being informed of granted guarantees in accordance with individually adopted funding programmes. As funds for the commitments adopted under the AGMFSEA were allocated in neither the 2010 nor 2011 budgets, whereas Article 5 of the Public Finance Act (Official Gazette RS, No. 79/99 as amended – hereinafter referred to as the PFA) stipulates that the amount of borrowing and all planned state guarantees, borrowing requirements of the public sector at the central government level in an individual year, other elements stipulated by the Act, and the special powers of the Government and the ministry responsible for finance in implementing the budget for an individual year shall be laid down by the act on the implementation of the state budget, the AGMFSEA is also inconsistent with Article 148 of the Constitution. The applicants further state that the guarantees granted under the AGMFSEA lack the fundamental elements required under the Code of Obligations (Official Gazette RS, No. 97/07 – official consolidated text; hereinafter referred to as the CO) for guarantees. In the opinion of the applicants, a guarantee is an ancillary obligation conditional on the existence of a principal obligation, whereas in this case the principal obligation does not yet exist or, as they allege, is a future, imprecisely determined, and uncertain obligation. Moreover, the debtor is allegedly imprecisely determined as well, and the guarantee will not be granted to a debtor but to the company specified in Article 1 of the AGMFSEA. The applicants therefore allege that the AGMFSEA is imprecise, unclear, and inconsistent with Article 2 of the Constitution.
2. In its reply to the request, the National Assembly states that in the course of the legislative procedure, amendments were adopted which altered the wording so that the Act now refers to one guarantee, not multiple guarantees. The AGMFSEA allegedly determines the procedure for granting the guarantee and clearly defines the interference with the position of the persons to whom it refers by limiting the absolute amount of the guarantee. In the opinion of the National Assembly, this satisfies the principle of clarity and precision under Article 2 of the Constitution. Concerning the allegation of the applicants that the conditions required for a guarantee under the CO have not been taken into consideration, the National Assembly believes that they are not applicable, as this does not entail a question of constitutionality but one of the relationship between two acts. Notwithstanding this, the CO allegedly addresses guarantees for future liabilities and in the case of the AGMFSEA, both conditions stemming from Article 1016 of the CO are allegedly fulfilled, i.e. the precision of the liability and the precision of the time in which the liability should originate. The National Assembly further notes that the challenged Act has allowed the Republic of Slovenia to participate in the financial aid mechanism, while at the same time the Republic of Slovenia contributed to the financial stability of the euro. It states that the principle of cooperation in good faith and observance of Article 3a of the Constitution prevailed in the decision to participate in the European mechanism and to adopt the challenged Act.
3. The Government of the Republic of Slovenia submitted an opinion on the request for a review of constitutionality opposing the positions of the applicants with regard to the nonconformity of the challenged provisions with the Constitution. It is of the opinion that the civil-law regulations which govern the guarantee are not legally relevant in reviewing the consistency of the AGMFSEA with the Constitution. A guarantee in the sense of Article 149 of the Constitution should allegedly be interpreted independently, taking into account that a state guarantee has a multitude of public-law elements, which allegedly entails that CO rules may be used as supporting materials, but are not essential to the interpretation of this constitutional notion. Regarding the applicants’ allegation of the absence of an ancillary character in the guarantee under the AGMFSEA, the Government states that even if this was a civil-law guarantee, Slovenian law provides for derogations from the rule that a guarantee must be ancillary. It emphasises that the guarantee under the AGMFSEA is a single guarantee, not multiple guarantees as the applicants mistakenly state, but is granted for multiple liabilities, which is allegedly the norm for state guarantees. The Government is of the opinion that an interpretation of Article 149 of the Constitution which would require the adoption of a special law for every single liability in cases such as this one, where a single guarantee is being granted for all liabilities, would be too narrow and render it impossible to create a system that would allow the state to respond rapidly. The Government calls for an interpretation of Article 149 of the Constitution whereby an act creates merely a basis for subsequent implementing regulations, i.e. so-called guarantee agreements, and determines in abstract terms the conditions for borrowing and guarantees, as these conditions were allegedly intentionally left out of the original wording of Article 149 of the Constitution. The Government is also of the opinion that the AGMFSEA is clear and precise in that it provides enough elements with regard to liabilities originating from the guarantee that the liability may be considered to be precise. It alleges that the total amount of the guarantee, the types of transactions for which the guarantee is being granted, and the debtor, i.e. the Luxembourg-based European Financial Stability Facility, Société anonyme, are all precisely determined. Furthermore, the purpose for which the guarantee is being granted is also allegedly determined.
4. The reply of the National Assembly and the opinion of the Government were sent to the applicants, who responded to them. They disagree with the claims of the Government and the National Assembly that they are alleging the nonconformity of the AGMFSEA with the CO, they do, however, insist that the AGMFSEA is unclear and imprecise as the guarantee is being granted for a future, uncertain, and imprecisely determined liability, which they allege the CO does not permit for a guarantee. They reiterate that a special act should be adopted for every individual guarantee, not only the AGMFSEA as the framework act for all guarantees to be granted under the European mechanism. This will allegedly result in an encroachment on the powers of the National Assembly and a violation of the principle of the separation of powers determined in Article 3 of the Constitution.
