Jean Monnet Center at NYU School of Law


3.Aspects of Legitimacy and Democracy

3.1. Principle of Reversibility as a Justification

As described by Edwards, the formal entry into force of the Treaty of Maastricht in November 1993 was surrounded by a certain air of uncertainty along with one of relief.87 The discussion preceding this milestone indicated that a number of different elements that had seemed important in the past in legitimating the integration process now seemed deficient and inadequate.88 Thus, the consequent moves to establish a Political Union in Europe resulted not simply in the problems related to ratifying the Treaty but also in a more general scepticism towards the single currency which would symbolise the Union.89 Among the consequences were the results of the French and Danish referendums. In Germany the discussion was dominated by a number of cases where the legitimacy of the Treaty, especially that of the EMU and ECB, was questioned.90

After considering the cases the German Constitutional Court established that even if monetary policy in the EMU becomes isolated from parliamentary, democratic legitimacy, the German Constitution provides expressly that the functions and powers of the Bundesbank can be transferred to the ECB.91 Subsequent important alterations to the integration programme would, however, not be covered by the existing Act of Accession and would therefore not be legally biding within the sphere of German sovereignty.92 Placing most of the management of monetary policy on an autonomous basis in the hands of an independent central bank restricts democratic legitimacy, stemming from the voters in the Member States, and therefore affects the principle of democracy. This modification of the democratic principle was, however, according to the Constitutional Court, acceptable as it took account of the particular mention that an independent central bank is a better guarantee of the value of currency.93 Consequently, the placing of monetary policy within the independent jurisdiction of the ECB in accordance with the strict criteria of the Treaty and the Statute satisfied the requirements of the German constitution under which a modification could be made to the principle of democracy.94

The decision of the German Constitutional Court is often referred to in connection with the attempts to restore the democratic deficit. According to Gustavsson, the Court argued for a constitutional Status Quo, namely indicating that the principle should even in the future be provisional suprastatism and overstatism without democracy.95 Even today, many responsible politicians would argue in this way if placed against the wall.96 What makes the theory somewhat unreliable is, however, that according to the Treaty one of the constitutional principles applicable to the Bank is irreversibility in the form of irrevocable fixing of convergence rates97 and the fixing of the calendar for transition to Stage 3 of the EMU98 which provide the context for a fully operational ECB.99 Against this background the Constitutional Court's theory of the provisional nature of the transfer of powers is imperfect. Furthermore, the provisional character of suprastatism has never been demonstrated in practice.100 Also Article 312 EC states that the Treaty is concluded for an unlimited period, which gives the impression of the arrangement being rather permanent than temporary. The democratic deficit is defended by the Court in terms of marginality, predictability and revocability, which according to Gustafsson leads "one to expect that the Court would be disinclined to view the EMU as democratically acceptable".101 Still, the converse actually obtains. Thus, "in adducing the position of the constitutionally independent and guarded Bundesbank, the Court makes a European virtue out of a German exception from the general rule of popular sovereignty and democratic accountability."102

Following the Court's reasoning, price stability becomes a value of greater significance than democracy and its prioritisation takes place at the expense of other rights of the individual. Whether the EMU arrangements can be considered a modification of the principle of democracy is in the author's view debatable, as is the extent to which the ECB can be regarded as democratic at all. One aspect of the theory, forgotten by many, is the fact that the independence of the central bank is only one necessary condition for price stability103 and that stability cannot be achieved solely by monetary policy. Thus sacrificing a number of political rights does not in itself guarantee the fulfilment of other fundamental rights contributed to by price stability.

3.2. Through Democracy towards Greater Legitimacy

The debate about democracy within the EU is part of a wider discussion on the status of human rights and fundamental freedoms in the Union. In the recent years, the democratic deficit of the Community governance has received great attention, partly due to the paradox of the principle of democracy otherwise being considered more or less a fundamental European value. Usually, and especially on ceremonious occasions, it is claimed that democracy legitimates itself.104 Even if public international law does not recognise the principle of democracy as such, the major international treaties do spell out the essential features of democracy, understood as the right of all citizens to participate in the political life of their societies.105 Recently some scholars have argued that democracy, or more specifically the right to vote in free and fair elections, has achieved universal recognition as an international legal right. 106

