Waibel Bruges EMU Exclusive Only in Name 10 February (f).docx

Monetary Policy: An Exclusive Competence Only in Name? Michael Waibel Michael Waibel is University Senior Lecturer in International Law at the University of Cambridge, Co-Deputy Director of the Lauterpacht Centre for International Law and a Fellow of Jesus College. Contact [email protected]. Thanks to Hannah Dixie for her help in the preparation of this chapter.   Introduction Monetary policy for those Members whose currency is the Euro is one of European Union’s few formally exclusive competences. Yet despite formal allocation of monetary policy competence to the Union, this chapter argues that the practice of monetary policy decision-making reflects the EU’s nation-state structure. It tells us one side of the story about the balance of power for the conduct of monetary policy. If exclusive competence at bottom means that member states have no say in devising policy, then monetary policy, is not at present a genuinely exclusive competence. Instead, the chapter contends that monetary policy is an exclusive competence of the EU in name only. At the very least, the position is more nuanced than the label of exclusive competence suggests. The first section compares competence for monetary policy with related areas, specifically economic policy, and closely connected thereto, education, health, labour and social policy. It also briefly discussed how the Eurozone crisis has affected the vertical balance of responsibilities between the EU and its member states in these areas. The second section examines the asymmetric allocation of competence for economic and monetary policy, and the fuzzy boundary between the two, through the prism of the two key Eurozone crisis cases before the CJEU, Pringle and Gauweiler. The third section examines why, contrary to first appearances, the EU does not at present have a genuine exclusive competence for monetary policy. Competence for Eurozone Monetary Policy and related Policy Areas Article 3 TFEU states unambiguously that ‘[t]he Union shall have exclusive competence [for] monetary policy for the Member States whose currency is the euro’. By contrast, Article 4 TFEU states that the Union only has a coordinating competence with respect to economic policy. A Hinarejos, ‘Economic and Monetary Union’ in Barnard Catherine and Peers Steve (eds), European Union Law (Oxford University Press 2013); F Fabbrini, Economic governance in Europe: comparative paradoxes and constitutional challenges (Oxford University Press, 2016), 203. For social policy, the Union’s competence is lesser still, providing only for Union ‘initiatives to ensure coordination’. the Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies. […] The Union shall take measures to ensure coordination of the employment policies of the Member States, in particular by defining guidelines for these policies. The Union may take initiatives to ensure coordination of Member States’ social policy. The competence literature typically focuses on legislative competence. R Schütze, ‘Organized change towards an “ever closer union”: Article 308 EC and the limits to the Community’s legislative competence,’ (2003) 22 Yearbook of European Law 79 and Schütze, ‘From Rome to Lisbon: “Executive federalism” in the (new) European Union,’ (2010) 47(5) CML Rev 1385. Most of the enumerated powers in the treaties are legislative powers. By contrast, monetary policy is at its core an executive competence, though one delegated to an independent monetary policy authority. To a lesser extent, the same observation applies to economic policy. Another example of a policy domain where the emphasis is also on executive functions is competition law. Legislative or harmonizing measures play only a minor role, see Chapter by Pablo Ibanez Colomo in this volume. This focus on executive action by an independent agency sets monetary policy apart from most other EU competences. As the third section explains, the Eurosystem The Eurosystem is made up of the ECB and the national central banks of those EU members that have adopted the Euro. Cf. Article 282 TEU, 2 sentence: ‘The European Central Bank, together with the national central banks of the Member States whose currency is the Union, which constitute the Eurosystem, shall conduct the monetary policy of the Union.’ is an independent, executive policy-making body that is independent from the political branches at national and EU level. In Garben’s view, a tension ‘between the need for containment and for conferral of the EU level’ characterizes EU economic policy. S Garben, ‘The Constitutional (Im)balance between “the Market” and “the Social” in the European Union,’ (2017) European Constitutional Law Review, at 21. Member States have been ‘legitimately concerned about granting the EU a hard competence in this area,’ ibid. fearing ‘it may become a blank cheque for the EU to decide on highly sensitive decisions of re-distributive nature at the core of their sovereign powers’ ibid at 21-22. which are arguably ‘beyond the EU’s limited legitimacy.’ ibid at 22. However, she concedes that ‘the closely intertwined European economies and the common currency would seem to necessitate a strong European-level capacity to decide on the crucial elements of this economic and monetary union.’ ibid. Given the limited coordinating competence, the EU Commission in 2010 devised the European Semester as a mechanism to enhance EU surveillance of member states economic policy and achieve better coordination economic policy. A Steinbach, Economic Policy Coordination in the Euro Area (2014) 124; A Hinarejos, The Euro Area Crisis in Constitutional Perspective (Oxford University Press 2015), 30; Garben, above note 6, 24, Fabbrini above n 2, at 30. Under this framework, the Council ostensibly ‘adopts country specific recommendations as part of the coordination of Member States’ economic and employment policy.’ But it has attracted the criticism that it pursues ‘a neo-liberal, deregulatory agenda.’ C Barnard, ‘EU Employment Law and the European Social Model: The Past, the Present and the Future,’ (2014) 67 Current Legal Problems 199, 204. Grahl and Teague have been particularly critical, stating: ‘With the “rescue-cum-retrenchment” regimes imposed on the states accepting bailout funds, virtually all social policy autonomy is lost.’ J Grahl and P Teague ‘Reconstructing the Eurozone: the role of EU social policy,’ (2013) 37 Cambridge Journal of Economics 677, 685. They note that even where the Commission does not demand specific social policy changes, ‘the intensity of the pressure for rapid fiscal consolidation makes them inevitable.’ ibid at 686. As for any suggestion of consolidating core social policies at the EU level, they refute this as ‘completely unrealistic’ ibid. in the aftermath of the Euro-crisis: ‘Since no resources were committed by the EU to achieve its social policy targets, since there are no effective levers to influence policy in the stronger states and since the weaker ones have to subordinate social objectives to deficit reduction, the targets are empty aspirations.’ ibid. The Euro-crisis brought these tensions to the fore. Dahan empirically investigated the EU-IMF financial stabilisation programme for Latvia in 2011-2012. He concludes that ‘the IMF practice has shown that various social policies have entered the Fund’s discourse. Social development and poverty reduction seem to have become priorities of IMF-supported programmes. Yet, the IMF lacks expertise in social policy and has a limited view of its mandate which prevents it fully engaging with such policies. Although a learning process has taken place in the IMF practice, this shift in policy thinking has not fully translated into practice. Social development may become a pillar of the IMF mandate, but it does not yet constitute a primary goal.’ S Dahan, ‘The EU/IMF Financial Stabilisation Process in Latvia and Its Implications for Labour Law and Social Policy’ (2012) 41 Industrial Law Journal 305, 326. C de la Porte and E Heins, ‘A new era of European Integration? Governance of Labour market and social policy since the Sovereign debt crisis,’ (2015) 13(1) Comparative European Politics; Communication from the Commission to the European Parliament and the Council, ‘Strengthening the Social Dimension of the Economic and Monetary Union’ COM(2013) 690. Subsequent EU crisis resolution efforts, particularly in Greece, led to sharp criticism and concern about the social consequences resulting under stabilisation programmes that countries such as Greece and Portugal adopted. eg M Karanikolos et al, ‘Financial crisis, austerity, and health in Europe,’ (2013) 381 The Lancet 1323, 1324. Borrowing countries reduced spending on social welfare, education and health. Greece, for instance, cut hospital budgets by 40 percent and experienced shortages of staff and medical supplies. ibid. In addition to lack of adequate access to health care, unemployment, mental disorders ibid at 1327. and suicide rate increased. ibid. In 2015, the International Labour Organisation warned that ‘serious health hazards are emerging because of the fiscal consolidation measures introduced since 2008’ International Labour Organisation, World Social Protection Report, 2015, available at www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_245201.pdf, 135. and also attributed ‘high unemployment, lower wages and social protection expenditure cuts’ ibid at 137. to the economic adjustment programmes in crisis countries. For Barnard, this is unsurprising, given that ‘social policy has always been seen as the poor relation to the EU’s economic dimension.’ Barnard above n 8; Dahan refers to the ‘pre-eminence of fiscal over social policy,’ S Dahan, ‘The EU/IMF Financial Stabilisation Process in Latvia and Its Implications for Labour Law and Social Policy’ (2012) 41 Industrial Law Journal 305, 326; Hinarejos refers to the ‘new social deficit’, above n 6, at 81. Some go so far as to argue that elements of the adjustment in the Greek programme have breached Greece’s and the lender’s human rights obligations. O De Schutter and ME Salomon, ‘Economic Policy Conditionality, Socio-Economic Rights and International Legal Responsibility: The Case of Greece 2010-2015’ (Legal Brief Prepared for The Special Committee of the Hellenic Parliament on the Audit of the Greek Debt (Debt Truth Committee)). Social policy has traditionally been a matter for the Member States, an area deemed within ‘the rightful purview of politics,’ Hinarejos, above n 6, at 80. thereby demanding ‘democratic legitimacy.’ ibid. One objective in establishing the monetary union was to insulate monetary policy from national politics. However, as Hinarejos has pointed out, this aim ‘soon faltered, as it became apparent that it is not possible to separate the market from the political, as both spheres overlap or clash.’ ibid. She continued: ‘This, together with the fact that EU law had been given direct effect and primacy over national law, meant that the economic and social policy choices made at the national level were bound to be overridden by EU rules created to protect and foster the single market and undistorted competition.’ ibid. As a result of the Euro-crisis, social policy became de facto more centralised in programme countries. ibid at 81. Hinarejos has summed up the result: ‘while in theory Member States’ choice in social policy remains their own, in practice these choices are progressively curtailed by an ever higher degree of control and surveillance as regards economic and fiscal policy. This interference can happen in various ways: because the increased control in economic and fiscal policy requires a Member State to cut spending, thus indirectly impacting its social policy spending; because recommendations adopted within the European Semester seek to nudge Member States to adopt certain policy choices; or in the clearest cases, because of Memoranda of Understanding require certain policy choices of Member States in receipt of financial assistance’. ibid. Similarly, Garben contends that EU economic policy is ‘affecting a wide range of other – highly sensitive – policy areas in unprecedented ways.’ Garben, above n 7 at 28. She refers to ‘a competence coup taking place through European economic governance’ ibid at 29. whereby Member States ‘are given detailed instructions about the level of their wages and the procedures for setting them, about their pensions, their health care and education systems, and face political and financial sanctions or bankruptcy if they fail to obey.’ ibid. The implication of this development is that social policy, once ‘the only remaining instrument governments could use to mitigate external economic pressures’ Grahl and Teague, above n 9 at 684. is now being removed from the competence of Member States. Social policy is thus a competence area where there is a at least some disconnect between the formal position in the treaties – a member state competence with only a limited coordinating function for the EU – and the de facto position – an area of competence in which there are increasingly spillovers from decisions taken at the EU level pursuant to monetary policy competence. As the third section shows, a similar, but reverse disconnect exists for the formally exclusive EU competence of monetary policy. The Fuzzy Boundary between EU competence for ‘Economic’ and ‘Monetary Policy’ The treaties sought to establish an ‘Economic and Monetary Union’ for the European Union. EU competence for ‘monetary’ and ‘economic policy’ is allocated asymmetrically. As the previous Section discussed, monetary policy is deemed to be an ‘exclusive’ competence However, Section 3 below contends that this formal characterization does not stand up to closer scrutiny. whereas ‘economic policy’ is only a ‘coordinating competence’. R Schütze, ‘Lisbon and the federal order of competences: a prospective analysis,’ (2008) 33 EL Rev 709; A Arnull and D Chalmers, The Oxford handbook of European Union law (First edition edn, Oxford University Press 2015) 87; Hinarejos above n 6, at68-69. Authority for economic policy remains at the national level. Article 121 requires Member States to regard their economic policies as matters of common concern and to coordinate them within the Council. One policy instruments are Broad Economic Policy Guidelines. These are non-binding and merely seek to coordinate national policies, without being backed up by an effective enforcement mechanism. The EU’s current economic and monetary governance arrangements are the result of a lot of ad hoc bricolage. Pisani-Ferry, as quoted in J-V Louis and R Lastra, ‘European Economic and Monetary Union: History, Trends, Prospects’ (2013) 32 Yearbook of European Law 196. In Pringle, an Irish member of Parliament contended that the European Stability Mechanism (ESM), an intergovernmental institution established by the Eurozone in 2011 to provide stability support to its member states and protect the euro, should be classified for competence purposes as ‘monetary policy’ under the exclusive competence of the EU, as stipulated in Article 3(1)(c) TFEU. Case C-370/12, Thomas Pringle v Government of Ireland, Ireland and The Attorney General, Judgment of the Court (Full Court) of 27 November 2012. Accordingly, and in line with Article 2(1) TFEU, the claimant argued that EU Member States lacked the competence to adopt any legally binding acts, such as the ESM, in this area. In contrast, the Member States submitted that the ESM was a measure of ‘economic policy’, falling outside the exclusive competences of the EU. The pivotal question for the CJEU to consider was therefore whether the creation of the ESM fell within the scope of monetary or economic policy. In qualifying the establishment of the ESM as ‘economic policy’, the CJEU ultimately sided with the Member States. Acknowledging that the TFEU lacked any definition of ‘monetary policy’, the Court recognised that the ESM must be considered in light of both its objectives and its instruments so as to determine which competence head its establishment pertained to. Case C-370/12, Pringle, para 53. It held that the objective pursued by the ESM, namely ‘to safeguard the stability of the euro area as a whole,’ ibid at para 56. was ‘clearly distinct from the objective of maintaining price stability, which is the primary objective of the Union’s monetary policy.’ ibid. In drawing this distinction, the Court held that ‘though the stability of the euro area may have repercussions on the stability of the currency used within that area, an economic policy measure cannot be treated as equivalent to a monetary policy measure for the sole reasons that it may have indirect effects on the stability of the euro.’ ibid. The Court emphasised that ‘any effect of the activities of the ESM on price stability is not such as to call into question that finding. Even if the activities of the ESM might influence the rate of inflation, such an influence would constitute only the indirect consequence of the economic policy measure adopted’. ibid at para 97. The Court thus concluded that the ‘close link’ ibid at para 60. between the ESM and the TFEU provisions ‘relating to economic policy and the regulatory framework for strengthened economic governance of the Union,’ ibid. rendered the ESM an economic policy measure. Consequently, the Court concluded that Articles 3(1)(c) TFEU and 127 TFEU did not preclude the agreement, and subsequent ratification, of the ESM Treaty by Member States. ibid, at para 98. The Court followed Advocate General Kokott’s opinion on how to qualify the establishment of the ESM. Although the concept of monetary policy was not directly defined in the treaty, she considered Chapter 2 of Title VII of the TFEU which relates to monetary policy. First, the provision of credit facilities of the kind envisaged by the ESM was not a task which Article 127(2) TFEU ascribed to the ESCB. Second, she submitted that ‘Articles 123 and 124 TFEU, which directly concern the conditions governing the financing of Member States, are to be found in the chapter on economic policy and precisely not in the chapter on monetary policy.’ Opinion of Advocate General Kokott, C-370/12, Pringle, para 82. Third, the ESM does not constitute monetary policy simply because it may impact money supply. She noted that neither is the ESM ‘a commercial bank which by the extending of credit can create money,’ ibid at para 84. nor does it indirectly affect the price stability in the euro area. The contrary conclusion would mean that ‘the entire economic policy would be reserved to the ESCB and the rules of the Treaty on the coordination of economic policy within the Union would be devoid of meaning.’ ibid at para 85. The judgment has attracted significant criticism in the academic literature. For example, Craig considered there to have been ‘force in the contention that the ESM was in reality directed towards monetary policy,’ PP Craig, ‘Pringle: Legal Reasoning, Text, Purpose and Teleology,’ (2013) 20 Maastricht Journal of European and Comparative Law 1, 5. highlighting ‘the wording of Articles 2 and 12 ESM, which predicate assistance on the fact that it is indispensable to the financial stability of the euro area as a whole.’ ibid. He criticised the Court’s reasoning on this point as ‘strained’ ibid. and accused it of ‘legal formalism.’ ibid. In the second central crisis case, Gauweiler, Gauweiler, BVerfG, Case No 2 BvR 2728/13 (14 January 2014). the claimants before the German Bundesverfassungsgericht (BVerfG), contended that the European Central Bank (ECB) had ‘transgressed its competence’ by implementing the OMT programme. PP Craig and M Markakis, ‘Gauweiler and the legality of outright monetary transactions,’ (2016) 41(1) EL Rev 4, 6. They alleged that the OMT programmed amounted to ‘economic policy’ which fell beyond the ECB’s monetary policy mandate. The Constitutional Court set out its preliminary view that the OMT programme was unlawful under EU law before making its first ever preliminary reference to the European Court of Justice. The role of the ECB is to conduct monetary policy for the euro area within the narrow remit provided by the Treaties. The main opposition to the OMT programme was prompted by the ECB’s purchasing of government bonds on the secondary market, conditioned upon the relevant Member State obtaining financial assistance from the ESM or EFSF. The pivotal issue was whether the OMT programme was a measure of monetary policy, and therefore within the competence of the ECB, or economic policy, and thus beyond its competence. Several features combined to lead the BVerfG to the conclusion that the OMT programme was economic in character. First, it assessed the programme’s objectives. Second, it questioned its selectivity given the targeted nature of the purchases. Finally, it queried the links with the ESM assistance programme. To determine the character of the OMT programme, the BVerfG referred to CJEU’s earlier judgment in Pringle Case C-370/12, Thomas Pringle v Government of Ireland, Ireland and The Attorney General, Judgment of the Court (Full Court) of 27 November 2012. in considering the programme’s ‘immediate objective’ Gauweiler, BVerfG, Case No 2 BvR 2728/13, para 63. and ‘the instruments envisaged to achieve the objective.’ ibid. This aspect of the Court’s judgement has attracted academic criticism. Borger pointed out that ‘the ECJ did not say in Pringle that regard should be had specifically to immediate objectives. It just stated that one should look at objectives, full stop.’ V Borger, ‘Outright Monetary Transactions and the stability mandate of the ECB: Gauweiler,’ (2016) 53 CML Rev 139, 171. He argues that by so confining itself, the BVerfG ignored the ECB’s longer-term indirect objective of ‘safeguarding price transmission and singleness of its monetary policy, and its ultimate aim of safeguarding price stability.’ ibid. Indeed, the BVerfG viewed the ECB’s proposed monetary policy transmission mechanism Gauweiler, BVerfG, Case No 2 BvR 2728/13, para 7. with scepticism. According to Craig and Markakis, this scepticism, ‘resonated through [the BVerfG’s] judgment, with the emphasis on the economic rationality of interest rate spreads and the assumption that any attempt to address this under the Treaty necessarily constituted economic policy that was ultra vires the ECB.’ Craig and Markakis, above n 57 at 18-19. Rather, agreeing with the submissions of the Bundesbank, the German Constitutional Court determined that ‘the primary objective (or at least the necessary intermediate objective) of the purchases is the reduction of the interest rates the Member States that benefit have to pay on the capital markets for new government bonds,’ Gauweiler, BVerfG, Case No 2 BvR 2728/13, para 55. with the OMT programme intended to ‘neutralise spreads on government bonds of selected Member States of the euro currency area.’ ibid at para 70. Consequently, the Court deemed such efforts to ‘safeguard the current composition of the euro currency area’ ibid at para 72. to be ‘obviously not a task of monetary policy but one of economic policy, which remains a responsibility of the Member States.’ ibid. Relying once again on Pringle, it reasoned that, just as ‘an act could not be treated as equivalent to an act of monetary policy for the sole reason that it might have indirect effects on the stability of the euro,’ ibid at para 64. equally ‘purchases of government bonds may not qualify as acts of monetary policy for the sole reason that they also indirectly pursue monetary policy objectives.’ ibid. On the matter of selectivity, the Court expressed concern over ‘targeting the secondary bond markets of euro economies that were in serious difficulty,’ Craig and Markakis, above n 57 at 10. which it found ‘highly problematic, because it thereby undermined the sanctity of interest spreads,’ ibid. thus falling outside the ECB’s monetary policy remit. The BVerfG also criticised the conditionality of the OMT, asserting ‘the fact that assistance via the OMT programme was conditional on economic policy reform showed that purchase of government bonds on the secondary markets was a measure of economic, not monetary policy. ibid. The BVerfG dismissed the argument that the OMT programme simply supported economic policy, which the ESCB is entitled to pursue under articles 119(2) and 127(1) TFEU. It did so because the ESM might ‘considerably broaden’ ibid. the scope of its assistance through the purchase of government bonds thereby potentially thwarting ‘underlying political decisions.’ ibid at para 83. above ‘mere “support” of the economic policy in the Union.’ ibid. In the view of the BVerfG, only ‘a very limited version’ A Hinarejos, ‘Gauweiler and the Outright Monetary Transactions Programme: The Mandate of the European Central Bank and the Changing Nature of Economic and Monetary Union,’ (2015) 11 European Constitutional Law Review 563, 574. of the OMT is thus permitted under EU law and the German constitution. However, as Hinarejos has recognised, the difficulty with this interpretation is that ‘such a limited reading of the Programme could arguably deprive the latter of its usefulness.’ ibid. Unsurprisingly, therefore, the CJEU chose to adopt a different approach. The CJEU, as it had done in Pringle, underlined at the outset that the TFEU ‘contains no precise definition of monetary policy but defines both the objectives of monetary policy and the instruments which are available to the ESCB for the purpose of implementing that policy.’ Case C-62/14, Peter Gauweiler and others v Deutscher Bundestag, Judgment of 16 June 2015, para 42. It continued to note that ‘under Articles 127(1) TFEU and 282(2) TFEU, the primary objective of the Union’s monetary policy is to maintain price stability’ ibid at para 54. and, further, that ‘without prejudice to that objective, the ESCB is to support the general economic policies in the Union, with a view to contributing to the achievement of its objectives, as laid down in Article 3 TEU.’ ibid at para 43. The Court’s first task was thus to determine whether the OMT programme fell within the scope of economic or monetary policy, as the BVerfG had endeavoured to do. It reached the opposite conclusion, namely that the monetary policy competence was an appropriate legal basis for the OMT programme. Settling on the same approach, the CJEU heeded the Pringle judgment in recognising the need to uncover the underlying objectives of the OMT programme. However, unlike the BVerfG, it considered both direct and indirect objectives Borger, above n 61 at 173. The ECB submitted that the aim was ‘not to facilitate the financing conditions of certain Member States, or to determine their economic policies, but rather to “unblock” the ECB’s monetary policy transmission channels.’ Opinion of Advocate General Cruz Villalón, Gauweiler (C-62/14), para 104. The CJEU considered this to contribute to the ultimate objective of monetary policy, namely maintaining price stability. Echoing its earlier judgment in Pringle, the Court held ‘a monetary policy measure cannot be treated as equivalent to an economic policy measure merely because it may have indirect effects on the stability of the euro area.’ Case C-62/14, Gauweiler, para 52. On the question of instruments, the Court turned to Article 18.1 of the Protocol on the ESCB and the ECB to demonstrate that the right of the ECB to ‘operate in the financial markets by buying and selling outright marketable instruments in euro’ ibid at para 54. is made explicit, thereby underlining the monetary policy character of the OMT programme. Addressing the BVerfG’s concerns over the selective nature of these bond purchases, the Court held: ‘the mere fact that the programme is specifically limited to those government bonds is thus not of a nature to imply, of itself, that the instruments used by the ESCB fall outside the realm of monetary policy.’ ibid at para 55. While the BVerfG was therefore right to suggest that ‘the monetary policy framework of the European System of Central Banks does generally not have a targeted approach,’ Gauweiler, BVerfG, Case No 2 BvR 2728/13, para 73. the CJEU contended that this selectivity by no means indicated the programme’s economic nature, pointing out that no provisions of the FEU Treaty require the ESCB to operate in the financial markets by means of general measures that would necessarily be applicable to all the States of the euro area.’ Case C-62/14, Gauweiler, para 55. Selectivity, in the Court’s view, was simply ‘the natural consequence of its initial focus on monetary policy transmission.’ Craig and Markakis, above n 57 at 10. The CJEU went on to reject the notion that the OMT’s attendant conditionality upon compliance with the ESM or EFSF financial adjustment programmes (which concern economic and fiscal policy) would impact this conclusion. While conceding that ‘a government bond-buying programme may, indirectly, increase the impetus to comply with those adjustment programmes and thus, to some extent, further the economic-policy objectives of those programmes,’ Case C-62/14, Gauweiler, para 58. the Court noted that ‘such indirect effects do not mean that such a programme must be treated as equivalent to an economic policy measure, since it is apparent from Articles 119(2) TFEU, 127(1) TFEU and 282(2) TFEU that, without prejudice to the objective of price stability, the ESCB is to support the general economic policies in the Union.’ ibid at para 59. The CJEU thus openly accepted that the OMT programme ‘had some impact on economic policy in the Member States undergoing severe financial difficulty,’ Craig and Markakis, above n 57 at 19. which it deemed ‘reflective of the interconnection between economic and monetary policy,’ ibid. but refuted the deduction that ‘economic policy was the principal rationale for the intervention.’ ibid. Borger has given three reasons why conditionality upon ESM adjustment programmes does not alter the monetary character of the policy. First, because the TFEU ‘specifically allows the ESCB to support the general economic policies in the Union.’ Borger, above n 61 at 161. Second, because the link is a testament to Article 119(3) TFEU, which recognises ‘sound public finances’ as a guiding principle of economic and monetary policy, intended ‘to make sure that States cannot free themselves from adjustment programmes because their financing constraints are eased due to OMT purchases.’ ibid at 161-162. Third, because ‘even though bond purchases tied to compliance with adjustment programmes constitute economic policy when carried out by the ESM [as in Pringle], the same cannot be said when they are conducted by the ESCB.’ ibid at 162. While at first glance this seems inconsistent, the CJEU justified the difference on the basis of the different underlying objectives in each case. Hinarejos, above n 78 at 569. As Borger explained: ‘Whereas the emergency fund aims to protect the stability of the euro area, the ESCB focuses on safeguarding price stability through restoring the transmission of monetary policy. Activation of its OMT programme is therefore specifically tied to the condition that this transmission is disrupted.’ Borger, above n 61 at 162. Pringle and Gauweiler illustrate that the boundary between ‘economic policy’ and ‘monetary policy is fuzzy. See generally Takis Tridimas, ‘Competence after Lisbon: The Elusive Search for Bright Lines’ in Diamond Ashiagbor et al (eds), The European Union after the Treaty of Lisbon (CUP 2012), 47; A Mody (2015), ‘Did the German Court do Europe a favour?’ 10 Capital Markets Law Journal 6 (2015). Whether the OMT programme is economic or monetary policy seemingly depends on the eye of the beholder. And this is not a sound basis for competence allocation in this crucial area. Craig and Markakis claim that ‘the respective starting points of the Bundesverfassungsgericht and the CJEU shaped their conclusions as to whether the OMT fell within the ECB’s powers.’ ibid at 8. These different perspectives underlined their respective judgments, they note, ‘the former’s focus on interest spreads reflecting its view that the OMT schema was really about economic policy, while the latter’s focus on monetary policy transmission reflected the alternative assumption that OMT could legitimately be regarded as falling within the sphere of monetary policy.’ ibid at 17. Not only is the allocation of competence to the EU for ‘monetary’ and ‘economic’ policy asymmetrical as mentioned earlier in this Section, but these two categories have (1) no natural correspondence in economics; (2) a strict separation between them is impossible in practice, especially when it comes to unconventional central bank measures such as quantitative easing and (3) the prevailing narrow conception of monetary policy risks hamstringing the Eurosystem in preserving financial stability. First, to economists, monetary policy is a constituent part of economic policy. The term ‘economic policy’ in economics is a generic term that compromises both monetary and fiscal policy. See eg the coverage of both monetary and fiscal policy by the influential journal Economic Policy; cf also F Snyder, ‘EMU - Integration and Differentiation: Metaphor for European Union’ in PP Craig and G De Búrca (eds), The Evolution of EU law (2nd edn, Oxford University Press 2011) 694. The crucial distinction is between fiscal policy – government spending and taxation, on the one hand, and monetary policy – money supply, exchange rates, interest rates, on the other hand. Yet the Treaties use ‘economic policy’ rather than ‘fiscal policy’ – the former, as the more generic term, is likely to be interpreted more broadly (as it happened in Pringle). Second, the dividing lines between internal market competences, EU economic policy coordination, and monetary policy are difficult to draw. “[E]ach policy area should ideally correspond to one competence category”, but it does not. R Schütze, European Constitutional Law (Cambridge University Press 2012) 163. A good illustration is quantitative easing, which crosses the boundary between monetary and fiscal policy. Because central banks engage in large-scale purchases of sovereign or private sector debt on large scale and over time, these measures are quasi-fiscal in nature. A Haldane, How long can you go, Speech at the Portadown Chamber of Commerce, Northern Ireland, 18 September 2015, available at www.bankofengland.co.uk/publications/Documents/speeches/2015/speech840.pdf. Despite judges and academics highlighted the grey zone between monetary and economic policy, these competence ‘crutches’ remain influential. Beaumont and Walker presciently remarked in 1999: PR Beaumont, Paul R. and Walker Neil, Legal framework of the single European currency (Hart Pub. 1999) 115. The final instance which could give rise to legal action is in some ways the most interesting. It concerns the boundaries between monetary and economic policy. The Treaty Articles make it clear that while the ECB has considerable power and autonomy over the former, the Commission and the Council have the primary say over the latter. Economics as a discipline does not, however, respect formal Treaty boundaries. The line between monetary policy and economic policy may not always be pristinely clear, and in any event the two obviously interact, a point recognised forcefully in the Luxembourg European Council meeting in December 1997. There might well therefore be cases brought by the ECB which raise issues on the borderline between economic and monetary policy. Judge Gerhardt, in his dissenting opinion in the BVerfG decision similarly commented: ‘Monetary and policies relate to each other and cannot be strictly separated.’ Dissenting Opinion of Justice Gerhardt, Gauweiler, Case No 2 BvR 2728/13, para 17. Advocate General Cruz Villalón expressed the same doubts over the purported dichotomy between economic and monetary union in his Opinion in Gauweiler, in which he stated: Although it may appear self-evident, it is important to make the point that monetary policy forms part of general economic policy. The division that EU law makes between those policies is a requirement imposed by the structure of the Treaties and by the horizontal and vertical distribution of powers within the Union, but in economic terms it may be stated that any monetary policy measure is ultimately encompassed by the broader category of general economic policy. Opinion of AG Cruz Villalón, Gauweiler (C-62/14) para 129. Hinarejos has also criticised the efforts to draw a sharp divide between economic and monetary policy, recognising that: ‘while the Court could be accused of drawing an arbitrary line between measures of monetary and economic policy, it seems impossible not to engage in arbitrary distinctions of some kind - an arbitrariness that seems imposed not by the Court itself, but by the problematic separation of competences at the heart Economic and Monetary Union.’ Hinarejos, above n 78 at 575. Meanwhile, for Craig and Markakis, the ‘contestation as to the legal divide between economic and monetary policy under the Lisbon Treaty is reflective of the inherent factual linkage between the twin components of economic and monetary union.’ Craig and Markakis, above n 57 at 17. In their view, this ‘inherent factual link’ ibid. between the two elements renders ‘the search for a pristine legal dichotomy with an unequivocal boundary’ ibid. between the two ‘doomed to failure.’ ibid. The authors recognised that this ‘may be uncomfortable in legal terms, given that EU competence in the respective areas differs’ ibid. but simply stated: ‘Legal categories of competence cannot, however, change the inherent factual connection between the constituent components of EMU, nor can they alter the fact that measures adopted to deal with macro-financial malaise will commonly have an impact on both limbs of EMU.’ ibid. Borger contends that there is little sense in defining monetary policy ‘by juxtaposing it with economic policy, especially not by looking at a measure’s objectives,’ ibid, at 181. believing it to be not only difficult but often futile, as ‘the two policy areas overlap and can at times be hard to distinguish in practice.’ ibid. Third, as we have seen, the CJEU in Pringle adopted a narrow view of monetary policy to find that EU member states could establish the European Stability Mechanism by way of treaty. Yet such a narrow conception of ‘monetary policy’ presents risk for financial stability. The Court defined monetary policy purely by reference to measures that serve directly the primary objective of maintaining price stability. Case C-370/12 Thomas Pringle v Government of Ireland, Judgment of 27 November 2012. It distinguished the provision of financial assistance as aiming at the stability of the euro area as a whole, which is distinct from the price stability objective. It found – without much reasoning - that the grant of financial assistance to a Member State falls outside the category of ‘monetary policy’. It then pointed out that such assistance complements the EU’s economic policy, which is intended to consolidate macroeconomic stability and the sustainability of public finances. That policy is largely preventive, whereas the ESM envisaged by Art 136(3) TFEU concerns the management of financial crises. That amendment therefore concerns economic, and not monetary policy. Ibid, paras. 54-60. The restrictive interpretation by the Court of the scope of the EU’s monetary policy leads to its finding that Art 136(3) TFEU is within the sphere of economic policy. The Court here emphasizes that the EU’s role is restricted, under Articles 2(3) and 5(1) TFEU to adopt coordinating measures (para 64). It further establishes that no Treaty provision confers on the EU the competence to establish a permanent stability mechanism. Ibid, paras 64-67. In contrast with the Advocate General, the Court does not dwell on the nature of the EU's competence in matters of economic policy, though it seems to endorse the Advocate General's view according to which the EU's competence is not shared (let alone exclusive), but of a lesser nature: mere coordination. Opinion of Advocate General Kokott, C-370/12, Pringle, para 93. Importantly, had member states not been able to agree on the ESM in 2011, the ECB may not have been able – due to the narrow conception of monetary policy – to fulfil a core function of most central banks – namely to maintain financial stability. Neither the TFEU nor the ECB Statute refers expressly to ‘financial stability’ as an objective, or task of the ECB. That said, fundamental financial instability is likely – at least in the medium run – to undermine price stability, the ECB’s primary objective under Article 127 (1) TFEU, and put at risk the support that the ECB ought to provide to the general economic policies of the Union. The ECB divides its functions into (i) basic tasks (monetary policy, foreign exchange operations, management of reserves and the operation of the payment system) and (ii) further tasks (issuance of banknotes, collection of statistics, financial