Transcript European Central Bank

THE EUROPEAN SYSTEM OF
CENTRAL BANKS
INTERNATIONAL ORGANIZATIONS
AGENDA
1. Introduction
•
History of the economic and monetary union in Europe &
Convergence Criteria
2. The European Central Bank
•
Historical background of ECB and role of the ECB in the EU
3. The European System of Central Banks
•
Historical background of ESCB
•
Role of the ESCB in the EU
•
Organization of ESCB
•
Governing Council and Executive Board of the ESCB
•
The Eurosystem
4. Sixpack Agreement
5. The European Semester
6. Country-specific Recommendations – Polish National Reform
Programme
7. The European System of Central Banks Report (2012)
8. Sources and bibliography
INTRODUCTION
History of the economic and monetary union
in Europe
• 1979 – creation of European Monetary System (EMS) by the EEC
• 1986 – Single European Act, creation of single market
• 1992 – Maastricht Treaty – Treaty on the European Union
• 1993 – creation of Single European Market
• 1998 – creation of European Monetary Institute
• 1991 – funding of European Central Bank
• 2002 – implementation of Euro currency
• 2010 – European Semester
• 2011 – Sixpack Agreement
INTRODUCTION
Convergence Criteria
• High degree of price stability – inflation rate not higher than 1.5
percentage points of three best performing Member States,
• Sound public finances - the ratio of the annual government deficit to gross
domestic product (GDP) must not exceed 3% at the end of the preceding
financial year and the ratio of gross government debt to GDP must not exceed
60%,
• A stable exchange rate - the observance of the normal fluctuation margins
provided for by the exchange-rate mechanism of the European Monetary
System, for at least two years, without devaluing against the currency of any
other Member State,
• Low and stable long-term interest rates - the nominal long-term interest
rate must not exceed by more than 2 percentage points that of, at most, the
three best-performing Member States in terms of price stability.
THE EUROPEAN CENTRAL BANK
Historical background & general information
• One of the core institutions of the European Union,
• Signed under the Treaty on European Union (Maastricht Treaty),
• Established in 1998,
• Central bank for the whole Eurozone area,
• Governs monetary policy of the EU member states,
• Accounted for one of the most important and strongest Central Banks on the
World
• Owned by all 27 National Central Banks
• Located in Frankfurt, Germany
• Current President – Mario Draghi from Italy
THE EUROPEAN CENTRAL BANK
Role of the European Central Bank in the EU
• Primary objective is PRICE STABILITY – keeping the inflation rate at very low
level and preventing it from deflation (around 2%),
• Defines and implements the monetary policy strategy for the Eurozone,
• Conducts foreign exchange operations,
• Governs foreign reserves of the European System of Central Banks,
• Promotes smooth operations of the financial markets infrastructure ,
• Issues euro coins and possess the exclusive right to authorize the issuance of
euro banknotes,
• Conducts direct financial market interventions – European sovereign debt
crisis,
• Responsible for the cooperation within EU and internationally with third bodies,
foreign central banks and other organizations,
• Claimed to be politically and financially independent (own budget).
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
Historical background & general information
• Established under the Maastricht Treaty and the Statue of
the European System of Central Banks,
• Comprises the ECB and all 27 National Central Banks of EU
Member States,
• In contrary to the Eurosystem, consists of the countries which
have not adopted yet Euro,
• Primary objective – PRICE STABILITY
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
Role of the ESCB in the EU
• Primary objective – PRICE STABILITY,
• Supports the general economic policies in the union in a view to contribution to
the achievement of the objectives of the whole European Union,
• Conducts policies pursued by the competent authorities relating to the
prudential supervision of credit institutions and the stability of the EU financial
system,
• Operates in the financial market, by for example buying and selling outright
or lending and borrowing claims and marketable instruments in every EU
currency as well as precious metals like gold,
• conducts credit operations with credit institutions and
participants, with lending being based on adequate collateral,
other
market
• Together with ECB may offer advice to the Council and Commission and other
authorities on the scope and implementation of Union legislations relating to
the prudential supervision of credit institutions and the stability of the financial
system of EU.
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
Role of the ESCB in the EU
• National central banks ought to be sole subscribers and holders of the capital
of European Central bank (5000 million Euro),
• Prepares regulations, in order to ensure efficient and sound clearing and
payment system within the borders of EU and with other countries,
• Acts in accordance with the guidelines and instructions of the ECB,
• Entitled to establish relations with central banks and financial institutions in
countries within borders of EU as well as institution established abroad,
• Allowed to sell spot and forward all types of foreign exchange assets as well as
precious metals.
