European Monetary and Economic Law EMEL...

European Monetary and Economic Law

EMEL NEWSLETTER 2019 Special Edition

Which Future for the Euro and the Economic and Monetary Union

after the European Elections?



EMEL Newsletter is a bimonthly newsletter launched on January 2018 as a learning

content for the course of European Monetary and Economic Law (EMEL): Towards a New

Shape of European Union?, held by Prof. Giulio Peroni at University of Milan. The course is a

Jean Monnet Module, which is a teaching program in the field of European Union studies

funded by the European Commission through the Education, Audiovisual and Culture

Executive Agency (EACEA).

EMEL Newsletter aims at creating a platform of periodical information regarding the

reform process of the European Union and of European Monetary Union especially, both for

didactical and informative purposes, for all law students of the University and for all people

interested in the law and the economy of the European Union, overall.

EMEL Newsletter aims also at involving students, in particular the students of the

course EMEL, in the writing process of the news and the articles reported in the Newsletter:

we hope that their participation will allow this project to grow in its contents and become a

useful mean of study and information for all law students.

EMEL Newsletter is edited by Dott. Tiziano Bussani, a Ph.D. student in Public,

International and European Law at the University of Milan, and it is coordinated and

supervised by the teacher of said course Prof. Giulio Peroni.

EMEL Newsletter Special Edition is a special issue that is published in addition to

the bimonthly issues of the Newsletter: it contains short students’ papers and articles

concerning the European Economic and Monetary Union. In this Special Edition, there are

reported selected papers written by the students of the EMEL course about the political,

economic and legal issues discussed at the Final Conference of the said course ‘Which Future

for the Euro and the Economic and Monetary Union after the European Elections?’, held on 24th

May at the University of Milan.


EMEL NEWSLETTER [email protected] | [email protected]


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INDEX

Final Jean Monnet Conference, University of Milan 24.5.2019

Which Future for the Euro and the Economic and Monetary Union after the European Elections?

FOREWORD

The Final Jean Monnet Conference 'Which Future for the Euro and the Economic and Monetary

Union after the European Elections?' held on 24.5.2019 4

PANEL I - EUROPEAN ECONOMIC AND MONETARY POLICY BETWEEN NATIONALIST

TENSIONS AND FEDERALIST IMPULSES

1. Yating Yu, The Weakness of the Euro and Reasons 6

PANEL II - WITH OR WITHOUT EURO? ECONOMIC EVALUATIONS OF THE SINGLE

CURRENCY

2. Juliette Ghassoul - Charlotte Gauvin, Euro, The Currency for a Single Monetary Policy: a Tool for

a Better Integration? 10

3. Colin Euphélie, To Put the Cart Before the Horse 13

PANEL III - DEEPENING EUROPE’S ECONOMIC AND MONETARY UNION: TOWARDS A

NEW ECONOMIC AND MONETARY ARCHITECTURE?

4. Sara Onorato, The Limits of ECB’s Monetary Policy and Supervision 15

5. Marie Amélie Baudry - Agathe Ernst, Depending Europe’s Economic and Monetary Union

Towards a New Economic and Monetary Architecture? 20


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FOREWORD

Final Jean Monnet Conference, University of Milan 24.5.2019

Which Future for the Euro and the Economic and Monetary Union after the European Elections?

On 24th May 2019, at the University of Milan, it was held the Final Conference of the Jean

Monnet course European Monetary and Economic Law: Towards a New Shape of Europe, organized by Prof. Peroni and titled ‘Which Future for the Euro and the Economic and Monetary Union after the European Elections?’.

The Conference gave rise to an intense debate about legal, political and economic issues

concerning the functioning, the crisis and the reform process of the European Monetary Union. Namely, the discussion focused on the evolving process of monetary integration in the Euro area and the relevant problems stemming from the last financial crisis, known as the ‘sovereign debt crises’ or the ‘Eurocrisis’, which had serious political and economic spill-over effects all around Europe - as the results of last European elections partially showed – implying the necessity of important reforms.

The debate has been organized into three panels, or rather into an historical, an economic

and a legal session of discussion.

Panel I European Economic and Monetary Policy between Nationalist Tensions and Federalist Impulses

Sara Parini, Associate Professor of Legal History – University of Milan, Chair

Lara Piccardo, Senior Researcher of History of International Relations - University of Genoa, The European Economic Integration Process: a Path Full of Obstacles

Lucio Valent, Adjunct Professor of Contemporary History - University of Milan, The Euro and the European Policy after the Adoption of the Single Currency

Panel II With or Without Euro? Economic Evaluations on the Single Currency

Roberto Tamborini, Full Professor of Economic Policy- University of Trento, Chair

Giorgio La Malfa, Full Professor of Political Economy – University of Catania, The Euro: a Resource or a Limit for the Economic Growth of Italy and the European Union?

Giuseppe Ferrero, Researcher – Bank of Italy, The Euro as a Currency for a Single Monetary Policy


5

Panel III

Deepening Europe’s Economic and Monetary Union: Towards a New Economic and Monetary Architecture?

Massimo Condinanzi, Full Professor of EU Law – University of Milan, Chair

Gianluca Contaldi, Full Professor of EU Law – University of Macerata, The Limits of ECB’S Monetary Policy and Supervision

Daniele Gallo, Associate Professor of EU Law– Università Luiss “Guido Carli” di Roma, The Impact of Austerity Measures on Saving the Eurozone within the European Social Dimension

Roberto Cisotta, Diplomat of the Italian Minister of Foreign Affairs, The External Dimension of the EMU and The Role of the EU within the International Monetary Relations

*

The students of the course EMEL were asked to write a short paper about the topic discussed during the Conference. In this Special Edition of the Newsletter have been published some of the papers submitted by those students.

*


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PANEL I

European Economic and Monetary Policy between Nationalist Tensions and Federalist Impulses

Yating Yu

WEAKNESS OF EURO AND REASONS: AN HISTORICAL PERSPECTIVE

European integration took a symbolic step forward on 1 January 2002 with the conversion of 12

national currencies to euro notes and coins. The aim of the euro was to speed up the integration process

and economic development in Europe. History of euro showed us that these optimistic goals have been

only partly fulfilled. Last global financial and economic crisis showed clearly main weaknesses of euro. This

modest result has several essential roots.

1. Euro, a departure from the initial plan

The financial crisis that started in August 2007 had deep consequences on the world economy. As

the waves of recession hit all the major economies, which were coupled with raising unemployment and

diffuse failures in both the financial and the real sector.

In 2010, a public debt problem has returned prominently on stage in many countries.