According to Scott, whilst it is the application of law that maintains the existence of a state, it is the democratic arrangements that legitimise the rule of law. A large portion of laws are accepted because they are fashioned by the democratic process and can be changed through the exercise of democracy.107 In a democracy the executive carries out the business of government whereas the constitutional role of the parliament is to scrutinise, to call to account and to make a global judgement of confidence in the executive government.108 Democracy is a way to create greater legitimacy. At one level, legitimacy is about the justification, and the acceptance, of authority and of the exercising of power.109 Thus, democratic legitimacy is a feature of collective decisions that accord with certain secondary rules.110 According to Nida-Rümelin, the decisions made using democratic procedures depend on the presupposition of being at least fundamentally capable of achieving common consensual agreement, whereas more comprehensive legislative projects are universally justified with normative arguments like the common interest, political justice and economic efficiency.111

An ideal form of government from a democratic point of view is a structure that guarantees justice and equal rights for all citizens who wish to participate in the decision-making. Decisions affecting the lives of individuals must be subject to public accountability.112 In brief, the civic virtue of contemporary government relies on the premise that the representatives of the demos decide policies for the interests of the demos and under the control of demos.113 The conception of democracy as an institutional arrangement has as its ultimate task to successfully channel and reflect the wishes of the majority in both the policy-formation and policy-execution stages.114 Still, it has been argued that political independence and democratic accountability do not need to be mutually exclusive, as there exist other forms of democracy apart from that based on the role of the parliament. Therefore, one way to create legitimacy is to limit and control the delegated powers e.g. through judicial review and predeterminated goals.115

Harden argues that even within the framework of a State, the complexity of the tasks of modern government is such that not all public power can be exercised directly by elected politicians.116 Every political system also includes a number of institutions that cannot claim to function in a democratic manner, such as the court system, but which are still a central part of a democracy. Still, at the same time as the citizens' possibilities to affect decision-making decrease their interest of the process also potentially disappears. Democracy in the European Union is certainly desirable and maybe possible, but only if new ways to design the institutional mechanisms for holding executive power accountable to Europe's voters are discovered.117 Therefore, even measures other than those usually suggested, increasing the powers of the European Parliament and of the ECJ, are needed. In any case, large-scale democratic deficiencies should not be seen as the price citizens must pay for their governments' European centred activities.118 Democracy and legitimacy are not co-terminus.119

3.3. Supervisory Mechanisms and Legitimacy

Credibility, legitimacy and accountability are central concepts that should be distinguished among when discussing the ECB.120 Credibility is based on the expectation that an institution can fulfil the functions it has been delegated and will properly carry out the functions it is entrusted with.121 In the case of the ECB it is crucial for the success of the Bank (and the EMU) that it can establish sufficient credibility and it is, in fact, questionable whether this has been achieved. Legitimacy, on the other hand, refers to the belief that a specific institution is widely recognised or at least accepted as being the appropriate institution to exercise specific powers.122 Accountability refers to the fact that the institution is more or less responsive, directly or indirectly, to the people who are affected by its decisions.123 Therefore, accountability and legitimacy are closely connected. On second thought, credibility has a connection with that form of legitimacy that is created through beneficial results. As stated by Cooper, the ultimate basis for a democratic government is "accountability to the public by all officials who make policy decisions affecting public welfare".124 Thus, according to Cooper, the ECB fails to satisfy this principle when it frames and executes one of the most important aspects of policy in modern economies, affecting hundreds of millions of people without being accountable to anyone.125 This also entails lacking legitimacy.

Both at the national and EU level recent years have shown a tendency towards autonomous organs, specialised agencies that have independent regulatory powers within a specific area.126 As a result of the transfer of certain powers to a new organ some of the legitimacy is lost - power can be delegated within the limits established by law but legitimacy does not automatically follow. Therefore the new institution must be able to create and establish its own legitimacy. This might in some cases prove a difficult task as these agencies are in most cases run by experts nominated by politicians and they implement extensive but by democratic methods marginally controllable power. Many of the problems in this context can be recognised even in relation to the ECB. Even though the legislative powers of the ESCB are subject to judicial review by the ECJ, which often is not the case with these agencies, the powers of the Bank represent quite a far-fetched model of indirect participation, even when assessed within the already problematic constitutional structure of the EU.127 The Bank is not the most suitable vehicle for increasing the accountability and overall constitutional value of the Community institutional matrix and even inside the EU its lack of accountability is highlighted.128

