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The Single Currency and the UK

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Abstract

While being part of the European Union, the United Kingdom is under a looser obligation in relation to economic and fiscal policy coordination, it has retained control over its monetary policy and it is not part of the euro area. It has also retained responsibility for the supervision of the United Kingdom banks.

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Notes

  1. 1.

    It has also been suggested that in some regards the United Kingdom can be compared to a Member State with a derogation (Kapteyn and VerLoren van Themaat 2008, p. 941), however such comparison is not entirely accurate.

  2. 2.

    Article 51 Treaty in European Union (TEU).

  3. 3.

    It has also been suggested that the United Kingdom’s opt-out (and that of the Denmark), constitute and important obstacle to the international projection of the euro (Lastra and Louis 2013, p. 62).

  4. 4.

    The Banking Union can be defined as a transfer of responsibility for banking policy from the national to the EU level and entailing the following components: (1) uniform supervision by the European Central Bank; (2) prudential regulation; (3) reorganisation and resolution with common funding; (4) lender of last resort function; (5) deposit insurance.

  5. 5.

    Article 282(1) TFEU.

  6. 6.

    Case C-370/12, Pringle (27 November 2012), paragraph 49.

  7. 7.

    Article 12.1 of the ESCB Statute, which from the legal point of view is also a protocol annexed to the EU Treaties, see Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank.

  8. 8.

    The four other Executive Board members, as well as the President of the EU Council and a member of the European Commission may also participate in General Council meetings, but they do not have a right to vote.

  9. 9.

    Article 3 of the UK Protocol.

  10. 10.

    Article 4 of the UK Protocol.

  11. 11.

    Articles 6 and 7 of the UK Protocol.

  12. 12.

    Also repeated in Article 282(2) TFEU and Article 2 of the ESCB Statute.

  13. 13.

    Article 42.1 of the ESCB Statute, which provides that a derogation referred to in Article 139 TFEU does not list Article 2 of the ESCB Statute; similarly, there is no exemption regarding Article 282(2) TFEU.

  14. 14.

    It is noteworthy that while Article 4 of The UK Protocol provides that, among other, Articles 127(1) to (5) TFEU and Article 282(2) TFEU, except for the first and last sentences thereof, shall not apply to the United Kingdom, there is no such corresponding duty in Article 7 of The UK Protocol.

  15. 15.

    See Article 11 of the Bank of England Act of 1998. Notably, the Bank of England’s objectives are not determined by the Bank itself but the Treasury under Article 12 of the Bank of England Act of 1998.

  16. 16.

    Other authors have referred to this prohibition as “‘No’ to instructions and ‘Yes’ to dialogue” (Arda 2006).

  17. 17.

    See Articles 4 and 7 of the UK Protocol.

  18. 18.

    Also known as the ‘prohibition of monetization of government debt’ (Lastra and Louis 2013, p. 97).

  19. 19.

    Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b (1) of the Treaty, OJ L 332, 31.12.1993, p. 1.

  20. 20.

    Article 123(2) TFEU.

  21. 21.

    The ‘ways and means’ facility is the central governments overdraft facility at the Bank of England.

  22. 22.

    Such as Council Decision 98/415/EC on the consultation of the European Central Bank by national authorities regarding draft legislative provisions, OJ L 189, 3.7.1998, p. 42.

  23. 23.

    Zilioli and Selmayr note that this is the only instance in Community law where a ‘national’ authority can directly be sued before the Court of Justice, which is normally only competent to settle disputes between the Community institutions and the Member States (Zilioli and Selmayr 2001, p. 77). In accordance with Article 139 TFEU, Article 42 of the ESCB Statute and The UK Protocol there are no derogations and the above provisions of TFEU and the ESCB Statute are applicable to all NCBs in the ESCB.

  24. 24.

    In contrast, most EU agencies have been established under Article 352 TFEU, under which most Member States have veto powers. A further issue under Article 114 TFEU may arise from the fact that while the Banking Union is not restricted to the euro-area, most of the Banking Union participants are euro-area Member States.

  25. 25.

    For example, Intergovernmental Agreement on the single resolution fund (Council Document 8457/14), available at http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%208457%202014%20INIT.

  26. 26.

    Interinstitutional Agreement between the European Parliament and the European Central Bank on the practical modalities of the exercise of democratic accountability and oversight over the exercise of the tasks conferred on the ECB within the framework of the Single Supervisory Mechanism, OJ L 320, 30.11.2013, p. 1.

