We open a new chapter on monetary policy according to the existing EC (EU) treaty rules.
Article 105 (ex Article 105) of the Treaty Establishing the European Community (TEC) is at the beginning of Chapter 2 Monetary policy. It sets out the objectives and the tasks of the European System of Central Banks (ESCB), including some important basic references to the European Central Bank(ECB) (OJ 29.12.2006 C 321 E/87):
Part Three – Community policies
Title VII – Economic and monetary policy
Chapter 2 – Monetary policy
Article 105 TEC
1. The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 4.
2. The basic tasks to be carried out through the ESCB shall be:
— to define and implement the monetary policy of the Community,
— to conduct foreign-exchange operations consistent with the provisions of Article 111,
— to hold and manage the official foreign reserves of the Member States,
— to promote the smooth operation of payment systems.
3. The third indent of paragraph 2 shall be without prejudice to the holding and management by the governments of Member States of foreign-exchange working balances.
4. The ECB shall be consulted:
— on any proposed Community act in its fields of competence,
— by national authorities regarding any draft legislative provision in its fields of competence, but within the limits and under the conditions set out by the Council in accordance with the procedure laid down in Article 107(6).
The ECB may submit opinions to the appropriate Community institutions or bodies or to national authorities on matters in its fields of competence.
5. The ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system.
6. The Council may, acting unanimously on a proposal from the Commission and after consulting the ECB and after receiving the assent of the European Parliament, confer upon the ECB specific tasks concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.
The next post is going to suggest further reading on economic and monetary union (EMU), especially monetary policy.