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2017 | Book

Interdisciplinary Introduction to Money and Currencies Read chapter Read first chapter

International and European Monetary Law

An Introduction

Authors: Christoph Herrmann, Corinna Dornacher

Publisher: Springer International Publishing

Book Series : SpringerBriefs in Law

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book introduces the fundamental monetary law problems of cross-border economic activity and the solutions thereto in international monetary law, and in EU law. After decades of having been neglected by legal scholars, international and European monetary law has attracted increasing attention in recent years. With the European Economic and Monetary Union (EMU), a full-fledged monetary union between sovereign States has been established for the first time in history. Its construction is primarily a work of law, with the Treaties on European Union (TEU) and on the Functioning of the European Union (TFEU) together with a number of protocols forming the constitutional basis. Yet, European monetary Integration has never taken place in isolation from international developments. Moreover, international monetary law, namely the Articles of Agreement of the International Monetary Fund (IMF) has always played a role - initially as the external monetary addition to the internal market project, after the breakdown of the Bretton Woods System in the 1970s as one of the major driving forces for monetary Integration within the EU. On a fundamental basis, international and European monetary law address the same principled problems of monetary cooperation: how to proceed with financial transactions cross-border where no global currency exists. The present work describes the different approaches and relations and interplay between the two legal regimes.

