EU: Monetary policy V Lisbon Treaty and European level supervision?

Have the objectives of the European System of Central Banks changed during the treaty reform process?

Are the basic tasks different?

Has prudential supervision of banks kept pace with reality?

We compare Article 127 of the Treaty on the Functioning of the European Union (TFEU) with the current treaty and the previous stages of the treaty reform process since 2001.

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Lisbon Treaty comparison

Substantially, the objectives of the European System of Central Banks (ESCB) and the European Central Bank (ECB) have remained unchanged from the current Treaty establishing the European Community (TEC), via the draft Constitution and the Constitutional Treaty, to the Treaty on the Functioning of the European Union (TFEU) (paragraph 1).

Price stability is the primary objective, from Article 105(1) TEC until Article 127(1) TFEU. The complementary objectives of supporting the economic policies of the Community/Union are essentially unchanged, as are the open market principles for action.

The treaty reform process has done nothing to change the important basic tasks of the ECB: to take full responsibility for monetary policy, to conduct foreign exchange operations, to hold foreign reserves and to improve payment systems (paragraph 2).

Mandatory consultation is retained. The European Central Bank still has to be consulted by the European Community (European Union) or by a member state on draft legislation relating to monetary policy (paragraph 4).


Actually the TFEU wording is more like the TEC text than the Constitutional Treaty, because the IGC 2007 drafters often saved ink when confronted with non-essential amendments (introduced by the European Convention or directly) in the Constitutional Treaty.

This far, things were fairly straightforward, but let us turn to banking supervision.

Despite global markets and European banks, national authorities are still responsible for the prudential supervision of credit institutions and the stability of the financial system ─ however fictitious their real mastery ─ and the contributory role of the ESCB has not changed one iota during the reform process (paragraph 5).

The European Convention proposed that at least some limited aspects ─ specific tasks ─ could be conferred on the ECB by the ordinary legislative procedure, but the IGC 2004 resolutely took away even the need for the European Parliament’s assent, and the governments agreed to immobilise themselves by reinstating the requirement of unanimity in the Council for such legislation (paragraph 6).

More often than not, unanimous legislation means no legislation. (Without qualified majority voting there would be no single market.) But even in the unlikely event of meaningful legislation of small ‘slices’ of responsibility, insurance undertakings are excluded from the scope of such future legislation.

[Reality may be staring everyone in the eye, but national administrations refuse to let it disturb their customary bureaucratic circles. This is a Europe based on governments and their straitjacket rules of intergovernmental international relations, not a union of citizens, fit to work primarily in the interest of citizens. Instead of hundreds of intricately self-incapacitating pages, a democratic European Union would need a readable Constitution of perhaps twenty pages.]

Back to comparing the text versions: The wording of paragraph 6 changed somewhat along the way; the Lisbon Treaty employs the terms ‘regulations in accordance with a special legislative procedure’.


Ralf Grahn