In the Euro area, such problem is most worrying in presence of explicit binding constraints fixed

in the Maastricht Treaty and in the Stability and Growth Pact. “Club Med” economies as Greece, Spain,

Portugal and Italy have been particularly affected, together with Ireland. The financial crisis also

demonstrated that the states outside the EMU like Britain, Sweden and Denmark managed their problems

better than the eurozone as a whole.

To find the weakness of euro, we have to go back to the history. In the initial stages of European

integration, when the European Steel and Coal Community was established in 1951, or when the 1957

Treaty of Rome launched the European Common Market, monetary unification was never mentioned as

a priority. As was defined at the beginning of the process by Jean Monnet, the construction of European

integration should proceed step by step. It should proceed cautiously and give people time to appreciate

the benefits of the integration.

It was generally assumed that it would take place only after the successful completion of

European economic integration. Monetary union would be the final step in this process, and would

coincide with the independent member states being joined into a larger European federation, like United

states of America. Then, and only then, would a common currency be introduced.

So, the presence of Euro is a huge departure from this idea, which is at the root of euro’s

persistent weakness.


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2. Reasons for the departure

Throughout the 1950s, 1960s and until the beginning of the 1970s, the Bretton Woods system

was in operation. Exchange rates among European currencies were basically fixed. So, there was no need

to apply a common currency.

a) Inconvertibility of the dollar into gold

The question of an exchange regime within the European Community only became an issue when

the United States declared the inconvertibility of the dollar into gold, devalued the currency and finally

abandoned fixed exchange rates altogether. Then, with floating exchange rate, the problem of a

monetary regime in Europe could no longer be avoided. A floating exchange rate regime among European

countries would not be compatible with a single market in which people, commodities and capital could

move freely.

An initial scheme for the European currencies to fluctuate jointly with the dollar was launched in

1972–73, followed by a more ambitious scheme for fixed exchange rates within the EEC. This was the

European Monetary System (EMS), which was based on an agreement for a set of fixed but adjustable

bilateral exchange rates which each member country had to enforce through appropriate economic

policies and back with its own currency reserves. The weak point of the EMS was its vulnerability to

exchange-rate speculation due to the growing scale of capital movements, reflected in the frequent need

for exchange-rate adjustments.

In 1987, an agreement was signed to create a mechanism in which a strong country can help a

weak country when its currency is under attack, so the defense of exchange rate would not be simply left

to the central bank of the country under attack. However, after signing the agreement, there was a secret

letter which claimed that it was illegal for Germany to accept such an agreement. They cannot buy lira

when lira is under attack, because it could lead to inflation. Germany declared that they will not be bound

by this agreement, as was the case with the Italian lira in 1992. This situation set the history of euro.

All the measures taken by European Union to avoid the influence of floating exchange rate were

not enough. It was becoming increasingly obvious that free capital movements, fixed exchange rates and

independent monetary policies could not co-exist. If capital movements are free, independently

established monetary policies are not necessarily compatible with stable exchange rates. For exchange

rates to be fixed and stable over time, either capital movements have to be restrained, or monetary

policies must be strictly coordinated.

b) German reunification

The fall of the Berlin Wall in November 1989 injected new urgency overnight into the question of

German reunification and its impact on the balance of power in Europe. The prospect of German

reunification made European leaders eager to devise ways to bind Germany even more tightly to the

European fold. It led to the idea that Germany give up its monetary sovereignty and its symbol of

economic power, the deutschemark, as a sign of goodwill and a guarantee of its continuing allegiance to

the process of European integration. This helped put monetary unification at the top of the agenda.


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In December 1989, the first European Council to be held after the fall of the Berlin Wall hastily

approved the Delors plan. An intergovernmental conference in 1991 drafted the text of an agreement on

EMU which was then incorporated into the Maastricht Treaty.

3. Reasons for the weakness

The weakness of the euro is the reflection of the initial policy-mix of the zone: tight fiscal policies

following the sharp tightening that was imposed on the zone by the Maastricht numerology, and loose

monetary policy that has resulted from the convergence of interest rates to the lower end of the zone.

In putting this grand scheme together, its founding fathers had to impose conditions on members

so they would not take actions that could undermine the credibility of the common currency. In particular,

they wanted to make sure that member countries would not run profligate fiscal policies by taking

advantage of the ease in attracting foreign funds in a single currency arrangement. This concern led to

the limit on budget deficits of 3 percent of GDP. Events in Greece and Ireland, however, have proven that

this limit not only failed to prevent problems from happening, but is also making the situation worse for

many countries. As a result, the European Central Bank and European Union are forced to fight economic

fires in one country after another, and talk of eventual breakup is growing louder by the day.

It is too dangerous to have a common monetary policy among countries so different from one

another. In the famous speech of Mario Draghi, he says “Within our mandate, the ECB is ready to do

whatever it takes to preserve the euro. And believe me, it will be enough.” It vividly shows the weakness

of euro, because we can’t imagine USA to say that we will preserve the dollar whatever it takes, because

dollar, the power of currency will always be there.

a) Monetary union without political union

The euro is weak currency because it’s not bond by a state, and there is no possibility of a politic

union of Europe today or in the foreseeable future. A monetary union without a political union is a built-

in source of weakness. The fact that the ECB has no effective counterpart in a European government

creates a vacuum around it.

The manner in which European integration developed in the post-war period probably made

separation between monetary and political union inevitable. Political union clearly remains a complex and

contentious issue: national governments, as well as public opinion, do not appear ready to entertain the

idea of moving from national states to a European federation. Monetary union without political union

would create a dangerous imbalance between monetary and economic policy, the former now to be

conducted at a supranational level, the latter to remain the responsibility of national governments.

b) Rigid mandate of ECB

The narrow mandate assigned to the ECB to concentrate exclusively on price stability, along with

rigid requirements for member governments to balance their budgets, built a deflationary bias into the

common currency’s workings. It has not always been clear how the ECB has assigned its decision-making

priorities between the two policy pillars of money supply growth and price stability, and it disregarded

strong money supply growth for a long period without giving a compelling explanation.


9

Under such tight economic-policy rules, the euro would only be successful so long as the

economic conditions in Europe remained satisfactory. When the economic cycle deteriorated, the

absence of a European economic policy response to the problems of low growth and high unemployment,

together with the powerlessness of national governments, would endanger the single currency’s

foundations.

As long as the monetary policy is centralised in the hands of the ECB while the fiscal policy remains

decentralised, it produces the conflict between the monetary and fiscal authorities and therefore

weakens the common currency. It was a mistake that in the EU framework they did not give up enough

administrative and financial power to the ECB to avoid the distribution of crisis of the financial markets in

the EMU. Also in building up the EMU the budgetary and fiscal national interests of member states were

underestimated.

