Law of the EMU and euro

The Top 100 Law and Lawyer Blogs

The Criminal Justice Degrees Guide has included 'Law of the EMU and Euro' in its 'Top 100 Law and Lawyer Blogs' list under 'Foreign Law'.

ECB: "unilateral euroization by Iceland comes with real costs and serious risks"

This week the European Central Bank (ECB) objected to possible euroization by Iceland. In a speech at the Iceland Chamber of Commerce, Mr. Jürgen Stark, member of the ECB’s Executive Board, said that he is “aware that unilateral euroisation is being discussed in Iceland as a possible option.” He continued by saying that the ECB would “neither encourage nor facilitate such a move.” Or in other words “The ECB would thus pursue a policy of non-engagement and non-support towards” unilateral euroization.

 

The ECB did also have a word of warning for Iceland, stating that such euroization’s “benefits are uncertain, whereas the costs are real, and the risks serious.”

 

As to a possible “partial euroisation sponsored by the private sector, as opposed to an official euroisation”, Mr. Jürgen Stark noted that he would “not dwell much on this issue”, stating that “the potential benefits are more limited, whereas some of the costs may be less acute.”

Politically the most interesting comments made by Mr. Jürgen Stark relate to national sovereignty: "After all, a currency is a key attribute of sovereignty. Sharing a common currency implies sharing a common political destiny."

The speech given by Mr. Jürgen Stark (reproduced below) gives also an overview of the procedure leading to the adoption of the euro.

Although this overview gives a good impression of the 'road to Frankfurt', it seems to be less accurate with respect to some issues.

For example, central bank independence is mentioned as a criterion to join the euro area. In fact, this criterion is applied at an earlier stage when candidate countries accede to the EU. Central bank independence is, however, indeed a "cornerstone" of the relevant criteria. While the European Commission restricts the test to statutory requirements such as central bank independence, the ECB includes a broader range of issues in its assessments. In its convergence reports the ECB also addresses legislation in the area of, i.a., banknotes, coins, foreign reserve management and exchange rate policy.

Moreover, stating that "the road to the euro consists of two stages" is an oversimplification of a very complex procedure composed of, as I would like to see it, three stages with six sub stages (which, I'm aware, is a simplification as well). The three stages would be (i) accession to the EU, and consequently accession to the Economic and Monetary Union (EMU) as a member state that has yet to adopt the euro, (ii) participation in ERM II, i.e., the European exchange rate mechanism, and (iii) adopting the euro and accession to the euro area.

 

Commemorating 10 years of Economic and Monetary Union

To celebrate the 10-year anniversary of the launch of Economic and Monetary Union (EMU) and the creation of the euro, all euro-area countries will issue a commemorative 2-euro coin with a common design. It will be available at the beginning of 2009.

A design competition between the mints of the euro area has resulted in the pre-selection by the Mint Directors of 5 designs, presented here. The final winning design will be selected exclusively by your votes via this web page.

 

The selection is open to all EU citizens and residents. Each person may only vote once. A prize of a set of high-value euro collector coins will go to a participant chosen at random from those who voted for the winning design. Voting will be closed on 22 February 2008.

Coin above (left): An expanding spiral of ten stars – or ten Europeans joining hands – symbolises the solidity of the euro after ten years of economic and monetary union, and its continuing growth and development.

Go to the European Commission website to vote.

 

The euro is the latest step in the long history of trade, from pre-historic barter – evoked by the deliberately primitive design – to economic and monetary union.

 

 

 

 

 

 

 

 

Next to the euro symbol, the Roman figure X stands for 10 years of economic and monetary union. It also symbolises Europe as a crossroads where peoples and cultures come together. The spiral suggests growth and development.

 

 

 

Next to the euro symbol, the Roman figure X stands for 10 years of economic and monetary union. It also symbolises Europe as a crossroads where peoples and cultures come together.

 

A series of curved lines pointing toward the euro is reminiscent of the European Parliament's semi-circular debating chamber, where the people's representatives gather from every corner of the EU.

 

Turkish Language Enters Euro Area

When, at the beginning of this year, Cyprus adopted the euro and joined the euro area, the Turkish language joined the European language community.

 

As a consequence of Cyprus’ EU membership al citizens of the Republic of Cyprus are also citizens of the European Union. This applies both to the Greek Community and the Turkish Community of Cyprus.

These two communities are defined in the Cypriote Constitution. The Turkish Community comprises among others all citizens of the Republic of Cyprus who are of Turkish origin and whose mother tongue is Turkish.