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
ORGANIZATION
• The process of decision-making in the Eurosystem is centralized through
decision-making bodies e.g. Governing Council and the Executive Board,
• MS that are not members of the Eurozone are the members of the ESCB with a
special status – they do not take part in the decision making concerning the
single monetary policy for the Eurozone, however they are still allowed to
conduct their national monetary policies,
• Completely independent institution,
• Can be only governed by the decision-making bodies of the ECB – Governing
Council and Executive Board of ESCB.
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
Governing Council
• Consists of the members of the Executive Board of the ECB and the governors
of the NCB’s of the Eurozone countries,
• Must meet at least ten times a year,
• Adopts guidelines and takes the
performance of the task of the ESCB,
decisions
necessary
to
ensure
the
• Formulates the monetary policy of the Union (setting monetary objectives, key
interest rates and the supply of reserves in the ESCB),
• Adoptes Rules of Procedure which determine the internal organization of the
ECB and its decision-making bodies,
• Exercises the advisory functions,
• Takes the most significant and impactful decisions regarding the Eurosystem.
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
Executive Board
• Consists of the President, Vice-President and four other members who are
chosen from professionals in monetary or banking matters,
• Appointed by government of the MS on the recommendation of the Council of
Ministers, European Parliament and Governing Council of EC,
• Prepares meetings of the Governing Council,
• Implements monetary policy in the euro area in the accordance with the
guidelines and decisions laid down by the GC ,
• Manages day-to-day business of ECB,
• Collects statistical information,
• Prepares the ECB’s annual reports,
• Establishes necessary rules for standardizing the accounting and reporting of
operations undertaken by the NCBs,
• ECB’s advisory functions,
• Sets conditions of employment of the members of staff of ECB
THE EUROPEAN SYSTEM
OF CENTRAL BANKS
The Eurosystem
• Comprises the ECB and the National Central Banks of the EU Member States
which have adopted Euro currency - sub-set of the ESCB
• Carries out the central bank functions for the euro area,
• ECB and the NCBs jointly contribute to attaining the common goals of the
Eurosystem,
• Creates access point to central baking in each participating Member State,
• Grants deeper financial stability and financial integration of each Eurozone
Member State,
• Defines and implements the monetary policy of the euro area usually by
financial market operations, has full control over the monetary base,
• Conducts operations that influence foreign exchange rates and domestic
liquidity conditions,
• Holds and manages foreign reserves,
• Promotes
smooth operations of payment systems – transferring money
between credit and other monetary institutions; Eurosystem contributes to the
conduct of the financial supervision – it advises legislators in its fields of
competence and it complies monetary and financial statistics.
Sixpack Agreement
General information
• Entered into force on 13 December 2011,
• Describes a set of European legislative measures to reform the Stability and
Growth Pact and to introduce new macroeconomic policies,
• Was created in order to set and ensure the degree of coordination necessary to
avid the accumulation of excessive imbalances and to ensure sustainable
public finances,
• Believed to help EU to function properly in the long run,
• Applies to all 27 member states with some specific rules for the Eurozone
members, especially regarding financial sanctions.
Sixpack Agreement
General provisions
• In case of any excessive deficit level, Eurozone Member states will be punished
with the financial sanctions. European Court of Justice may impose financial
sanction (0.1% of GDP) if a country does not properly implement the new
budget rules in national law. Moreover, automatic sanctions are triggered,
based on a different voting mechanism in the Council of the European
Union. What is more additional sanctions will be held in an interest bearing
deposit (0.1% GDP) for countries which fail to act on recommendations to
rectify a macroeconomic imbalance.
• New agreement will require contracting parties to ensure convergence towards
the country-specific medium-term objective, as defined in the SGP, with a
lower limit of a structural deficit of 0.5% of GDP; (1.0% of GDP for Member
States with a debt ratio significantly below 60% of GDP).
• Member States should ensure that their fiscal frameworks are in line with
minimum quality standards and cover all administrative levels.
Sixpack Agreement
General provisions
• New Macroeconomic Imbalance Procedure (MIP) broadens the EU economic
governance framework to include the surveillance of macroeconomic trends.
The aim of the MIP is to identify potential risks early on, prevent the
emergence of harmful imbalances and correct the imbalances that are already
in place;
• New rules of make a debt criterion (SGP) absolutely operational again, new
numerical debt condition has been defined as: if the 60% reference for the
debt-to-GDP ratio is not respected, the Member State concerned will be put in
excessive deficit procedure;
• Expenditure benchmark places a cap on the annual growth of public
expenditure according to a medium-term rate of growth. For Member States
that have not yet reached their medium-term budgetary objective, the rate of
growth of expenditure should be below this reference rate in order to ensure
adequate progress.
