The Making Of The Statute Of The European System Of Central Banks ~ Chapter 12: Conclusions

In the previous chapters we have studied the genesis of the articles of the Statute of the European System of Central Banks (ESCB),[i] which allowed us to come to a clear understanding of their meaning both from an economic and a text-interpretative perspective. This covers most of the pages of this study, and should be of interest to practitioners and academics. At the same time we have tried to make a map of the checks and balances present in the Statute. Checks and balances would seem indispensable for an institution like the ESCB, which is designed as a federal central bank system with a centre and regional banks, neither of which was supposed to be dominant, though at the same time monetary policy has to be one and indivisible. The ESCB’s external relations are also characterized by checks and balances; for example while the ESCB is independent, its Board members are appointed by he political authorities. In fact, right from the beginning the designers of the Statute (basically the governors) took great care to introduce adequate checks and balances, in order to make the ESCB’s independence politically acceptable. On the basis of the description of the genesis of the articles of the Statute, we conclude that the Statute has a good measure of checks and balances. These checks and balances fall into different categories. We distinguished five categories, which followed from reviewing the concept of and the literature on federalism. The checks and balances concept is a new method of describing the ESCB Statute and the relevant Treaty articles on Monetary Union. It allows us also to discover possible weak spots in the design and from this we can derive suggestions for features to be improved.

As an intermediate step we reverted to the literature on economic integration, in a search for criteria for optimal forms of international organizations, allowing us to assess the design of the ESCB. In fact, most studies on international organizations are limited to providing a factual description, and do not provide a framework or criteria for the optimal design of international organizations. A distinction made by the neo-functionalist theory of economic integration is that between purely intergovernmental organizations and supranational organizations. The first category is of a purely voluntary nature and consists basically of its members, a place to meet and a secretariat.[ii] The basic thesis of the neo-functionalists is that cooperation in one functional area will spill over in other areas, thus cascading into deeper integration. This process will only flourish though, when there is a supranational body with some own (though possibly reversible) powers and preferably a mandate for furthering integration in general. The neo-functionalist theory could explain the first decennia of post-war European integration (starting from the Schuman plan), but not the subsequent standstill from the mid-seventies until the mid-eighties – for which reason this particular theory lost much of its glamour. Other integration theories however also failed to describe (and predict) the uneven process of European integration. The pure intergovernmentalists for instance cannot explain the surrender of sovereignty. However, it would seem that even when progress takes places, possibly at uneven steps and maybe strongly dependent on persons (Adenauer, Kohl, Mitterrand) and events (unification), no such progress can be permanent without embedding it in institutions with a formal mission with an expansive element.

Economic integration theories did not provide a framework for the optimal design of supranational institutions. Therefore, we turned to the literature on federalism, looking for concepts allowing us to assess the design of the ESCB. Indeed, monetary integration in Europe has taken a federal form – federal as opposed to unitary and also as opposed to hierarchical.[iii] We find that an important element of federalism is power sharing and not just separation of powers. The American political system is usually taken as the prototype of a system of checks and balances, with a distinction made between executive, legislative and judicial powers. At the same time though there are many interlinkages, for instance the president appoints members of the Supreme Court, but needs the approval of the Senate; the president has full executive powers, but for his budgetary appropriations he needs Congressional approval (see chapter 2 for more examples). A main fear of the drafters of the American Constitution was that the branches would develop their own powers, indirectly encroaching on the domains of the others; one example being the absolute monarchs in Europe, but also the British Long Parliament, largely overlapping with the Cromwell period, which assumed executive and judicial (prosecuting and sentencing) powers. These principles of balancing powers are also visible in the design of the Federal Reserve, where public interest (with rampant anti-financial sector feelings) had to be balanced with private sector interests (banking sector), both sides fearing dominance by the other. This fear pervades the set-up of the system (Federal Reserve Banks and a Board) and the internal distribution of powers. Read more

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The Making Of The Statute Of The European System Of Central Banks ~ Annex 2: General Overview Of Sources Relevant For The Genesis Of The Articles

The sources used for this study can be divided over three periods: the period of the Delors Committee, the drafting of the ESCB Statute and the IGC.

Delors Committee period
The main document is the Delors Report, including a collection of papers submitted to the Committee, partly at the initiative of the members of the committee, partly at the request of the chairman (annexed to the Report). Also important are the draft versions of the Delors Report (made available for research purposes due to the courtesy of dr Szász). In addition, internal reports[i] have shed light on the discussions in the Committee. The Delors Committee met eight times [ii] and produced 5 (sometimes only partial) draft versions of its report. Other important documents are: the Genscher memorandum, the Stoltenberg memorandum, the press conference of the Bundesbankpresident on May 1988, the conclusions of the European Council summits of June 1988 and June and December 1989. These documents have been published either in HWWA (1993)[iii] or in the Presseauszüge of the Bundesbank.

