Why should the President of the European Central Bank listen to the European Parliament?

INTERNATIONAL STUDIES]NTERDI§CIPLINARY PoLiTIcAL AND CULTURAL JoURNAL No. l/2m8

ARTICLES

PaWeł BIyła

WIiY SHOULD THE PRESIDENT OF TIIE EUROPEANCENTRAL BANK LISTEN TO THE EUROPEAN

PARLIAMENT?'

Introduction

This paper aims to presen! llre concepilial fiamcwork within Which ńerelationships between the European Centml Bank (ECB) and the EuropeanPar]iament (EP) may be analysed, Algunenls in favour of central bank in,dependence and accountabilily are discussed, valio!§ aspccts of legitimacy are1ookęd at throughout the paper, Moleovel. it poinls oul thc main powers of theEP towards the EcB. stre§sillg sometimes the mechanisms undeflying theirestablishmen!, The plocedure of appointing the ECB Pre§ident as well as thatof parliamentaly hearings are devoted consjderable space, The crucial importanceor lhc influence of ńe EMU on the firturc of the entire Eufopean projectinvites our conclusion that the constant dialogue between the EcB and the EPis not only beneficial for boih sides. but also indispensable,

Central bank independence ver§u§ accourrtability

Thc casc lor irrdcpendencc

in short. the concep! of central bank independence ęxcludes govemmęnt'sinlclfcrence in the conduct of thc monetary pojicy, ln particular. the concept issubject to the following inlerpretalions:

IThiś Fpcr §'as prepared during the course on tbe Europead Parliament and ils role \łińi.the Union with }rof Maiiin wesi]ake .t ńe college ol E!.ope in Bluges in the ninnrel semesterol 2002

i5l

l) personal indcpendence. rcialed to nominaiion and dismissal processes ofthe ccntla] bank boald męmbelsi

2) financial and economic independence. \łhich requires, inter alia, lhecentral banł financing of the excesses of public spending;

3) political independence. where we analysc the freedom of the monetaryauthority in setting ils objectives and in choosing the inslrunent§ to achięVethem (operaljonal independcnce).]

The lheoretical case for central bank jndependence rests on the assumPtionthat price stabiliiy is the primary objective, because high inflation or deflationcause enormous economic, political, and social cost§, as some countries'pastexpelicnces reveal, Tha! objective is presumably not sufficienlly safcguarded byelected politicians who focus on the shod 1erm. From the theoretical standpoint.the cenlral bank independence emergęs as a solution to three differelli. butlelaled p.oblems,

Firstly, i1 can preven! the relative dominance of lhe fi§cal authority (andpolicy) over lhe mo ętary authority (and policy), Secondly, it plotects ihesociety from ilre distol1ions caused by e]ectoral cycles, sometin]cs ii is claimedthat only at the European level can independent central bankiis be fullyde-coup]cd from the influence of a single e]ectolal cycle,l Thirdly, it is a solutionto the dynanlic inconsistency of the monelaly policy,' Rolrert Elgie constructeda se es of indicators to measure ccnEal bank independence, according to Whichlhe ECB scores very high in compalison with other central banks.s it isconfirmed by dc Grauve, who points out that the ECB enjoys a higher level ofindependcnce than the Fedcral Reserve Board in the United states and theGennan Bundesbank.6

In spite of beiig backed up by empirical and theoretical arguments. centralba]* independencc is subject !o some crilical rcmarks, The principa] linc ofcriticism is bascd oI1 the argumen! that L\e separaiion between fiscal andnonetary auihorities could imply diffictllties in the co_ordination between them,with potenlial iosses in thc aclrievement of ńeir olrjectives, Finally. feals arisethat an indcpendent centraL bank wil1 act legardless of the effects on society'sweliarc. which leads us !o the theme of the central bank accoi]ntahilitv The

: P. de sousa, In.]ePe,defi ahn Accaunlabl? c?nlra] Bd Lś ahn th. Durapean cenl.al Bank,"Europ.ln lnLegrxtion o.1inc Papels (EIoP)", 2001i 9, http://eioporavejop/lexte/2oo1 009ah(m,j c, Lord. P, N{agne(e, łbt€J Towa ls a cehera! Theary aJ Legninac} in rhe EuraP.anU3ż,, worknrg tatćr 39/02, EsRc "onc Europe or scv@l]'' Progfumme. University of suscx:hltpr/qalw,one europe ac, k, January 2002. p 4

' P, de sousg. IndePehnat ą,Il Accóunldbk..5 k Eleie- Dżthocfulic A.countabili|, and CehtaL Bank lhdepeĄ.leh.e: Hklórica] an.] ca !en,

po|aĄ ^"dLiańdl

ah.l Eurap.dn Perłecliles, "west European Politics", l998, 3. pp. 53_76i R, E!8i€,D.nó.ralic Aććou,labili^ ahn Cehlral lJóhk lnd.penllenće: A RePly lo various crnŁJ, "wesiLurope!. Politics'',2001, l. p 220,