B. – I.
Starting Point for Constitutional Court Review
5. Money is coined liberty. The existence of money is a necessary condition for a functioning economy in which goods are traded with money acting as the medium. The value of money is tied to and dependent on society. It is determined by decisions of monetary authorities and financial policy, while also being affected by individuals, who are holders of human rights and fundamental freedoms. Of particular importance are prices, loans, interest rates, economic forecasts, valuations, etc. The external value of money depends on the relationship between the national currency and other currencies, and their sovereign, economic, and social foundations. It is this interdependence that makes it impossible for a state to constitutionally guarantee the value of money. Just as the right to private property determined in Article 33 of the Constitution can guarantee only freedom of conduct in the field of property rights (Constitutional Court Decision No. U-I-199/02, dated 21 October 2004, Official Gazette RS, No. 124/04, and OdlUS XIII, 65) for the person offering property, while having no bearing on the demand for the offered property, in monetary affairs the state can only provide institutional frameworks for money, but it cannot guarantee its value.
6. When the Republic of Slovenia adopted the euro as its currency, the sovereign guarantor vouching for the stability and convertibility of money changed, as did the legal framework providing for the freedom associated with money. In this era of economic and monetary union, these are issues that, at least insofar as monetary policy is concerned, are in the exclusive domain of the European Union (hereinafter: the EU), but economic policy issues have nevertheless remained in the domain of the Member States. A separation of powers traditionally exercised by the state has thus occurred between the EU and the Member States.
7. The Treaty of the European Union (consolidated version, Official Journal C 83, dated 30 March 2010 – hereinafter referred to as the TEU) bound Member States to continue the process of creating an ever closer union among the peoples of Europe. It follows from the preamble to the TEU that the Member States are firmly resolved to achieving the strengthening and convergence of their economies and to establishing an economic and monetary union including a single and stable currency. The EU’s objectives listed in Article 3 again make mention of the economic and monetary union whose currency is the euro. The EU shall strive for sustainable development of Europe based on balanced economic growth and price stability. Economic policy, although not in the exclusive domain of the EU as is monetary policy, has become a matter of common interest and is carried out in the context of broad guidelines adopted by the Council of the EU (Article 120 of the TFEU). Following accession to the EU and the adoption of the euro, the Republic of Slovenia and its economy is no longer the sole guarantor of money, the guarantors now are the members of the euro area and their economies. The Government and the National Assembly are thus subjects which must adopt their economic decisions in a manner that contributes to the objectives pursued by the EU. In view of the membership of the Republic of Slovenia in the monetary union, however, even the Government and the National Assembly cannot evaluate the economic, social, and political factors and forecasts of future economic trends independently; they must act in conjunction with other Member States.
8. As the euro is the single currency, the bankruptcy of one of the participating Member States may jeopardise not only the euro as a single currency, but also the economies of the participating Member States. The state of the monetary system is a symptom of the state of society and its economy as a whole. It is precisely because the euro is a single currency that coordination among participating Member States is all the more necessary. This is in keeping with the principle of sincere cooperation among Member States (the third paragraph of Article 4 of the TEU) which respect each other and provide each other assistance in fulfilling the tasks and objectives that the EU pursues. It therefore follows that in a case such as the case under consideration, which involves the interdependence of the Member States and their economies, concerted action among euro area Member States is required even though the conduct of the Member States is based on their national competences
9. It needs to be taken into account that long-term economic impacts and their consequences on the stability of money cannot be evaluated based on a single intervention, they must be monitored on an ongoing basis and continually verified. This is, however, a task for the government and legislature, not the courts. Since it is impossible to predict with certainty how the market will react and what the future development will be, political actors need to be given broad enough discretion in their decisions. As a consequence, constitutional review of such issues is by necessity reserved.
10. It was based on these starting points, with due consideration of the necessity of the euro area Member States to take concerted action with regard to measures to ensure the financial stability of the euro area, and in view of the current period of severe economic crisis and downturn that has affected economic growth and financial stability, worsening the debt and deficit positions of the Member States, that the Constitutional Court reviewed the alleged unconstitutionality of the AGMFSEA.
B. – II.
European Financial Stabilisation Mechanism
11. The AGMFSEA regulates the equity participation of the Republic of Slovenia in the joint-stock company founded for the purposes of funding financial stability in the euro area in accordance with the resolutions of the Council of the EU (ECOFIN) dated 7 May 2010, and the granting of guarantees by the Republic of Slovenia for the liabilities of this company. The Act thus allowed the Republic of Slovenia to participate in the special mechanism created by the euro area Member States to safeguard the financial stability of the area. The EU’s previous institutional arrangements had not provided for an effective mechanism of financial assistance to the Member States whose common currency is the euro (the members of the euro area). The EU only had a mechanism, created by Council Regulation 332/2002, for balance of payments financial assistance for states which have not yet introduced the euro, which had been adopted pursuant to Article 143 of the TFEU.
12. Therefore, at the 7 May 2010 meeting of euro area Member States, the heads of state or government decided to create a special mechanism for financial assistance to euro area Member States in the event that a Member State cannot secure sufficient financing on the market. The mechanism comprises two elements: 1) a regulation on the European financial stabilisation mechanism and 2) a standing-by-facility which, under an agreement made between the members of the euro area, will be based on a special-purpose vehicle (Ger.: Zweckgesellschaft). The financial arrangement also includes the International Monetary Fund (hereinafter referred to as the IMF), which is to contribute a sum equalling at least a half of the EU’s contribution via its established mechanisms.