According to Scheinin, in the case of the ECB, the EC Treaty includes no appropriate legislative structure guaranteeing that the enactment of legal rules at the decisive stage of the process would be in the hands of a representative legislative body elected for that purpose.129 This means that the fundamental constitutional principle of the participation of those who are affected is compromised130 and indicates a lack of procedural legitimacy. At the same time this is a prevalent solution when central banking is considered - there exists hardly any central bank whose legal acts would be directly controlled by such an organ. On the other hand, the ECB has more comprehensive powers than most of the other central banks and de facto can adopt acts affecting the legal status of an individual. This makes one question the democratic accountability and therefore also the legitimacy of the ECB - the weakness in the possibilities to call for democratic control and accountability and the Bank's isolation from political influences contribute to an increased democratic deficit in the EU.131 The independence of the ECB can, however, also be seen, in accordance with the theory of the German Constitutional Court, as a modification of the principle of democracy that has been specifically created to implement monetary policy.132

The fact that the term of office of the members of the Executive Board is eight years and is non-renewable133 weakens the democratic accountability of the ECB even further in the sense that the public cannot show its dissatisfaction with the leadership by not renewing their mandates. During those eight years, a member of the board can be forced to retire by the Court of Justice only if he no longer fulfils the conditions set for the quality of his work or if he has been guilty of serious misconduct.134 Firstly, this entails that the appointments undoubtedly become political even if the mandate cannot be renewed. Secondly, however, this is not necessary a bad thing against the background of political legitimacy. As suggested by Gros, it is debatable whether or not the requirement strengthens independence: on the one hand it implies that governments cannot reward `soft' policy by a second turn. On the other hand it means that in practice the cohesion of the Board might be diminished and all Board members might be even more dependent on political good-will to find suitable jobs after their term has expired.135 Consequently, not only is the ECB shielded from politicians, the statutes also place it beyond the reach of democratic rules that sanction bad behaviour.136 Furthermore, changes in the functions and goals of the ECB require the revision of the Treaty. This takes not only time but also the agreement of all Member States, which in practice makes it almost impossible.137

It is clear that there exists no idealistic nation state where all principles of democratic accountability could be made a reality also within monetary policy. Central banks have traditionally enjoyed varying levels of independence. There are, however, considerable differences between the ECB and national central banks,138 partly in their relation to parliamentary control. According to constitutionalism an independent central bank is a threat to democracy only if it is developed to have a management that works in parallel with the political government but under no requirement to function in an accountable manner.139 Some observers are of the opinion that accountability requires explanation and justification, but not necessarily control by elected politicians.140 According to the result-dominated theory, a loss of democracy in this sense can be accepted if economic efficiency is rated higher than democracy in the economic and political situation at hand.141 According to this theory it becomes crucial for the legitimacy of the EMU that the arrangement has demonstrable positive results.142 Furthermore, it is difficult to decide whether increased democracy would eventually produce more preferable economic effects.143

In democracies, all power is delegated power,144 and the parliament is free to make any decisions it wishes. Why therefore would it be wrong to give a central bank an independent status?145 After all, the possibility to delegate decision-making power is a necessary and widely accepted part of representative democracy.146 The independence of a central bank can never be absolute. Still, an organ of the state needs to implement its powers in a legitimate manner. Therefore, in a democratic state the independence of the central bank needs to be "accountable independence".147 Still, it should not be forgotten that the EC (EU) is not a democracy, at least not in the traditional sense.

It is often concluded that the deficit of democracy and legitimacy can be avoided by establishing other sources of accountability by way of combining different supervisory mechanisms all the time maintaining the important independence of the Bank.148 One possibility is public discussion and the principle of transparency149, which in the case of the ECB is limited. Another factor that could contribute to the democratic legitimacy of the ECB is the adoption of a binding objective through a democratic process. A fixed objective is, nevertheless, legitimate only if there is some kind of control on how the objective is interpreted and if there is a possibility to change the goal through a democratic process.150 In the case of the ECB the Bank interprets the goal independently.151 Revisory power of the European Parliament to amend the objective of the Bank would create legitimacy but this is not the case with the ECB.152 Furthermore, there is the possibility for judicial review of the acts of the ECB, which at least has strong potential in the construction of legitimacy.153