Other reference documents are: the Werner Report and a number of autobiographies Lawson (1992), Thatcher (1993), Kohl (1996) and the voluminous study by Dyson and Featherstone (1999).

Period of drafting the ESCB Statute
The Committee of Governors met four times at the level of governors [iv] and more than ten times on the level of the Alternates[v] and they discussed numerous internal draft versions of the ESCB Statute. The basic document is the draft Statute of 27 November 1990 (published in HWWA (1993)), which was sent to the IGC. The draft contained a limited number of bracketed elements, indicating where the governors had not been able to agree among themselves. On 26 April 1991 a new version was sent to the IGC, now including the chapter on financial provisions (chapter VI), a chapter on general provisions (chapter VII) and proposals for a simplified amendment procedure and complementary Community legislation (chapter VIII) (CONF-EMU 1613/91, 29 April 1991). On 28 October a draft version of chapter IX (Transitional Provisions)[vi] was transmitted to the IGC, together with a draft version of the EMI Statute. All draft versions of the draft ESCB Statute are available through the courtesy of dr Szász. There are no official records of the meetings of the Alternates. The author based himself on internal reports by the participants of the Nederlandsche Bank. The discussion among the governors has been recorded in minutes. Many of the arguments used in the discussions between the central bankers were also reflected in official speeches, a number of which are published at the end of this book (speeches by Bundesbankpresident Pöhl and the French governor de Larosière) – see Annex 3.

Period of IGC
The IGC met 14 times at the ministerial level[vii], 23 times at the deputies level [viii]and 6 times at the level of the EMU Working Group[ix]. This Working Group, chaired by Dutch civil servant Bernard ter Haar, redrafted the Treaty texts on the basis of the outcome of the discussions at the Deputies level and sometimes solved problems for them. The author attended most of the IGC meetings at the Deputies level, chaired by Yves Mersch and Cees Maas in the first and second half of 1991 respectively, and most meetings of the EMU working group. There were also six informal Ecofin meetings (joint meetings of ministers of finance and governors).[x] The delegations and presidency of the IGC produced 120 UEM-documents over the course of one year. All these documents were numbered, with numbers starting with UEM/../year, for instance UEM/34/91. Many of these documents were made public by Agence Europe.[xi]

Important IGC documents are: the draft Treaty text of the Commission, France and Germany (published in HWWA (1993)[xii]. Other important conference documents are the Luxembourg presidency’s non-paper of 10 May and its reference document of 18 June (CONF-UP-UEM 2008/91) and the Dutch presidency’s draft Treaty text (UEM/82/91) of 28 October (all printed in HWWA (1993). The Dutch presidency presented new consolidated versions on 22 November (UEM/112/91), on 28 November (UEM/118/91) and 5 December (CONF-UEM 1620/91). The draft Treaty version of 5 December is available in the Metten-archives.[xiii] Many other conference documents have been published by Agence Europe. There are no official minutes of IGC meetings. Most of the drafting took place at the level of the deputies (or the EMU working group). The exchange of views between the delegations was witnessed by the author as a member of the Dutch delegation and made it possible to understand the evolution of the wording of the draft articles.

Other useful documents of the same period:
– Commission documents: ‘Economic and Monetary Union’, 21 August 1990 (published in HWWA (1993)); ‘Central bank legislation in 16 countries’,
– Commission document II/77/90, January 1990, circulated to the Monetary Committee (available in the Metten-archives), circulated to the Monetary Committee as II/77/90-EN.
– Monetary Committee document: ‘Economic and Monetary Union beyond Stage 1: Orientations for the Preparation of the Intergovernmental Conference’ (version of 26 March 1990, published by Europe (Europe Documents, no. 1609, 3 April 1990) and final version of 23 July 1990 published in HWWA (1993).
Germany: Stellungnahme der Deutschen Bundesbank zur Errichtung einer Wirtschafts- und Währungsunion in Europa, 19 September 1990 (published in HWWA (1993)).

All these documents and the records of the meetings have been studied to trace the genesis of those articles considered most important for the constitution of the ESCB.