13. At an extraordinary session held on 10 May 2010, the Council of the EU (ECOFIN), acting on the proposal of the European Commission pursuant to the second paragraph of Article 122 of the TFEU, adopted Regulation No. 407/2010 establishing a European financial stabilisation mechanism (OJ L 118, 12 May 2010, pp. 1–4 – hereinafter referred to as Regulation No. 407/2010). The regulation provides for financial assistance to the Member State concerned, contracted on the capital markets by the European Commission on behalf of the EU, limited to the margin available under the own resources ceiling for payment appropriations (Article 2 of Regulation No. 407/2010), which equals approximately EUR 60 billion. At the same extraordinary session of the Council of the EU (ECOFIN) on 10 May 2010, it was agreed that euro area Member States would establish a special-purpose vehicle to contract borrowings or issue debt securities with the purpose of providing financial assistance in the form of loans to euro area Member States with the guarantee of other euro area Member States. The challenged AGMFSEA was adopted to provide for the participation of the Republic of Slovenia in the special-purpose vehicle, not for the implementation of the measures pursuant to Regulation No. 407/2010. In accordance with Article 288 of the TFEU, a regulation has general application, which means it is binding in its entirety and directly applicable in all Member States. This means that the Member States do not transpose adopted and published regulations into their national law.
14. The special-purpose vehicle with the registered name European Financial Stability Facility, société anonyme (hereinafter referred to as the EFSF) was founded on 7 June 2010 by the Grand Duchy of Luxembourg acting as sole partner in order to speed up its incorporation. All euro area Member States reaffirmed their commitment to participate in the mechanism. To this end, the Member States and the EFSF signed the EFSF Framework Agreement, which determines the conditions under which the EFSF may make loans to euro area Member States in financial difficulties, the conditions for the funding of such loans by issuing or contracting debt securities, loans and financing arrangements, and the terms and conditions under which the euro area Member States issue guarantees for the debt securities, loans, and other financing arrangements issued by, contracted by, or entered into by the EFSF. EFSF shares will be transferred to other Member States once they have completed all the requisite internal procedures. The company is incorporated under Luxembourg law. The EFSF was founded with a subscribed capital of EUR 31,000 and authorised share capital of EUR 30 million. The equity share of the Republic of Slovenia in the EFSF is 0.4711%, equalling the share of the Bank of Slovenia in the capital of the European Central Bank (hereinafter referred to as the ECB), with regard to which only the euro area Member States are taken into consideration. Each euro area Member State is to have one member on the EFSF Board of Directors, the financial assistance mechanism will be operational for three years or until 30 June 2013, and the EFSF will be dissolved and liquidated when it has received full payment of the funding granted to the Member States, and its liabilities under the debt securities issued, loans contracted, and other financing arrangements issued with the guarantees of euro area Member States, and any guarantor liabilities thereunder, have been fully repaid.
15. If a euro area Member State requests a loan from the EFSF, the European Commission, in liaison with the ECB and the IMF, will start negotiating conditions regarding economic policy management with the borrower, which will be written down in a memorandum of understanding and will need to be fulfilled or shown as being fulfilled by the borrower as a condition for receiving the loan. After the approval of the memorandum of understanding, the European Commission, in liaison with the ECB, will present to a Eurogroup working group a proposal of the main terms of the loan agreement, which will take into consideration the current financial market conditions and the terms determined in the memorandum of understanding. When the Eurogroup working group confirms the main terms of the loan agreement, the EFSF, in liaison with the Eurogroup working group, will negotiate the other (detailed) terms of the loan agreement with the borrower. The loan agreement with the borrower will be signed by the EFSF subject to prior unanimous approval by all guarantor Member States.
16. The EFSF, in liaison with the Eurogroup working group, will structure a funding programme that includes the key funding terms (interest, maturity, currency, etc.) under which the EFSF may borrow, issue debt securities, or enter into other financing arrangements to obtain funding in order to fund the making of loans in accordance with the loan agreement. The funding programme is unanimously approved by all guarantor states. In the event that a guarantee is enforced, each guarantor state will contribute to the indemnification of creditors in proportion to its respective share of the issued guarantee (pro rata pari passu). These are individual, not joint guarantees. In the event that a guarantor state cannot fulfil its obligations under the granted guarantee, other guarantor states will cover its share of the liability to creditors (but only up to a maximum of their share of the liability increased by 20%). These guarantor states can then attempt to recover a part of the unfulfilled obligation under the granted guarantee from the stepping out guarantor state. In the event that a guarantee is enforced because a borrower cannot repay its loans, the EFSF will assign or transfer its claim with respect to the borrower to the guarantor states in proportion to the fulfilled obligations stemming from the guarantee of each guarantor state.
17. The euro area Member States which participate in the special-purpose vehicle and thus in the established mechanism as a general rule adopt decisions unanimously. However, in accordance with the fifth paragraph of Article 10 of the EFSF Framework Agreement, unanimity means a positive or negative vote of all guarantors which are present and participate in the relevant decision, provided that any Member State which is not participating in a guarantee is not entitled to vote on any decision to make a new loan agreement. It is a precondition of the validity of any such vote that a quorum of a majority of the Member States able to vote whose guarantee commitments represent no less than two-thirds of the total guaranteed commitments are present at the meeting. Other (less important) decisions are adopted by a two-thirds majority, in accordance with the sixth paragraph of Article 10 of the EFSF Framework Agreement.
