Friday, 14 November 2008

Eurozone: International policies and external representation

It looks like a natural consequence of economic and monetary union that the European Union (European Community) would have unified policies and representation in its dealings with the outside world.

The existing treaty expresses a desire towards more unified external representation and common EU policies in international financial organisations and conferences, but the wording is vague and the existence of both eurozone members and non-euro members complicates issues.

The intergovernmental conferences drafting the treaties have clearly recognised the need for clarification, and they have wanted to develop the euro area’s (eurozone’s) means to reach common positions and representation internationally.

The International Monetary Fund (IMF) is a starting-point for these discussions, but they concern other international financial institutions and forums (such as G7/8) as well.

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Current treaty

The fourth paragraph of Article 111 (ex Article 109) of the current Treaty establishing the European Community (TEC) concerns the position and the representation of the European Community at international level (in the latest codified version of the treaties, Official Journal 29.12.2006 C 321 E/90):

Article 111(4) TEC

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4. Subject to paragraph 1, the Council, acting by a qualified majority on a proposal from the Commission and after consulting the ECB, shall decide on the position of the Community at international level as regards issues of particular relevance to economic and monetary union and on its representation, in compliance with the allocation of powers laid down in Articles 99 and 105.

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Scope

The scope of Article 111(4) TEC is interesting. Formal exchange-rate regimes are treated separately (paragraph 1). Economic policy is mainly a matter within member state competence. The European Central Bank is meant to have autonomy in international monetary matters.

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Draft Constitution

The European Convention proposed a new section with the aim to strengthen the autonomy of the euro area, Section 3a Provisions specific to Member States which are part of the euro area. Common euro area policies and eurozone representation internationally were given a sharper focus in Article III-90 of the draft Constitution (OJ 18.7.2003 C 169/44─45):


Article III-90 Draft Constitution

1. In order to secure the euro's place in the international monetary system, the Council of Ministers, on a proposal from the Commission and after consulting the European Central Bank, shall adopt a European decision establishing common positions on matters of particular interest for economic and monetary union within the competent international financial institutions and conferences.

2. For the measures referred to in paragraph 1, only members of the Council of Ministers representing Member States which are part of the euro area shall vote. A qualified majority shall be defined as the majority of the votes of the representatives of the Member States which are part of the euro area, representing at least three fifths of their population. Unanimity of those members of the Council of Ministers shall be required for an act requiring unanimity.

3. The Council of Ministers, on a proposal from the Commission, may adopt appropriate measures to ensure unified representation within the international financial institutions and conferences. The procedural provisions of paragraphs 1 and 2 shall apply.


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Finland

The Finnish government reported on the results of the European Convention in Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin (VNS 2/2003 vp). The government remarked that the Finnish Convention delegates had supported the proposals to prepare common EMU positions and to decide on unified representation in international financial institutions and conferences (page 66):

”Euroalueen ulkoista edustamista vahvistetaan perustuslaillisessa sopimuksessa siten, että neuvosto voi komission aloitteesta ja EKP:ia kuultuaan hyväksyä päätöksiä joilla vahvistetaan yhteinen kanta EMU:n kannalta keskeisissä kysymyksissä kansainvälisiä rahoituslaitoksia tai konferensseja silmälläpitäen. Samoin neuvosto voi hyväksyä toimia joilla varmistetaan euroalueen yhtenäinen edustautuminen kansainvälisissä rahoituslaitoksissa ja konferensseissa. Näissä tapauksissa päätöksentekoon osallistuvat vain euroalueeseen osallistuvat jäsenvaltiot. Suomen edustajat konventissa tukivat näitä ehdotuksia.”

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Sweden

Ahead of the intergovernmental conference, the Swedish government presented its views in Regeringens skrivelse 2003/04:13 Europeiska konventet om EU:s framtid (2 October 2003). Non-euro Sweden was fairly supportive of effective decision-making in the eurozone and international representation for the euro area in international financial institutions (page 50):
”Det kan finnas skäl för euroländerna att på olika sätt säkerställa ett väl fungerande beslutsfattande i euroområdet. Det är dock viktigt att samordningsprocesserna behåller sin gemensamma karaktär. Det är också förståeligt att euroländerna vill uppnå en effektiv representation av euroområdet i internationella finansiella institutioner.”

