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ECB Executive Board Appointment Reform: A Summary

Core Content

This document, authored by Jean Pisani-Ferry and prepared for a hearing before the European Parliament's Committee on Economic and Monetary Affairs in May 2006, critiques the current practice of appointing members to the Executive Board of the European Central Bank (ECB). It argues that the existing system, which tends to favor nationals from larger euro area countries and replaces outgoing members with compatriots, is not fully aligned with the principles of the Treaty on European Union and the ECB Statute.

Main Points

1. Current Practice Overview

• The ECB Executive Board has historically been dominated by representatives from larger euro area countries: France, Germany, Italy, and Spain.
• Outgoing members are often replaced by nationals from the same country.
• This pattern was notably broken in 2002 when Christian Noyer was replaced by Lucas Papademos, but it was intended to allow for a subsequent change in the ECB President.

2. Criticisms of the Practice

• Contradiction with Treaty Spirit: The Treaty and ECB Statute do not specify a country-based appointment system. Instead, they emphasize the selection of individuals with "recognised standing and professional experience in monetary or banking matters".
• Limitation of Choice: The Council's selection process is constrained by national preferences, which may not lead to the best candidates.
• Inconsistency with Eurosystem Principles: The Eurosystem is designed to focus on the euro area as a whole, not on individual countries. The national appointment system seems to contradict this.
• Potential Risks in Diverse Situations: In times of economic or political stress, a national-based system may create perceptions of bias or cartel-like behavior, undermining the legitimacy of the ECB in smaller countries.

3. Impact of Euro Area Enlargement

• The current practice may become increasingly problematic as the euro area expands.
• The existing rotating system in the Governing Council already prioritizes country size, and combining it with an informal national-based system for the Executive Board could exacerbate these issues.

Key Information

• Treaty and Statute: Article 112 of the Treaty and Article 12 of the ECB Statute do not mandate a country-based appointment system.
• Governance Structure: The ECB is designed as a federalist structure, with national central bank governors participating in monetary policy decisions.
• Proposed Reform: A reform is needed to ensure that the selection process focuses on competence, experience, and diversity, rather than nationality.

Proposed Reform Mechanism

The document outlines a potential reform process, which includes the following steps:

1. Search Committee: A search committee, composed of senior European personalities, should be appointed by the Eurogroup to identify suitable candidates.
2. Consultations: The committee should consult on the professional profiles and skills required for the Executive Board members, with input from the Eurogroup and ECB President.
3. Hearings: The European Parliament should organize hearings for the shortlisted candidates to assess their expertise and views on monetary policy.
4. Appointment Decision: The final decision should remain with the Council, but the process should be transparent and merit-based.

Conclusion

The document concludes that the focus should shift from the nationality of candidates to their professional qualifications and policy philosophies. It emphasizes that the euro is a shared asset and should be managed with the best standards of central banking, not through diplomatic routines. A reform process should be initiated to ensure a more competent, diverse, and representative Executive Board.