 

The Cypriot Constitution provides that Greek and Turkish are the Republic’s official languages. Legislative acts and government documents have to be drawn up and published in both official languages. Greeks and Turks must be addressed by the Cypriot government in the Greek or the Turkish language respectively.

 

Cyprus’ language diversity also manifests itself on, among other things, stamps, and Cypriot banknotes and coins. As of January 1, 2008, on the national side of “Cypriot euro coins” the name “Cyprus” reads both “KΥΠΡΟΣ” in Greek and “KIBRIS” in Turkish.

 

On May 19, 2006, AgoraVox ran an article, authored by myself and titled “Turkey’s European Dream Starts with the Turkish Language”.

Source of pictures: ECB website

ECB independence still unresolved under EU Reform Treaty

The legal experts preparing a EU Reform Treaty have finalized their work. However, several political issues remain unresolved. One of these issues is the European Central Bank’s independence and institutional position.

 

After the French and Dutch ‘No’, Mr. Ben Bot, the former Dutch Foreign Minister, declared the European Constitution dead. Subsequently, a new Intergovernmental Conference (IGC 2007) was organised, to “draw up a [Reform Treaty] amending the existing [EU and EC] Treaties with a view to enhancing the efficiency and democratic legitimacy of the enlarged Union, as well as the coherence of its external action” (see the IGC’s mandate).

 

However, the ‘constitutional project’ was not entirely abandoned, as evidenced by the IGC’s mandate: “the Reform Treaty will introduce into the existing Treaties … the innovations resulting from the 2004 IGC”.

 

One of such innovations was the Constitutional Treaty’s attempt to classify the ECB as “an institution” (Article I-30(3)), albeit not as one of the five main institutions listed in Article 1-19: European Parliament, European Council, Council of Ministers, European Commission and Court of Justice of the European Union. Consequently, the ECB was not intended to be part of the EU’s “institutional framework”.

 

Instead, the ECB was placed under the heading ‘The Other Union Institutions and Advisory Bodies’. This underlined the ECB’s link with the EU’s institutional framework, while preserving its independence.

 

However, the first draft of the Reform Treaty (July 2007) classified the ECB as one of ‘the Union’s institutions’, together with the five main institutions mentioned above. This may bring the ECB under more political scrutiny.

 

Consequently, the ECB wrote the Portuguese presidency of the Council of the EU, reiterating what was agreed by the 2004 IGC. Moreover, the ECB requested references in the Reform Treaty both to the ECB and the European System of Central Banks (ESCB).

 

Today the ‘final’ draft of the Reform Treaty is published. Neither of the ECB’s requests is taken on board by the legal experts of the IGC 2007. So, this issue may well be followed up in the political arena on October 18 at the summit in Lisbon.

 

For an academic discussion of the ECB’s institutional position see the following two recent papers, authored by Chiara Zilioli and Martin Selmayr:

• ‘The Constitutional Status of the European Central Bank’, Common Market Law Review 44: 355-399, 2007
• ‘Recent Developments in the Law of the European Central Bank’, Yearbook of European Law 2006, 1-89 (link to my blog on this paper)

For a simplified explanation of the July draft Reform Treaty see the BBC website:

• The draft EU Reform Treaty – minus the euro-legalese (link)
• Q&A – The Reform Treaty (link)

 

Malta: the 14th star of the euro area

Malta is going to adopt the euro on 1 January 2008. As final preparations get under way for the transition, the National Euro Changeover Committee and the Central Bank of Malta, in co-operation with the European Commission and the European Central Bank, organised a high-level international conference entitled “EMU Governance & Euro Changeover: Malta on the path to the euro” in Valletta on 1 October 2007.

 

And the day before this conference the ECB and the Central Bank of Malta (CBM) launched their joint communications campaign for the euro changeover in Malta.

 

The ECB website has published the speeches of its President, Jean-Claude Trichet, during these events:

• The process of European economic and financial integration
  (October 1)

• Welcome Malta! (September 30)

The welcome address by the Governor of the CBM, Michael C Bonello, at the conference may be found on the CBM website.

 

The Malta Independent Online covers the speeches of the other speakers.

 

Photo: To mark the launch of the joint communications campaign for the euro changeover in Malta, Michael C. Bonello, Governor of the Central Bank of Malta, and Jean-Claude Trichet, President of the European Central Bank, unveiled euro banners on the façade of the Central Bank of Malta’s main premises in Valletta. Mr Trichet also presented the 14th “Euro Star” to the Central Bank of Malta, a memento that is offered to each new member of the Eurosystem.