Fifthly, the requirement of professional expertise from the Board Members154 could create legitimacy by guaranteeing the high quality of decisions. The sixth alternative is the appointment procedure of the Members of the Bank leadership, which in the case of the ECB is not primarily democratic in nature.155 The ECB is under some reporting obligations to the other EC organs which, however, without any decision-making powers can only have a limited role in contributing to the Banks's democratic legitimacy.156 The eighth possibility is the European Parliament, the modest role of which in the EU structure is apparent.157 Furthermore, one should remain critical of the possibilities of the European Parliament to increase legitimacy and democracy in the EU. According to Edwards, the elections to the EP have witnessed a relatively low and even falling voter turnout and therefore it would seem that the organ has only won limited credibility with the electorate.158 Finally, Scheinin mentions the possibility of national parliaments participating in the decision-making.159 But as decision-making powers are delegated to genuinely independent or supranational bodies, as is the case with the EU, the possibilities of national parliaments are very limited, as decisions are not made by Government representatives but by independent operators, such as the ECB.160 These nine alternatives show, according to Scheinin, that there is certain strong potential for combining independence and accountability in the operation of the ECB, but at the same time they show worrying signs of a serious deficit of legitimacy.161 Gros, on the other hand, concludes that the claimed conflict between the requirement for a central bank to be independent and the idea that it should also be accountable for its actions to a democratic body can be more apparent than real.162

It has been stated that the ratification of the Treaty and Statute by all Member States, a clear legal basis and organs with (even if only indirectly) elected members guarantee that the independence of the ECB does not result in a complete lack of any democratic control.163 Some authors are, however, of the opinion that accountability cannot be guaranteed simply by the fact that the initial stage of the EMU is democratic but that the continuing operations and policies of the Bank should be subject to democratic control.164 This entails first and foremost a problem connected with the Treaty-making.

One possibility to increase democracy would be to give the Council the right to override actions of the ECB in some cases, but only after debate in national parliaments.165 The competence of the European Parliament could be strengthened so that it at least could initiate an amendment to the Statute even if the change would require the approval of the Council to take legal effect.166 Another alternative would be the creation of a specific supervisory Board that would function independently from both Community and national instances.167 This institution could oversee the ECB's work and eventually have the power to veto, delay or at least discuss its decisions.168 The basic problem of independence and accountability would, however, still remain as it is highly unlikely that this kind of a government would itself be directly accountable,169 maybe unless the organ would be elected by and accountable to the European Parliament.

Without risking the required independence of the ECB and restricting the competence of the ECJ it would be necessary to guarantee that the political institutions of the EU have adequate possibilities to decide whether the monetary objectives and acts of the Bank correspond with the financial objectives of the Union as well as how the ECB in practice manages to achieve these goals. Those supportive of a strong and independent central bank find that sustainable and successful monetary policy is a prerequisite for legitimacy. Still, clarity and credibility can only be achieved through explicit voluntary precommitments to certain intentions and the possibility for the assessment of performance and results in case the predetermined criteria are not met.170 Furthermore, as stated by Obradovic, the concept of legitimacy refers not merely to the validation of rules and rule making but also to the acceptance of legal decisions by individual citizens, as a moral obligation to accept them.171

The question of the ECB and legitimacy has been answered in two ways. To the first group belong those who think that the existing mechanisms constitute an acceptable and sufficient guarantee of legitimacy. To the other group belong those who find that even if the dispersed and scattered arrangements within the EMU contribute to creating legitimacy. The Bank's powers give reason to feel uneasy about the legitimacy of the arrangement. Thus, the ECB cannot fulfil the requirements of democratic decision-making. The opinions vary as greatly between those who oppose the democratic deficit and those who speak for new restrictions to the implementation of the principle of democracy in order to create more technocratic ways of governance. To the latter group belong those who are in favour of a total abandonment of accountability, a position that according to Gustavsson is "needed in order to defend the idea of the European Central Bank being irreversibly beyond any possible influence from electoral change or shifts in public opinion".172

In the already problematic structure of the Union the criticism against the ECB is highlighted even if an independent central bank is a normal solution in national arenas. It is extremely difficult to solve the problem of independence versus accountability. How to make the ECB more accountable and still keep it independent of political decision-making? As for a vision for the future, as stated by Brentford, "there is no evidence that the trade-off between independence and accountability will necessarily disappear in the long run." 173 With reference to the risk of inflation it is possible, however, that the Bank is one of those efficiency-oriented institutions that can only be legitimated through its results.174 Still, it is difficult for many to accept a political theory not built upon the principle of representiveness and not open to the possibility of changing policies and office-holders as the result of general elections.175 Therefore, there are observers who find that, in line with the German Constitutional Court, provisional suprastatism remains the best available option.176 In the author's view, however, the theory is more fiction than facts and therefore hardly realistic. As stated by Chryssochou, "if the Union is ever to meet even the minimum requirements of a large-scale democratic polity, it needs to adjust its present arrangements to ensure the closeness, representativeness and accountabilty of the governors to the governed".177 This applies even for the ECB. The Bank is in many ways characterised by a lack of democratic legitimacy. Thus, it is crucial to determine whether other arrangements can contribute to the establishment of sufficient legitimacy, which in the case of the ECB is questionable.