6 P, d€ Grault, Ecano ics aJ Monelą], U,'o,, oxlórd 2coo. p, ]62,

European Par]iameni expresscd a sbong suppoń for the ECB independence, Itsresolution dep]oled the envisaged management structure of ils forerunner, thęEMl. as the EP considered it insufficient to gualantee its indepęndence vis-a-visthe netional centra] banks and the govemments of tbe Member states, sub-sequently, the EP has adopted an own_initiative report urging all Mcmber statesto render their central banks truly independent.?

An interesljig casę is sweden, which is said to use ńe argument that itscentral banł is

'?a, independent in order noi to bę obtiged to adopt the single

Eulopean curręncy. as it has no possibiliiy of opting-out from the EMU. unlikethe UK and Denmafk,

The casc fol Accountability

'Accountabilily' is the quality or state of being 'accountable', someoneis accountable whel1 he or she is responsible for his/her oWn decisionsand is expected to explain them when asked. The concepts of accountabilityand independence are c]osely related wjth that of democlacy, In a repre-§entalive democracy, lhc Parliament and, indirectly, the government arechosen by the public, who holds lhem accountablc. at least through thec]ectIon process. Recognising the politicians'natrtral tendency to use inexcess lhe monetary inslruments, lhe socicly delegales ńe monetary policyresponsibility !o an independent centra] lrank, Tlre democratic ]egitjmacyof this central bank requi.es that it should be accountable to the society,or at ]east to the society's e]ected rępresentatives, because its behaviourhas a considęrab]e impact on the sociely's welfare, Trade-off possibilitiespresumably exist, as successive French 3overnments have quęstioned thelegitimacy of failing to balance the technocratic +lalities of ńe independcn!ECB with an 'econo.nic government' dealing with non moietary policiesat the EU leveI,8

Crcdilriliiy, leg]timacy and accountability are central concepts that should bedistinguished whcn discussing the EcB,' cledibi]ity is bascd on the expectationńat an inslilution can fulfil the functiois it has been delegated and wi1l properlycarry out lhe functions it iS entrusted wilh, Hodson and Maher claim that thecredibilily of the EcB depends not only on ils assured nldependence and abilityto deliver price stability, but also in part on lhe bloader policy mix of the EU

W' v sh, ,l J , ,, P,,, ocn. "l lhe L ope,,l cenlldl B",,

1 Nr, wcsilrkc. A M..|eh luid? 10 lhe aiopean Parlianre"l, London 1995, p, l70.I c, Lord, P. Nli8n€tt€,

^/.,.J lołzzls,,,, p, ]5,

'!-, sn]dcr. aMtl Re|isilal: Ar. \ye Makinł a cahslil ian? What conllnulian Ar. weMdkb!'/, |tl:] The Eyalulioh óJ LU Law, eds P cdig, c, ae Burca, oxford 1999. p..1ó3.

and the Member states.'o Given that the tęchnical discourse of banking andfinancial experts dominated debates leading to the EMU,'| the credilrility of ńesystem \yas of greater concefn than the broader questions of accountability andlegitimacy,Ir

Legitimacy refers to the belief that a specific institution is widely recog-nised or at least accepted as being ńe appropriate inslitution to exercisespecific powers. Democratic legiiimacy is not nęcessarily lelevant in analy-sing the EMU, It is rather a malter of techDocratic legitimacy to put in placethe approp.iate jnstilutional mechanisms to guarantee economic stability.Within this framework, accountability and transparency concem the provisionof reasons for monetary policy decisions, According to Kenneth Dyson, theEMU accords with a model of post,parliamentary governance, characterisedby the imporlance of non-majoritarian institutions and the 'tecłlicisaiion' ofpublic policy,]3

Accountability refęr§ to the fact ńat the insiifution is mole ol le§s responsive,directly or indirectly, to the people who are affected by its decisions, Thegreater the delegation of power by a government to an a8ency, the greatel theneed for accountability to that govemment to ensure the agency has achievedits objectives, Therefore, accountability and le8itimacy are closely connected,on second thought. credibility has a connection with thal form of legitimacythat is created through beneficial results (output legitimacy).|a Thc functionallegitimacy can also be achieved through lransparency and accountat]ility, butHodson and Maher believe that such legitimacy is not sulficient and needs tobe underpinned by subslantive legitimacy based on either a democratic mandaleor sharcd values,]s According !o James Forder, independence substantia'ly arisesfrom unaccountability,]ó