European leaders: "Cyprus and Malta can join euro area"

Yesterday European leaders decided that Cyprus and Malta can join the euro area on 1 January 2008. The final approval, though, will come from the European finance ministers, the ECOFIN Council. They are set to meet on July 10.

The European leaders’s decison follows a supporting resolution by the European Parliament.

While there was overwhelming support for the applications from Cyprus (585 in favour, 14 against) and Malta (610 in favour, 12 against), MEPs were concerned that the timetable they were being asked to follow in adopting their opinion was too short.

To avoid this happening in future, they adopted - by 552 votes in favour to 37 against - a separate resolution urging the Commission and Council to come to a formal inter-institutional agreement with Parliament with a view to ensuring MEPs have at least two months to consider proposals to enlarge the euro area.

When Cyprus and Malta adopt the euro, the number of countries using the euro will rise to 15. The number of people using the euro will only grow by 1 million. Currenlty the euro is used by 318 million Europeans.

 

UK euro coins for sale

The United Kingdom has not adopted the euro. It has negotiated and obtained a so-called “opt-out”. Nevertheless, it is possible to order online UK euro coins.

The UK’s opt-out is laid down in the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland (the UK Protocol). This Protocol is annexed to the TEC and forms an integral part thereof.

In accordance with this Protocol the UK retains its powers in the field of monetary policy under its national law. Furthermore, the UK is not obliged to join the euro area. It is for the UK to notify the EU Council whether it intends to do so.

On 30 October 1997 the UK notified the EU Council that it did not intend to adopt the euro at the start of the third stage of EMU on 1 January 1999. Pursuant to the UK Protocol a number of Treaty provisions concerning monetary policy do not apply to the UK.

Until the UK decides to join the euro area there will be no such thing as a British euro coin. Once the UK decides otherwise, and it complies with the rules governing the entrance of the euro area, it has the power to design a national side to ‘its’ euro coins.

For the time being, and legally speaking, one can not pay with British euro coins. However, as Allard Knook (ECJblog) has e-mailed me, this is not to say that one can not obtain British euro coins. A set of these coins is for sale online: 56 euro’s at www.eurocoins.co.uk.

The National Side of the Slovenian Euro Coins

The red coins show a stork (1 cent), the ancient Sovereign Enthronement Stone (2 cent) and a man sowing stars (5 cent).

 

The yellow coins show the unrealised "Cathedral of Freedom" designed by Jože Plecnik (10 cent), two playing Lipizzaner horses (20 cent), and Mount Triglav, Slovenia's highest mountain (50 cent).

 

The 1-euro coin shows the bust of Primož Trubar, author of the first Slovenian printed book (1550). The 2-euro coin shows the profile of France Prešeren, Slovenia's greatest poet, with a verse in his handwriting.

 

Edge lettering on the 2-euro coin: SLOVENIJA, followed by an engraved dot.

 

SOURCE: European Commission website

“Austrian national bank predestined for banking supervision”

In an interview with the Austrian national daily newspaper Der Standard, Klaus Liebscher – governor of the Austrian central bank (OeNB) – claims banking supervision.

 

“If lawmakers want it, OeNB can take the responsibility for banking supervision completely. We are predestined for this, we have the experts, we can do it," Liebscher reportedly said.

 

His claim is based on OeNB’s mandate as laid down in national laws and the Statute of the European System of Central Banks (ESCB). Liebscher said: “We are responsible for the functioning of the markets, the supervision of the entire financial markets’ stability.”

 

Indeed, safeguarding financial stability is often presented as ESCB ‘aims’. See, for example, ‘The mission of the Eurosystem’ and ‘The strategic intents of the Eurosystem’.

 

However, no general financial stability ‘objective’ can be derived from the EC Treaty.

 

Nevertheless, since monetary policy and financial stability are linked, and financial markets and infrastructures play a key role in the transmission of monetary policy, the ECB and euro area national central banks (NCBs) like OeNB have a legitimate interest in and are committed to financial stability.

 

In 2001 the ECB published a note on the involvement of central banks in prudential supervision: ‘The Role of Central Banks in Prudential Supervision’. This note was adopted after debates on the reorganisation of the supervisory structure in some euro area countries.

 

The Governing Council of the ECB concluded that “when viewed from a Eurosystem perspective, the attribution of extensive supervisory responsibilities (i.e., both macro and micro-prudential) to NCBs is likely to prove beneficial”.