At the same time it is fully possible that the democratic problems of the Union and the Bank have been exaggerated. Even at the national level there are a great number of institutions that lack democratic accountability, such as the central banks in general, but their legitimacy is questioned extremely seldom.178 Generally however, as explained by MacCormick, the deepest enemies of democracy in the contemporary world is the relapse to rule by a virtuous few, whether it be judges of a supreme court, a council of ministers deliberating in private or a bureaucracy of highly trained experts.179 According to Louis, in a democratic society it should always be the political authority that has the final word, even with regard to a central bank. 180

The possibility for a real, pluralistic and participatory democracy in the Union exists. It is, however, unclear whether there is political will to improve the situation.181 The reality might be that the legitimacy and the relevance of the whole of the Union is not sensed by large sections of the public.182 The same applies to the norms adopted by the ECB and central bank actions in general.

87 Edwards, Geoffrey (1998), p. 121.

88 Idem., p. 125.

89 Idem., p. 131.

90 The best-known case is Manfred Brunner and Others v. the European Union Treaty, Bundesverfassungsgericht (2. Senat) 12.10.193, Cases 2 BvR 2134/92 and 2159/92. The case has also been published in (1994) 1 CML Reports 57, Vol 69(2), pp. 57-108.

91 According to the Court, this provision also means that the implementation of the power is not in itself contrary to basic rights. Protection of fundamental rights is result of a "relationship of co-operation" between the ECJ and the Constitutional Court. Brunner and Others v. the European Union Treaty, pp. 78-79. According to the Court, it is part of the unassailable content of the democratic principle that the carrying-out of state functions and the exercise of state powers is derived from the people of the state and the persons exercising them are fundamentally answerable to the people. Still, the necessary relationship of responsibility can be established in various ways. What according to the Court is decisive is that a sufficiently effective content of democratic legitimacy, that is, a specific level of legitimacy is achieved. Idem, pp. 84-85.

92 Brunner and Others v. the European Union Treaty, p. 89. According to the Court, Germany's membership in the Union and the rights and duties that follow therefrom have been defined in the Treaty so as to be predictable for the legislature and are enacted in the Act of Accession with sufficient certainty. Idem. The Court underlined that the interpretation of the Treaty might not have effects that are equivalent to an extension of the Treaty and that such an interpretation of enabling rules would not produce any binding effects for Germany. Idem, p. 105.

93 Brunner and Others v the European Union Treaty, p. 104. Emphasis added.

94 Idem. p. 104. According to the Constitutional Court the fact that an independent central bank is a better guarantee of price stability has been tested and proven in the German system.

95 Gustavsson, Sverker (1998), p. 214.

96 Idem., p. 215.

97 Now Art. 123(4) EC.

98 Now Art. 121(4) EC.

99 Brentford, Philip (1998), p. 83.

100 Gustavsson, Sverker (1999), p. 5.

101 Gustavsson, Sverker (1999), p. 5.

102 Idem.

103 Gros, Daniel (1998), p. 353. According to Gros other important factors that assure price stability in the long run are the aversion to inflation felt by the public and, more particularly, the behaviour of the representatives of employees end employers reflecting such an attitude. Idem.

104 Hermansson, Jörgen (1996), p. 37.

105 Curtin, D.M. (1997), p. 34. See e.g. art. 25 of the International Convent on Civil and Political Rights, referred to also in footnote 41. Rosas underlines that the article explicitly accepts both the direct and indirect forms of democracy. Rosas, Allan (1999), p. 438. Even if there exists no "right to democracy" can democracy be seen as a combination of some political rights such as the right to political participation and the right to vote. From these follows even the right to hold the decision-makers accountable through a possibility of not renewing a mandate in the next elections and this way require changes in the policy through periodic elections. According to Chryssochoou, a responsible government not only has to give an account of itself to its citizens, but also needs to be prepared to listen to, and answer questions in, the legislature about its actions and inactions. Chryssochoou, Dimitris N. (1998) p. 51. This requirement is partly fulfilled by the ECB.

