Slovak University of AgricultureFaculty of Economics and Management

History of the Economic and Monetary Union, ESCB and ECB

2007/2008

Class 2 MPA Ivana Ďurovkinová

Group 11 Jana Kóňová

• Economic and Monetary Union (EMU)

• The European System of Central Banks (ESCB)

• The European Central Bank (ECB)

Economic and Monetary Union (EMU)

• established at the Hanover Summit in June 1988

• twelve member states • chaired by Jacques Delors • Delors set out a plan to introduce the EMU

in three stages (1989)• plan included the creation of the European

System of Central Banks (ESCB) and other institutions

Stage One of EMU

1 July 1990 – 31 December 1993

• all restrictions on the movement of

capital between Member States were

abolished

Tasks:

• to establish a work programme

• to define the mandates of the existing sub-committees and working groups established for that purpose

Solution:

• The Treaty of Maastricht in February 1992: established the institutional structure set economic convergence criteria

Stage Two of EMU

1 January 1994 – 31 December 1998

• the establishment of the European Monetary Institute (EMI) on 1 January 1994

• in December 1995 name of the new currency (euro) was introduced and was confirmed that Stage Three of EMU would start on 1 January 1999

• in December 1996 was selected design for the euro banknotes

• in June 1997 were formed principles and fundamental elements of the new exchange rate mechanism (ERM II)

• on 2nd May 1998 eleven Member States which had fulfilled the conditions for the participation in the third stage of EMU were selected

• the establishment of the European Central Bank (ECB) on 1 June 1998

Stage Three of EMU

1 January 1999 – continuing

• the number of Member States increased to 12 on 1st January 2001 – Greece joined the third stage of the EMU

• Slovenia became the 13th member of the euro area on 1 January 2007

• in January 2008 were joined Cyprus and Malta

• Slovakia will also join the third stage of the EMU in January 2009

• on the day each country joined the euro area, its central bank automatically became part of the Eurosystem

The European System of Central Banks (ESCB)

• is composed of:

the European Central Bank (ECB)

the national central banks (NCBs) of all 27 European Union (EU) Member States

• the ESCB's principal aim is to maintain

price stability by way of: defining and implementing the monetary

policy of the euro area conducting foreign-exchange operations holding and managing official foreign-

exchange reserves of the countries of the euro area

promoting the smooth operation of payment systems

• the monetary functions and operations of the ESCB involve in particular: the opening of accounts by the ECB and

the national central banks for credit institutions, public entities and other market participants

open market and credit operations the requirement on credit institutions

established in Member States to hold minimum reserves

operations with public entities

making regulations to ensure efficient and sound clearing and payment systems

cooperation with the central banks and credit institutions of third countries

and with international organizations

The European Central Bank (ECB)

• established on 1st June 1998

• fully independent of national and Community institutions

• ensures the smooth running of the Economic and Monetary Union

• primary objective – maintain price stability

• the ECB manages the ESCB

• the ECB has three decision-making bodies: the Governing Council

- the highest decision-making body

- comprises of six members of the Executive Board and twelve central bank governors of the Member States that have adopted the euro

- each member has one vote

- main task – formulating the monetary policy for the euro area

- may set interest rates at which commercial banks can obtain money from their central bank

the Executive Board

- comprises of the President and Vice-President of the ECB and four other members

- implements the monetary policy

- gives instructions to the national central banks

- prepares meetings of the Governing Council

- responsible for the day-to-day management of the ECB

the General Council

- comprises of the President and Vice-President of the ECB and the central bank governors of all the EU Member States

- carries out the transitional tasks of the ECB

- contributes to the advisory functions

- collects statistical information, contributes to the reporting activities of the ECB

• to ensure price stability and maintain a realistic economic policy, the ECB's tasks are: to issue bank notes and coins

to cooperate at international and European level

to stabilize the financial system and monitor the banking sector

• the acts or omissions of the ECB are open to judicial review by the Court of Justice of the European Communities (CJEC)

• at national level – debtors or any other person are decided by the

courts in the Member States

• the seat of the ECB was

established in Frankfurt

Thank you for your attention