Slovak University of Agriculture Faculty 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 2 nd 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 1 st 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 1 st 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

t he 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

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