106 This has been stated by Curtin, D.M. (1997), p. 33. Even according to Rosas it is clear that the international community has increasingly rallied around a basic requirement of democracy and political rights. Rosas, Allan (1999), p. 447. This is according to Rosas visible e.g. in the results of the World Conference on Human Rights in Vienna 1993 and the work of the OECD Human Dimension. Rosas also mentions the resolutions of the UN Security Council such as the resolutions on South Africa, Cambodia, Haiti and Burundi. Idem. pp. 446-447. Rosas makes also reference to the human rights clauses in all trade and co-operation agreements the Union has entered with third countries, which include an express right to suspend the operation of the agreement if the other party violates "democratic principles". Idem. p. 447.

107 Scott, Andrew (1998), p. 148.

108 Harden, Ian (1994), p. 624.

109 De Búrca, Gráinne (1996), p. 349. According to De Búrca, since the Member States lose much of the power, which is transferred to the European Union, their internal, constitutional structures can, at best, constitute only an indirect source of legitimacy of Community power. Idem., p. 352. According to De Búrca it is argued that given that the Union is not a state, it does not require the same mode of democratic legitimation, which we expect of the state, but can be legitimated in other ways. Idem, p. 353.

110 Nida-Rümelin, Julian (1997), p. 43. According to Nida-Rümelin, it is, nevertheless, difficult to say in abstract terms which secondary rules are constitutive for a democratic system. Idem.

111 Idem.

112 Chryssochoou, Dimitris N. (1998), p. 47.

113 Idem. , p. 56.

114 Idem., p. 48.

115 Majone, Giandomenico (1996), p. 13-14.

116 Harden, Ian (1994), p. 624.

117 Hix, Simon (1998), p. 47. According to Hix, for at least the foreseeable future, the EU is an `upside-down political system': the institutions at the national level exercise greater executive authority in most areas of public policy than the European institutions, and the media and the general public are primarily concerned with who controls these national offices. Idem. p. 44.

118 Chryssochou, Dimitris N. (1998), p. 63.

119 Weiler et al (1995), p. 6. One knows from the past of polities with arguably democratic structure and process, which enjoyed shaky political legitimacy and were replaced, democratically, with dictatorships. One knows from the past and present of polities with an egregiously undemocratic governmental structure and process which, nonetheless, enjoyed or enjoy high levels of legitimacy. Idem. ,p. 6.

120 The following distinction is introduced by Snyder in Snyder, Francis (1999), p. 463.

121 Snyder, Francis (1999), p. 463.

122Idem. According to Snyder, the legitimacy of the whole of the EMU is closely bound up with the nature and function of its institutions, the ECB and the ESCB.

123 Idem.

124 Cooper, Richard (1994), p. 70. Cooper underlines that whereas democracies differ greatly in their detailed institutional arrangements, the fundamental principle is the same.


126 Such agencies include for example the European Environmental Agency, the Agency for the Evaluation of Medicinal Projects, the Agency for Safety and Health at Work and the Monitoring Centre for Control of Drugs and Drug Addition. Power can be delegated to these administrative organs e.g. in order to create greater efficiency or increase expertise.

127 Scheinin, Martin (1998), p. 23. It has even been stated that the ECB represents a great deal of the EU's democratic deficit.

128 Brentford, Philip (1998), p. 110.

129 Scheinin, Martin, (1998) p. 21.

130 Idem. According to Scheinin, the situation of the ECB is corollary of the more general constitutional problem or defect in the constitutional structure of the EU. Hence, law making in the EU is not based on direct or first-degree-indirect participation of the people. Idem.

131 Laffan, Brigid (1997), p. 51.

132 Arndt, Hubertus (1996), p. 226-227.

133 Art. 112(2)b and Art. 11(2) of the Statute. The members shall be appointed from among persons of recognised standing and professional experience in monetary or banking matters by common accord of the governments of the Member States on a recommendation from the Council, after it has consulted the European Parliament, and the Governing Council of the ECB. The Statute includes specific provisions for the initial appointment of the Executive Board, namely that the President is appointed for 8 years, the Vice-President for 4 years and the other members for terms of office of between 5 and 8 years. None of these are renewable (Art. 50).