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Constitutional Treaty

The intergovernmental conference (IGC 2004) re-ordered, but essentially maintained the Convention proposal in Article III-196 of the Treaty establishing a Constitution for Europe (OJ 16.12.2004 C 310/86):

Article III-196 Constitution

1. In order to secure the euro's place in the international monetary system, the Council, on a proposal from the Commission, shall adopt a European decision establishing common positions on matters of particular interest for economic and monetary union within the competent international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

2. The Council, on a proposal from the Commission, may adopt appropriate measures to ensure unified representation within the international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

3. For the measures referred to in paragraphs 1 and 2, only members of the Council representing Member States whose currency is the euro shall take part in the vote.

A qualified majority shall be defined as at least 55 % of these members of the Council, representing Member States comprising at least 65 % of the population of the participating Member States.

A blocking minority must include at least the minimum number of these Council members representing more than 35 % of the population of the participating Member States, plus one member, failing which the qualified majority shall be deemed attained.

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Sweden

The government of Sweden, still outside the eurozone, described the common positions and the euro area representation in the draft ratification bill, Lagrådsremiss Fördraget om upprättande av en konstitution för Europa (2 June 2005), page 172. The Swedish government saw that the Constitutional Treaty strengthened the external action of the euro countries:

”Euroländernas externa agerande

När frågor av särskilt intresse för valutaunionen diskuteras vid internationella finansiella institutioner och konferenser skall enligt dagens bestämmelser beslut om vilken ståndpunkt gemenskapen skall framföra fattas med kvalificerad majoritet av rådet. Beslutet fattas på förslag av kommissionen efter att ha hört Europeiska centralbanken. Nuvarande fördrag specificerar inte på vilket sätt den gemensamma ståndpunkten skall förmedlas, dvs. hur euroländerna skall vara representerade. I det konstitutionella fördraget stärks euroländernas s.k. externa agerande. Detta sker dels genom att endast euroländer får delta i beslutsfattandet om gemensamma ståndpunkter i frågor av särskild betydelse för valutaunionen och om hur dessa ståndpunkter skall framföras, dels genom stärkt stimulans för enad representation vid internationella finansiella institutioner och konferenser (artikel III-196).”

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Original Lisbon Treaty

In Article 2, point 100, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) inserted a new Chapter 3a Provisions specific to member states whose currency is the euro (OJ 17.12.2007 C 306/75─76):


100) The following new Chapter 3a and new Articles 115 A, 115 B and 115 C shall be inserted:

‘CHAPTER 3a
PROVISIONS SPECIFIC TO MEMBER STATES WHOSE CURRENCY IS THE EURO


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Article 115 C TFEU (ToL)

1. In order to secure the euro's place in the international monetary system, the Council, on a proposal from the Commission, shall adopt a decision establishing common positions on matters of particular interest for economic and monetary union within the competent international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

2. The Council, on a proposal from the Commission, may adopt appropriate measures to ensure unified representation within the international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

3. For the measures referred to in paragraphs 1 and 2, only members of the Council representing Member States whose currency is the euro shall take part in the vote.

A qualified majority of the said members shall be defined in accordance with Article 205(3)(a).’.

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Renumbering

The TFEU table of equivalences confirms that the new Article 115c TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 138 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII, and in the renumbered Chapter 4 ‘Provisions specific to Member States whose currency is the euro’ (OJ 17.12.2007 C 306/214).

(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)

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Consolidated Lisbon Treaty: TFEU

Article 138 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/107:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 4 Provisions specific to Member States whose currency is the euro
Article 138 TFEU
(ex Article 111(4), TEC)

1. In order to secure the euro's place in the international monetary system, the Council, on a proposal from the Commission, shall adopt a decision establishing common positions on matters of particular interest for economic and monetary union within the competent international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

2. The Council, on a proposal from the Commission, may adopt appropriate measures to ensure unified representation within the international financial institutions and conferences. The Council shall act after consulting the European Central Bank.

