SUGGESTIONS FOR PREVENTING A SIMILAR
SITUATION FROM OCCURRING AGAIN IN THE FUTURE
205. Professor Giavazzi complained that the procedure
whereby the Council chose candidates for the Executive Board was
shrouded in secrecy. No one knew how the Council came to its nomination
for the candidate; the process was not subjected to any scrutiny.
Who were the alternatives, for example, when the Council nominated
Mr Trichet to replace Mr Duisenberg as President of the ECB? From
which pool of people was he chosen? Professor Giavazzi also mentioned
the recent replacement on the Executive Board of Sirkka Hämäläinen,
the former governor of the Bank of Finland, by the deputy governor
of the Bank of Austria, Gertrude Tumpel-Gugerell. Again, there
was no discussion as to who might be the best candidate to replace
Ms Hämäläinen, and no alternatives to Ms Tumpel-Gugerell
were openly proposed:
"What was the process whereby the deputy governor
of the Bank of Austria was chosen? Most likely she is the best
candidate for the post, but I do not think there has been an open
scrutiny. Because individuals are so important, the way they are
selected is very important and here the political process falls
down. It is not the fault of the bank. It is the fault of the
way that the Council of heads of state, which is responsible for
the appointments, comes to a decision."
206. Professor Giavazzi contrasted the appointment
procedure for members of the ECB with that for posts in the European
Commission,
"where the top administrative jobs, notably
recently the appointment of the Director General for economic
and financial affairs, Mr Regling, happened through a process
of committee. The Commission, in the case of Mr Regling, had appointed
a committee which included both insiders from the Commission and
outside experts. These people went through a list of potential
candidates and came back to the Commission with a list of three
candidates who were deemed suitable for the job."
207. That type of process of selecting candidates
was "far ahead" of what happened for the Executive Board.
Professor Giavazzi suggested that for these candidates too the
Council should adopt a procedure with a nominating committee.
The European Council could appoint a committee and individual
countries could come up with suggested names, but then the nominating
committee would have a procedure whereby the alternatives were
discussed and compared. The committee would then present the European
Council with a list of three or four people for it to decide on
a nomination. Professor Giavazzi recognised that it would be difficult
to set down operating rules for this committee, but the fact that
it was not easy did not mean it should not be attempted. Having
a committee that would openly compare candidates would be "an
enormous step" forward (QQ 100-02, 105).
208. Other witnesses agreed that the appointment
procedure could be improved and made more transparent by the Council
being presented with a list of possible candidates. Dr Schmieding
suggested that an initial list of candidates could be drawn up
publicly by the Commission. He further added and that perhaps
the Council should only pick candidates to which neither the ECB
nor the European Parliament had objected. Mr Codogno's view was
that "a special commission of the European Parliament or
the EU Commission" should propose candidates "purely
on technical grounds." (Q 80; p.81)
Should the European Parliament
have the power to reject candidates for the Executive Board?
209. At the moment, the European Parliament is only
consulted on the Council's recommendation. As was seen in the
recent decision to amend the voting modalities of the Governing
Council - where the European Parliament was consulted and rejected
the proposal, but this rejection did not affect the decision of
the European Council, which adopted the proposal regardless -
a process whereby the European Parliament is only consulted allows
the Council to disregard the European Parliament's opinion. The
European Parliament is concerned that its voice carries little
weight in these matters, and it therefore wants the power to confirm
the appointment of the Council's nominations. This would mean
that rather than just offering a view on a the Council's nomination,
Parliament would have the right to veto the candidate. EMAC argued
that this would increase the accountability of the appointment
process:
"a key element of accountability [for the ECB]
could materialise when new members of the ECB board are designated.
Even if the treaty gives some leeway on the matter, the European
Parliament claims the right to confirm their appointment in the
same manner as the American Senate with the Federal Reserve. Board
members have a particular responsibility: they are responsible
for the day-to-day management of the ECB in key areas and have
a particular duty to represent all the Europeans. That's why the
Parliament should designate them through a clear and democratic
procedure. Far from being a threat to their independence, this
confirmation would give them added credibility."[112]
210. The European Parliament wants the new constitutional
Treaty to give it the capability to confirm appointments to the
Executive Board and is pushing for this issue to be considered
at the IGC. A substantial number of witnesses supported amending
the Treaty to give the European Parliament (on the advice of EMAC)
the power to veto the candidates. Mr Bootle argued that for the
EMAC hearing to be constructive, the Committee had to have "some
teeth". With the power to overturn an appointment would come
responsibility. Mr Volcker added that the extra responsibility
could have a positive knock-on effect and might change the psychology
of other meetings between the two institutions, making the ECB's
regular monetary dialogues with EMAC "potentially more meaningful"
(QQ 105-07, 134; p.87).
211. Professor Giavazzi further argued that if the
European Parliament had the power to reject the Council's candidates,
the introduction of this discipline could improve the prospects
of the Council adopting a more open procedure for nominating candidates
based on a nominating committee, because such a procedure would
allow the Council easily to demonstrate that it was putting forward
good candidates (Q 109).