Bolh at the national and EU level receDt years have §hown a tendencytowards autonomous or8ans, specialised agencies that t}ave indePndent regulatory

'! D, Hodson, l. M^h.r, EMU: Balancinł credibiLiry and lźlitinat! ih lhe Polic! Mir,working patcr I2r00. EsRc "onc Europc or scvclall" Plogramme, Universny of slśex:http://www,one europe,ac,Uk, Novcnbł 2m0, pp, 2 3,

Ll l', snyder. En/U ł.!ijr€l,,,. P,438,j A, verdun, T. clrristians€n. P.li.lćj, Inslbulionś ull lhe Euro: Dilehms af bgilihacr.{in:) Aflel lh? Eura: shapihE lElilulioB for Q.wrmnc. in lle wake o.f EulopćaĄ MońetarJU,lo,. ed, c, crouch. oxlbrd Uniler§ny Prcs. oxford 2000, p. 167,

L3 K, Dyson, EMU as ElroPeaĄi.aliok: cóntleehće, DiwĄilr and ca,lżsćł.), "Joumal ofcońńon N{eket studieś'. 2000. 4, p, ó5ó,

|' P, Lcino, 7ła Eufupedn c.niral Bank and k9itińac\: k the ECB a MollifLcaliob ol or ąĄErcepliaĄ lo lhe PlinciPle of Dahocrac!?, canbidge, MA 2000i hĘ]/*,wwJeaf,momeĘrcgrań.olg/papervoo/oo1 101,html,

l D, Hodson, I. Nlah€r, lMUr Baldnćin\..., p.1.|r J, Fnrder. sohe MethadologicaL Issu.s ih lh. Slalubry- Charuclerisalioh ol ceńIrqL lląĄk .

"wen Elropcan Politici', 2o0l, ], p,209,

Why shoulil (he Presidcnt ol thc EurolcaD ccntral Bank,,,

powers wilhin a specific a.ea.|l As a result of the trarrsfer of ceftain powers toa new organ some of the Iegitimacy is lost, Po\łer can be delegated within the]imits established by law but legitimacy does not automatictlly follow, Therefore,1he new institution must bc abie to create and establish its own legitimacy, Thismight in some cases prove a difficuLt task as these agencies are in mo§l casesrun by experts nominated by politicians and they implement extensive powerthat is marginalLy conkollable by democlatic methods,

ln lhc case of ńe ECB, i! shotrld be accountable to the European citizens,or at least it should answer before the European Parliament. in practice, thismonitoring role is not easy to perform for the following reasons,

Firslly, lherc is no c]ear yardstick to evaluate the EcB perlormance in theachievement of the objectives defined in the Treaty and the statutes, wkhouta clear Trcaly-based definition of price stability, it is hard for outsiders todcmonstmte that the EcB is ai fault, Thereforc, it remains also complex tothink of ponalisation for poor pęrformance, The adoplion of a binding objectivethrough a democratic process shouId in principle contribute to the democfaliclegitimacy of the ECB, Nevenhelcss, some kind of conEoL on how the objectiveis interpreted and a Possibility to change this goal through a democratic Processsecm necessary as Well, In our case, the ECB is independent in interpreting theEMU objectives, The commitlee on Eco onic and Monetary Affairs of theDuropean Parliament emphasised that the ECB prnnary olrjective of safęguardingpiice slability is not a goal in its own right, bui an essentia] precondition foteconomic gicwlh and the creation of employment- Thal is why the commiltceargues th3t the monetary policy must be comp]emented by closer macro-economic policy co ordination in the euro-zone,r3

Sccondly, the EP cannot mŃe amendments in lhe institutional structuregoveming lhe ECB, This is a unique sjtuation that thę BcB enjoys even amongthe most independent central banks, as any change in its statutes requjręsa modification of an intemational lrcaly on the basis of unanimity and a ratifi-calion procedure in each Member state,

Thirdly, the fact lhat the term of office of ihe members of the Executive Boardis ei8ht years and is non renewable|'werrkens the democntic accountability of the

|' such agencies inclrLde for cxamplc t])c Europan Enlnonmcntal Agency, ńe Agency lor theEvafuatioó ol Medicinal Ploj.cts. the Agen y for satety and Health at work and the Monitóingcentre lbl confol ol Dmgs and Drug Addition, Power .an be delegated 1o theśe adninistrativeorgans e,g. in ordcr to creale grea€r ellićienćy ór inćreaśe expeflise.

|i commiiiee on Economic and Monetary Affanś of tbe European Palliament, Rapportclrich|ista Randzio Plath. R.pórl an lhe 2000 AnhuaL Reparl af lhe EuroPżdĄ cehtral gank, A50225/?00l finxl.2l June 200l,