[i] There are no official minutes of the meetings of the Delors Committee. The internal reports are based on debriefings to staff.
[ii] On 13 September, 10 October, 8 November, 13 December 1988 and on 10 January, 14 February, 14 March and 11 and 12 April 1989.
[iii] HWWA (1993) stands for a study by Krägenau and Wetter, who brought together a large volume of documents relating to European monetary integration, which was published in 1993 by the HWWA-Institut für Wirtschaftsforschung – Hamburg.
[iv] On 10 July, 11 September, 13 November 1990 and 9 April 1991. In the second half of 1991 the governors met to discuss the draft EMI Statute and the chapter on transitional provisions.
[v] Alternates: 29 May, 18 June, 29 June, 9 July, 20 July, 3 September, 9 September, 15-16 October 1990 and 10 February, 10 March and 7 April 1991. Apart from this, several specialized committees or ad hoc working groups met over the period summer 1990 – spring 1991 to discuss legal, monetary and supervisory aspects. (Not mentioned are the meetings of the Alternates spent on drafting the EMI Statute and the chapter on transitional provisions, which took place in the second half of 1991.)
[vi] Later renamed into ‘Transitional and other provisions’.
[vii] Ministers: 15 December 1990 and 28 January, 25 February, 18 March, 8 April, 10 June, 9 September, 7 October, 11-12 November, 20-21 November, 25 November, 1 December, 2-3 December 1991, 9 December 1991.
[viii] Deputies: 15 January, 29 January, 19 February, 26 February, 12 March, 19 March, 2 April, 9 April, 23 April, 10 May, 21 May, 4 June, 2 July, 9 July, 3 September, 10 September, 1 October, 8 October, 22 October, 5 November, 13 November, 26 November, 30 November 1991.
[ix] Working Group: 17 October, 30-31 October, 6 November, 14 November, 18-21 November, 26-28 November 1991.
[x] 20 May 1989 (s’Agaro), 9 September 1989 (Antibes), 31 March 1990 (Ashford Castle), 8 September 1990 (Rome), 11 May 1991 (Luxembourg), 20-21 September 1991 (Apeldoorn).
[xi] International treaties are prepared in a peculiar way. There are no parliamentary discussions, there are no official records, there is no official Commentary. However, during the IGC the French press agency (Europe) published many interim conference documents.
[xii] Most documents in HWWA (1993) are published in German translation.
[xiii] These archives are available for research purposes through the Institute of Social Sciences and History in Amsterdam. The archives contain documentation used by Alman Metten (the Member of the European Parliament) and Bart van Riel (assistant to the Dutch socialist party members of the European Parliament) in writing ‘The Choices of Maastricht’ (Van Riel and Metten, 2000), only available in Dutch.

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The Making Of The Statute Of The European System Of Central Banks ~ Bibliography

Aarsman, Olga (2001), ‘The development of the FRS (1913-2000) and lessons for the ESCB’, thesis Vrije Universiteit, Amsterdam, April/May 2001 (only available in Dutch).
Agence Europe, several daily press reports and Europe Documents, 1988-1992.
Akhtar, M.A. and Howard Howe (1991), ‘The Political and International Independence of U.S. Monetary Policy’, Banca Nazionale del Lavoro Quarterly Review, no. 178, September.
Alesina, Alberto (1988), ‘Macroeconomics and Politics’ in S. Fischer(ed.), NBER Macroeconomics Annual.
Alesina, Alberto and Lawrence Summers (1993), ‘Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence’, Journal of Money, Credit and Banking 25
Alesina, Angeloni and Etro (2001), ‘Institutional Rules for Federations’, NBER Working Paper 8646.
Amtenbrink, Fabian (1999), The Democratic Accountability of Central Banks – A comparative study of the European Central Bank.
Artis, M. (2002), ‘EMU: the First Four Years’, paper presented by at the conference ‘Enlargement and the Future of Europe 2002’, Institute for International Policy Studies, Tokyo, November 2002.
Aufricht, Hans (1967), ‘Central Bank Legislation’, Vol. II: Europe, IMF Monograph Series no. 4.
Bade and Parkin (1978), Central Bank Laws and Monetary Policy: A Preliminary Investigation’, in: M. Porter (1978), The Australian Monetary System in the 1970s: the proceedings of a conference (Victoria, Austalia, 1977).
Bade and Parkin (1988), Central Bank Laws and Monetary Policy: A Preliminary Investigation, Dept. of Economics, University of Western Ontario.
Bakker, Age F.P. (1996), The Liberalization of Capital Movements in Europe – the Monetary Committee and Financial Integration 1958-1994.
Bakker, Age F.P. (1996), ‘Verslag van een bezoek aan het Federal Reserve System’, (Report of a Visit to the Federal Reserve System), De Nederlandsche Bank, December 1996.
Barents, R. and L.J. Brinkhorst (1994), Grondlijnen van het Europees Recht.
Barro and Gordon (1983), ‘A Positive Theory of Monetary Policy in a Natural-Rate Model’, Journal of Political Economy 91 (August 1983), pp. 589-610.
BBC2 – Arte TV (1998), ‘The European Monetary Union’, (Brook Lappings Production).
Beaufort Wijnholds, Onno de (1992), Inaugural Lecture on the Occasion of the Assumption of the Office of Professor of Monetary and Banking at the University of Groningen.
Begg and Green (1998), ‘The Political Economy of the European Central Bank’, in Arestis and Sawyer (eds.) The Political Economy of Central Banking.
Berg, van den Carel C.A. and Cindy van Oorschot (2000), ‘Wie is de lender of last resort in EMU?’ Maandschrift Economie, Vol. 64, February 2000, pp. 77-85.
Berg, van den Carel C.A., ‘Relationship between the ECB and the Ecofin Council and its Implications for the Exchange Rate Policy for the Euro’, Economic and Financial Computing (European Economics and Financial Centre), Vol. 8, no. 2, Summer 1998.