For the EMU project to be successful, it was essential that both monetary and fiscal rules be

changed. Where monetary policy is concerned, the ECB’s mandate should no longer be restricted to price

stability. It should instead be enlarged similar to those governing the US Federal Reserve to include

responsibility for fostering economic growth in the eurozone. It is well known that revising the Treaty is a

very difficult task. But if the alternative is a breakup of euro which could have devastating consequences

far beyond anything we have seen so far, any effort to make the Treaty responsive to balance-sheet

recessions is well worth the effort.

As for public finance, the commitment to budget equilibria should be applied only to current

public expenditure, with public investment made exempt from the overall limit, giving national

governments some leeway in case of an adverse economic cycle. The changes could not be accomplished

in small steps, they could only come about through a quantum leap involving a further loss of national

sovereignty and its transfer to a federal level. In other words, a political union in Europe was a prerequisite

for the EMU’s success.

c) States will not exit despite of the weakness

Even though euro’s weakness brings much nightmare, member states will choose to hang

together instead of exit. The first reason why members will not exit is the economic costs. Once a country

has voluntarily surrendered its national currency and monetary policy independence to a common

currency area and its institutions, the costs of leaving that monetary union and introducing a new national

currency are more than significant. A country that leaves the euro because of problems of

competitiveness would be expected to devalue its newly-reintroduced national currency. But workers

would know this, and the resulting wage inflation would neutralise any benefits in terms of external

competitiveness. The country would be forced to pay higher interest rates on its public debt. Moreover,

a country that reneges on its euro commitments will antagonise its partners. It will not be welcomed at

the table where other EU-related decisions were made. The optimum degree of economic integration,

which once served as a trigger for a country to join the euro area is higher than the trigger that induces a

member country to leave the common currency area. In this sense, the current pressing situation in the

euro area still calls for a “tolerance band”.

Yating Yu


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PANEL II

With or without Euro? Economic evaluations of the Single Currency

Juliette Ghassoul - Charlotte Gauvin

EURO, THE CURRENCY FOR A SINGLE MONETARY POLICY:

A TOOL FOR A BETTER INTEGRATION?

Giuseppe Ferrero, Deputy Head of the Monetary Analysis Division at the Bank of Italy, compares

the maintain of price stability within the Economic and Monetary Union as a maintain of the temperature

of a lake. But Europe includes different lakes who are affected in a different way from the temperature

outside. It raises the issue of a need to implement a system that put in communication all those lakes.

The European construction was launched in the 1940s and 1950s by the « founding fathers »: the

French Jean Monnet and Robert Schuman, the Italian Alcide de Gasperi, the German Konrad Adenauer

and the Belgian Henri Spaak. From an economic point of view, it is a question of rebuilding a continent

ruined by the conflict and uniting middle powers to continue to have weight on a global scale.

On 9 May 1950, Robert Schuman made a statement in which he stated that he wanted to imagine

a « federation » based on the pooling of Franco-German production in order to avoid war: the European

Coal and Steel Community (ECSC) was established in 1951. « Europe will not entirely be built at once, nor

in an overall construction: it will be built through concrete achievements that first create solidarity in the

facts ». For the founding fathers, the enlargement and deepening of Europe as a political entity aimed at

reducing the sovereign powers of states to the benefit of a supranational organisation would require

integration and cooperation primarily in the economic sphere. Then, the single currency will in fact be a

tool to extend cooperation to other activities.

Economic integration is therefore the effective way to develop a strong Europe, especially after

the failure of the European Defence Community (EDC) in 1954. It is the economic integration that is

followed between 1957, when the Treaty of Rome established a European Common Market between six

countries (Benelux, Germany, France and Italy), and 1986, when the Single Act was signed, putting an end

to the remaining boundaries to trade between countries. The European organisation is therefore logically

called the European Economic Community (EEC).

Since 1968, the customs union has been achieved, thanks to the good economic situation, and

the results of the Member States have been very significant. The European Monetary System came into

force in 1979. These economic successes explain the successive enlargements. The Schengen area project

for the free movement of persons was launched in 1985 and was implemented in 1995.The particularity

of the "European model" is to combine political and economic liberalism with a welfare state.


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At the end of the 1980s, European integration had a very mixed picture. While economic

integration is well advanced, the political integration did not made much progress and the main reason

of this stagnation was the issue of decisionmaking.

With the end of the Cold War in 1989, Western Europe was forced to react and adapt to the new

situation. The fall of communism in the former popular democracies raises new challenges for a European

Community. The EEC changed its name in 1992 to the European Union (EU).

After 1989, for the Baltic States and the countries of Central and Eastern Europe (CEECs), the

regional organization represented not only aid for their economies, but above all an area of democracy

and economic liberalism. For their part, the countries that are already members, such as France, wish to

extend the area of peace and cooperation to the CEECs, but also the free trade area and the large

economic market that the EU constitutes: the inhabitants of the new countries represent customers for

European companies.

Between 1989 and 2007, the EEC, which became the European Union (EU) in 1993, grew from 12

to 25 members, then to 27. In addition to the two enlargements of 1995 and 2004-2007, the major event

marking the construction of Europe is the Maastricht Treaty, signed in 1992 and entered into force in

1993. The Treaty proposes a decisive relaunch of political Europe with the development of a Common

Foreign and Security Policy (CFSP). Above all, under this treaty, twelve EU countries have a common

currency: the euro, adopted in 1999, but whose coins and banknotes only began to circulate in 2002.

To conduct the common monetary policy, the member countries create the European Central

Bank. Finally, in the Stability Pact, they undertake to manage their economies according to common rules.

Convergence criteria are imposed to join the euro zone, requiring candidates to reduce their public deficit

below 3% of GPN.

In a context of economic and financial crisis, Mario Draghi confirmed, in his speech to the

Committee on Economic and Monetary Affairs of the European Parliament (July 2012) the fundamental

goal that EMU has to pursue: «maintaining price stability in the euro area ». He affirmed that « this is our

mandate ». The main issue of his speech was the defence of the value of Euro including the defence of

price stability.

Credibility is at the basis of the establishment and the functioning of a common currency and it

relies on several factors, one of which is the most important: price stability. While the Treaty on the

Functioning of the European Union does not give a precise definition of price stability, this principle is at

the heart of the concerns of ECB and EU monetary policy. In May 2003, the ECB's Governing Council has

presented its monetary policy strategy and has given a quantitative definition of price stability: « Price

stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the

euro area of below 2% ». This target of 2% is considered as the perfect level of inflation.

Price stability also means the guarantee of the equilibrum of the balance of payments. Indeed,

the concern of the balance of payments, an important document giving the economic wealth of states, is

crucial. A change in a country's balance of payments can cause fluctuations in the exchange rate between

its currency and others. Countries with current deficit tend to produce inflation which is then

redistributed among creditors because of the free movement principle existing within the single market.