  27. 27.

    The Treaty Establishing the European Stability Mechanism (the ESM Treaty), available at http://www.esm.europa.eu/about/legal-documents/ESM%20Treaty.htm.

  28. 28.

    Memorandum of Understanding between the Council of the European Union and the ECB on the cooperation on procedures related to the Single Supervisory Mechanism (SSM) 11.12.2013, available at http://www.ecb.europa.eu/ecb/legal/pdf/mou_between_eucouncil_ecb.pdf.

  29. 29.

    For example, Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’), available at http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:52013XC0730(01)).

  30. 30.

    Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes, OJ L 173, 12.6.2014, p. 149.

  31. 31.

    For example, Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, OJ L 287, 29.10.2013, p. 63.

  32. 32.

    Remarkably, the task of prudential supervision has not been placed in Article 3 of the ESCB Statute together with other tasks of the ESCB. The rationale may be that this was a task foreseen for the ECB alone and not for the entire ESCB. However, Smits points out that Article 127(6) TFEU is not a separate article but a paragraph in an article describing the tasks of the ESCB (Smits 2000, p. 355). Smits’ observation is supported by the language of Article 132(1) TFEU, which stipulates, among others that ‘[I]n order to carry out the tasks entrusted to the ESCB, [...]’, while one of the legal bases for the ECB regulations is also Article 25.2 of the ESCB Statute.

  33. 33.

    See Article 42.1 of the ESCB Statute and Article 34 of the ESCB Statute respectively.

  34. 34.

    See Articles 4 and 7 of the UK Protocol.

  35. 35.

    Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176, 27.6.2013, p. 338.

  36. 36.

    Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, OJ L 176, 27.6.2013, p. 1.

  37. 37.

    Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council, OJ L 173, 12.6.2014, p. 190.

  38. 38.

    Article 120 TFEU provides that the ‘Member States shall conduct their economic policies’, which is further confirmed by Article 127(1) TFEU referring to the task of the ESCB to ‘support the general economic policies in the Union’ indicating that it is possible to have a number of economic policies in the EU.

  39. 39.

    Article 121(1) TFEU.

  40. 40.

    Resolution of the European Council on the Stability and Growth Pact Amsterdam, 17 June 1997, OJ C 236, 2.8.1997, p. 1.

  41. 41.

    Available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf.

  42. 42.

    Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure; OJ L 306, 23.11.2011, p. 33; Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25; Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies, OJ L 306, 23.11.2011, p. 12; Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area, OJ L 306, 23.11.2011, p. 8; Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area, OJ L 306, 23.11.2011, p. 1; Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States, OJ L 306, 23.11.2011, p. 41.

  43. 43.

    Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area, OJ L 140, 27.5.2013, p. 11; Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability, OJ L 140, 27.5.2013, p. 1.

  44. 44.

    Available at http://www.consilium.europa.eu/european-council/pdf/Treaty-on-Stability-Coordination-and-Governance-TSCG/. This Treaty is not applicable to the United Kingdom.

  45. 45.

    Regulation (EU) 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) 1083/2006, OJ L 347, 20.12.2013, p. 320, as amended.

  46. 46.

    Article 142 TFEU read together with Article 5 of the UK Protocol.

  47. 47.

    However, the applicability of such legal provision in the world where value of sterling is not set by the authorities but it is subject to external or market factors is arguable.

  48. 48.

    Articles 143 and 144 TFEU in conjunction with Article 5 of the UK Protocol.

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Authors and Affiliations

  1. Estonian Business School, Tallinn, Estonia

    Andres Tupits

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  1. Andres Tupits
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Editors and Affiliations

  1. Tallinn Law School, Tallinn University of Technology, Tallinn, Estonia

    David Ramiro Troitiño

  2. Tallinn Law School, Tallinn University of Technology, Tallinn, Estonia

    Tanel Kerikmäe

  3. Tallinn Law School, Tallinn University of Technology, Tallinn, Estonia

    Archil Chochia

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Tupits, A. (2018). The Single Currency and the UK. In: Ramiro Troitiño, D., Kerikmäe, T., Chochia, A. (eds) Brexit. Springer, Cham. https://doi.org/10.1007/978-3-319-73414-9_10

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  • DOI: https://doi.org/10.1007/978-3-319-73414-9_10

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