Sixpack Agreement
General provisions
• Ensures stricter application of the fiscal rules by defining quantitatively what a
"significant deviation" from the MTO or the adjustment path towards it means
in the context of the preventive arm.
• Each year all EU member states are obliged to submit a SGP compliance report
for the scrutiny and evaluation of the Commission and Council;
• Euro Summits should be held at least twice a year.
• Introduction of European semester which is an annual national budget
assessment procedure by the European Commission.
• Surveillance of macroeconomic imbalances including both current account
deficits and surpluses.
• Greater transparency on texts and discussions, involving the European
Parliament and national parliaments and public hearings.
• More refined indicators for macroeconomic imbalances, to ensure that spillover
effects of national policies across member states are taken into account
alongside macroeconomic imbalances.
The European Semester
General information
• Cycle of economic and fiscal policy coordination within the EU economic policy,
• Every year since 2011, the EU member states coordinate their budgetary and
growth-oriented policies over a period of around six months,
• Main aim is to ensure fiscal stability and avoid severe macroeconomic
imbalances in the EU,
• Helps the member states seek their common growth goals under the Europe
2020 strategy more effectively,
• During the European Semester the member states align their budgetary and
economic policies with the objectives and rules agreed at the EU level,
• Each semester begins after adoption of Annual Growth Survey, which is usually
a set of EU priorities for a given year in order to boost economic growth and
job creation processes.
The European Semester
Main aims
• Increase fiscal cooperation,
• Promoting growth and competitiveness,
• Tackle unemployment,
• Perform structural reforms in line with the Euro 2020 strategy
• Ensure sound public finances,
• Foster economic growth,
• Prevent excessive macroeconomic imbalances in the EU,
The European Semester
Calendar
• November and December - preparations for the European Semester
should start when the Commission publishes its Annual Growth Survey
and Alert Mechanism Report (reviews macroeconomic developments in
each EU state) already in November of the preceding year. After the
Commissions review, it can decide to conduct additional in-depth
review on certain matters.
• January and February - The Council of the European Union debates
over AGS, formulates recommendations and adopts conclusions. In
addition to that, European Parliament is also allowed to discuss this
survey and can publish own initiative report - opinion on the
employment policy guidelines.
• March - Based on AGS and the Council analysis and conclusions, the
European Council provides policy orientations and simultaneously The
Commission publishes in-depth reviews of macroeconomic imbalances.
What is more the Spring meeting of European Council is held during
which issues of the overall macroeconomic situation, progress towards
the five EU - level targets and progress under the flagship initiatives
are discussed.
The European Semester
Calendar
• April – All MS are required to submit their plans for sound public
finances (Stability or Convergence Programmes) and reforms and
measures to make progress towards smart, sustainable and inclusive
growth, in areas such as employment, research, innovation, energy or
social inclusion (National Reform Programmes).
• May and June – evaluation of national policy plans and presentation
of drafts of
specific recommendations. Moreover, Council of the EU
discusses them and agrees on final country-specific recommendations.
Afterwards, they should be presented to the European Council for
endorsement.
• July
the
Council
formally
adopts
the
country-specific
recommendations. In addition to that, Member States take into
account advised recommendations and they are initiating processes of
their implementation.
• November and December – cycle starts over again towards next
European Semester.
The European Semester
The European Semester
The most important changes
• Synchronized
calendars of economic and fiscal policy reporting and
evaluation at the EU level,
• Changed the coordination of national economic policies from ex-post to
ex-ante,
• Introduction of a new component in policy coordination: surveillance
of macroeconomic imbalances in the member states which is designed
to identify risk of unsustainable macroeconomic developments much
earlier, to help preventing their emergence and to correct them swiftly
in case their occurrence.
Polish National Reform Programme
Most important actions planned
for 2013-2014
Polish National Reform Programme was adopted by the Council
of Ministers on 30 April 2013. In accordance with the European Semester
scheme, each EU Member State is required to prepare such report.
The main actions planned for 2013-2014 in terms of Reform Programme are:
• Reform of the labor market policy - improving quality and
effectiveness of services provided to the clients by the Labor Offices,
support the employment of persons over 50 years old, establish special
National Training Fund, creation of the completely new instrument
supporting the creation of new jobs and unemployed persons to return to
work.
• Development of support system for enterprises - creation of
favorable environment for enterprises, as well as active measures
increasing innovation and competitiveness by R&D grants, repayable
instruments for the purchase of modern technologies, machines and
equipment, venture capital funds, support for intellectual property rights,
education vouchers for entrepreneurs, fostering cooperation between
enterprises and higher education institutions strengthening
Business
Environment Institutions.
Polish National Reform Programme
Most important actions planned
for 2013-2014
• Implementation of programme to support investments - supporting
projects related to areas and technologies of the greatest potential for
growth.