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It reveals the need for two economies with free movement of capital goods to have free exchange rates.

Independent money policies would have to manage the same policy. However it would raises a problem

because all decisions of each policy would have an effect on others. So, finally, the solution which

emerged the best was the adoption of a unique currency. This solution appears among the three pillars

of the Economic and Monetary Union : common monetary policy, common currency and coordination of

economic and fiscal policies.

This deepening of European integration raises strong reservations: Great Britain is not adopting

the euro. In France, the Maastricht Treaty was almost rejected by referendum; in Denmark, it was

rejected and the population had to be revived. The European Constitutional Treaty was then rejected by

referendum in France and the Netherlands in 2005, before its adoption in 2007 following the Lisbon

Summit. Even today, the instability of Member States' budgets still poses serious problems (example of

the Greek crisis).

Asked to react to the risk of Greece's bankruptcy and attacks on the European currency, the EU

seems weakened by Member States' diverging positions and the lack of an appropriate arbitration

mechanism. However, political will prevails: while the European Central Bank reassures the markets by

buying public debt within the euro zone, the members of the EU Council establish that Greece's problem

is a European one, calling for a joint response from the seventeen countries in the monetary zone.

In addition to finance Greece's rescue plan with the IMF, in May 2010 the euro area Member

States decided to create a €750 billion fund to safeguard the Union's financial stability. In doing so, they

also plan to move towards greater integration of their fiscal policies, suggesting, in particular, the creation

of common supervisory bodies. The euro and debt crises have provoked a reflex of solidarity among

Europeans that was not foreseen in any Community text.

At the end of the day, the Economic and Monetary Union is a controversial topic concerning two

main issues: it raises, firstly, controversies on the benefits of a common currency and, secondly, a balance

between the necessity of having large fiscal rules and the necessity to guarantee fiscal stability. Indeed,

one of the roots of the EMU's weakness is the exclusion within the competence of the EU of economic

and fiscal policies which remain firmly in the hands of the States.

Like the recent crises that have had the unexpected effect of broadening the scope of Community

competences and strengthening European governance, it is conceivable that the Union's integration will

continue as its members see that the European scale remains the most effective in tackling global

challenges. In the meantime, the imperative challenge for Member States will be to produce a common

discourse on Europe, even in the absence of a shared vision of its role and place in the world. It is also on

this condition that the Union will regain its legitimacy among its citizens, an essential prerequisite for its

further integration.

Juliette GHASSOUL

Charlotte GAUVIN


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Colin Euphélie

TO PUT THE CART BEFORE THE HORSE

During the final Jean Monnet Conference, the Professor La Malfa was invited to talk about the

impact of the Euro on the Italy’s Growth (Panel II : With or Without Euro ? Economic Evaluations on the

Single Currency - The Euro: A Resource or a Limit for the Economic Growth of Italy and the European

Union). Giorgio La Malfa is a full professor of political economy at the University of Catania (Sicily) and he

is famous for being an ancient Italian minister of Budget and Economic Planning (1980-1982) and

European Affairs (2005-2006). He began to explain the will of Jean Monnet, a founding father of Europe,

defined in the ‘50s that the European construction has to be done step by step to give time to the people

to appreciate rules. But the history did not go as planned and the plan took a radically different turn. In

the very beginning, the common currency was indicated as the final step to the correlation of political

integration as a full federal republic with common currency as the USA.

The adoption of a common currency restricts the discretion of Member States in the adoption of

their financial and economic policies. They lost control over their exchange rates and the ability to

manipulate the level of interest that has been transferred to the European Central Bank (ECB). The

problem lies in the fact that the euro as a single currency has not been adopted following the birth of a

federal state. The single currency system is a poorly implemented good idea and with a chaotic

application, it is difficult for the euro to succeed. His reasoning is explained by the fact that money

requires political sovereignty, but Europe does not have it. Thus, the common currency is a simple

agreement at a fixed exchange rate involving restrictive rules.

It would have been wise for those who thought, in the 1980s and 1990s, to create a common

currency for Europe, to reflect on the experience of the 1944 Bretton Woods agreements, at the root of

the global interest rate system fixed exchange rates that had accompanied the economic development

of the post-war period; so need a form of symmetry.

The founding fathers wanted to avoid passing monetary unification before political unification.

However, the beginning of the ‘90s is marked by the fall of the Berlin Wall leading to the reunification of

the two Germany, Mitterand (President of the French Republic) then decided to accelerate the European

integration to limit the autonomy of Germany. Instead of waiting for the birth of a European federal state

to equip it with a single currency, it was decided the opposite, to build the currency knowing that this

constraint would have made the link between European countries and would have incited to accelerate

the process of political integration, and that's a mistake. Too soon, too fast, the European peoples were

not yet ready and even less so today on the point of political unification. Europe remains an alliance of

sovereign states which, moreover, are today pressed by public opinion to recover spaces of national

sovereignty, as the results of the recent European elections demonstrate. Money is a poorly tolerated

link and it will remain so in the future. Monetary integration puts pressure on the variety of economic

conditions that has been acute as a consequence of the financial-economic crisis we knew.


14

The complexity of the euro problem stems from the fact that the economy and politics are closely

linked. The conviction of its promoters was that the economic success of the single currency would

facilitate the political objective of European political integration. The euro crisis puts an end to this

ambition. Europe should accept that the acceleration of this integration can be entrusted only to an

increase in the capacity for public expenditure or a reduction of the tax burden or both; essentially to an

increase in the deficit. If Europe wanted to prevent countries from developing these policies, it should

entrust this task to the Commission coupled with ECB. But this would require the affirmation of a principle

of solidarity to which Europe is not ready, the powerful Germany opposing it. The European Central Bank

has been given responsibility for preventing inflation and stabilizing prices, but no center for economic

growth has been envisaged; no intervention tool has been put in place to mitigate the consequences of

shocks from outside the monetary union (speculative attacks). The ECB should have expanded powers to

integrate growth, as in the case of the Federal Reserve and the Stability and Growth Pact eased.

The Stability and Growth Pact is defined by the European Commission as « a set of rules designed

to ensure that countries in the European Union pursue sound public finances and coordinate their fiscal

policies ». It permits to cement the trust among the Member States, it ensured that the European

Commission would monitor national budgets in order to maintain their deficits below the threshold of 3

percent of their gross domestic product. And, the national responsibility for financial policies was

underlined by the « no bail-out clause » that gives the possibility of a Member State in financial problem

calling upon the others to take over its financial obligations.

