In order to promote financial and budgetary discipline, the economic and monetary union (EMU) prohibits overdraft facilities by member states or their public entities from the European Central Bank (ECB) or the national central banks.
Article 101 of the Treaty establishing the European Community (TEC) is one of the provisions aiming at fiscal discipline through the independence of central banks.
Article 101 of the Treaty establishing the European Community (TEC) is found in the latest consolidated version of the current treaties, published in the Official Journal of the European Union 29.12.2006 C 321 E/83─84:
Part Three – Community policies
Title VII – Economic and monetary policy
Chapter 1 – Economic policy
Article 101 TEC
1. Overdraft facilities or any other type of credit facility with the ECB or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the ECB as private credit institutions.
The current Article 101 TEC was introduced, as Article 104, by the Treaty on European Union, also known as the Treaty of Maastricht (OJ 29.7.1992 C 191).
The Europa web portal offers an overview of the ‘Treaty of Maastricht on European Union’:
The text of the Maastricht Treaty is available at (although only the OJ text is legally binding):
Here are a few examples of materials on economic and monetary union (EMU), and the EU’s fiscal rules in general:
A general introduction to economic and monetary union (EMU), with further useful references, is found in Paul Craig & Gráinne de Búrca, ‘EU Law ─ Text, Cases, and Materials’ (Oxford University Press, 4th edition, 2008), pages 728─742.
Anthony Annett & Albert Jaeger: Europe’s Quest for Fiscal Discipline ─ Will the Stability and Growth Pact help Europe find the right balance between fiscal discipline and flexibility? (IMF, Finance & Development, June 2004):
Ludger Schuknecht: EU Fiscal Rules ─ Issues and Lessons from Political Economy (European Central Bank, Working Paper Series No 421, December 2004) looks at “soft law” convergence versus fiscal sovereignty:
The current financial turmoil is reflected in the newspaper article by Matthew Saltmarsh ‘EU budget rules face test with downturn’ (International Herald Tribune, 9 September 2008):
The prohibitions underpinning fiscal discipline are briefly depicted in the following books:
Kari Joutsamo, Pekka Aalto, Heidi Kaila & Antti Maunu in ‘Eurooppaoikeus’ (Kauppakaari, 2000) presents the background in Finnish in the chapter ‘Talous- ja rahaliitto EMU’ (pages 740─766), especially the section on economic policy ’15.4 Talouspolitiikka’(pages 755─760), with the provisions on budgetary discipline on page 758.
Bernhard Nagel: Wirtschaftsrecht der Europäischen Union (Nomos, 4. Auflage, 2003) explains Article 101 TEC in the following terms:
„Einer der Kernpunkte der Unabhängigkeit der EZB ist das Verbot der Kreditgewährung an die EG oder die EG-Mitgliedstaaten. Die Mitgliedstaaten können von der Europäischen Zentralbank keine Überziehungskredite erhalten. Damit ist den Mitgliedstaaten erstens der Einsatz der Notenpresse zur Finanzierung ihrer Defizite verwehrt (vgl. Art. 101 und Art. 116 Abs. 3 EG).“
The Europa web portal offers a presentation ‘Prohibition on the central banks granting credit facilities to public authorities and undertakings’:
The text of Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b (1) of the Treaty (OJ 31.12.1993 L 332) is available at:
What constitutes a prohibited overdraft facility? The question is not purely theoretical, as shown by the fresh Opinion of the European Central Bank of 9 September 2008 at the request of the Austrian Federal Ministry of Finance on a draft Federal law providing for an Austrian contribution to the HIPC-Trust Fund for Liberia’s debt relief (CON/2008/41), available at:
Next, we look at the corresponding proposal of the European Convention.