Monetary Law Blog

Italy runs excessive deficit

The Commission has adopted an opinion that concludes that an excessive deficit exists in Italy. The opinion, written in accordance with Article 104(5) of the EC Treaty, takes into account the opinion of the Economic and Financial Committee, and the findings of the Commission’s report of 7 June.

The Commission opinion is based on the following elements:

• A general government deficit at 3.2% of GDP in 2003 and 2004 and expected to remain well above 3% in 2005 and in 2006 under an unchanged policy scenario.
• A debt-to-GDP ratio of 106-107% of GDP in 2003 and 2004 which is clearly above the reference value of the Treaty and has not declined at a satisfactory pace over recent years, nor will do so in the near future on account of the present level of the primary surplus.

Portugal infringes upon Stability Pact

In accordance with Article 104(3) of the EC Treaty, the Commission has adopted a report indicating that the Treaty requirements concerning the deficit and debt criteria are not fulfilled by Portugal.

Portugal plans to record a government deficit of 6.2% in 2005. Such a figure is well above the 3% reference value set in the Treaty. According to the Commission such figure cannot be considered exceptional, since it does not result from an unusual event outside the control of the government, nor is it the result of a severe economic downturn.

Furthermore, the Commission notes that the deficit is also not temporary, as it is projected to be above the reference value for three years. The consideration of “other relevant factors”, as required under the Treaty, reinforces the above conclusion.

See: press release and the full Commission report

The European Central Bank - Credibility, Transparency, and Centralization

In this publication of The MIT Press the authors (De Haan, Eijffinger and Waller) discuss several issues:

·       The ECB: Structure, Strategy, and Policy

·       The ECB's Strategy: An Assessment

·       Transparency, Accountability, and Credibility of the ECB

·       Centralization or Decentralization

·       New Member Countries

·       Options for Reform

 

Furthermore, the authors assess the ECB’s political independence as guaranteed by law (Article 108 EC Treaty).

Opinions at the request of Latvijas Banka and Lietuvos bankas

The ECB Governing Council has adopted opinions at the request of Latvijas Banka and Lietuvos bankas.

 

On the national authorities’ duty to consult the ECB see a prior post.

Guide to Consultation of the European Central Bank

The ECB has published a Guide to Consultation of the European Central Bank by National Authorities Regarding Draft Legislative Provisions. The duty to consult the ECB is laid down in Article 105(4) EC Treaty.

The ECB’s guide assesses the background, objective and scope of the duty to consult the ECB, and compliance and the legal consequences of non-compliance with this duty.

Furthermore, several practical issues of the consultation procedure are addressed: timing of the consultation, requesting an opinion, time limits, acknowledgement of receipt, adopting opinions, language regime, transmission and publication of opinions.

Please be informed that last year I published a paper entitled Consulting the European Central Bank. Legal Aspects of the Community and National Authorities' Obligation to Consult the ECB Pursuant to Article 105(4) EC (European Banking and Financial Law Journal, Euredia 2004/1, pp. 111-152).

EP demands tightly drafted rules for the new Stability and Growth Pact

The European Parliament (EP) has amended the Commission proposals to reform the Stability and Growth Pact (the Pact). The EP wants to ensure that the reform of the Pact is implemented without going too far in loosening the rules.

 

In adopting two reports from Otmar Karas, MEPs are calling for a number of changes aimed at tightening definitions and limiting the timetable for correcting excessive deficits. Furthermore, the EP has adopted amendments concerning the strengthening of the monitoring by the Commission and the credibility and quality of statistical data. The justification for the latter amendments suggests that these amendments are motivated by the problems entailed in the statistical data produced by Greece and Italy.

Conclusions ECOFIN Council – 7 June 2005

· Common guidelines for the national sides of euro coins
The ECOFIN Council has welcomed the common guidelines for the national sides of euro coins which the Commission adopted in its Recommendation of 3 June 2005
Read the press release (0.1 MB).

· Authentication of euro coins and handling of euro coins unfit for circulation
The ECOFIN Council has welcomed the Commission Recommendation concerning authentication of euro coins and handling of euro coins unfit for circulation.
Read the press release (0.1 MB).

· Enlarged EU represented on euro coins
The ECOFIN Council has decided to change the common sides of the euro circulation coins so as to ensure that all EU Member States will in the future be represented on the common side of the bi-colour coins (1- and 2-euro) and the “Nordic gold” coins (10-, 20- and 50-cent).
The common side of the smallest denomination coins (1-, 2- and 5-cent) represent Europe in the world and are not affected by the enlargement of the European Union.
Read the press release (0.1 MB).

Revised version of the “General Documentation”

The revised version of the document entitled “The implementation of monetary policy in the euro area: General documentation on Eurosystem monetary policy instruments and procedures” (generally referred to as the “General Documentation”) has entered into force.

 

The amendments include all changes to the Eurosystem’s operational framework for monetary policy that have been approved by the Governing Council since February 2004.