The European Monetary Union will remain structurally weak as long as there is an imbalance

between Monetary Union and Political Union. For La Malfa, the fact that the European Central Bank has

no effective equivalent in a European government is penalizing since this situation affects the leadership

capacity of the bank. EMU hinges in the adoption of a single currency and thus monetary policy may be

seen as an exclusive EU competence. However, the sustainability of the single currency depends on

coordination of national economic policies. The European Monetary Union launched in 1992 involves the

coordination of economic and fiscal policies by a common monetary policy and a single currency, the

euro. EMU counts 28 Member States with 19 which adopted the euro as their currency, they form the

euro area. For La Malfa, we must persevere in the path of economic integration by strengthening the

political union of Europe. For this, we must share sovereignty in new areas such as macroeconomic

policies that affect the velvet of the currency and therefore the growth and stability of the entire system.

Without a single regulatory system, crisis monitoring and resolution mechanisms managed at Community

level, it will not be possible to restore a stable financial market in the euro area.

In favor of the Euro, there is its role of reserve currency at the international level, conferring on it

a certain stability that the different European currencies could hardly have and have alone. But the Euro

is seen as a weak currency since the famous speech of Mario Draghi, the president of the ECB, of 26 July

2012, with « whatever it takes » to save the euro because for example, you will never hear the president

of the USA say the same thing.

The crisis in Italy is a balance of payments crisis. Faced with the expansion of the deficit,

international operators are reluctant to invest because they fear the economy because Italy is unable to


15

grow at a sufficient pace to be able to repay its debts. Europe is not satisfied with the Italian results as

public finances are still not improving. And the boomerang effect engenders dissatisfaction among Italian

citizens as a result of the government's recessionary policy. To conclude, La Malfa said that Italy paid the

fact that the growth in 2019 is lower than the 2017 one.

Colin Euphélie

PANEL III

Deepening Europe’s Economic and Monetary Union: Towards a New Economic and Monetary Architecture?

Sara Onorato

THE LIMITS OF ECB’S MONETARY POLICY AND SUPERVISION

1. The creation of the European Central Bank

The European Central Bank is the central institution adopted by the 19 countries that adopted

the Euro as currency, the function of the European System of Central Banks (ESBC) and of the Euro system

are provided by the Treaties on the Function of the European Union (TFEU).

The ESCB is an institution created by the Maastricht Treaty in 1993, parts of this institution are

the ECB and the central banks of the Member States. The ECB is the main power of the ESCB. The main

difference between the ESCB and the Euro system is that: the ESCB is composed by the ECB and the 28

central banks of the Member State, the Euro system is adopted by the BCE and the national central banks

of the Member States that adopted the Euro as currency, as declared by the article 282 par. 1 of the TFEU

‘The European Central Bank, together with the national central banks, shall constitute the European

System of Central Banks (ESCB). The European Central Bank, together with the national central banks of

the Member States whose currency is the euro, which constitute the Euro system, shall conduct the

monetary policy of the Union.’ There will be this difference until all the Member States will not adopted

the Euro. The European Central Bank was created in 1998 with the adoption of the Amsterdam Treaty

that amended the European Union Treaty. The ECB was the successor of the European Monetary Institute

(EMI) that was created in the second part of the Economic and Monetary Union (EMU) to manage all the

situations and the problems that were presented with the adoption of the Euro as currency.

The full power of the ECB was put in place on 1 January 1991 with the introduction of the Euro as

official currency for the Euro area. The national central banks transferred their monetary policy function

to the ECB, at first this power was transferred by 11 States then by other State that joined the Union such

as: Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia and Lithuania. The first president of the ECB


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was Win Duisenberg, who was the president of the EMI and Dutch central Bank, his aim was to guarantee

a strong currency, and to help German, Dutch and Belgian governments. The French government opposed

Duisenberg to be president of the ECB, because they wanted a French citizen to take over the presidency,

they resolved the problem with a gentlemen’s agreement where Duisenberg agreed to resign before the

end of his term in favour of Trichet a French national who will take over.

2. The monetary policy of the ECB

The primary function of the ECB is to maintain price stability and safeguard the value of the Euro,

as provided from art. 127 par. 1 TFEU ‘1. The primary objective of the European System of Central Banks

(hereinafter referred to as ‘the ESCB’) shall be to maintain price stability. Without prejudice to the

objective of price stability, the ESCB shall support the general economic policies in the Union with a view

to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty

on European Union. The ESCB shall act in accordance with the principle of an open market economy with

free competition, favouring an efficient allocation of resources, and in compliance with the principles set

out in Article 119.’

‘The ECB’s Governing Council has defined price stability as "a year-on-year increase in the

Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. Price stability is to be

maintained over the medium term". The Governing Council has also clarified that, in the pursuit of price

stability, it aims to maintain inflation rates below, but close to, 2% over the medium term.’

(www.ecb.europa.eu).

The price stability reflects a considerable benefit. With the maintaining of stable prices there will

be an increasing economic welfare and the growth of the economy. The monetary policy influences the

real activity only in the shorter term. The aim of price stability refers to the general level of prices in the

economy, the price stability helps in the achieving of high levels of economic activity and employment.

The ECB can adopt a non-standard policy, that are not part of the traditional policy used by the

ECB, when there is a liquidity crisis, the traditional policy is not efficient so there is the application of non-

standard policy, like the Quantitative Easing.

The European Central Bank decided in 2012 to introduce an instrument, the quantitative easing,

that had the role to help the economy and the growth of the Euro system. The quantitative easing wanted

to divide the credit of the banks to the economy and fight the deflation and keep the inflection in the

limit of the 2%; with the quantitative easing the ECB tried to increase the currency. The European Central

Bank bought the bond of a State. During three years there were three programs of quantitative easing,

the first one ‘bazooka’, provided the monthly purchasing of 60 billion of euro to buy State bond, this

program last until March 2016, when the monthly purchasing was improve from 60 to 80 billion of euro

for the purchasing even of ‘abs’ (Asset backed securities) and ‘cover bond’ (it is a debt securities issued

by a bank, this debt securities is characterized by a high liquidity and a low risk), during December 2016

there was the third program of the Quantitative Easing, the program of purchasing was reduced to 60

billion of Euro, on March 2017 the ECB confirmed the extension during all 2017 of the QE and the


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reduction from April to 60 billion of euro, and in October of 2018 it was reduced from 60 to 30 billion of

euro by month. The role of ECB was to face out the crisis.