212. Professor Draghi agreed that ideally the European
Parliament should be given the power to hold formal confirmation
hearings, which would include the power to reject the candidate
nominated by the Council. Such a move would increase the democratic
accountability of the ECB, which was a very important institution
that was necessarily run by unelected officials. The question
was whether now was the right time to make such a move. Professor
Thygesen considered that the current system of hearings in the
European Parliament was already "a reassuring practice"
and at the moment it was enough that EMAC issue an opinion and
raise critical questions. Mr Trichet testified to the European
Parliament that "an official confirmation procedure would
be indispensable in a totally federal political structure."
He said that "should political Europe evolve in this direction"
official confirmation hearings would "become necessary."[113]
The Commission and the UK Government were against modifying the
existing roles of the different institutions involved in the appointment
process of the members of the Executive Board and would not be
pursuing amendments in the IGC (QQ 79-80, 196-98; pp.25, 72, 90).
- We see the hearings that the European Parliament
holds with candidates for the Executive Board as an extremely
valuable part of the appointment procedure. The hearings bring
some openness and democratic legitimacy to the process. Over time
the nature of these hearings may evolve and their significance
will probably increase. At some later date consideration could
be given to granting the European Parliament the power to confirm
the Council's nomination for the Executive Board; but it is essential
to prevent the process from becoming unduly politicised. We are
strongly of the opinion that the time is not yet right to take
the final decision on appointments to the Executive Board away
from the Member States.
98 Government Responses (Session 2001-02, 2nd
Report, HL 13), p.1. Back
99
The ECB itself stresses that the two terms are distinct and should
not be used interchangeably. See the two articles "The Accountability
of the ECB" and "Transparency in the monetary policy
of the ECB", in the November 2002 edition of the ECB Monthly
Bulletin. Back
100
'Is the ECB sufficiently accountable and transparent?' Lorenzo
Bini-Smaghi and Daniel Gros, European Network of Economic Policy
Research Institutes (ENEPRI) Working Paper no.7, September 2001.
When using this statistic in its EMU study Policy frameworks
in the UK and EMU, the Government cautioned that the ranking
"should be seen as indicative only, as the choice of criteria
cold affect the result" (p. 43). The six central banks examined
were the Bank of England, the ECB, the Federal Reserve, the Bank
of Canada, the Bank of Japan, and the Bundesbank. Back
101
See our earlier report How is the euro working? (Session
1999-2000, 18th Report, HL 124), paragraph 16. Back
102
The European Central Bank: Will It Work? (Session 1997-98,
24th Report, HL 112), paragraph 110. We repeated this call in
our report How is the euro working? (Session 1999-2000,
18th Report, HL 124), paragraph 122. Back
103
'ECB Watchers Conference: The evaluation of the strategy', Opening
remarks by Professor Issing, Frankfurt, 11 July 2003. Back
104
See Box 1 'The publication of Eurosystem staff economic projections
by the ECB' on page 11 of the 2001 edition of the ECB Annual
Report. See also the introductory statement of President Duisenberg
for the Monetary Dialogue with the Economic and Monetary Affairs
Committee of the European Parliament, Brussels, 23 November 2000. Back
105
See, for example, European Parliament resolutions of 2 April 1998
on democratic accountability in the third stage of EMU (OJ C 138,
4.5.1998, p. 177); 27 October 1999 on the 1998 Annual Report of
the ECB (OJ C 154, 5.6.2000, p.60); 6 July 2000 on the 1999 Annual
Report of the ECB (OJ C 121, 24.4.2001, p.456); 4 July 2001 on
the 2000 Annual Report of the ECB (OJ C 65 E, 14.3.2002, p. 159);
3 July 2002 on the 2001 Annual Report of the ECB; and 3 July 2003
on the 2002 Annual Report of the ECB. Back
106
This position was shared by Chris Huhne MEP, who argued it forcibly
within the Economic and Monetary Affairs Committee of the European
Parliament (see, for example, his remarks in the hearing confirming
Mrs Gertrude Tumpel-Gugerell's appointment as a member of the
ECB's executive board, 29 April 2003). Back
107
See resolutions referred to in footnote 106. Back
108
'Presentation of the ECB's Annual Report 2001 to the European
Parliament', Strasbourg, 2 July 2002. Back
109
Answer to the questionnaire drawn up by the Economic and Monetary
Affairs Committee of the European Parliament for its hearing on
11 September 2003 on the appointment of Mr Trichet as President
of the ECB. Back
110
Monetary Dialogue with the Economic and Monetary Affairs Committee
of the European Parliament, Brussels, 10 September 2003. Back
111
Statement by Prime Minister Blair to the House of Commons, 5 May
1998 (Hansard, Column 563-65). Back
112
EMAC Report on the 2000 Annual Report of the European Central
Bank, A5-0225/2001, p.14. Back
113
Answer to the questionnaire drawn up by the Economic and Monetary
Affairs Committee of the European Parliament for its hearing on
11 September 2003 on the appointment of Mr Trichet as President
of the ECB. Back