Download 10. Economic and Monetary Union

Economic and Monetary
Union
The EU has as an objective the
establishment of the EMU
The Institutions
• The EUROPEAN SYSTEM of Central Banks
• It comprises the European Central Bank(ECB)
and the National Central Banks (NCBs).
• The basic tasks: to define and implement the
monetary policy of the EU/to conduct foreignexchange operations/to hold and manage the
official foreign reserves of the MS/to promote the
smooth operation of payment systems.
• The ESCB is governed by the decision-making
bodies of the ECB: the Governing Council and
the Executive Board.
The European Central Bank
• Within the ESCB, the ECB has certain defined
tasks: to supply of money (it authorizes the issue
of euros and sets short-term interest rates for
the euro)/to make regulations (on minimum
reserves for credit institutions and where the
Council provides on the prudential supervision of
credit institutions)/it has executive powers (it can
instruct the NCBs)/it can impose fines on
undertakings/It is to be consulted on all
proposed EU or national measures that fall in
areas within its responsibilities.
The principles
Article 130 TFEU regulates the ECB’s
independence and accountability. ECB shall not
seek or take instructions from EU institutions or
from national governments.
It has a separate legal personality and
organizational autonomy.
It has financial and accounting independence (2633 of the Protocol).
The same principles are applied as regards the
national central banks.
The Governing Council
• The Governing Council’s meetings are confidential. The
ECB has the power to make or not its deliberations
public.
• The external relations of the euro-zone (Article 219
TFEU). The competence belongs to the Council acting
unanimously.
• The management of exchange rates between the euro
and the currencies of the other Ms takes place in the
context of Exchange Rate Mechanism II(1999).
Participation in the ERM II is voluntary for the non eurozone MS. The exchange rate can fluctuate within a band,
normally set at +/- 15% around the central rate. All other
currencies are floating freely against the euro.
The excessive deficit procedure
• As early as 1997 a compromise was agreed
where the figure of 3% would not be applied in
an exceptionally severe economic downturn.
• As of 1 December 2009, twenty of Ms have been
found to have an excessive deficit.
• A relative procedure can lead theoretically to the
levying of very heavy fines on the national
governments.
• Excessive deficits are either an annual
government deficit of more than 3 % of the GDP
or a government debt of more than 60% of GDP.
(Articles 126 TFEU, 1 of the Protocol).
Economic surveillance
• Ms must coordinate their national policies. They
have to treat them as a matter of common
concern (Article 121 TFEU).
• The procedure works by guidelines that are
extremely wide-ranging. There are concerning a
lot of policy fields (education, environment,
employment, social security etc).
• It is soft law with no strong sanctions and many
of the guidelines express medium-terms targets.
• The effectiveness of the surveillance mechanism
was very week.