The quantitative easing was the substitute to the application of the OMT, the creation of the OMT

was made because, as provided from art. 123 TFEU [1. Overdraft facilities or any other type of credit

facility with the European Central Bank or with the central banks of the Member States (hereinafter

referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central

governments, regional, local or other public authorities, other bodies governed by public law, or public

undertakings of Member States shall be prohibited, as shall the purchase directly from them by the

European Central Bank or national central banks of debt instruments. 2. Paragraph 1 shall not apply to

publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall

be given the same treatment by national central banks and the European Central Bank as private credit

institutions.], the European Central bank cannot buy directly the Bond of a State, so the idea of the

European Central Bank was to buy them in the secondary markets, so indirectly, with this the ECB can buy

bonds without break the Treaty. With the OMT the ECB offered to buy short - term bond in the secondary

markets, the OMT was a bond buying programme announced by Mario Draghi in 2012, under the OMT

the ECB offered to purchase eurozone countries short - term bond in the secondary markets, to reduce

the interest rate faced by countries that might leave the euro, but the OMT was never put in place.

Are these measures compatible with the Treaty? The problem is the difficulty in the definition of

the limits of the activities put in place by the European Central Bank, the limits appear unclear if we take

a closer look to the Gauweiler Case.

3. The Gauweiler Case (C-62/14)

In this Case the request concerns the validity of the OMT and the interpretation of the art. 119

TFEU [Art. 3 TFEU ‘1. The Union shall have exclusive competence in the following areas: (a) customs union;

(b) the establishing of the competition rules necessary for the functioning of the internal market; (c)

monetary policy for the Member States whose currency is the euro; (d) the conservation of marine

biological resources under the common fisheries policy; (e) common commercial policy. 2. The Union

shall also have exclusive competence for the conclusion of an international agreement when its

conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise

its internal competence, or in so far as its conclusion may affect common rules or alter their scope. And

art 119 TFEU ‘1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of

the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic

policy which is based on the close coordination of Member States' economic policies, on the internal

market and on the definition of common objectives, and conducted in accordance with the principle of

an open market economy with free competition. 2. Concurrently with the foregoing, and as provided in

the Treaties and in accordance with the procedures set out therein, these activities shall include a single

currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy

the primary objective of both of which shall be to maintain price stability and, without prejudice to this

objective, to support the general economic policies in the Union, in accordance with the principle of an


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open market economy with free competition. 3. These activities of the Member States and the Union

shall entail compliance with the following guiding principles: stable prices, sound public finances and

monetary conditions and a sustainable balance of payments], 123 TFEU and art. 127 TFEU and of art. 17

to 24 of Protocol No.4 on the Statute of the European System of Central Banks and of the European

Central Bank.

The request was made a cause of series of constitutional actions of individuals and resolution

proceeding between constitutional bodies, about the participation of the Deutsche Bundesbank (Central

Bank of Germany) in the execution of the OMT decisions and the failure of the Bundesregierung (federal

Government) and the Deutscher Bundestang (Lower House of German Parliament) in the regarding of

these decisions. The European crisis began in 2008, during 2010 became a sovereign debt crisis of States

that are part of the Euro area, in summer 2012 the State financial situation became unsustainable for the

increasing of the purchasing bonus that were applied to debt securities and the return to the sovereign

currency became reality, so the ECB decided to announce the OMT program. In support to those actions

‘the applicants in the main proceeding submit that the OMT decisions form, overall, an ultra vires act

inasmuch as they are not covered by the mandate of the ECB and infringe Article 123 TFEU and that those

decisions breach the principle of democracy entrenched in the German Basic Law and thereby impair

German constitutional identity’ [point 6].

The Bundesverfassungsgericht (German Federal Constitutional Court) asked to the European

Court of Justice, in the application of art. 267 TFEU [The Court of Justice of the European Union shall have

jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties; (b) the validity

and interpretation of acts of the institutions, bodies, offices or agencies of the Union; Where such a

question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers

that a decision on the question is necessary to enable it to give judgment, request the Court to give a

ruling thereon. Where any such question is raised in a case pending before a court or tribunal of a Member

State against whose decisions there is no judicial remedy under national law, that court or tribunal shall

bring the matter before the Court. If such a question is raised in a case pending before a court or tribunal

of a Member State with regard to a person in custody, the Court of Justice of the European Union shall

act with the minimum of delay] for the legitimacy of OMT program. [point 32]. The federal Constitutional

Court asked if the decision of the Governing Council exceeds the monetary policy mandate of the ECB.

The Court needed to determinate if the measure falls within the area of monetary policy, as it is

possible to read in the point 5, for the art. 18 par. 1 of the Protocol (No. 4) on the ESCB and the ECB [18.1.

In order to achieve the objectives of the ESCB and to carry out its tasks, the ECB and the national central

banks may: — operate in the financial markets by buying and selling outright (spot and forward) or under

repurchase agreement and by lending or borrowing claims and marketable instruments, whether in euro

or other currencies, as well as precious metals; — conduct credit operations with credit] the Court said

that ‘in order to achieve the objectives of the ESCB and to carry out it tasks, as provided for in primary

law, the ECB and the national central banks may, in principle, operate in the financial market by buying

and selling outright marketable instruments in euro. Accordingly the transaction which the Governing

Council has in mind in the press release use one of the monetary policy instruments provided for by


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primary law’, and it is possible to say that with this consideration the Court could affirm that the

programme announced falls within the area of monetary policy. But this mechanism could be adopted

only if there was the respect of the principle of proportionality, and for that the ESCB needed to examine

carefully and impartially all the elements and it must give an appropriate statement of the reasons of its

decisions [point 66 – 69]. ‘It follows from the foregoing that, in economic conditions such as those

described by the ECB at the date of the press release, the ESCB could legitimately take the view that a

programme such as that announced in the press release is appropriate for the purpose of contributing to

the ESCB’s objectives and, therefore, to maintaining price stability.’ [point 80], but it is necessary to

analyse if this program didn’t go out with what is necessary to achieve the purpose of the ECB.

In the press release it was communicate that this measure should be applied only when it was

necessary, in fact it was not applied after two year by the communication of the program and it had a

limited application, ‘It follows from those considerations, first, that a programme such as that announced

in the press release ultimately concerns only a limited part of the government bonds issued by the States

of the euro area, so that the commitments which the ECB is liable to enter into when such a programme

is implemented are, in fact, circumscribed and limited. Secondly, such a programme can be put into effect

only when the situation of certain of those States has already justified EMS intervention which is still

under way.’ [point 87].

It was, also, necessary to analyse if the program violated the art. 123 ‘As regards a programme

such as that announced in the press release, it must in the first place be stated that, in the framework of

such a programme, the ESCB is entitled to purchase government bonds — not directly, from public

authorities or bodies of the Member States — but only indirectly, on secondary markets. Intervention by

the ESCB of the kind provided for by a programme such as that at issue in the main proceedings thus

cannot be treated as equivalent to a measure granting financial assistance to a Member State.’ [point

103].

For these reasons the Court said that articles 119, 123 (1), 127 (1 – 2) TFEU and Articles 17 to 24

of Protocol (no4) on the Statute of the ESCB and of the ECB must be interpreted as permitting the

adoption of a program for purchasing governments bond on secondary markets, such as the programme

announced in the press release.

