Berend van Baak, Personnel Head of the European Central Bank in Frankfurt ( www.ecb.int) , explains the current confusion and charts the way ahead. The shorter version of this article is in the October 2001 issue of "People Matters".
In August 2001 President Duisenberg of the European Central Bank unveiled the new euro banknotes to the public. On 1 January 2002, these euro banknotes replace the national currencies of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Spain and Portugal. Your carefully hoarded, though always forgotten when travelling, banknotes and coins left over from continental holidays will be the target of many a charity. President Duisenberg also said "In addition to the economic and political benefits which the euro brings, it will, I believe, help to change the way in which we think about one another... Europeans will realize that they are at home throughout Europe". A similar process is taking place in the European central banking community. On 1 June 1998 the European Central Bank (ECB) and the European System of Central Banks (ESCB) were established. The Bank of England is a member of the ESCB, although as the UK has not adopted the euro, the Governor of the Bank of England is not represented on the Governing Council.
The establishment of the ECB and the ESCB has created an institutional relationship between the national central banks, although its exact nature is difficult to define. The ESCB has a number of tasks given to it by the Treaty of Maastricht, the most important of which is to conduct monetary policy for the euro area. These tasks are performed by the ECB who shall to the extent deemed possible and appropriate call upon the National Central Banks (NCB) to carry out operations for the ESCB. The highest decision-making body of the ECB is the Governing Council, which is composed of the six members of the Executive Board of the ECB and the twelve Governors of the NCBs of the euro area.
The creation of the ESCB is not a merger of the NCBs with the ECB as its Corporate Headquarters. The authority of the ECB is limited to seeing that the tasks given to the ESCB are fulfilled and the NCBs remain administratively fully independent. To some extent, the ESCB/ECB has more the character of a joint venture, with the difference that it can take decisions that are binding on the NCBs, who are its shareholders. The unique construction of the ESCB/ECB makes it very difficult to achieve smooth functioning of the institutional framework. For example, the ECB can take decisions that are binding on the NCBs. Those may be decisions on eligible collateral for monetary operations, but they may also affect the work force of the NCBs. The printing of the euro banknotes is a case in point. Many NCBs possess their own banknote printing works. If the ECB's Governing Council should decide that in future the printing of bank notes will be put to tender, this will have a huge impact on the NCBs who have their own printing works. The ECB has agreed with three European trade union federations representing central bank staff on a Social Dialogue with representatives of all the ESCB members to discuss such issues before decisions are taken. But the trade unions want to develop this Social Dialogue from the view of the ECB as the "Corporate HQ" of the ESCB. Discussions on common HR policies in the ESCB or negotiating a redundancy package for printers are simply outside the competence of the ECB and therefore do not belong in the ESCB's Social Dialogue.
A second example may be the development of the relationship of the NCBs and the ECB. The NCBs in the past were rather monopolists in their own countries. The establishment of the ESCB and the ECB has changed all that. The NCBs now have to compete for influence in the ESCB/ECB. High-level expertise, combined with the ability to perform in an international environment, is what is now sought after. Comparisons are also naturally being made between members. What functions are the other central banks performing, and why? What are their staffing levels? What about outsourcing? Finally, there is the difficult question: what is the optimum size of the ECB for the job it has to do? A particularly thorny question for the Governors of the NCBs, who as members of the ECB's Governing Council need to ensure that the ECB is able to function effectively, but as Governors of their NCBs have to deal with a natural suspicion within their institutions on the balance of power between 'the center and the periphery'.
After three years of ECB/ESCB we are still at the beginning of the process of settling down in our new institutional framework. A lot of "storming", "norming" and "forming" will yet have to take place. The issue of the euro banknotes and coins on 1 January will make the ECB and the ESCB even more visible and can only accelerate these developments. Calling off the 'merger' or dissolving the 'joint venture' is certainly not an option. And don't forget those foreign currencies you are hoarding.