OeNB Seminar

Check against delivery.

1. The needs. 

The European Union (the Euro area), is becoming with the adoption of a single currency and the completion of the internal market, a unified economic area where the factors of production and the citizens as such, circulate freely like within a State. 

The Member States are no more able uti singuli to comply with their obligations towards the IMF, as provided for by, in particular, Article IV, sections 1 to 3, article VIII, sections 2(a), 3 and 4 of the Articles of Agreement. It is not incongruous to support the view that for the purpose of the participation to the IMF, the euro area should be considered as or assimilated to a single "country" in the meaning of Article II, section 2 of the Articles of Agreement of the Fund. 

Economic policy remains mostly within the sphere of competence of the members of the EU. It is often referred to the so-called asymmetry between monetary and economic union. On the other hand, there is an economic policy of the Union that consists of the closely coordination of the economic policy of the Member States, within the framework of the Council. No commitment can derive in that field for the Member States from another source without the participation of the Union. 

2. The Treaty. 

The Treaty provides for the conclusion of agreements on the exchange and monetary regime of the Euro area (article 111 §3), the international capacity of the ECB (articles 6, 9 and 23 of the ESCB statutes), and a procedure for the adoption by the Council of the modalities of adopting positions and organising the representation of the Union in international fora (article 111 §4). The status quo is preserved, at least, temporarily, as far as the participation to the IMF is concerned (see ESCB Statutes, article 31 §1). But it would be an error to invoke the continuity provided by the Treaty in order to support the maintaining of the situation as it is now. 

3. The Practice. 

Pragmatism is the master word in the way the euro area is now represented in the international sphere. It reflects the division among the Member States and their general reluctance for their substitution on the international scene. No decision under article 111 §4 has ever been taken. The coordination of attitudes within international fora and the preparation of the meetings of the Groups are assumed by the Euro Group, acting informally with the help of the Economic and Financial Committee, the successor of the Monetary Committee. The resolutions of the European Council of Luxembourg and Vienna (1997 and 1998) in favour of a kind of tripartite representation of the Union have not been fully implemented, due to the lack of consensus among the partners of the European members. The ECB has appointed an observer to the Executive Board of the IMF (since the start of the third stage) and it takes part to the work of in a number of organisations, committees and caucuses. The country holding the revolving presidency of the EU Council has some coordinating role within the IMF, through the Executive director of its nationality, with the help of the EC Mission in Washington and the assistance of an official of the Commission. The Economic and Financial Committee has created a special group in charge with present and future questions linked to the role of the Union within the IMF. 

The Euro area does not appear as a single actor within international monetary and financial institutions. The Member States have lost their specific weight in the organisations without being replaced by the Union. There was no European view on such important questions like the Turkish and Argentine crisis. There is no EU or Euro area single position on the basic questions at the agenda of the IMF. 

Nobody seems to be happy with the way the euro area is represented now. 

4. The work of the Convention so far. 

As far as international representation of the euro area is concerned, Group VI of the Convention, on Economic Governance (Final report, CONV 357/02, 21 October 2002) was unfortunately only able to agree on the fact that "the effectiveness of the current informal arrangements (reflecting the fact that the provisions of Article 111 §4 TEC have not been implemented) for representing the Eurozone in international organisations should be improved" and made clear its divisions on the solutions recommended in order to remedy to this pragmatism. 

On the other hand, there were numerous voices within the Convention in favour of the single representation of the Euro area in the international financial institutions. This standpoint was supported by the members pertaining to this area within the Group "External Action" (see final report of Group VII, 16 December 2002, CONV 459/02, p. 32) and by many voices within the Plenary. One can read in the communication of the Commission on the institutional architecture, entitled "For the European Union. Peace, Freedom, Solidarity", of 4 December 2002, COM (2002) 728 final: "If the European Union is to address international monetary and financial discussions in a coherent way, and if it is to come up with a strong and, above all, stable position, the euro zone would gain from being represented by the Commission, acting in close conjunction with all the bodies concerned" 1) . Commissioner Solbes has made various declarations both within and outside the Convention in favour of a single representative in the IMF Board that would increase the visibility and the influence of Europe. France and Germany, in a joint contribution on Economic Governance, of 22 December 2002, CONV 470/02 CONTRIB 180, p. 5, supported the idea of a "single chair" for the Euro area in the international financial institutions, like the IMF. 