4. There are limitations to the power of the ECB?

With this case it seems that the ECB has no limit to his manoeuvre power, but this is incompatible

with the EU legal order, so we can find three limits to the power of the ECB:

- The Concept of Monetary policy: the art. 127 par. 1 TFEU state: ‘1. The primary objective of the

European System of Central Banks (hereinafter referred to as ‘the ESCB’) shall be to maintain price

stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic

policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid

down in Article 3 of the Treaty on European Union. The ESCB shall act in accordance with the principle of

an open market economy with free competition, favouring an efficient allocation of resources, and in

compliance with the principles set out in Article 119.’ The monetary policy is important because it will


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always impact the Member States, but a concern is the spill over effect that the monetary policy can

produce. Spill over effect can happen but the ESCB must prove that there is a connection between the

measures that can produce spill over effect and the main objective that is the price stability.

- The principle of proportionality (not the principle of subsidiarity because the monetary policy is

one of the competences that are only of the EU): the application of the measures must be in proportion

to the aim of the ESCB, as provided from art. 5 TEU [4. Under the principle of proportionality, the content

and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties. The

institutions of the Union shall apply the principle of proportionality as laid down in the Protocol on the

application of the principles of subsidiarity and proportionality], it is necessary that the press release of

the ECB contains the reason of the decision, so it can be proved that there is the respect of the

proportionality.

- The respect of human rights: for the professor Contaldi, the human rights protection in the

financial plan aid was lower that the protection that they could receive in the EU legal order, ‘because

the financial plan aid is the consequences of an agreement between member states and Troika, so that

people could not take profit of the protection of human rights usually guaranteed in the Eu legal system’.

5. Conclusion

After the analysis of the measures that the ECB created to help the States during the crisis and of

the judicial case, it possible to say that there are some limits to the EBC’s actions, but these seems not

effective, the ECB has a wide discretion that cannot be easily controlled with a judicial approach, but it is

possible to think that with the application of restriction measures it will not possible for the ECB to give

an effective aid to the Member states with the consequences that the crisis spread all over and the States

might leave the euro area.

Sara Onorato

Marie Amélie Baudry - Agathe Ernst

DEPENDING EUROPE’S ECONOMIC AND MONETARY UNION TOWARDS A NEW

ECONOMIC AND MONETARY ARCHITECTURE?

First of all, for sure the crisis changes the architecture of the European Union and has fragilized

the balance between the different member states, the answer is it a new Economic and Monetary

architecture?

There are some measures taken for strengthen the integrity of the euro zone (which is a zone

where the countries have adopted a common currency: the euro), and it is begun with the coordination

of economic policy and budgetary monitoring. Indeed, there is a need of stability, and a new monetary

architecture is put in place for the monetary and resolution of mean establishment of loans which are

very important in the Euro Zone. There are several tools for the Economic, banking, budgetary Union such


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as a technical help for the Member States, and a real monitoring of banks in the Euro Zone. And also,

there is a need of more strengthen for the Institutions with a real dialogue with the Parliament.

We will study first the point of view of the professor Gianluca Contaldi (Full professor of European

Union –EU- Law, University of Macerata) who was explained the limits of the ECB’s Monetary policy and

supervision.

First what the is the ECB and its monetary policy. The European Central Bank is the central bank

for the euro and monetary policies within the Eurozone (which is represented 19 member states of the

European Union; it is actually one of the largest monetary areas in the world). It was established by the

Treaty of Amsterdam, and it is one of the world’s most important central banks. The article 2 of the

Statute of the ECB provides the primary objective which is the price stability in the Eurozone. The ECB is

governed by European Law directly. And for its monetary policy is joined its main goal: maintain the price

stability, its aims at inflation rates of below, but close to, 2% over the medium term.

The professor takes the example of the Gauweiler Case for illustrate those limitations of the ECB’s

Monetary policy and supervision: it is the German Constitution which asked to the CJEU if the European

Central Bank can buy government bonds even if the Article 123 of the TFEU prohibited monetary financing

for Member States, it is about the legality of the OMT programme (which was a measure of economic

and not monetary policy, and that programme was incompatible with the prohibition of monetary

financing of MS enshrined in article 123 TFEU). The case touched on the nature and the legitimacy of the

role of the ECB as in independent expert. We can say that the ECB is in front of the crisis indeed the ECB

covers the political vacuum of the European Union, and we can say that there is a change of its functions,

ECB is now the new central hub of European Economic policy. But the ECB is not able to manage the crisis,

thus, it was essential that a new tool born in order to manga it: we are in necessity phases.

And of the point of view of the interlocutor it has for consequence that there is no limit to the

monetary policy of ECB and ESCB, indeed there is here a sort of discretionary power. But we have to take

precautions because there are three limitations: the concept of Monetary Policy, the principle of

Proportionality (because monetary policy is an exclusive competence), and finally the third limitation is

the respect of Human Rights.

The ESCB (the European System of Central Bank consists of the ECB and the National banks of all

the member states of the European Union, it has not the monetary authority for the simple reason that

not all member states are taking part of the Euro zone) has effects on the real economy, its militance but

also on the price stability. And there are the spill-over effects which represented the fact when an

economic event occurs because of something else, if it is recognizes the maintenance of the price stability

remains a main goal. Then, the second limit is the principle of proportionally, which regulated the exercise

of powers by the European Union. Under this rule the action of the European Union is limited to what is

necessary to achieve the objectives of the Treaties (this principle is laid down in article 5 of the TEU, and

this criterion is set out in Protocol N°2). Thus, for him these principles mean that the ESCB and the ECB

have to act in particular circumstance, which allowing National authorities to exercise prudential

superstition.


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But there is the problem of the devil’s proof; the Member States has to demonstrate that the

national measure is more capable of attaining the aim and the object of the regulation which attributes

a special competence of supervision to the ECB. And finally, the third and last limit is the respect of the

Human Rights, which is for sure lower than the protection of the European Union Legal order. But the

limits don’t seem to be really effective; which means that we can say that the ECB is not really controlled

by a legal control because those institutions (ECB and ESCB) enjoy a broad discretion. Plus, there is one

monetary politic whereas there are 19 budgetary national politics, and in time of crisis it creates even

more gap between the countries and if the limits are not real it can be complicate for facing this crisis.

For the ECB the solution to face of the crisis if founding takes even more independence (even it

has already its independence), the limits seem to be only on the paper. After we have to study about the

impact of austerity measures on saving the Euro zone within the European Social dimension (Professor of

EU Law, Daniel GALLO), and finally we have to look about the External Dimension of the EMU and the

Role of the EU within the International Monetary Relations (Roberto Cisotta, Diplomat of the Italian

Minister of Foreign Affairs).

