The Bank, the Bond and the Bail-Out: On the Legal Construction of Market Discipline in the Eurozone

The ‘logic of the market’, so holds the Court of Justice, is the standard of legality of financial assistance to indebted member states under EU law and, ultimately, the legal justification for strict conditionality and the imposition of austerity. This logic of the market, though, is different from actual market behaviour. Austerity, it turns out, is not the inevitable response to market pressures but a function of political substitutes for market discipline (Pringle) and technocratic truth seeking about the ‘correct’ price of debt (Gauweiler) which the Court has frozen into law. The perverse consequence of making the modalities of financial assistance dependent on the ‘logic of the market’ is, moreover, to render the assistance as ineffective and expensive as possible. ‘The logic of the market’ in the Court's case law is best seen as punitive and cynical politics masquerading as inept economics.