B. – III.
State Borrowings (Article 149 of the Constitution)
18. The applicants allege that the challenged AGMFSEA encroaches on the position of the National Assembly; in their opinion a special act should be adopted by the National Assembly for each individual guarantee. Currently, however, the Government will adopt all decisions with respect to the guarantees and inform the National Assembly thereof quarterly. In the opinion of the applicants, the AGMFSEA is therefore inconsistent with Article 3, the second paragraph of Article 120, the third paragraph of Article 153, and Article 149 of the Constitution.
19. The constitutional provision on state borrowing in Article 149 of the Constitution is – with regard to the relationship between the legislature and the executive and their powers, and hence with regard to the relationship to the second paragraph of Article 120 and the third and fourth paragraphs of Articles 153 of the Constitution – a special provision inasmuch as it refers only to state borrowings. The Constitutional Court, therefore, reviewed the alleged unconstitutionality of the AGMFSEA from the viewpoint of this constitutional provision.
20. Article 149 of the Constitution determines that state borrowings and state guarantees for loans are only permitted on the basis of law. This provision is part of Chapter VI of the Constitution, which regulates the complete system of public finances and state financing. Taxes and other charges form the bedrock of public finances and hence of state financing. Articles 146 and 147 of the Constitution provide for the full fiscal sovereignty of the state, which encompasses the power and the right to create sources of fiscal revenue, enforce its collection, and determine the amount thereof (see also Constitutional Court Decision No. U-I-233/97, dated 15 July 1999, Official Gazette RS, No. 61/99, and OdlUS VIII, 188). The second method of financing state expenditure is borrowing. When the state does so is a political and not a legal issue. Whereas the financing of state expenditure by taxes and other charges is carried out in the present, financing through borrowing entails a deferral of the burden to the future, to subsequent budgetary periods. Borrowing thus affects future budgets and hence future assets and revenue from taxes and other charges, and, consequently, future decisions on state expenditure, which requires that the matter be regulated at the level of the Constitution. The Constitution regulates this issue in Article 149.
21. Article 149 of the Constitution uses the words and phrases “state borrowings”, “guarantees by the state for loans”, “permitted”, and “on the basis of law”. This raises the questions of what the subject of this constitutional provision entails and what constitutional law demands arise thereby. In Article 149, the Constitution does not create an explicit authority for the state to borrow, it merely permits borrowing in principle, just as Article 147 of the Constitution determines that the state imposes taxes, customs duties, and other charges by law. From a constitutional law perspective, therefore, the decisive issue is not the permissibility of borrowing but its limits.
State Guarantees for Loans
22. With regard to the terms used in Article 149 of the Constitution, it is not possible to draw on their civil-law definitions where, for example, the term guarantee (Lat. fideiussio) is defined as the guarantor’s obligation to honour the debtor’s obligation if the debtor is unable to do so itself. Even though the terms are linguistically equal to the civil law terms, they need to be given independent meaning and defined as a constitutional law category based on the intention of the constitution framers and taking into account the nature of state borrowings and guarantees. These are important instruments of economic  and fiscal policy that affect economic development, which requires that the terms loan and guarantee be interpreted broadly and that it be allowed, with an appropriate breadth of meaning, that the mentioned terms also include new instruments that will be created on the market in the future and facilities that the law and economic policy do not yet recognise at present.
23. Given this starting point, the term state guarantees for loans needs to be defined as any category of security or guarantee under which the state assumes the risk of (potential) liability for third-party liabilities, thus affecting the scope of borrowing (public debt) and, by extension, the amount of state assets. Such an effect may be achieved with a variety of instruments, including surety, guarantee, lien, letter of comfort, etc., whereby the legal form (structure) for assuming liabilities is not constitutionally relevant. What various state guarantees generally have in common is that they do not always correspond to civil law instruments, they are hybrid legal acts with elements of multiple legal acts, or an individual security may combine civil-law and public-law elements. The fundamental difference between loans and guarantees in the sense of Article 149 of the Constitution is that loans create a direct and unconditional liability to repay the funds, whereas guarantees create a conditional liability incumbent upon the state which is realised only in the event of a third party reneging on its liability. This means that guarantees may have financial consequences for future budgets, but not necessarily so. The difference is also reflected in the budget, as loans must be stated and/or planned in the budget in their entirety, whereas for guarantees only an amount corresponding to the likely due liabilities of the state arising thereunder in the budget period must be determined. However, this amount is only a portion of the entire amount of liabilities arising from the state guarantee. At the same time, this does not entail that a guarantee is not a constituent part of the public debt.
On the Basis of Law
24. In its essence, Article 149 of the Constitution is a procedural provision which regulates the legal form and power regarding the adoption of a decision on state borrowings and state guarantees for loans. State borrowings and guarantees require a special decision by the National Assembly in the form of an act. This means that what is required is a special legislative decision under which the financial burden is actually or potentially transferred to the future, while at the same time Article 149 of the Constitution provides for the fundamental power of the National Assembly (the current as well as future terms) to decide on state revenue and expenditure, taking into account the fundamental human rights and freedoms of the present and future generations, as well as the principles of a state governed by the rule of law and a social state. Article 149 of the Constitution furthermore ensures special disclosure of state borrowings and guarantees in accordance with the principles of democracy and the rule of law.