'' A( I1 (2) of tbc statlrc of ńe Elropean sysrcm of cenłal Banks and ot tne Europeancenlral Bank (Prctocol no, 3 to ńe Maastricht Tleaty), Tbe ńenbeś śhall be appointed lromłmóng persons of rccogf,ised standińg and plofessiónal expericnće in monetary or bankjng matieisby .onrnron accord ol thc govclnńen§ ol ńe Menb€r sIates on a r*ómnendation from drc

]0

ECB e\,en fuither il1 the sense thai the public cannot show its djssalisfaction\ł,ith the leadelship by not renewing their mandates. During lhose cighlyeals, a member of the Boald can be foi]ed to retire by tlre Couń ofJusticc only if he or she no longer fulfi]s the conditions set for the qualityol'thcjr wo* or if they havc been found guilty of Selious misconduct,]oFirstiy, thiS entails tha! th() appointments undolibtedly become political eveni1' lhc mandate cannot be rencwcd, Secondly, however, thi§ i§ not necessarya bad thing against the background of polilical legitimacy, It is debatableWhether or not tbe rcquilenrent strengthens independence, on the one hand.it implies thal govelnments cannot reward 'soft' policy by a second tum.on fie orher hand, it ineans that ii practice the cohesion of the Boardmight be dnninished and all Board members might be even more dependen!on political goodwill 1() l'ind sllitable jobs after thcir telm ha§ expned,:IConseq ently, not on]y is ihe EcB shielded from politicians, but so thestatules place it beyond rlre reach of democratic rules that sanction ]mproperbehavjour.]' Tlrerefore, some crilics claim thal the problem of lhe EuropeanUnion's democratic deficit iS nowherc n]ole pronounced than in lhe dornainof EMU.:r

on thc other hand, a high-ranking ECB officia] argues that the issue ofaccounlability for the ECB performance wiih resp€ct to its cle^rly definedmandate nccds to be logically separated froln the tran§parcnc} ofthe poticy-tnaking process itself (aS opposed to the outcomes of this process),otnar lssing clajms tha! lhc ECB can already be regarded as ihe mosttrirnspalcnt and accountable central bank in the wor]d,:] simi]arly, Daniel Glossconcllldes 1hal lhe claimed conflict between the cenlla] banł independence andit.1..o_nl]blli,) ._n be lnole dpf,,lle"l lh]n leJl,'When .nler\,iued on L,ehillof the House of Lord§. Mr, Reglilg from the German Federal Ministry of|inance was firm in his opposiljon to the suggestion that the independence of

coun.ll. .fLdr It ha\ consulted lhc Eulo]rcan P ]iameni, xnd ńć 6ole..ing council ol Lbć EcBThe statutc inc]udcs spccilic pio!Ńions lol the innill atpointnrcnt of thc Exccutivc Board. namelllljal thc Presjdenl is appoin(ed 1or 8 yeaś, the viće-President lbr 4 yea6 and tlte oths ntJnbcslil lernrs oI oliice ol bctwcen 5 and 8 yca$. N"one ol ńese .re renewab]e (arl, 50)

'' AJt, l] (4) ol the stalutc, This is initiated by an aplll.adón by (he Goveming council or

] D. Gro§. D.llĘłłg Plne sńbilil| in ljlvlJ: lhe EuruPcah slsl.Ą.fcżhlral Bdnk1- Iin:)EuroF'sche waihruńgsunión] von den KonzeP(ion żur cesialung/BeihaiiF żu Kledit U.d (apital

il. 1,1/l998, ed, I], Franckc. Du.ckcl and Humblot. Berlin l998. pP 355-35ó.11 P. Larao, Thż turaPeah cehlraL aąĄk..,

'] (. Featl]eNone, The Palilnd Drnan]ns oI l::cohóĄic ahtl lvaĄ.ląr- unior. [inl DeyelaP-

"]enls in l1e Eurapean U,ioł. eds L. cran, D, Dinrn, N, Nulent, London 1999, p 326.

]' o. Issing, Tł, Eudsf,l.,l: TraĄspdr.nl ahd A.camtab]e ar'WilleI in EurolanIl'"'Jaf^a]ol com]non Nlarkcr §hdics" 1999, 3. p 505.