Professor Daniel Gallo, then spoke about the impact of Austerity Measures on Saving the

Eurozone within the European Social Dimension.

Following the crisis, one of the objectives of the European institutions was to move towards a

deeper and more integrated Economic and Monetary Union (EMU), capable of better resisting

international economic shocks and developing a prosperous economy in the long term. It was then

essential to introduce austerity measures, but they have not been without impact, particularly with regard

to the protection of fundamental rights.

Our speaker began by talking about the different measures put in place to deal with the crisis.

This is the case, first of all, of the compact fiscal system, a union of economic and budgetary governance

rules relating to stability, coordination and governance within the Economic and Monetary Union. Seen

both as a step towards European integration but also as a solution to the crisis, it requires a balanced

budget and a limit on the structural deficit (1% to 0.5%). It includes the "European Semester", a system

for coordinating the national economic and budgetary policies of the EU Member States, also established

during the crisis, for a more integrated and better coordinated governance.

Nevertheless, compact taxation is intergovernmental in nature and is not comparable to

Community law, it is only advisory. This shows the fundamental role given to informal entities, as is also

the case for the Eurogroup, created in 1997 after the establishment of Economic and Monetary Union.

Although it has a coordinating role and is one of the main decision-making bodies in economic and

monetary policy, it is not officially an EU institution. Thus, for all these processes, bodies such as European

Parliament as well as of national parliaments have very limited roles. It is truly the Commission that

intervenes by issuing recommendations and guidelines on national policies, approved by the European

Council and adopted by the Council of the EU, as well as the Court of Justice which can give enforceability

to decisions or financial sanctions.

This development shows the relationship between democratic mechanisms and economic

policies. Indeed, at the same time as the introduction of austerity measures, it was necessary to preserve


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the protection of civil, political, social and economic rights and the rule of law, democracy, political

stability and social cohesion in Europe. However, the budgetary constraints on the welfare state in times

of austerity may have been liable to abuse these rights.

« Human rights are (...) threatened by the impact of the economic crisis and growing inequalities...

European societies have suffered from the effects of the recent economic crisis, which has profoundly

altered social cohesion in many Member States and could ultimately undermine the rule of law and

democracy. »

Mr Thorbjørn Jagland, (Secretary General of the Council of Europe), 17 April 2014 in « Report on

the state of democracy, human rights and the rule of law in Europe ».

The ECHR or the European Committee of Social Rights have regularly had to deal with situations

that directly concerned measures implemented by Member States to deal with the economic crisis (e. g.

Koufaki and ADEDY v. Greece).

Professor Gallo then referred to concepts such as the social market economy, or the justiciability

of rights, according to which social rights would be given the same consideration and treatment as civil

and political rights, especially in times of crisis. It is a question of giving greater effectiveness to the claim

of certain rights such as housing or care and even to recognize their scope as fundamental rights.

In this context, conferences, such as the 2014 Council of Europe conference in Turin on the

economic crisis, have focused in particular on strengthening the normative system of the Charter of

Fundamental Rights with a view to improving the implementation of fundamental social and economic

rights, alongside those civil and political rights guaranteed by the European Convention on Human Rights.

They recall the legal obligation to respect the principle of the rule of law and fundamental rights in the

performance of the tasks provided for in the Treaties.

In this context, the Council of Europe may recommend certain guidelines to be taken into account

by States when adopting measures to prevent them from disproportionately affecting human rights. This

involves taking into account concepts such as "public interest", "discriminatory measures" or "the

principle of proportionality".

This is a question of greater responsibility of the EU in dealing with these issues. This is reflected

in the case law of the ECJ. Our speaker referred to some cases such as Associacao Sindical dos Juizes

Portugueses (ECJ, 27 February 2018) in which the Court recalled the principle of independence of national

judges. Similarly, he referred to the Pringle judgment, distinguishing between the competence of the

Member States (authors of the Treaty) and that of the institutions of the European Union (which must be

preserved), in which the Court recognized the possibility for Member States to conclude an international

treaty between Member States of the Euro zone as long as they did not "distort the powers conferred on

the institutions of the European Union by the EU and FUE treaties".

05/28/2019 Marie Amélie BAUDRY & Agathe ERNT

In fine, this intervention illustrates the impact of the austerity measures introduced after the crisis

on the Eurozone and in particular the social impact. It is now a question of discussing the external

dimension of Economic and Monetary Union and the role of the European Union in international


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monetary relations, developed during the intervention of the Diplomat of the Italian Minister of Foreign

Affairs, Roberto Cisota.

Indeed, EMU is made up of a group of countries that have adopted a single currency and have

their open economic markets, thus forming a free trade area. The EU Eurozone is the world's largest EMU.

The EU in 2010 would have seen changes. It has been applied of budgetary discipline rules in the

donation of economic policy and in a second stage, an expansive monetary policy and extraordinary

interventions of the ECB. The latter carried out long-term refinancing operations (December 2001 -

February 2012) and purchases of sovereign bonds on the secondary markets between 2010 and 2011

under the Securities Market Programme. It has also taken the adoption of low interest rates as an

extraordinary measure.

With regard to the evolution of the powers of the EU institutions, it notes the increasing intrusion

of coordination action at EU level into national budgetary policies as well as the growing importance of

the search for financial stability (between the international market and EMU) and the new supervisory

powers.

Finally, in terms of economic policy developments, we see that country-specific

recommendations are made.

It is also the period of introduction of the notion of protection of international normative systems.

In this context, it was decided that a full and detailed analysis should be carried out to determine whether

the Community has competence to conclude an international agreement and whether this competence

is exclusive.

He also refers to external competences in EMU. On the basis of the principle of parallelism,

monetary policy falls within the competence of the EU through the prerogatives of the ECB.

It evokes also monetary agreements and exchange rate policy (Art. 219 TFEU), in particular

monetary policy operations (e. g. currency swaps) or cooperation in the technical field and within IOs.

It also refers to economic policy through its enrichment and external consequences, for example,

in the field of supervision, but also to the existence of the particular recognition of the existence of an EU

economic policy in the tax pact (Article 2(2), with reference to Article 4(3) of the EU Treaty).

He referred to the example of the International Monetary Fund (IMF). There are competences

explicitly covered by the EU, in particular in the field of monetary and economic policy with regard to loan

conditionality and budgetary discipline. However, problems may arise with regard to development

cooperation expertise. There is therefore a fragmentation of representation which creates an

unsatisfactory situation in the idea of unified representation, which to exist would require more radical

solutions.

Marie Amélie Baudry

Agathe Ernst

European Monetary and Economic Law EMEL...

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