Current Legal Issues Affecting Central Banks, Volume III.


Robert Effros
Published Date:
August 1995
  • ShareShare
Show Summary Details

In the negotiations that led to the Maastricht Treaty, some countries expressed concern about what would happen if monetary union were pursued in the absence of adequate political union.1 By way of illustration, consider whether sanctions may be imposed upon a country that ends up with an excessive budgetary deficit. In the context of inadequate political coordination, it is likely that there would be no system for common security policy. Under these circumstances, when each member of the European Community has its own army, its own security policy, and its own procurement policy for armaments, how can an economic and monetary union control budgetary deficits if a particular member state discovers a matter affecting its security and wishes to spend money on it? The Protocol on the Statute of the European System of Central Banks and of the European Central Bank provides that only the European Central Bank will be able to take a national central bank before the European Court of Justice to see if the national central bank is conforming to Maastricht.2

The concern just described is not the only one. Observers have noted a number of ambiguities in the Maastricht provisions on European Economic Monetary Union. To what extent will questions arising from them be able to be raised before the Court? What is the meaning, for instance, of “primary objective” and “price stability” in the injunction of Article 105 of the EC Treaty that “[t]he primary objective of the ESCB shall be to maintain price stability”?3 Under the constitutional structure, who has the power, if anyone, to seek judicial review of the decision-making of the ECB itself?

The draft of EMU, which was prepared by the central bank governors, gave the ECB considerable supervisory powers over commercial banks.4 The Maastricht Treaty makes ECB jurisdiction in this area more difficult. There has to be a lot of political decision-making before this power can be exercised by the ECB. In the meantime, the power remains with the national central banks and the national supervisors. Some observers doubt that this situation will be able to continue. They doubt that home country control as envisaged under the Second Banking Directive will be sufficient.5 Another observer has pointed out that “serious conflicts could arise if one of the national central banks were to act as lender of last resort to credit institutions having severe liquidity problems, and its lending were seen by the ECB as threatening the stance of monetary policy.”6

    Other Resources Citing This Publication