Table of Contents

Frontmatter
Chapter 1. Interdisciplinary Introduction to Money and Currencies
Abstract
For a comprehensive understanding of the legal principles constituting International and European Monetary Law it is necessary to focus first on the subject matter at hand: Money. Despite the term’s universal and frequent usage, few outside the world of economic academics have probably taken the time to ponder what money actually is, how it evolved historically and how monetary systems and policy function today.
Christoph Herrmann, Corinna Dornacher
Chapter 2. Monetary Sovereignty and History of International Monetary Law
Abstract
The aforementioned principle of monetary sovereignty plays an important role in monetary law and is key to understanding international monetary relations notwithstanding the much discussed potential erosion of the principle.
Christoph Herrmann, Corinna Dornacher
Chapter 3. Fundamental Legal Problems of International Monetary Relations
Abstract
Monetary sovereignty and thus monetary systems continue to be a primarily national matter. Their origin is a national one, confined to a specific territory. With the exception of monetary unions, every State issues its own currency and monetary regulations or decides to use a foreign currency for its own purposes. Therefore there is no universally valid and accepted means of payment—no universal currency.
Christoph Herrmann, Corinna Dornacher
Chapter 4. The International Monetary Constitution: The IMF Articles of Agreement—Institutional Design and Decision-Making
Abstract
The legal framework of the IMF (or “Fund”) is the main source of International Monetary Law besides, of course, general principles derived from customary international law. With a member base of 189 states, the IMF Articles of Agreement enjoy a nearly global binding force and have shaped the international monetary system since its entry into force on 27 December 1945. The agreement is the constitutional treaty of the IMF and has been amended seven times throughout its history.
Christoph Herrmann, Corinna Dornacher
Chapter 5. The International Monetary Constitution: The IMF Articles of Agreement—Substantive Legal Obligations
Abstract
While the IMF’s mandate is to ensure the stability of the international monetary system through surveillance, technical and financial assistance, membership in the IMF comes not only with benefits but also with obligations. Its objectives (Art. I IMF Articles of Agreement) can only be achieved, if all members fulfill certain requirements and comply with a certain standard, enabling the envisaged system to function. To this end, the Articles of Agreement impose a set of substantive legal obligations of a varying legal nature upon the member states. The main duties are comprised in Art. VIII (convertibility) and Art. IV (exchange arrangements) IMF Articles of Agreement. Compliance with these obligations is closely monitored and enforced by the IMF. A breach of any of these duties may result in sanctions (see Art. XXVI sec. 2 IMF Articles of Agreement) with three escalating levels depending on the duration and severity of the violation: (1) ineligibility to use the general IMF resources, (2) temporary suspension of voting rights and (3) compulsory withdrawal from the IMF (rarely applied in practice).
Christoph Herrmann, Corinna Dornacher
Chapter 6. IMF Lending (Financial Assistance)
Abstract
From a member state’s perspective, providing financial assistance is probably considered the core responsibility of the IMF and a key advantage of membership. Art. V IMF Articles of Agreement authorises the Fund to perform financial assistance and to develop suitable policies for its lending activities in order to remedy actual or potential balance of payment problems of member states. Yet unlike banks, development organizations or private creditors the IMF does not offer financial support for specific projects nor for balancing out purely fiscal disequilibria. In short, the IMF deals with issues of illiquidity, not of insolvency.
Christoph Herrmann, Corinna Dornacher
Chapter 7. History of European Monetary Law
Abstract
The history of the European Union (EU) and in particular of economic and monetary integration is not a story of linear evolution according to an ideal abstract system, but one shaped by events and political will, by trial and error, by successes and failures.
Christoph Herrmann, Corinna Dornacher
Chapter 8. The Legal Framework of EMU post Lisbon—Institutional Setup
Abstract
The European Union (EU) is often referred to as an entity “sui generis”, somewhere between a mere confederation of nation states and a real federal state. This peculiarity is reflected in its legislation as well as in the design of its institutions that are more often than not based on complex, multi-layered structures. They represent the growing importance of the Union and the residual sovereignty of the member states. Naturally, the institutions’ historical evolution has also left its mark on the structure and design of EMU.
Christoph Herrmann, Corinna Dornacher
Chapter 9. The Substantive Legal Foundations of EMU post Lisbon
Abstract
EMU serves important objectives of the EU, e.g. the smooth operation of the internal market, coordination of economic and fiscal policies, price stability and supervising and monitoring financial institutions, which have long left the confinement of national borders. To this end, EMU displays certain key characteristics, which have a significant impact on the economic life within the union but also in relation to third countries and non-Euro area members.
Christoph Herrmann, Corinna Dornacher
Chapter 10. The Monetary Policy of EMU
Abstract
The ability to set the monetary policy and regulate one’s own currency is a classical attribute of state sovereignty. By transferring these powers to the EU, where they are exercised by the Eurosystem (Art. 127 (2), 282 (1) TFEU), the Council and the Parliament (Art. 133 TFEU), the Euro area Member States have effectively transferred their monetary sovereignty to the supranational EU.
Christoph Herrmann, Corinna Dornacher
Chapter 11. Economic Policy Coordination in EMU
Abstract
“We called economic and monetary union a union that was extremely monetary and scarcely economic”. This statement by Pascal Lamy, a former Director General of the WTO and European Commissioner for Trade, captures the asymmetry between monetary and economic integration in EMU nicely. In retrospect, arguably, some of the key policy decisions taken when drafting the treaties or secondary law appear short-sighted or strategically unsound.
Christoph Herrmann, Corinna Dornacher
Chapter 12. The External Relations of EMU
Abstract
The Euro area is not a separate and closed system, but operates on an international scale beyond the borders of its Member States’ territory (cf. Art. 63 TFEU, Member States’ membership and participation in international organisations and fora, e.g. IMF, OECD, G7 and G10).
Christoph Herrmann, Corinna Dornacher
Chapter 13. EMU and the Sovereign Debt Crisis—Legal Aspects of Financial Assistance for Member States
Abstract
The narrative of a financial crisis is a peculiar thing. One may deduct from the term crisis that something unforeseeable is happening, something out of the ordinary, perhaps even unprecedented.
Christoph Herrmann, Corinna Dornacher
Chapter 14. EMU and the Sovereign Debt Crisis—Legal Aspects of Monetary Policy Responses and the Banking Union
Abstract
In 2008/2009 the Eurosystem acted promptly and efficiently in responding to the crisis by supplying markets with sufficient amounts of central bank money in order to preempt illiquidity problems. Keeping the monetary circulation going and transmission mechanisms functioning is vital for a central bank (see Chap. 10) and the initial efforts of the Eurosystem were indeed effective in averting dramatic contractions and alleviating the condition of financial markets.
Christoph Herrmann, Corinna Dornacher
Metadata
Title
International and European Monetary Law
Authors
Christoph Herrmann
Corinna Dornacher
Copyright Year
2017
Electronic ISBN
978-3-319-57642-8
Print ISBN
978-3-319-57641-1
DOI
https://doi.org/10.1007/978-3-319-57642-8