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The Legal Framework for the European System of Central Banks

In: Central Banking and Financial Stability in East Asia

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  • Helmut Siekmann

    (Goethe University)

Abstract

The Treaty of Maastricht imposed the strict obligation to establish an economic and monetary union as an integral part of the EU. The single currency was to become the currency of the EU and the legal tender in all Member States unless an exemption was explicitly granted. Consequently, the primary law systematically only speaks of economic policy or monetary policy which is the task of the Eurosystem, consisting of the ECB and the central banks of the Member States whose currency is the euro. Although the national central banks of all the Member States together with the ECB constitute the European System of Central Banks, only the ECB is granted legal personality. General economic policy is not a task of the EU, but has been retained by the Member States. Exceptions have to be provided explicitly in the primary law. EU law, however, contains a host of rules to prevent excessive debt and deficits on the part of the Member States. Price stability has been set as the “primary objective”. The term has to be interpreted as close to zero per cent inflation. To safeguard the primary objective, a comprehensive guarantee of the independence of the ESCB, the ECB, and the members of its organs has been provided for. Exit from the Monetary Union while remaining a EU Member State is not possible. The introduction of a parallel currency is prohibited. If a new currency in substitution of the euro or parallel to it is introduced, all claims denominated in euro will remain in euro and, economically, the burden will most likely even increase.

Suggested Citation

  • Helmut Siekmann, 2015. "The Legal Framework for the European System of Central Banks," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert (ed.), Central Banking and Financial Stability in East Asia, edition 127, pages 43-86, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-17380-1_4
    DOI: 10.1007/978-3-319-17380-1_4
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    References listed on IDEAS

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    1. Ludger Schuknecht & Philippe Moutot & Philipp Rother & Jürgen Stark, 2011. "The Stability and Growth Pact: Crisis and Reform," CESifo DICE Report, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(3), pages 10-18, October.
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    10. Bitros, George C., 2013. "European Union failures in Greece and some possible explanations," MPRA Paper 45017, University Library of Munich, Germany.
    11. Helmut Siekmann, 2015. "The Legality of Outright Monetary Transactions of the European System of Central Banks," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert (ed.), Central Banking and Financial Stability in East Asia, edition 127, pages 101-123, Springer.
    12. James, Harold, 2012. "Making the European Monetary Union," Economics Books, Harvard University Press, number 9780674066830, Spring.
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    Cited by:

    1. Siekmann, Helmut, 2015. "The legality of outright monetary transactions (OMT) of the European system of central banks," IMFS Working Paper Series 90, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Siekmann, Helmut, 2016. "Replacing or supplementing the euro in member states whose currency is the euro," IMFS Working Paper Series 109, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    3. John B. Taylor & Volker Wieland, 2016. "Finding the Equilibrium Real Interest Rate in a Fog of Policy Deviations," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 51(3), pages 147-154, July.
    4. Siekmann, Helmut, 2018. "Legal tender in the euro area," IMFS Working Paper Series 122, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    5. Siekmann, Helmut, 2015. "Exit, exclusion, and parallel currencies in the euro area," IMFS Working Paper Series 99, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).

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