25. It does not follow from the linguistic meaning of Article 149 of the Constitution that it determines substantive (material) conditions or limitations to which state borrowings and guarantees might be bound. However, this does not mean that an act on the basis of which a state guarantee is assumed may be devoid of substance or that the National Assembly may give the Government unlimited power to assume state guarantees or to borrow. The constitutional requirement for the adoption of a law on the basis of which the state may borrow needs to be understood as a requirement that (future) obligations be precise or at least determinable. It is not the implementing instruments (for example, a guarantee agreement) that must make the liability incumbent upon the state clear and predictable, but the act by which the state assumes the guarantee. This also follows from the principle of a state governed by the rule of law (Article 2 of the Constitution) and the principle of the legality of the operation of the state administration (the second paragraph of Article 120 of the Constitution). The demand for precision or determinability ensures that a decision on borrowing is always adopted by the National Assembly itself and that the National Assembly does not transfer this decision with general and unlimited authority to the executive branch. Determinability requires that it is possible to infer from the legal facts of the matter what the future liabilities of the state will be and what purpose is being realised by the borrowing; in any event, liabilities must be specified in terms of amount, either in explicit terms or as a percentage of a specific amount (for example, the total budget). The latter follows from the principle of a social state (Article 2 of the Constitution), which requires that at any moment, including for the future generations which will bear the burden of present borrowing, the state must ensure a social minimum that comprises not only minimum subsistence but a minimum which ensures opportunities for the fostering of human interactions and for participation in social, cultural, and political affairs. At the same time, this is an upper limit that, despite the absence of an explicit constitutional provision on a borrowing ceiling, The legislature may not disregard and may not encumber the state with so much debt that it would jeopardise the social state.
B. – IV.
Review of the AGMFSEA
26. Article 1 of the AGMFSEA determines that the Act regulates the equity participation of the Republic of Slovenia in the EFSF and the assuming of guarantees for its liabilities. The applicants do not challenge the equity participation in the EFSF, accordingly the Constitutional Court limited the review of conformity with the Constitution to the regulation of guarantees for EFSF liabilities.
27. Substantively, Articles 3, 4, and 5 of the AGMFSEA regulate what was determined by the EFSF Framework Agreement, which the euro area Member States concluded with the EFSF. Pursuant to the first paragraph of Article 3 of the AGMFSEA, the Republic of Slovenia grants an irrevocable and unconditional guarantee for all funding instruments in the framework of the funding programme for the purposes of granting loans to euro area Member States in financial difficulties, for individual funding instruments outside the scope of the funding programme for the purposes of granting loans to euro area Member States in financial difficulties, and for liabilities arising from financing arrangements associated with the funding instruments and the obtaining and maintenance of a high rating thereof (hereinafter: financing arrangements). The second paragraph of Article 3 of the AGMFSEA determines the framework and the details of the granted guarantee. The guarantee is limited to EUR 2.073 billion and to the funding of obligations under loan agreements entered into on or before 30 June 2013, and can be granted for funding instruments and financing arrangements on or before 30 June 2013. The Act also stipulates that the EFSF may grant funds obtained by means of funding instruments to a euro area member state only with the unanimous approval of participating euro area Member States. The sixth and seventh indents of the second paragraph of Article 3 of the AGMFSEA regulate requests for the repayment of funds from the company that it receives from the borrowers, and the transfer of overdue EFSF claims to borrowers to the Republic of Slovenia (subrogation). The first paragraph of Article 4 of the AGMFSEA regulates the funding programme, which euro area Member States adopt unanimously and which contains the terms of the funding instruments for the acquisition of funds that the EFSF allocates for loans to euro area Member States in financial difficulties. In adopting the funding programme, the Government must cooperate with the National Assembly in accordance with the Act on Cooperation between the National Assembly and the Government in EU Affairs (Official Gazette RS, Nos. 34/04, 43/10, and 107/10; hereinafter referred to as the ACNAGEUA). In Accordance with the second, third, and fourth paragraphs of Article 4 of the AGMFSEA, the guarantee is granted for all funding instruments from each individual funding programme, for individual funding instruments outside the scope of the funding programme, and for financing arrangements. Under the fifth paragraph of Article 4 of the AGMFSEA, the minister in charge of finance is authorised to enter into guarantee agreements and grant deeds of guarantee. The sixth paragraph of the same article of the AGMFSEA regulates the duty of the Government to report, on a quarterly basis, on granted guarantees, approved loans, and individual instalments of loans to a euro area Member State in financial difficulties. Article 5 of the AGMFSEA regulates how to proceed in the event the company cannot honour the obligations for which the guarantee is given under the Act. It stipulates that the Republic of Slovenia transfer its share to the EFSF two days prior to the due date or after the due date based on a written request (i.e. a Noteholder Representative Guarantee Demand) directly to the lender, agent, or creditor, instead of to the EFSF.