'" D. Gros, D.ln,pĄ Plic.... | 359

Why should the Prcsidcnt ol the European central Bank,.. ll

the ECB constituted a kind ol democralic deficit. becausc the Trcaty whichprovided for its creation hrd been duly ratifięd.b

It seems that meetings of the Goveming Counci] of the ECB should befollowed promptly by ptlblication of decisions laken and of the reasons forthose decisiol1s. but lhat publication should not go as far aS to disclose lhecourse of the aĘumcnt, with its ebb and flow as minds are made up andchanged, A disclosure to this extent wou]d lead to an identification of individualsand counlries with paticular policy positions, it would diminish ihe collectivęnature of the decision,making process, ł would also risk luming what shouldbe decisions taken wilh the whole euro_zonc in mind inlo contests betlveennational points of view with all lhe emotion, publicity and posturing that thiswould attract,2] Issins ar8ues that efforts to locate accountability and tra8sParenc}at tbe leve] of individual membel§ of lhc ECB Governing council are likely tounde ninc llre necessary collective sense of responsilrility and to obscure theclariiy and coherence of the policy signals,Żs

Neveńheles§. the EP called for the minutes of the ECB Governing Councilto be published. I1 proposcd that a summary o{ the stance oi both the apPlovillgand dissenting parties should be jncluded, it also su8gestęd that the Govemingcouncil should volc on monetary measures at lhe cnd of cach meeling and thalrhe results of these votes slrould be pLrblished in an anonymou§ way to avoidinappropriate pressurcs on lhe Governing CounciL members,]9

ln the EMU as elsewhere, tlre EP sees its vocation to feassert parliamentarycol1llol on the EU level, Generally, it pursues a three-pronged §trategy to

overcome the shortcomings of the persisting democralic dcficit, Firsliy, it ains !o

exploit lulIy and conso]jdate its treaty_based powcrs. secondly, it looks lorconscnsual inter-institutional agreemenls, Thifdly, it Will seek ireaty amęndments,]0

what is a 'good' ćcntral bank?

lt is good if it is predictable strategically, but not tactically, A dclicalebalance must be struck. Tlre strategy of 1hc central bank sbould be pledictableand transparent for financial markels in the medium and 1ong run, Thęreforę,the intermediate inflation targets and the ways ol achieving them should be as

clear as pos§ible, Hol,,,ever. this does not imply that the tactics of a central

]i Holse ól Lords. seLe.l co}ńhillee on EuraPedn conD]unilies TfeĄr^ Fourlh Repan, |99a.hllp //wlvlv.p lianenr,the{tationery-oficcco,uU!a/ldl9979B/ldselec/ldeuconV]12',.

]i o. Issńg. rłe l7,Lras$le}n..., p 5lż.]! Eurcpcan Paniamcnt, R.rolulióĄ ón lhe 2000

^ĄhuaL R.|o of lhe 1)Cl3, minules ol4 July

2001 provjsionaLedition,ji N'l, wC§ akt, A Molleh, *ide..., D.l'11.

|1

lrank shoujd be transparent jn the (very) sholt run, It needs some ambiguity inits foreign exchange interventions and opcn market oPcrations, because of theinleractIon of these monclary instruments With the financial markets, This_mblpLlll) lnJ) be a plelcquisi(e ol ellecti!€ness,

significant differences among centra] banks exist in thjs rcspccl, on the onelland. lhe Bank of England and the Federal Reserve Board in the Unites stalesale more inclined !o be accountable and transparent with the danger ol revcalinga pań of their tactics, on ńe other hand, conlinenlal European central lranks.such as the Bundesbanł before 1999, tfy to raise their eif]ciency regard]css oflhe danger of hiding some of their strategy, The ECB sbould aim for the bestof both modcls.'j

The role of the European Parliament in the Economicand Monetary Union

The Europ€an Parliamen! plays a limilcd role in thl3 Economic aDd MonetaryUnion, It consists of thJce functions: deliberative, lesislative, and supervisory.

DcliberatiYe

The European Commission and the council must report to the EuropeanPalliament on a]] major decisions and developments in the field of genera]

economic pol]cy. It applies in particular to the plocedules called] 'broadguidelines','excessive deficits', and'muhilateral surveillance'.

on thc basis of this information. ihe European Parliament may:1) adopt repońS in a competent committee;2) stań a debate in thę plęnary;3) vote a resolution,For instance, in a resolution adopled in January 2001. the European Par-

liamcnt cxPressed its re8ret that the ECB, 'Whi]st Prlrsuing its policy of pricestability in Europe, has paid an extraordinaly bonls of 387. 10 some oF its ownemployees,'The EP called for bonuses in the next five years to be in line withthe inflationary target and lhereby to set an example for wage moderation,r:

rr .|, dć rtżin. s, Eijfling§, 7ł. Dehacralic Ac.aunlabiliĘ af lhe EuraPean cenlral Bank:A CDńhl?ht ah'l\Ń l;airy ląk!, "Jouńal oi cosnon Markct studieś' 2t(]0, 3. p.,106.