Despite the fact that during the discussions within the Plenary, voices were numerous in favour of a single chair, and without alluding to the work of Group VII, in its commentary to draft article 34 (former article 111 TEC, slightly modified) of Part II, Title B of the Constitutional Treaty on External action (CONV 685/03, 23 April 2003, p. 70), the Presidium, referring to the inconclusive remarks of the report on Economic Governance, proposed to maintain the paragraph 4, as it is in article 111. It left to the Council the task to appoint a representative of the Euro area, either the President of the Ecofin Council or the Commission, what would be, it observes, more coherent with the rest of the Constitution, considering that monetary policy is an exclusive competence of the Union for those Member States which have adopted the euro. A number of amendments proposed by the Conventionals to this provision require this choice to be done now. And the Commission finds a lot of support in that perspective. 

5. Comments and Perspectives. 

Once more, in the history of European integration, the first obstacles to the full expression of the international legal capacity of the supranational organisation are internal to the Union. Of course there are factors specific to the EMU. All the Member States are not taken part to the third stage and many seem to be afraid to loose part of their competences in the exercise of macroeconomic policies, now that those of them taking part in the single currency have lost their individual freedom of action on the exchange rate. But the attitude of the Member States which are reluctant is also dictated by their general opposition to their fear of being put out of the game on the international playing field. It would, in their views, be contrary to the concept of "Federation of Nation States". For others, it would be better to postpone the decision on that matter. Further progresses in the direction of a political union are requested in order to accept the substitution of the Union to its Member States in specific areas. But the same are sometimes very modest in their proposals to go ahead towards a "true" political union. 

This attitude prevents the Union to play a constructive role in international organisations and caucuses. It impedes a correct reflection abroad of the level of solidarity reached on the internal side. It constitutes an obstacle to the coherent defence of the interests of the Union on the international sphere. This dispersion lets open the way for the domination of one single power in the World. If it does not react, the Union will always remain in a position of inferiority. 

It is the reason why we believe, in line with the solution proposed by the Commission, that it should be decided in favour of this institution being the representative of the Euro area (Union), without prejudice of the competences of the ECB and in close contact with the Euro-Ecofin Council. 

For elements of an international agreement related to economic policy, where the competence of the Union is not an exclusive one, the Member States could give a genuine mandate to negotiate (to the Commission) and conclude (to the Council), as an alternative to the classical mixed agreements, that dilute the responsibility between the actors and are contrary to the visibility of the Union for the external world. The internal allocation of competences between the Union and the Member States should not be a concern for the third states, as the Court of Justice decided a quarter of a century ago that the precise nature of the allocation of competences was an internal question in which third countries should not intervene (Ruling 1/78, 14 December 1978, ECJ Reports, 2180, paragraph 35). The classical role of committees would permit the necessary coordination and assistance. 

A second best solution would be the representation of the Union by the president of the Euro-Ecofin or of the Eurogroup. The "model" of the future Minister for Foreign affairs, with the double hat: vice president of the Commission and agent of the European Council, could lead to that choice. We are not convinced that such a precedent would be a very fortunate one, because of the institutional confusion that would so be created, especially in a field that was clearly designed from the origin as a Community competence. 

The choice for a solution for the external projection of the euro is not only a legal but also a political one, both for the Union and for third countries. It is evident and well known that the Union cannot impose a solution to its partners and to the IMF. A difficult negotiation has to take place in order to solve some delicate questions concerning the quotas and the constituencies. It is not certain that it will be easy for the Union to succeed in its projects. But it is also clear that the Union would surely not be able to convince the outside world that some important changes are needed if the solution proposed by the Union is not a clear-cut one, based on solid legal grounds, and if it appears that there is no strong political will on the part of the Union to defend the solution. An expression of this will in the Constitution would be the best recipe for success. 

1) See suggestion for amendment of article 34 of Part II by MM. O’Sullivan and Ponzano