3. For the measures referred to in paragraphs 1 and 2, only members of the Council representing Member States whose currency is the euro shall take part in the vote.

A qualified majority of the said members shall be defined in accordance with Article 238(3)(a).




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Sweden

The Lisbon Treaty ratification bill of the Swedish government, Regeringens proposition 2007/08:168 Lissabonfördraget (3 July 2008), on page 183, mentions the external representation for the euro countries in the same terms as concerning the Constitutional Treaty:

”Euroländernas externa agerande

När frågor av särskilt intresse för valutaunionen diskuteras vid internationella finansiella institutioner och konferenser ska enligt dagens bestämmelser beslut om vilken ståndpunkt gemenskapen ska framföra fattas med kvalificerad majoritet av rådet (artikel 111.4 i EG-fördraget). Beslutet fattas på förslag av kommissionen efter att ha hört Europeiska centralbanken. Nu gällande EG-fördrag specificerar inte på vilket sätt den gemensamma ståndpunkten ska förmedlas, dvs. hur euroländerna ska vara representerade. Genom Lissabonfördraget stärks euroländernas s.k. externa agerande. Detta sker dels genom att endast euroländer får delta i beslutsfattandet om gemensamma ståndpunkter i frågor av särskilt intresse för den ekonomiska och monetära unionen och om hur dessa ståndpunkter ska framföras, dels genom stärkt stimulans för enad representation vid internationella finansinstitutioner och finanskonferenser (artikel 115c i EUF-fördraget).”

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Priollaud and Siritzky

In ‘Le traité de Lisbonne ; Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation Française, 2008), François-Xavier Priollaud and David Siritzky present the Lisbon Treaty provisions of Chapter 4 (Dispositions propres aux États membres dont la monnaie est l’euro) on page 258 to 260.

There is an informative section under the headline « Vers une representation unifiée de la zone euro dans les enceintes internationales ».

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United Kingdom FCO

‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon (Cm 7311, 21 January 2008) offers the following comment on Article 138 TFEU (on page 13):

“Draws on Article 111(4). Develops arrangements for international representation.”

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UK House of Commons Library

The UK House of Commons Library presented the amending treaty in ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Communities’ (Research paper 07/86, 6 December 2007), on page 62 and 63. Note that the numbering of the Articles changed in the signed treaty (original ToL):


Articles 114, 115 and 115(a) (Constitution Articles III-194, 195 and 196), “Provisions specific to Member States whose currency is the Euro”, are new.

Article 114 allows for measures on the coordination and surveillance of budgetary discipline and economic guidelines to be set specifically for the euro area. Article 115A allows for an informal ‘euro group’ to be set up, consisting of Ministers whose currency is the euro. In practice the ‘euro group’ already exists and meets informally prior to normal ECOFIN meetings. Article 115C allows the Council to adopt decisions establishing common positions relevant to EMU within international financial institutions and conferences as well as measures to ensure unified representation within international financial institutions and conferences. These measures will only cover the euro area and will be decided by Member States of the euro area. The Deutsche Bank thought the recognition of the group as a kind of Euro-ECOFIN Council would “moderately strengthen the role of the Eurogroup and improve policy coordination within the euro area.”

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Widipedia

With regard to the euro area generally, the Wikipedia article Eurozone offers an introduction to the single currency and a section on the Eurogroup, including a few words on external representation (last update 7 November 2008):

http://en.wikipedia.org/wiki/Eurozone

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Article 138 TFEU clearly adopts Article III-196 of the Constitutional Treaty, except for the technical solution that the Lisbon Treaty shifts the definition of a qualified majority to Article 238(3)(a) TFEU.

When it is clear that the euro area has a unified external representation and that the eurozone members decide on the common positions, it should be harder for the Eurogroup members themselves, for other EU members or for outside states and international institutions to resist unified representation and action by the euro area.



Ralf Grahn