r] Elio!]can lar]ianeni, Resohnion on lhe rePoń óf the Courl aJ Au.łrorś ón the operalianaleJJićieĄć, aJ lhe nanagenen| ą lhe EuraPear Man4an In itule a,d |he EuraPean cenlral Bank

far 1h. f"ancia] rear ]998 rogelher |ilh lhe replks al nE EuraPean ce"tal aa,*. minutcs ot1ó Jrnualy 200l - provisional cdition.

wl , s o,Id ],,P,..,dcr of,l, lLl^|ar .tl"al B,,1l,, i3

The effectiveness of this resolution can only bc assessed il1 future (on theassumption that the ECB makęs available the necessaly data),

The EP has already Used its untramnt]led righi of expression to fotcethe Conrmission and the council into politica] debalo preceding the adoptionof the economic guidelines, ńough its only right is to be informcd ć, po§labout llrc recommendations by the Councjl. Responding to the MaastrichiTleaiy, the EP regrelted the iack of any economic policy authorily witbadequate democratic legitimacy 10 counlerbalance thc autonomous monetarypolicy authoity of the ECB,

I-egislatiYe

Thc Eutopean Parliament n1usl bc consu]ted, and a parliamenlary votetaken. on:

1) ie8islation pfeparing lhe introduclion of lhe EuIo;2) which countrięs qualify for nrembership in EMU:3) the arrangements for introducing Euro coins by the Member states,

whereas notes are the rcsponsibility of the ECB:4) ]egislation implementing the'excessive deficit'procedure, including the

stabi]ity and Growth Pacts;5) agrccments on exchange rates between ńe Euro and other currencięs etc,r3

The co-operation ptocedurc applies to the multilateral survciliance in lheframcwork of the EMU, The EP may seek to extend the field of appljcation ofthis procedule, as it gives it more power ihan mere consultation or information.

As iar as changes to lhe stalule of ńe European central Bank and powersgiven !o lhe ECB to supervise financial institL(ions are concemed, the assenl oflhe European Parliament is needed in most cases,

supervi§ory

Under lhe Maastricht Treaty, the European central Bank enjoys lull in,dependence in delermining nroneiary policy, It atone has the responsibility forsettinS the interest rales and for Llsing othel monctaly instruments necessary topreserle the stability of the Euro. This independence of the ECB is balanced toa certain exten! by its accountability to the directly elected European Parliament,exprcssed by the following mcchanisns.

]1 Th. innnutio"s af .canahi dĄd ńohelar! uhian, Eva]canhlipr/w*v,eUroPad.eU,nrtł3ctshcciV5_4 0_en,htm. 20 octobcl 2000.http]//*,ww.europar],eu.inVeuró/2 ]rc/2 pc2,cnhnn, 27 r\pri] 1998,

Palliam.nt Fact shcct.Par!iah.hl ah.1 F:Ml],

14

FirŃ of a1l, the EP has instituted detailed plocedures (RuIe 36) for theappoinlmeni of ihe ECB President, Vice,President aid olher members of lheECB Executjvc Board- The European Partiament may teject a nomination, butthe European council may disregard lhe rejeciion, This means that the EP hasonly a political powel to assess nomjneęs, Through its hearing procedufe, itmay help to guide public opinion. in ihis way promoting lhe credibility, andlegitimacy of the ECB,]r

These proceduręs were applied to the election of A. Lamfalussy, the firstPresident of the European Monetaly Institute, the predecessor of ihe EcB, aswell as to that of Wim Duisenberg, Accofding to M. Wcstlake. the procedureapplied by tlle European Palliancn! at ńese occasiotN can lry no męans be calledcosmetic or supcńicial, The EMI President'Was grilled fol three houfs'as lvellas he prcsented detailed responscs in wliting to the par]iamentary que§tionnairc,Thc EuLopean Parliamcn! iook advantage of the Ametican cxperiences in ihisfield, as lbc then Chaifwoman of dle Moneialy Affairs sub commirce went ona ract,finding mission to lhe U,s, Senate.r5 This might show not only a pragmaticapproach of the EP tolvards the EMU, but also ]ts growing, though oftenconcealed. desirc to acquire a constitulional role comparabie to that of thcAmedcan Congress, Thc ongoing discussions in the ffamcwolk of ihe Europeanconslitulional Convention might serve to confirm or refute this hypolhcsis in thenear fufure. Thanks !o taking the appointment of the EMI presjdential nominee sose ously, the European Par]iament cleated an important pfecedent and a line ofaccollntabilily for the Economic and Monetary Union.]6

