Monday, 29 September 2008

EU: Overdraft facilities prohibited III

Central banks have been pouring liquidity into the markets, but at least the public sector in the EU countries is barred from monetary financing.

In the Treaty establishing a Constitution for Europe, signed by all, but approved internally by 18 member states before ratification stalled, the provisions on economic policy were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’, Section 1 ‘Economic policy’.

Article III-181 is found in OJ 16.12.2004 C 310/78:

Article III-181 Constitution

1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, 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 European Central Bank 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 European Central Bank as private credit institutions.


We are able to see that Article III-181 of the Constitutional Treaty only added Union ‘offices’ to the first paragraph. Otherwise the provision was identical with Article III-73 of the draft Constitution and almost the same as the current Article 101 TEC.


Legislative materials tend to concentrate on the novelties, so the results of following random checks
are hardly surprising.

The Swedish government memorandum ‘Fördraget om upprättande av en konstitution för Europa’ (Utrikesdepartemetet, Departementsserien (Ds) 2004:52, december 2004) described the signed Constitutional Treaty, but I found no comment on Article III-181.

The same applies to the draft ratification bill in Sweden ‘Lagrådsremiss ─ Fördraget om upprättande av en konstitution för Europa’ (Ds 2004:52, 2 June 2005).


The government of Finland laid out the Constitutional Treaty in its ratification bill ‘Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 67/2006 vp). On page 183 Article III-181 was stated to be substantially the same as Article 101 TEC:

”III-181 artikla, jossa kielletään niin sanottu keskuspankkirahoitus, vastaa asiasisällöltään SEY 101 artiklaa.”


The same remark can be found in Swedish, in ’Regeringens proposition till Riksdagen med förslag om godkännande av Fördraget om upprättande av en konstitution för Europa och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen (RP 67/2006 rd), page 187:

”Innehållet i artikel III-181, som förbjuder s.k. centralbanksfinansiering, motsvarar i sak artikel 101 i EG-fördraget.”


Klemens H. Fischer in ‘Der Europäische Verfassungsvertrag‘ (Nomos, Stämpfli & Manz, 2005), page 310, makes the observations that „Artikel III-181 EUVV korrespondiert mit Artikel 101 EGV“ and „Artikel III-181 EUVV korrespondiert mit Artikel III-73 VVE“.


Both the texts of the Articles and the (lack of) comments have shown that there was no substantial change between the current TEC and the Constitutional Treaty.

The next instalment turns to the IGC 2007 and the Lisbon Treaty.

Ralf Grahn