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House of Lords
Session 2002-03
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European Union Committee Publications

European Union - Forty-Second Report

Here you can browse the report which was ordered by the House of Lords to be printed 30 October 2003.


PART 1: executive summary

PART 2: background


The contents of this report

The inquiry

The Structure and Governance of the ECB and ESCB


The ECB's monetary policy strategy

The monetary policy record of the ECB

The facts

The views of our witnesses

The Committee's conclusions on the ECB's monetary policy decisions
so far

Financial Stability and Prudential Supervision

The Committee's conclusions on financial stability and prudential
supervision in the EU

PART 3: The ECB's monetary policy Strategy


Does the EC Treaty give the ECB the right remit?

A comparison of the mandates of three central banks

Does the ECB actually aim at a single objective?

How does the Fed interpret its broad mandate?

There is a limit to what monetary policy can achieve

In practice the ECB has paid attention to growth

The Committee's conclusions on the mandate that the EC Treaty gives to the ECB

Who should define price stability for the euro area?

'Goal independence' and 'operational independence'

Should a political body define price stability for the euro area?

The problem with giving the power to define price stability to a political body

Certain witnesses argued that the ECB was the best placed institution to
define price stability

The Committee's conclusions on who should define price stability for the
euro area

The ECB's internal review of its monetary policy strategy

The ECB's definition of price stability

A safety margin against deflation

A positive measurement bias in the HICP

Inflation differentials in the euro area

Should the ECB's definition of price stability be changed to a symmetrical
inflation target?

What is a 'symmetrical' inflation target?

A further benefit of a symmetrical inflation target

A question of semantics?

Why does the ECB reject adopting an explicit inflation target?

The Committee's conclusions on the ECB's definition of price stability

The timescale over which the ECB is committed to achieving price stability

The Committee's conclusion on the time horizon of the ECB's definition
of price stability

Should the ECB maintain its two-pillar monetary policy strategy?

The role of the two pillars and their different time perspectives

The two-pillar strategy is an instrument to organise and convey information

What status should be accorded to monetary analyses?

Does there need to be a separate monetary pillar?

The Committee's conclusions on the ECB's two-pillar monetary
policy strategy

Should the ECB conduct further reviews of its monetary policy in the future?

The Committee's conclusion of future reviews of the ECB's monetary
policy strategy

Should the ECB have an Exchange Rate Policy?

The current institutional arrangements for the exchange rate of the euro

Do exchange rates matter for monetary policy?

Should or could the ECB have an exchange rate target?

Conclusion of the Committee on whether the ECB should adopt an
exchange rate target

PART 4: Reform of the Governing Council


How the Governing Council currently operates

How Enlargement of EMU would affect an unreformed Governing Council

An enlarged Governing Council would be inefficient…

… and would create the possibility of a controlling coalition of
smaller Member States

The agreed reform of the voting modalities of the Governing Council

The limitations imposed by the Nice 'enabling clause'

From ECB proposal to Council agreement of the reform

An overview of the agreed reform

Criticisms of the agreed reform

The Governing Council would be too large, making it inefficient

The proposal is not entirely clear on a number of points

It is far too complex and is not therefore transparent

It emphasizes nationality as the basis for who can vote

The speed with which the proposal was agreed by the Council did not
allow the requisite time for parliamentary scrutiny

The way forward: how should the Governing Council be reformed?

A comparison with other central banks

The considerations of efficiency and nationality

The way forward in the IGC

Conclusions of the Committee on reform of the Governing Council

PART 5: transparency and accountability


The current reporting arrangements for the ECB

Contacts with academics

Inflation projections

The President's press conferences and the ECB Monthly Bulletin

Do press conferences provide full transparency?

Publication of minutes of the meetings of the Governing Council and the results
of any votes taken

The position of the European Parliament

Arguments for the publication of minutes and votes

Minutes could better reflect the range of views within the
Governing Council…

…which would lead to a greater understanding of the Governing
Council's decisions

Publication of attributed minutes and votes would increase accountability
and could ensure that members of the Governing Council acted in the
European interest

Publishing even just the balance of votes in an anonymous way
would help to make the Governing Council more predictable

Why is the ECB against publishing minutes and votes?

The legal position

The Governing Council operates by consensus…

…and is a collegiate body

Publication of attributed minutes and votes could lead to political
pressure to deviate from a euro-area perspective

The minutes could be published in an anonymous form

If the Governing Council were reformed, the publication of attributed
minutes and votes could be reconsidered

Conclusions of the Committee on the publication of minutes and votes

Appointments to the ECB Executive Board

The current process for appointing members of the Executive Board

Should the manner by which the Council selects candidates for appointment
be made more transparent?

How the Council's reaches its decision

The appointment of the first President of the ECB

Suggestions for preventing a similar situation from occurring again
in the future

Should the European Parliament have the power to reject candidates for
the Executive Board?

PART 6: Economic Governance of the Euro Area


Why is there a need for co-ordination between monetary and fiscal policy?

The current institutional arrangements for co-ordination

Meetings between the different institutions

What might happen to necessitate a greater degree of co-ordination
between monetary and fiscal policy?

Difficulties with the Stability and Growth Pact?

The prospect of deflation?

Should more be done to ensure the possibility of formal co-ordination of
monetary and fiscal policy?

What could be done to improve the exchange of information between the
fiscal and the monetary authorities?

Conclusions of the Committee on economic governance of the euro area

PART 7: summary of conclusions


Appendix 1: Sub-Committee A
(Economic and Financial Affairs, Trade and External Relations

Appendix 2: List of Witnesses

Appendix 3: Glossary


Oral Evidence, 6 May 2003
Oral Evidence, 13 May 2003
Oral Evidence, 3 June 2003
Oral Evidence, 17 June 2003
Oral Evidence, 24 June 2003
Oral Evidence, 1 July 2003
Oral Evidence, 15 July 2003
Oral Evidence, 7 October 2003


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