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TED ~ 10 Talks To Celebrate Black History Month

Insightful talks that offer fresh, thoughtful perspectives on Black identity.

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Solutions For An Unfair World ~ Contents & Introduction: Consternation

1. The world in which we live is too complex
2. We have to bring trade under democratic control
3. Curb globalisation: a dialogue between the veritable left and the simplifying right
4. Peace in our time?
5. A president with messy moral standards

Bitter tears, bon courage
About the author & Acknowledgement & Literature


After November 8, 2016, I have occasionally thought that the governments of civilised nations should recall their ambassadors from the United States, for consultation as it is called; I’d rather say for consideration. Thus far that recall did of course not happen, but consideration is more than ever necessary. After one year it is abundantly clear that Donald Trump’s government has not left relations within the us and the rest of the world untouched.

Obviously, us citizens must set their own course, but as residents of all corners of the world we have to consider what this Trump is doing. Let me mention in this essay a few points that we have to think about. What can we still expect, what have we already seen, how did that affect us, and how can we respond appropriately?

A warning is called for, and it comes from Luigi Zingales – as his name suggests an Italian, who is a professor in the United States. Make the comparison with Berlusconi, he suggests, and deduce lessons from that. ‘Mr. Berlusconi was able to govern Italy for as long as he did mostly thanks to the incompetence of his opposition. It was so rabidly obsessed with his personality that any substantive political debate disappeared; it focused only on personal attacks, the effect of which was to increase Mr. Berlusconi’s popularity.’ (New York Times, 22.11.16)

The purpose of this essay is not to fall into that trap. The election of Trump forces us, more than anything else, to consider some fundamental issues. At the same time we should not be afraid to formulate ambitious solutions. It is still possible to build a civilised, human, just and ecologically sustainable world. We need radical proposals for that, which I would like to present here in five – in principle separately readable – chapters. Read more

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Solutions For An Unfair World ~ The World In Which We Live Is Too Complex

It is beyond any doubt: for many citizens life in the second decade of the twenty-first century is difficult. Many are burdened with debt. In the United States and, for example, in Spain, residents can be evicted from their homes at any time. The chance that people will find a decently paid job is decreasing. Long-term unemployment is rather rule than exception. Industries are disappearing. Many suburbs need proper maintenance, but it’s not happening, and the police there will not always be seen as your best friend. Worst of all perhaps is that the social safety nets, which have helped people through difficult times in their lives, are becoming increasingly wide-meshed. You often are on your own, in an environment in which you suspect – or are convinced – that immigrants are driving you out of the housing and job market, and have easier access to social services. The neighbourhood in which you live has less social cohesion than before, and mutual trust is gone. Daily life has almost no certainties anymore.

Of course we do not know this precisely, but the shaming of the political elite that is the order of the day may have something to do with this. After all, is it not the responsibility of politics to provide citizens with a safe and secure existence?
When we think about this, some paradoxes stand out. First of all, there is hardly any anger directed at the business establishment. The leaders of big companies always claim to be the true leaders of the free world, but if something goes wrong in society – and that is really the case now – they are not held responsible. Secondly, by confronting the political elites angry citizens make it abundantly clear that they expect a lot of care from the government. Despite decades of neoliberalism – which advocated the perishing of the state – for many citizens the state still seems to be the entity that needs to keep society in order.

And the third paradox is that citizens have chosen time and again for political leaders who, according to the principles of neoliberalism, have denied the state the financial and organisational means of realising something for individual citizens and the society as a whole. At the same time the state should look after jobs and pensions, affordable health care, safety and everything that gives life perspective. In the absence of resources and competence, states, and thus politicians, can not provide all these things under neoliberal regimes. Nevertheless, the state is expected to deliver protection and social security to its citizens. After all, markets can only flourish if the state is strong enough to make life liveable for its citizens.

The relative impotence of the state to provide citizens with security in their lives is in stark contrast with the power that big companies have acquired over the course of several decades. These are companies that have grown into transnational corporations. Their structure is usually so complex that it is hardly understood what they do – anywhere in the world – and what the consequences might be. They can regard any form of regulation as being irrelevant to them and even prevent these rules from being implemented, including by lobbying at a large scale, wherever appropriate. Such transnational corporations act as collaborative entities that secure their interests on a worldwide scale. Read more

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