28. Considering the constitutional interpretation of Article 149 of the Constitution, and in view of the described starting point of the constitutional review, in the circumstances of this case, with the euro as the single currency requiring cooperation among the euro area Member States, the Constitutional Court deems that the AGMFSEA is not inconsistent with Article 149 of the Constitution. A special decision of the National Assembly in the form of an act was adopted for the guarantee granted for the liabilities of the EFSF. The Constitutional Court deems that the authority granted to the Government [by the AGMFSEA] is not void of substance, to the contrary, it deems that the liability assumed or to be assumed by the Republic of Slovenia is precise. It is precise inasmuch as it determines the following: the purpose for which the guarantee is being granted – funding instruments by means of which appropriate funds for loans to euro area Member States in financial difficulties are provided; the amount of the guarantee – EUR 2.073 billion; the duration of the guarantee – for loan agreements made on or before 30 June 2013 and funding instruments and financing arrangements entered into on or before 30 June 2013; the debtor – the EFSF; and the types of transactions for which the guarantee is being granted – financing facilities in the framework of the funding programme or individual funding instruments outside the scope of this programme, and financing arrangements. This entails that the challenged arrangement is not inconsistent with the principle of clarity and precision, one of the principles of the state governed by the rule of law under Article 2 of the Constitution, for it is possible to determine both the substance and the purpose of the provision governing the guarantee. Since, as the Constitutional Court has already explained, it is not constitutionally relevant to the review of conformity with Article 149 of the Constitution what the legal nature of the guarantee under the AGMFSEA is – whether or not it is a guarantee within the meaning of the CO – the applicants cannot substantiate the unconstitutionality of the AGMFSEA with allegations referring to the issue of the inexistence of the ancillary nature of the guarantee under the AGMFSEA.
29. The applicants allege that the challenged arrangement is unconstitutional in particular in that, in their opinion, the National Assembly should adopt a special act for each individual guarantee, not just one, general act such as the AGMFSEA. The allegation is unsubstantiated, for the applicants’ understanding of the guarantee under the AGMFSEA is clearly wrong. These are not multiple guarantees, which would require a special guarantee for each funding programme or each individual funding instrument or financing arrangement, it is a single guarantee in the amount of up to EUR 2.073 billion that is not drawn at once but in multiple instalments in accordance with the needs and always in proportion to the share of the Republic of Slovenia [in the share capital of the EFSF] (pro rata pari passu). By the nature of things, therefore, it is not necessary that a special law be adopted for each call for a portion of the guarantee. The decision on participation in the European Financial Stabilization Mechanism and hence the decision on assuming the guarantee was adopted by the National Assembly by an act that precisely defines what kind of guarantee is being granted, in what amount, to whom, and for what purpose. The range of movement that the Government has in adopting individual funding programmes in accordance with the first paragraph of Article 4 of the AGMFSEA is thus clearly and precisely defined. This paragraph provides for an additional option – which does not follow from Article 149 of the Constitution, but which does not entail that it is therefore unconstitutional, i.e. that the Government cooperate with the National Assembly in accordance with the ACNAGEUA in the adoption of funding programmes. This entails that the National Assembly will participate in forming the positions of the Republic of Slovenia on a proposed funding programme (the first paragraph of Article 4 of the ACNAGEUA) or adopt these positions itself (the first paragraph of Article 11 of the ACNAGEUA).
30. The applicants specifically highlight the third paragraph of Article 4 of the AGMFSEA, which stipulates that the Government may approve the drawing of funds under the Act for individual funding instruments outside the scope of the funding programme, and Article 6 of the AGMFSEA, which stipulates that the funds for the fulfilment of obligations under the Act and any other liabilities determined in accordance with the bylaws of the EFSF be provided in the budget of the Republic of Slovenia. The third paragraph of Article 4 needs to be interpreted in the context of the operation of the EFSF. It follows from the EFSF Framework Agreement that the EFSF may issue funding instruments outside the scope of the funding programme, but they must be closely linked to its core activity of securing the obtaining and maintenance of a high quality rating for the EFSF and its instruments, and facilitate funding by the EFSF. Regarding the guarantee for these instruments, it is vital that the liability of the Republic of Slovenia is limited to the amount determined by the AGMFSEA, which cannot be exceeded except by a new act or by amendments to the AGMFSEA; this follows from Article 3 of the AGMFSEA, which explicitly determines for which funding instruments and financing arrangements the guarantee is being granted. The EUR 2.073 billion ceiling on the liability of the Republic of Slovenia applies to any potential liabilities that may be incurred by the Republic of Slovenia in association with its participation (the status of shareholder) in the EFSF, which includes other liabilities in the sense of Article 6 of the AGMFSEA.  The liabilities incurred by the Republic of Slovenia in connection with the operations of the EFSF may not exceed EUR 2.073 billion. In the event that the liabilities exceeded this amount, the National Assembly would have to adopt a new act due to the requirements laid out in Article 149 of the Constitution. Additionally, the sixth paragraph of Article 4 of the AGMFSEA needs to be interpreted as entailing that the Government must report to the National Assembly on all liabilities incurred by the Republic of Slovenia under this law, which includes also the guarantees granted for funding instruments outside the scope of the funding programme and other liabilities within the meaning of Article 6 of the AGMFSEA.