• Strategy for Energy Security and the Environment - ensuring the
high quality of life of the present and future generations, taking into
account the issues related to the environmental protections and
establishing conditions for sustainable development of modern energy
sector.
• Investments in renewable energy resources.
• Counteracting poverty - increasing chances for employment, preparing
special support programmes for people most isolated from the labor
market. Another measure will be adoption of the National Programme
against Poverty and Social Exclusion.
• Development of social economy sector – providing social economy
support mechanisms, including the establishment of friendly environment
for social economy development and raising social awareness.
• Deregulation of certain types of professions.
The European System
of Central Banks Report (2012)
Year 2012 in a view of EU Central Banks:
• very volatile financial conditions brought about by the financial and
sovereign debt,
• High creditability of ECB monetary policy,
• Quite weak investment and private consumption levels,
• Weak economic confidence and heightened uncertainty on the market,
• 2.5% of inflation rate,
• Key ECB interest rates lowered by 25 basis points,
• Treaty on Stability, Coordination and Governance in the Economic and
Monetary Union,
• Surplus of over 2.16 billion Euro in ECB budget,
• Net profit – 998 million Euro - distributed to the euro area NCB’s in
proportion to their paid-up shares in the European Central Bank’s
capital.
References
Written references:
• European Central Bank Annual Report 2012 by European Central Bank,
• Polish National Reform Programme Europe 2020 (2013/2014) Update,
• Protocol (No 4) on the Statute of the European System of Central
Banks and the European Central Bank,
• Europejski System Banków Centralnych by Narodowy Bank Polski
(2004),
• The European System of Central Banks by European Central Bank,
• The Role of national central banks within the European System of
central banks – the example of De Nederlandsche Bank by Nout
Wellink.
References
Internet sources:
•
http://en.wikipedia.org/wiki/European_System_of_Central_Banks
•
http://www.ecb.europa.eu/home/html/index.en.html
•
http://www.ecb.int/ecb/educational/facts/orga/html/or_001.en.html
•
http://www.ecb.int/home/html/index.en.html
•
http://www.ecb.int/pub/pdf/other/escb_en.pdf
•
http://www.ecb.int/ecb/legal/pdf/c_08320100330en_ecb_statute.pdf
•
https://www.ecb.int/ecb/orga/escb/html/index.en.html
•
http://europa.eu/about-eu/institutions-bodies/ecb/
•
http://www.ecb.int/ecb/legal/1341/1343/html/index.en.html
•
http://www.nbp.pl/publikacje/esbc/esbc.pdf
•
http://www.ecb.int/pub/pdf/other/escb_pl.pdf
•
http://www.uniaeuropejska.org/europejski-system-bankow-centralnych-esbc
•
http://www.ecb.int/pub/annual/html/index.en.html
•
http://facta.junis.ni.ac.rs/eao/eao200702/eao200702-02.pdf
•
http://europa.eu/legislation_summaries/other/l25014_en.htm
•
http://www.ecb.int/pub/pdf/annrep/ar2012en.pdf
•
http://www.ecb.europa.eu/pub/pdf/other/ecbhistoryrolefunctions2006en.pdf
References
Internet sources:
•
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/124882.pdf
•
http://ec.europa.eu/economy_finance/articles/governance/2012-03-14_six_pack_en.htm
•
http://ec.europa.eu/economy_finance/economic_governance/
•
http://www.euractiv.com/euro-finance/parliament-adopt-pack-eu-budget-news-507898
•
http://www.consilium.europa.eu/special-reports/european-semester
•
http://ec.europa.eu/economy_finance/een/019/article_88106_en.htm
•
http://www.consilium.eu.int/homepage/highlights/european-semester-council-concludes-eus-economic-policypriorities-for-2013?lang=en
•
http://ec.europa.eu/europe2020/making-it-happen/country-specific-recommendations/
•
http://ec.europa.eu/europe2020/pdf/nd/nrp2013_poland_en.pdf
•
http://www.consilium.europa.eu/special-reports/european-semester/how-does-the-european-semester-work
•
http://europa.eu/rapid/press-release_MEMO-11-14_en.htm
•
http://www.consilium.europa.eu/special-reports/european-semester/what-changes-did-the-european-semesterintroduce
•
http://ec.europa.eu/europe2020/pdf/nd/nrp2013_poland_en.pdf
•
http://ec.europa.eu/europe2020/making-it-happen/index_en.htm
•
http://en.wikipedia.org/wiki/European_System_of_Central_Banks
•
http://www.bis.org/review/r020620a.pdf
•
http://en.wikipedia.org/wiki/Sixpack_%28European_Union_law%29