This p.ocedure of appointment of the EcB officjals mcans for them thateven befolc takins office they need 10 listen to lhe EP in order to achievea favouralrle assessnel1l at the outset of theil career, By establishing thenodalilies of this procedulc, lhe Eurcpean ParliameIt managed to exploitbrilliantly ils polcntial of internal rule_making autonomy to advance its politicalagenda, The co,operalion of the nominees entranced the EP power, aS WimDuiscDberg declared that he would withdraw his candidatule in case the EPrefused !o express its confidence. consequently. the ovcrall credibilily of theprocedure was skilfu]ly reinforced without necessarily amending the Treatyańicle, The recurrent realurc of the EP Powe$ is their implicit and p.eventivecharactel. Member stales will consider the EP potential tefusal, even beforesubmitting a candidalurc to the post of the ECB President,r7 In case the EP

ra comńinee on E.osomjc and N,lonćtary Affans and Indunria] Policy ol the EP, Rapporieuichrista Randzlo Phń, łt1,,, an d.hołąli. dcćouhląbilił ih lhe 3 pha§ oI EMU, Ń allal98,ż3

j5 \t, w.śllake,'I'he Eurapedn Parlianent's, Eneryin! Powers (t ĘFinlheht, "Iowna1 alconnDon Markct srudies'' 1998. 3, p 434,

ra M, w€stl.ke. A Mad. l Euid.,.,, |.11o]r Nl, wcstl,ke. T he Eurapean Parlianen!'s EWr8nś.,,. pp 436'137,

why should the lresidcnt ol drc Europcan cenlral Bank. ]5

rcfu§es to approve of the candidete, he or she is normal]y supposed to resign,otherwise, it is doubtful that thc Mcmbel slates would rctain the necessaryunanimily to proceed wiń the appointment,]l NoNirhstanding these successes

or tather bccausc of them - the EP has asked several times for greaterpowers in thl) appointment process of the Executive Board members in the

samc Way jt paticipates in the appoinmęnt of ihe Commission,r9 which confimsWeStlake's predictions,

Furthermore, the President of lhe ECB is required to present an annuallcpori to the European Parliamen!, coleling the conduct of the monetary poiicy,How important the EMl was and lhe EcB is fbr lhe EP may be inferred fromlhe fact lha! only the presideni of the Cortrt of Auditors enjoys a sim]Iar rightto present his institution's annual repoń,ao

Finally. Thc President of the ECB. or another membef of its Board ofGo\emo$. aPpears before the Economjc and Moneiary Affairs committee ofthe European Par]iament at least every 3 months to answer questiol,§ on ńeeconomic out]ook and 10 justify ńe conduct of nonetary policy in the Euronrea (Rule 40), A rcquest for an additional hearing may come from either side,Baron Alcxandre Lamfalussy stressed the importance of this constructjve dia-logue, He emphasised thal parliamenlary questions and conccrns as Well a5

those of the media, banking associalions and Society at large. had given himvaluable insights into the citizens'expecLations,1lIn response to a parliameniaryquestion, lhe Eutopean comilission indicatcd the qua$eily hearings of the EcBPresidenl in the EP as an inpońant coDlmu cation too1 raisiig the kanspalencyon seltiDg interest rates,'|'

onc or lbe main ropics raised in the exchanges of views berween the ECBand the EP was how the sing]e monetaly policy could best contrjbute to thegeneral economic policy objectivcs of ńc community, Such as suslainable andnon-inflationary growlh and a high ]cvcl oI enployment. Wim Duisenberg saidthat the bes! conldbution of monetary policy to glowth and employmentobjcclives \ła§ to provide economic agents with the well,founded expectationthat future economic developmenis Would be characterised by price stat]ility,

ll R, corbćll. F. Ja.obs, Nt. shlcklelon, Tłe tu Pcan Par]idnżn\ Londo. 2q)0. p. 2]]8r!

^, DashBood, J, DDlnei! de la lłochar€, D. o'Ke€fe, w, Roin, P. sIot, c, Tnnmeimans,

J, winttr. a,lż.alil. ,,1ś.r.leś vnhi}l lhe Ec: The EurapeaĄ ceĄld lJąĄl. ! no.1.1:. "commooMlikel l,iw Review" i996, 4. pp,62]]_63].

łr [t. W.stlake. ,{ Modłh iui.|e.., |.161.]| E rolean Monctary lnst]lule, A&keśś sireh b)- Baran Al.\andr. LahJafu§! oh 1he accasion

óI .he ćhaĄEe al pksiienc, oJ lh. 'n]r.