31. The allegation of the applicants that the challenged Act is inconsistent with the first paragraph of Article 148 of the Constitution, which stipulates that all revenues and expenditures of the state and local communities for the financing of public spending must be included in their budgets, is unsubstantiated as well. The Supplementary Budget of the Republic of Slovenia for 2010 (Official Gazette RS, No. 56/10 – Rb2010) includes all expenditures which have direct and financial consequences for the 2010 budget. Expenditure on increases in equity stakes abroad (account 4414) was thus increased by EUR 141,482, which corresponds to the share of the Republic of Slovenia in the subscribed capital of the EFSF in the amount of EUR 146.05 and its share in the approved capital of the EFSF in the amount of EUR 141,335.26. As the Constitutional Court has already explained in this decision, the fundamental difference between a loan and a guarantee is inter alia the moment at which a liability is incurred by the state. Since a loan guarantee is conditional (its enforcement is a future, uncertain fact), it does not have immediate direct financial consequences, but such arise at some time in the future. It is for this reason that in every budget, payments for enforced guarantees are budgeted only in the amount corresponding, according to the legislature’s estimate, to the expected enforcement of guarantees or securities in the budget period. In this case, it is furthermore necessary to take into account the characteristics of the European mechanism, as the EFSF did not even start in 2010 to carry out the operations for which it had been established and the legislature appears to have assessed that no enforcement of the guarantee under the AGMFSEA was to be expected in 2010. The Constitutional Court cannot venture an opinion on the correctness of this assessment, for this is a question of adequacy, not constitutionality. In the allocation of public funds for individual functions (public expenditure), the National Assembly has a certain scope of discretion with regard to its political judgement when adopting the budget (see Constitutional Court Decision No. U-I-40/96, dated 3 April 1997, Official Gazette RS, No. 24/97, and OdlUS VI, 46), which includes an assessment of expected enforcement of guarantees.
32. In the event that statutory regulation interferes with a human right, the Constitutional Court reviews the admissibility of such interference from the viewpoint of a constitutionally admissible aim (the third paragraph of Article 15 of the Constitution) and from the viewpoint point of the principle of proportionality (Article 2 of the Constitution). If the Constitutional Court finds that the interference is constitutionally inadmissible, it establishes its nonconformity with the human right, not with the provisions governing the principles for the protection of human rights (see Constitutional Court Decision No. U-I-219/03, dated 1 December 2005, Official Gazette RS, No. 118/05, and OdlUS XIV, 88). In other words, the general principle of proportionality (Article 2 of the Constitution) cannot be an independent criterion for the assessment of conformity with the Constitution, it is connected to an established interference with a specific human right. The Constitutional Court therefore did not need to respond to the alleged nonconformity of the AGMFSEA with Article 2 of the Constitution.
33. In view of the above, and taking into account the starting point of the constitutional review in the case under consideration, the Constitutional Court established that the AGMFSEA is not inconsistent with the Constitution.
34. The Constitutional Court reached this decision on the basis of Article 21 of the Constitutional Court Act (Official Gazette RS, No. 64/07 – official consolidated text – CCA), and the third paragraph of Article 46 of the Rules of Procedure of the Constitutional Court (Official Gazette RS, Nos. 86/07 and 54/10), composed of: Dr. Ernest Petrič, President, and Judges Dr. Mitja Deisinger, Dr. Etelka Korpič – Horvat, Mag. Miroslav Mozetič, Jasna Pogačar, Mag. Jadranka Sovdat, Jože Tratnik, and Jan Zobec. The decision was reached with seven votes against one. Judge Mozetič voted against.
Dr. Ernest Petrič
 F. M. Dostoevsky, Zapiski iz mrtvega doma (The Dead House), Matica Slovenska, Ljubljana 1912, p. 19. English translation from: Dover Thrift Editions, 2004, Mineola, NY. See also the German Federal Constitutional Court in the case BVerfGE 97, 350, p. 371.
 The classical notion of money in A. Smith, Wealth of Nations: An Inquiry into the Nature and Causes of the Wealth of Nations, A Selected Edition, Oxford University Press, Oxford 2008, p. 282.
 See Article 1 of the Euro Introduction Act (Official Gazette RS, No. 114/06 – hereinafter referred to as the EIA).
 See Article 3(1)c of the Treaty on the Functioning of the European Union (consolidated version, OJ C 83, 30 March 2010 – hereinafter referred to as the TFEU).
 H. J. Hahn and U. Häde, Währungsrecht, 2nd edition, Verlag C. H. Beck, Munich 2010, p. 310.
 J. A. Schumpeter, Das Wesen des Geldes, Vandenhoeck & Ruprecht, Gottingen 1970, p. 1.
 Council Regulation (EC) No. 332/2002 of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States' balances of payments, OJ L 53, 23 February 2002, pp. 1–3, Special edition in Slovenian: Chapter 10, volume 3, pp. 81–83.
 Hungary, Latvia, and Romania presently receive this assistance.
 All summarised from the Conclusions of the Council of the EU, dated 9 May 2010, Council documents No. 9602/10 and No. 9614/10, both available at <http://www.consilium.europa.eu>.
 The second paragraph of Article 122 of the TFEU states: “Where a member state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member state concerned. The President of the Council shall inform the European Parliament of the decision taken.”
 In Fratelli Variola Spa v Amministrazione Italiana delle Finanze, 34/73 of 10 October 1973, the Court of Justice of the EU took the position that Member States may not convert the content of regulations to national law in a manner such that the legal nature of the rules from the regulation may be concealed.
 See European Financial Stability Facility, société anonyme, Grand duché de Luxembourg, Mémorial C – No. 1189, 8 June 2010, p. 57026, available at: <http://www.etat.lu/memorial/memorial/2010/C/Pdf/c1189086.pdf#Page=2>.
