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The legal framework for the European System of Central Banks

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  • Siekmann, Helmut

Abstract

The paper traces the developments from the formation of the European Economic and Monetary Union to this date. It discusses the fact that the primary mandate of the European System of Central Banks (ESCB) is confined to safeguarding price stability and does not include general economic policy. Finally, the paper contributes to the discussion on whether the primary law of the European Union would support a eurozone exit. The Treaty of Maastricht imposed the strict obligation on the European Union (EU) to establish an economic and monetary union, now Article 3(4) TEU. This economic and monetary union is, however, not designed as a separate entity but as an integral part of the EU. The single currency was to become the currency of the EU and to be the legal tender in all Member States unless an exemption was explicitly granted in the primary law of the EU, as in the case of the UK and Denmark. The newly admitted Member States are obliged to introduce the euro as their currency as soon as they fulfil the admission criteria. Technically, this has been achieved by transferring the exclusive competence for the monetary policy of the Member States whose currency is the euro on the EU, Article 3(1)(c) TFEU and by bestowing the euro with the quality of legal tender, the only legal tender in the EU, Article 128(1) sentence 3 TFEU.

Suggested Citation

  • Siekmann, Helmut, 2015. "The legal framework for the European System of Central Banks," SAFE White Paper Series 26, Leibniz Institute for Financial Research SAFE.
  • Handle: RePEc:zbw:safewh:26
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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," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(03), pages 10-17, October.
    2. 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.
    3. Lastra, Rosa Maria, 2006. "Legal Foundations of International Monetary Stability," OUP Catalogue, Oxford University Press, number 9780199269341.
    4. Scott, Hal S, 1998. "When the Euro Falls Apart," International Finance, Wiley Blackwell, vol. 1(2), pages 207-228, December.
    5. Bitros, George C., 2013. "European Union failures in Greece and some possible explanations," MPRA Paper 45017, University Library of Munich, Germany.
    6. 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.
    7. James, Harold, 2012. "Making the European Monetary Union," Economics Books, Harvard University Press, number 9780674066830, Spring.
    8. Issing, Otmar, 2008. "The Euro: A currency without a state," CFS Working Paper Series 2008/51, Center for Financial Studies (CFS).
    9. repec:ces:ifodic:v:9:y:2011:i:3:p:16750160 is not listed on IDEAS
    10. repec:ces:ifodic:v:9:y:2011:i:3:p:10-17 is not listed on IDEAS
    11. Hal S. Scott, 1998. "When the Euro Falls Apart," International Finance, Wiley Blackwell, vol. 1(2), pages 207-228, December.
    12. Thomas Eger & Hans-Bernd Schäfer (ed.), 2012. "Research Handbook on the Economics of European Union Law," Books, Edward Elgar Publishing, number 13923.
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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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    Keywords

    economic and monetary union; euro; monetary policy; economic policy;
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