Frłnłfurl, 30 JLne 1997, bttP/Www,ecb,ilvemi/kc}/

r: E roFean Pa]ixment. Wrnft" qu5liaĄ b! lłik Mei.r lo lhe cannissian an Puhlic dis.lasurcą.teckiah hlkiĄg óĄ ńleren ąles apprinE the Brnish hoael b lł. arc r. E ]600/00. 19 May2moi md,.1łJ,l./ śó., bf Mr. solbes llin aĄ be}0[ aflhe cdłlłłlioł ] JUly 20]}],

A climate of price stability would allow businesses and consumers to takeinvestment and sPending decisions undislolted by inflation or deflation. Duringanother hearing beforc the EP committee. the President of lhe ECB shared theconcems that the eulo cxchange rate did not reflect lhe robust ecónomicfoundations of the euro_zone, He stlessed tha1 available economic indicatorsWould Suggest that ńe euro had a strong potential to apprcciate, on anotherocca§ion, he recallcd the rationale behind an EcB initiative aimed at improvingcross-border retail payment services within the euro zone. The fees and theexecution time for such !m sactions should be similar to those of domestic rekilpayments, Another focal issue pertained to the need to prepare adequatelyEulopean cilizens for the introductjon of coins and notes of the singłe Currencyon l January 2002. A nember of the EcB Executive Board was invited to theEP comnittee to present the main features of lhc infonnation campaign directedto ńe EU citizens. The N,lEPs pointed oui that due aftention should be paid 10 lhepropcr information of vulnerable grouPs such as lhc blind and partially sighted,rr

on 23 January 2002, the President of the EcB appeared again before theCommittee on Economic and Monetary Affairs of the EP. He was pleasęd toreport that the cash changeover had progressed very smoothly so far, which Wasabove his expectations, ,Ąllhough some minor problems occurręd, lhe opelationwas successful taking into account its scale, In reply !o a qucstion asked bya Duich socialist MEP, the President of the ECB shared his impression that the

Psychological impact of the cash changeover had given a great boost 10 thefeeliig of 'sol1 of flaternalisation in Eufope among ńe population', He believesthat the pulrlic opinjon will stań to exeń plessurc on ńe elected representativesto hannonise fuńher other poLicies, It is his conviction that the EU citizens willnot understand that policies can be so different in the various areas of a region,and the euro,zone is just a re8ion, which uses one currency, In his opinion.monctaly inte8ration will lead 10 fiscal integratjon, which will necessitatea harmonisation of social policjes as wel].aa

l6

r] Európean cenfal Bank, Allhuąl Repa 2000, Fnnkiult 200l, p, i53 L55,ł European ccnkal Bank. T eśnnon} befórc lhe conniltee o| Econanic and Manefu.! Aiai.sóI llt Eurapean Pdrlidheh! \rilh lhe PresnleĄl ollhe fc8, Bruseh. 23 lanńly 2(n2

conclusion

As we can see, ihe Monnet method is still relevant in ana'ysing the Europeanproject, The evidencc that the European project is based on incremental changesbuilt on Precedents and aiming to satisfy shortłerm pragmatic lequirements isomnipresent, N,I, westlake applies this model lo the evolution preceding the

Why shoujd thc Prcsidcnt ol thc European central BaŃ,., I,7

establishment of lhe El]ropean and Monetary Union.ł'The stalemcnt of theEcB President madc during his appearance in flont of the EP committeesuggests that this line of argumentation might be extrapolated lo future develop-ments of the EU policy mix- Academic literanlre considers possible new §tepsto be laken in responsc to the challengcs posed by the EMU process. Thepo§sibility of asymmetric shocks may lead to a creation of a co-insurance fundor a permission of EU budget deiicils or to providing the EU with a sup-mnational fiscal authority,ad Even the recently fa§hionalrle open melhod ofcoordinltion may lead to a glowth of common values and to a subsequenttransfer of competence to the EU level.ar These scenarios clearly justiry thenccessity ol a conslant dialo8ue between the EcB President and thę EuropeanParliament if we want to address scriously the issue of the democratic deficit inlhe Eulopean cons!ruction as a whole, The Prccess of accountability of theECB officials raises the public prorile and perceived importance of the EuropeanParliamcnt, lt might be complemented by regular appearances of the nationalbank governors in their respective national parliaments to amplify the ex,pl3nations given by the EcB President to the EP.

Ji Nt, wostlak€. Th. Euro|)eąh ljĄioĄ'ś 'bliful \ lchmkrs', The Prac.s al ca"sliłulional.hahłe, |in) The Euro?.ah UĄiaĄ l}elohl

^ńslerdąh: Ne\l conc.P6 ą EuroPean lnlegrdlion, .1J.

M wesilike. London lEJ8, p,22ł l', crowlcY, T he Inslitulianal InPlialians af EMU. "Joumal of comńon Mdkei s(udiei'

200l, 3, p,400,!? D, Ilodson, L Nlaher, '|he oPeĄ Melhod ąs ą Nż|| }4ade af coyernahce: Ihe Casż of safl

E.ohonn Pol4 ca-ar.lifulioh. "lolnil of commoD Mdket studiei' 2001, 4, p,722,