 See Terms of reference of the Eurogroup, European Financial Stability Facility, 7 June 2010, available at: <http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/misc/114977.pdf>.
 The agreement does not have a supranational character. See also: J.-V. Louis, Guest Editorial: The No-Bailout Clause and Rescue Packages, Common Market Law Review, Volume 47, No. 4 (2010), p. 973.
 The company’s share capital was raised to EUR 17.5 million on 21 July 2010. See Mémorial C – No. 1566, 31 July 2010, p. 75122, available at: <http://www.etat.lu/memorial/memorial/2010/C/Pdf/c1566317.pdf#Page=2>.
 All summarised from EFSF Articles of Incorporation, published in Grand duché de Luxembourg, Mémorial C – No. 1189, see note 12.
 See Annex 2, EFSF Framework Agreement, available at: <http://www.efsf.europa.eu/documents/efsf-framework-agreement.htm>.
 The share of the Bank of Slovenia in ECB capital is 0.3288%. See Decision of the ECB, dated 12 December 2008, on the national central banks’ percentage shares in the key for subscription to the ECB’s capital (ECB/2008/23), OJ L 21, 24 January 2009, pp. 66–68.
 In accordance with Protocol (No. 14) on the Eurogroup to the TFEU, it is a group for informal meetings of the ministers of the Member States whose currency is the euro.
 Cf., J.-V. Louis, ibidem, p. 974. The same in H. Kube and E. Reimer, Grenzen des Europäischen Stabilisierungsmechanismus, Neue Juristische Wochenschrift, Volume 63, No. 27 (2010), p. 1911.
 All summarised from the EFSF Framework Agreement.
 German legal theory refers to it as the Steuerstaatsprinzip. See C. Seiler, Konsolidierung der Staatsfinanzen mithilfe der neuen Schuldenregel, Juristenzeitung, Volume 64, No. 14 (2009), p. 722.
 W. Heun, Artikel 115, in: H. Dreier (ed.), Grundgesetz Kommentar, Band III, Artikel 83–146, Mohr Siebeck, Tübingen 2008, p. 1109.
 According to Musgrave, this is the pay-as-you-use rule. R. A. Musgrave, Should we have a capital budget?, The Review of Economics and Statistics, Volume 45, No. 2 (1963), pp. 134–137.
 H. Kube, Artikel 115 (October 2009), in: T. Maunz and G. Dürig (eds.), Grundgesetz Kommentar, Band VII, Artikel 107–146, Verlag C. H. Beck, Munich, p. 11.
 These are the anticipated material effects (sachliche Vorgriffswirkung). C. Seiler, ibidem, p. 722.
 The future effects of borrowing are one of the principal reasons, according to legal theory, for institutional control of state borrowing. For details, see H. Fischer-Menshausen, Artikel 115, in: I. von Münch and P. Kunig (eds.), Grundgesetz-Kommentar, Volume 3, C. H. Beck'sche Verlagsbuchhandlung, Munich 1996, p. 1210.
 S. Cigoj, Teorija obligacij [Theory of Obligations], Časopisni zavod Uradni list SR Slovenije, Ljubljana 1989, p. 370.
 H. Heuer, Artikel 115 (March 1996), in: E. Heuer et al. (eds.), Kommentar zum Haushaltsrecht, Volume 1, Hermann Luchterhand Verlag, Neuwied, p. 9.
 W. Heun, ibidem, p. 1112.
 K. H. Friauf, Staatskredit, in J. Isensee and P. Kirchhof (eds.), Handbuch des Staatsrecht der Bundesrepublik Deutschland, Band IV Finanzverfassung – Bundesstaatliche Ordnung, C. F. Müller Juristischer Verlag, Heidelberg 1990, p. 331.
 For the same reasoning, see: F. Arhar in: L. Šturm (ed.), Komentar Ustave Republike Slovenije [Commentary on the Constitution of the Republic of Slovenia], Fakulteta za podiplomske državne in evropske študije, Ljubljana 2002, p. 991.
 M. Wiebel, Artikel 115 (April 1978), in: R. Dölzer, Bonner Kommentar zum Grundgesetz, C. F. Müller, Heidelberg, p. 24.
 Ibidem, p. 26.
 The same in H. Kube, ibidem, p. 13.
 This follows from the draft materials of the Constitution. A provision that tied borrowing to a substantive condition (“Loans may be taken out only for extraordinary budget expenditure.”) was deleted from the draft Constitution, while such a condition was not foreseen for guarantees in any phase of the framing of the Constitution. M. Cerar and A. Perenič (eds.), Nastajanje slovenske ustave: izbor gradiv Komisije za ustavna vprašanja [The Creation of the Slovene Constitution: A Selection of Materials of the Commission for Constitutional Questions] 1990–1991, Volume III, National Assembly of the Republic of Slovenia, Ljubljana 2001, p. 1139.
 A particular limit on the amount of borrowing is also determined by the provisions of the TFEU on excessive deficits and Protocol 12 concerning the excessive deficit procedure.
 The EFSF Framework Agreement in the first paragraph of Article 7 also limits the liabilities of the guarantor states, which it defines as costs, losses, expenses, or liabilities, proportionally to their equity stake in the EFSF, which corresponds to the share of their respective central banks in ECB capital, taking into account only euro area Member States.