13. EUROPEAN CENTRAL BANK
(a)
(24285)
6163/03
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(b)
(24286)
6684/03
COM(03)81
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European Central Bank Recommendation for a Council Decision on an amendment to Article 10.2 of the Statute of the European System of Central Banks and of the European Central Bank.
Commission Opinion on European Central Bank Recommendation for a Council Decision on an amendment to Article 10.2 of the Statute of the European System of Central Banks and of the European Central Bank.
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| Legal base: | (a) Article 10.6 of the Statute of the European System of Central Banks and of the European Central Bank; consultation; unanimity
(b) —
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| Document originated: | (a) 6 February 2003
(b) 21 February 2003
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| Deposited in Parliament: | 24 February 2003
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| Department: | HM Treasury
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| Basis of consideration: | EM of 8 March 2003 and Minister's letter of 18 March 2003
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| Previous Committee Report: | None
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| To be discussed in Council: | 22 March 2003
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared
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Background
13.1 Article 10.2 of the Statute of the European System
of Central Banks (ESCB) and of the European Central Bank (ECB)
deals with voting in the Governing Council of the ECB. (Article
10.2 does not govern voting on matters relating to the Statute's
financial provisions for the ESCB, for which voting rights are
weighted by shares in the capital of the ECB). The Council is
composed of the six members of the Executive Board and the governors
of the national central banks of the Member States in the euro
area. Voting under Article 10.2 is by simple majority and each
member of the Council has one vote. Article 10.6 of the Statute,
inserted by the Nice Treaty, allows amendment to Article 10.2
in anticipation of the accession of new Member States to the euro
area.
The documents
13.2 In document (a) the ECB recommends that the Council
adopt a Decision to amend Article 10.2. In order to avoid too
unwieldy a Governing Council, it suggests that, once there are
15 (or in certain circumstances 18) Member States in the euro
area, all six Executive Board members retain a vote, but there
be a rotational system of voting rights for the governors. This
would allow for a total of 21 voting members of the Council (as
would be the case at the moment if all Member States were in the
euro area). In devising such a system the ECB says it has been
guided by five principles:
- one member, one vote — that is, that the Executive Board
members and those governors for the time being having voting rights
would have one vote each;
- all members, whether with a voting right or not, would have
the right to participate in meetings;
- governors from larger Member States would have voting rights
for more frequent periods than smaller Member States;
- automatic adjustment of the new system to cope with any sequencing
of euro area enlargement up to 27 Member States; and
- the need for a transparent and understandable system.
13.3 The rotation proposed is based on grouping of Member
States by rank using two indicators — share of gross domestic
product at market prices (with a weighting of 5/6 in the
ranking) and share of total assets of the aggregated balance sheet
of monetary financial institutions (weighting of 1/6). Whilst
there were 15 to 21 Member States there would be two voting groups
— the five largest sharing four votes and the remaining
11 to 16 sharing 11. With 22 or more Member States in the euro
area there would be three voting groups — the five largest
sharing four votes, the next ranking Member States numbering half
of euro area members (rounded up if necessary) sharing eight votes
and the remaining Member States sharing three votes. Within each
group governors would have their turns at holding voting rights
for equal amounts of time. With 27 Member States in the euro area
each governor in the first group would have a voting frequency
of 80%, in the second 57% and in the third 38%.
13.4 In document (b) the Commission gives its opinion
on the ECB Recommendation. It says it bases the opinion on four
needs:
- swift and efficient decision-making;
- decision making bodies to act with the interests of the whole
euro area in mind;
- the system to be considered by all Member States, new and
old, as neutral and unbiased; and
- markets and the general public to be able to understand the
system.
13.5 The Commission says that, in the interests of swift
and efficient decision making, consideration should be given to
reducing the overall number of votes in the Governing Council
below that suggested by the ECB. It thinks the ranking of Member
States would give a more neutral and unbiased allocation of voting
rights if it were based on equal weighting of shares of gross
domestic product at market prices and of population. (The
Commission notes that in the past it has advocated the importance
of a population criterion for the voting rules of other institutions.)
It suggests that, for transparency, the start date for rotation,
the frequency of rotation and the sequence for assigning voting
rights within groups should be clarified and publicised at an
early date. Finally the Commission notes that the Nice Treaty
aimed to prepare for enlargement and that this proposal meets
the limited Treaty requirement in relation to ECB voting. But
it suggests that further consideration could be given to ECB governance,
in the Convention on the Future of Europe and at any subsequent
Inter-Governmental Conference, both in relation to voting rights
and to other issues, such as the possibility of a monetary policy
board.
13.6 If the ECB Recommendation is adopted by the Council
(in the formation of Heads of State and Government) it would be
subject to ratification by Member States. In the case of the UK
it would be laid before Parliament in accordance with the Ponsonby
Rule.[22]
The Government's view
13.7 In her Explanatory Memorandum the Financial Secretary
to the Treasury (Ruth Kelly) tells us:
"The UK supports the existence of an effective decision-making
body in the ECB.
"While the UK remains outside the single currency, the ECB
proposals have no impact on the operation of monetary policy in
the UK.
"The Government has made clear that it will only recommend
UK membership of the single currency if the economic case is clear
and unambiguous. A comprehensive and rigorous assessment of the
five economic tests will be made within two years of the start
of this Parliament."
13.8 In relation to the Government's wish for an effective
decision making body in the ECB, the Minister says in her letter
that, given the terms of Article 10.6 of the Statute and the requirement
for unanimity in both the Governing Council and the Council, the
ECB Recommendation is "the only feasible proposal achievable
at the current stage".
Conclusion
13.9 The attempt to make voting in an expanded Governing
Council of the ECB less unwieldy is perhaps laudable. But the
Commission's opinion shows that the way a ranking system for allocating
limited voting rights is weighted raises wider questions of governance
in the EU. The Minister tells us that in the present circumstances
the ECB Recommendation is the only feasible proposal for more
effective decision making in an enlarged Governing Council. On
that basis we clear the documents.
22 Under
the Ponsonby Rule treaties are laid before Parliament for 21 sitting
days, together with an Explanatory Memorandum from the Government. Back
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