stability and supervision and international and European cooperation). See www.ecb.europa.eu/ecb/tasks/html/index.en html. In terms of the mandate and the governing instruments, financial stability thus appears to play a lesser role. This seemingly narrow view of ‘monetary policy’ risks boxing the euro area into a competence straightjacket that does not allow the Eurosystem with the ECB at its helm to perform essential functions of modern central banking – such as measures to preserve financial stability – in fighting financial crises. See further Louis and Lastra, above n 37 at 134-139. More broadly, a very deep crisis can put the survival of EMU as such at risk, or risk the exclusion of one (or more) Eurozone members from the currency union, such as Greece. Is Monetary Policy a Genuinely Exclusive Competence? In formal terms, Article 3 TFEU states unambiguously that ‘[t]he Union shall have exclusive competence [for] monetary policy for the Member States whose currency is the euro’. Yet this formal allocation of competence to the Union tells us little about the balance of power for the conduct in monetary policy. If exclusive competence at bottom means that member states have (formally) no say in devising policy, then monetary policy, even in formal terms, is not genuinely an exclusive competence. Instead, the chapter contends that monetary policy is, to a significant extent, an exclusive competence of the Eurozone in name only. At the very least, the position is far more nuanced than the label of exclusive competence suggests at first sight. Monetary policy is an exclusive competence of the Union in name only for three reasons: (1) the treaties confer such competence for monetary policy on the Eurosystem, an independent entity insulated from executives, legislatures and, to a significant degree, judiciaries at the national and EU level; (2) the Eurosystem – the monetary authority for the Eurozone – is composed both of a unique EU organization (the ECB) and presently 19 national central banks By contrast, the European System of Central Banks (ESCB) comprises the ECB and the NCBs of all 28 member states, even those that have retained their own currency for the time being.; (3) the ECB is not exclusively responsible for specific tasks that are often considered to be part of monetary policy. First, Competence for monetary policy does not vest in the ‘Union’ as such. In the terms of Article 2 TFEU, the Treaties do not ‘confer on the Union exclusive competence’ for monetary policy. Rather, according to Article 282 TEU, the competence for monetary policy vests in the Eurosystem. Article 282(1) TEU. Within the Eurosystem the ECB plays the lead role, an ‘unparalleled organization’ with separate legal personality, internally and externally, rather than a ‘mere’ Union institution such as the Council or the Commission. C Zilioli and M Selmayr, ‘The Constitutional Status of the European Central Bank,’ (2007) 44 CML Rev 355, 346. The Treaties and the Statute ensure that this organization, as well as national central banks, enjoy a high degree of independence from the political branches at EU and at national level. Article 30-31 TEU; Article 7 Statute of the European System of Central Bank and of the European Central Bank. The ECB is functionally, institutionally, personally and financially independent, see Convergence Report, European Central Bank 21 (2012). For example, the shareholders of the ECB are national central banks, rather than EU member states. See generally F Amtenbrink and K Van Duin, ‘The European Central Bank before the European Parliament: theory and practice after ten years of monetary dialogue’ (2009) 34 EL Rev 561. Each of the 20 institutions that make up the Eurosystem has to be independent from the executives and legislatures at member state and EU level. In sum, it is not the Union that it empowered to act through legislation and binding legal act, but the Eurosystem, an independent and unique entity. Second, the Eurosystem is a hybrid European-national entity. A unique feature of monetary policy in EMU is the very substantial involvement of national institutions – namely national central banks (NCBs). The main decision-making body for monetary policy is the ECB’s Governing Council composed of six Executive Board Members headed by the President of the ECB and currently 19 national central bank governors. Article 12 ECB Statute. The ECB’s other decision-making body, the Executive Board, is responsible for the implementation of monetary policy as decided by the Governing Council. Importantly, pursuant to Article 10 of the Statute, the Executive Board members account for only 28 percent of total voting rights in the Governing Council, whereas National Central Bank Governors account for 72 percent. The balance of voting rights is thus heavily weighted towards member states, rather than European decision-makers. The allocation of the preponderance of voting rights to officials of member state institutions, albeit independent, has important implications for where the balance of power for the conduct of monetary policy lies in practice. For example, tensions emerged between German Bundesbank President Jens Weidmann and other members of the Governing Council concerning outright monetary transactions and the Greek programme. See P Blustein, Paul, Laid low: The IMF, the Euro Zone and the First Rescue of Greece (CIGI Papers, 2015) 342; ‘Europe’s monetary opposition,’ 6 October 2012 available at www.economist.com/node/21564245, ‘Weidmann isolated as ECB plan approved,’ 6 September 2012 available at www.ft.com/content/3651b028-f846-11e1-b0e1-00144feabdc0 and ‘Special Report: Inside Mario Draghi’s euro rescue plan,’ 26 September 2012 available at www.reuters.com/article/us-ecb-draghi-plan-idUSBRE88O09A20120926. The experience of central banking in the United States is instructive in this respect. Up to the Great Depression, the US central bank was similarly decentralised as the contemporary Eurosystem. The Banking Act of 1935, one of the major reforms of the New Deal, ushered in much stronger central control by the centre – where the Federal Reserve Board – as opposed to the 12 regional Federal Reserve Banks – took the lead in devising monetary policy. For the first time, the Board had the majority of votes on the central monetary policy committee, the Federal Open Market Committee. Banking Act of 1935, Title II, Amendments to the Federal Reserve Act; BS Bernanke, ‘A Century of US Central Banking: Goals, Frameworks, Accountability,’ (2013) 27 The Journal of Economic Perspectives 3, 8; HH Preston, ‘The Banking Act of 1935’ (1935) 43 Journal of Political Economy 743, 753-754; FA Bradford, ‘The Banking Act of 1935’ (1935) 25 The American Economic Review 661, 665; AD Gayer, ‘The Banking Act of 1935,’ (1935) 50 The Quarterly Journal of Economics 97. As we have seen, ECB monetary policy-makers are currently in the minority on the Governing Council. Third, the Statute adopts a narrow notion of ‘monetary policy’ Narrow compared to what modern central banks around the world. and formally confers exclusive competence on the ECB only with respect to monetary policy so defined. Article 12.1 of the ECB Statute contains an illustrative list of measures that fall under monetary policy, namely ‘decisions relating to intermediate monetary objectives, key interest rates and the supply of reserves in the ESCB’. While NCBs are bound to follow the instructions with respect to these measures, they are free to carry out other functions under Article 14 (4) of the Statute of the European System of Central Banks and the European Central Bank – unless the Governing Council finds with a 2/3 majority that these ‘interfere with the objectives and tasks of the ESCB.’ Article 14.4 of the Statute of the European System of Central Banks and the European Central Bank provides that: ‘NCBs may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.’ Further on Article 14.4 see BC Scouteris and PL Athanassiou (forthcoming), ‘National central bank tasks and the boundaries of the ECB Governing Council’s powers under Article 14.4 of the Statute: State of play and future prospects’, Commemorative Volume in memory of Professor Dr. Leonidas Georgakopoulos (Bank of Greece’s Center for Culture, Research and Documentation). In practice, the most important other function is lender of last resort lending, specifically in the form of emergency liquidity assistance (ELA). ELA is a central feature of modern central banking is the lender of last resort function, which refers to lending to illiquid but solvent financial institutions and states. WH Buiter and E Rahbari, ‘The European Central Bank as a lender of last resort for sovereigns in the Eurozone,’ (2012) 50 JCMS Annual Review Lecture; I Jack and T Cassels, ‘Cyprus: an analysis of the impact of the resolution methodology on stakeholders’ claims including the emergency liquidity assistance’ (2013) 8 Capital Markets Law Journal 450, 459. Recipient financial institutions must be solvent, albeit in temporary need of liquidity, and provide adequate collateral. W Bagehot, Lombard Street: A Description of the Money Market (Scribner 1873), 197; A Steinbach, ‘The Lender of Last Resort in the Eurozone,’ 53 CML Rev 361, 363-364. If these two conditions are met, central banks should lend without limit Bagehot above n 135; Steinbach above n 135 at 364. although they typically lend only on a discretionary basis, without spelling out hard and fast rules ex ante. ibid. ELA, as an alternative to central bank money, has certainly played a crucial role in sustaining the financial systems of several EU Member States. In 2012, 10 per cent of all liquidity supplied to Eurozone banks constituted ELA and without it, the financial systems of Cyprus, Greece, Ireland and also the United Kingdom would likely have collapsed in the wake of the Euro-crisis. See eg ‘ECB’s emergency loan lifeline for Greek banks,’ 1 July 2015 available at ;www.ft.com/content/3fa39a3e-2006-11e5-aa5a-398b2169cf79; ‘Irish central bank boosts emergency liquidity,’ 16 January 2011 available at www.ft.com/content/8796eb78-1fea-11e0-b458-00144feab49a and I Plenderleith, ‘Review of the Bank of England’s provision of emergency liquidity assistance in 2008–09,’ (2012) Report presented to the Court of the Bank of England available at www.bankofengland.co.uk/publications/Documents/news/2012/cr1plenderleith.pdf. We can distinguish between ‘classic’ lender of last resort assistance to specific, individual institutions, and general, system-wide liquidity providing operations to financial institutions at large. Steinbach above n 135. Traditionally, individual emergency liquidity assistance (ELA) fell outside the ESCB’s responsibilities and was in practice left to national central banks (NCBs). The Eurosystem did not want responsibility for such individual ELA, as evidenced by the silence of the treaties on the Eurosystem’s lender of last responsibility. Borger above n 61 at 149. The ECB has traditionally stipulated that liability for individual ELA rests with NCBs. ECB Financial Stability Review (2006) available at www.ecb.europa.eu/pub/pdf/other/financialstabilityreview200612en.pdf?eeb9342332f4cd3127e55b523c51c9ff. See also ECB Annual Report (1999) available at https://www.ecb.europa.eu/pub/pdf/annrep/ar1999en.pdf, 109: ‘The main guiding principle is that the competent NCB takes the decision concerning the provision of ELA to an institution operating in its jurisdiction. This would take place under the responsibility and at the cost of the NCB in question’. ELA loans are provided by and at the discretion of NCBs; they appear on NCB balance sheets; loss pooling is prohibited; ECB Annual Report (1999) above n 141. and ECB opinions and public statements emphasize that ELA is not a Eurosystem function. Rather, the ‘competent NCB takes the decision concerning the provision of ELA to an institution operating in its jurisdiction.’ ibid. However, although ELA is primarily an NCB function, the ECB oversees the provision of ELA. The ECB’s Governing Council may, with a two-thirds majority vote, object to ELA that a NCB plans to extend. Article 14.4 of the Statute of the European System of Central Banks and the European Central Bank. However, simply because the Union treaties are silent as to any lender of last resort role for the ESCB does not mean that it can never perform that function, particularly in the case of general liquidity support to the financial system at large warranted by financial stability considerations. ECB President Draghi, when discussing whether ELA should be treated as senior to unsecured deposits and senior debts of Cypriote Bank Laiki, described ELA as part of ‘ECB’ operations: ‘if you want to remain as a counterparty in the ECB’s monetary policy operations, it should certainly be treated as such.’ Transcript of the Introductory Statement to the press conference held at Frankfurt am Main with Mario Draghi and Vitor Constâncio (4 April 2013) available at www.ecb.int/press/pressconf/2013/html/is130404.en.html4. Further, in responding to criticism that the ECB had political motives, he asserted, ‘[w]e acted exactly within our mandate...We would have been acting politically if we had not done this.’ ibid. Especially since the Eurozone crisis, it is increasingly questioned whether NCBs remain exclusively competent for system-wide ELA. According to one school of thought, system-wide emergency liquidity assistance is an inherent part of monetary policy and inheres in the ESCB’s responsibility for financial stability for the whole Eurozone. Whether the ECSB has responsibility for ‘financial stability’ has been controversial, particularly since the Eurozone crisis. Accordingly, some argue that the ESCB’s contribution to financial stability was not limited to giving advice under Article 25.2 Statute, and that the ESCB could also use its powers under Article 18.1 of the ECB Statute for last resort assistance in case of a general lack of liquidity. This view gained ground during the Eurozone crisis, but remains controversial. The ESCB regards itself Borger above n 61, 150; Case C-62/14, Peter Gauweiler and others v Deutscher Bundestag, Judgment of 16 June 2015. competent for “enhanced credit support” to financial institutions if the Eurozone’s financial stability is at risk. Steinbach above n 135, at 368. Article 18.1 ECB Statute also provided the legal basis for the programme on outright monetary transactions, examined in Gauweiler below. There is a lack of clarity as to how the Eurozone’s ELA system functions. At least to some extent, this lack of clarity may be by design. The ECB’s 2013 ELA Agreement guidelines are vague, and non-binding. And importantly for present purposes, the competences of the ECB and NCBs are not clearly delineated. Moreover, it is unclear whether ELA, in the absence of state guarantees, constitutes monetary or fiscal policy. When ELA is conditional upon prior state guarantees to avoid the risk of the ECB becoming liable, it is more likely to qualify as fiscal policy. W Buiter, J Michels and E Rahbari, ‘ELA: An Emperor Without Clothes?’ (21 January 2011) Citi Economics, Global Economics View, which suggests that balance-sheet exposure of NCBs through ELA should be covered by state guarantees in order to ensure compliance with the concept of financial independence of the ECB and NCBs; Belgium has in place legislation requiring any ELA granted by the NCB to be underwritten by explicit state guarantees; ECB opinions endorse such an approach: see Opinion of the European Central Bank at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability (CON/2008/46): ‘In order for emergency liquidity assistance provided with a State guarantee as collateral, as provided for in the draft law, to comply with the monetary financing prohibition, the following criteria should be met...there must be no doubts as to the legal validity and enforceability of the State guarantee under Belgian law. In this respect, the ECB welcomes the fact that the establishment of the State guarantee is enshrined in the draft law.’ But as argued elsewhere in this chapter, delineating monetary and economic/fiscal policy is often difficult. ELA in the Eurozone has also been controversial. A leading example is the provision of €9.2 billion ELA by the Cypriote central bank to Laiki Bank. The Bank of Cyprus subsequently inherited this ELA liability. Jack and Cassels, above n 134 at 451. Critics have accused the Cypriote central bank for lending to a bank that was likely insolvent, making it extremely unlikely that Laiki would ever be able to repay the loan. ibid. Cypriot President Anastasiades noted that Laiki Bank had received ELA “under very questionable circumstances”’ ibid at 459. and requested that EU leaders ‘unwind Cyprus’ restructuring and the partial merger of Laiki and Bank of Cyprus. The debate on the scope of ‘monetary policy’, in particular that the ECB should give to financial stability considerations. “Tellingly, a draft Statute of the ESCB and ECB, drawn up by the Committee of Central Bank Governors, initially envisaged giving the ESCB a greater responsibility for financial stability and listing it among its “basic” tasks instead of placing it in a separate provision. Several States opposed the proposal, and it did not make it into the final Treaty text.” See Art 3 of the Draft Statute of the ESCB and ECB (Europe Documents, No 1669/1670, 8 Dec 1990). For a discussion of this draft see Smits, op. cit. above note 15, pp. 336–338. See also R Lastra, ‘The governance structure for financial regulation and supervision in Europe,’ (2003) 10 Columbia Journal of European Law 49, 56. Conclusion From the standpoint of competence, the question of whether a measure qualifies as monetary or as economic policy is sometimes crucial importance - as manifested in the two key crisis cases that reached the CJEU (Pringle and Gauweiler). Whereas the Treaties formally assign exclusive competence to the Eurosystem for monetary policy, the EU only has a coordinating competence for economic policy. The chapter showed that the EU’s formally exclusive monetary policy competence defies categorization – neither in formal nor in substantive terms is it a genuine exclusive competence. But not only is it difficult to draw a bright line between exclusive and shared competence. The boundary between economic and monetary policy is also porous, and not particularly meaningful in economic terms. As this chapter has also shown, built into the Eurosystem is a high degree of subsidiarity, in contrast to the formally exclusive competence for monetary policy. The important policy question is whether the governance of economic and monetary union as currently configured has struck the right balance between the supranational and national, between the centre and the periphery. In the monetary and economic policy arenas, both too little and too much European integration can lead to crisis, particularly if integration across the economic/monetary policy divide is asymmetric, with integration of monetary policy proceeding at a faster pace than integration of economic policy. E Chiti, AJ Menéndez and PG Teixeira (eds), The European Rescue of the European Union? (ARENA Report No 3/12 2012), 2; Hinarejos, above n 6 at ch 1; S Dahan, O Fuchs and M Layus, ‘Whatever It Takes? Regarding the OMT Ruling of the German Federal Constitutional Court’ (2015) 18 Journal of International Economic Law 137, 148. One prominent diagnosis is that the Eurozone is stuck in an unstable equilibrium, and that member states face a choice: progress towards a genuine economic and monetary union, or disintegration. European Commission (2012), ‘A blueprint for a deep and genuine economic and monetary union Launching a European Debate’ COM(2012) 777 final/2 Van Rompuy, Herman and others (2012), ‘Towards a Genuine Economic and Monetary Union’; T Cesaroni and R de Santis, Current Account 'Core-Periphery Dualism' in the EMU (CEPS Working Document, 2015). See generally J von Hagen and B Eichengreen, ‘Federalism, Fiscal Restraints, and European Monetary Union”,’ (1996) 86(2) American Economic Review, 134-138 and J Rodden, Hamilton's paradox: the promise and peril of fiscal federalism (Cambridge University Press 2006).). In theory, monetary policy competence could be repatriated, especially in case of a breakup of European monetary union. MD Bordo, and L Jonung, ‘The Future of EMU: What Does the History of Monetary Union Tell Us?’ (1999) Working Paper 7365; KH O'Rourke, and AM Taylor, ‘Cross of Euros’ (2013) 27 The Journal of Economic Perspectives 167-191. Speculation about such break-up reached fever pitch at the height of the Greek debt crisis and has periodically resurfaced. eg S Deo, P Donovan and L Hatheway, ‘A brief history of break-ups,’ (2011) Global Economic Perspectives; S Fiedler, ‘A Greek Euro-Zone Exit Could be a Tragedy,’ (2011) Wall Street Journal, 4-6 November 2011; Allen & Overy, ‘The Euro and Currency Unions,’ (2011) Global Law Intelligence Unit. Most recently, Ted Malloch, a contender to become the new US ambassador to the European Union, called into question the sustainability the Eurozone; H Smith, ‘Trump envoy says Greece is now more likely to leave the euro’, The Guardian, 8 February 2017. The worst for EMU is if neither national central banks nor the ECB can effectively act as lender of last resort in crises. But the more likely outcome is a move towards deeper economic integration, with more centralization of macroeconomic policy and a broader understanding of monetary policy (including a financial stability mandate for the Eurosystem and lender of last resort function). A greater focus on financial stability and the ECB’s lender of last resort function was the natural, if in some quarters controversial outgrowth of the Eurozone crisis, see Peter Praet, ‘The ECB and its role as lender of last resort during the crisis, Committee on Capital Markets Regulation conference on The lender of last resort – an international perspective,’ Washington DC, 10 February 2016, available at https://www.ecb.europa.eu/press/key/date/2016/html/sp160210.en.html.www.ecb.europa.eu/press/key/date/2016/html/sp160210.en.html. A formal change of the ECB’s mandate is both extremely unlikely and almost certainly unnecessary. See generally T Linzertand F Smets, ‘Monetary policy in a banking union’ in F Ester and others (eds), Financial Regulation: A Transatlantic Perspective (Cambridge University Press 2015). When the Eurozone, and Greece in particular, faced the prospect of a currency union without a lender of last resort, the ECB devised the OMT programme. Thereby, it took its responsibility for financial stability and its lender of last resort function seriously. P De Grauwe, ‘The European Central Bank as Lender of Last Resort in the Government Bond Markets’ (2013) 59 CESifo Economic Studies 520. The OMT programme has achieved parts of its stated aims secured the Eurozone’s financial stability in the short run and decreased yield spreads on the sovereign debt of Eurozone member states. C Altavilla, D Giannone and M Lenza, ‘The Financial and Macroeconomic Effects of OMT Announcements’, ECB Working Paper Series No 1707, August 2014; N Cassolaand J Jorge, ‘The ECB's OMTs: A tale of governments, investors, and the central bank’ (2016) 65 Journal of International Money and Finance 94-116; European Parliament, Effectiveness of the ECB programme of asset purchases: Where do Do We Stand?, Monetary Dialogue 21 June 2016, Compilation of Notes. The macroeconomic effects of predecessor programmes, the ECB’s Securities Market Program and two Covered Bond Purchase Programmes from 2009 through 2012 were also significant; HD Gibson, SG Hall and GS Tavlas (2016), ‘The effectiveness of the ECB's asset purchase programs of 2009 to 2012’ 47 Journal of Macroeconomics 45-57. Strong criticism has also been voiced, see e.g. Sinn, Hans-Werner, The Euro trap: on bursting bubbles, budgets, and beliefs (Oxford University Press), 280-93. The OMT programme may have inflated asset prizes unsustainably and may had have an important redistributive impact. The Banking Union, and the upward migration of supervisory responsibilities to the EZB Council Regulation (EU) No. 1024/2013 of October 15, 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (2013) OJ L287/63; D Howarth and L Quaglia, ‘Banking Union as Holy Grail: Rebuilding the Single Market in Financial Services, Stabilizing Europe's Banks and “Completing” Economic and Monetary Union’ (2013) 51 JCMS: Journal of Common Market Studies 103-123., may contribute to enlarging the monetary policy competence in practice and impact the provision of ELA to financial institutions. 28 1