134 Art. 11.4 of the Statute. This is initiated by an application by the Governing Council or the Executive Board.

135 Gros, Daniel (1998), p. 355-356.

136 De Grauwe, Paul (1998), p. 1.

137 The requirement of all Member States acceptance, being primary law, makes the ECB immune to the incidence of political changes. Hahn, Hugo J. (1991), p. 814. In some Member States this would require constitutional amendments. At the same time it is, according to Herdegen, difficult to visualise higher restraints on democratic principles or a stronger entrenchment against majority rule between nations. Herdegen, Matthias J. (1998), p. 21. This view can also be criticised - unfortunately it is difficult to believe that the ECB in practice would be the most extreme example of an infringement of the implementation of the principle of democracy.

138 Hoffmeyer sees the accountability problem in relation to the question of ultimate political control and considers the central banks functioning in national systems having at least two formal strings to the political system. Firstly, their rules have been stipulated and can be revoked by parliaments. Secondly, central bank leadership is nominated politically and in almost all cases for a limited period. In addition monetary policy decisions are subject to public opinion in the sense that they must be understood and in the long run accepted by the public. Hoffmeyer, Erik (1992), p. 37. According to Elgie, compared to other central banks, the institutional architecture of the ECB is a departure from the norms of political accountability and there therefore is a distinct "democratic deficit" which needs to be addressed. Elgie, Robert (1998), p. 53. Central Banks in the Euro area do, however, suffer from similar problems than the ECB and as their status was strengthened through the convergence criteria.

139 Heikkilä, Vesa (1993), p. 41.

140 E.g. According to Harden, in a democracy there is no reason for all public power to be concentrated n the hands of an executive government. Harden, Ian (1990), p. 414.

141 But this only assuming that the decision is unanimous and that the economic efficiency actually increases as a result of the politically independent monetary policy. This is one way of handling the problem of the democratic deficit. Agné, Hans (1998), p. 28. At this point it is possible to see some connection with the infranational (or the neo-corporatist) model of government of J.H.H. Weiler as the implementation of law is rather justified by results than process. See e.g. Weiler et al (1995). See also and the problem of "utilitarian support" in Obradovic (1996) mentioned in footnote 40.

142 Hermansson, Jörgen (1996), p. 38. The same applies to the whole of the EU.

143 Idem., p. 37.

144 De Grauwe, Paul (1998), p. 2. According to de Grauwe, people delegate powers to politicians and politicians delegate it to specialised institutions. In order for the pyramid to work well, at each stage there must be a strong mechanism, which ensures that those who receive power remain accountable.

145 Arndt, Hubertus (1998), p. 221.

146 Idem., p. 222. See also Jyränki, Antero (1994). According to Jyränki, the more democratic a law-making procedure is, the easier the delegation is approved of and the longer the distance to political institutions, the weaker political supervision becomes. Jyränki, Antero (1994), pp. 142-143. According to Jyränki, the principle of democracy can also be regarded as meaning that the legislative power can only be exercised by a parliament. Jyränki, Antero (1994), p. 140.

147 Lastra, Rosa Maria (1992), p. 482.

148 The topic has been discussed by a number of scholars. The nine (most comprehensive) alternatives following in the main text are introduced by Scheinin in Scheinin, Martin (1998), pp. 28-33. Another theory is introduced by Majone according to whom independent organs can be placed under democratic accountability through different control mechanisms. Majone names clear objectives and procedural requirements, judicial review to protect the rights of individuals, expertise to guarantee the technical quality of decisions, transparency and the participation of the public to guarantee the organs responsivity in relation to it. Majone, Giandomenico (1996), p. 14. For Padoa-Schioppa's theory see footnote 163.

149 According to Scheinin, many central banks have improved their capacity to be in regular dialogue with the media. Every statement by a central bank is, however, a message to the market and is intended to influence market operations. Therefore, this communication must be seen as instrumental and not discursive. Scheinin, Martin (1998), p. 29. According to Ungerer, however, the central banks in Germany, Switzerland, the US and the Netherlands are not independent in that sense that they would be outside democratic control and the formulation of public opinion. Ungerer, Horst (1993), p. 18.
The ECB has often been discussed in relation to the central bank of New Zealand. According to Mayes it is, however, impossible for the ECB to reach a population more than 100 times that of New Zealand, a fact that in practise sets the banks in very different positions. The problem with respect to the ECB becomes more serious in connection with the whole of the EU's democratic deficit. This makes the ECB rather to follow the rules it has been placed under than to see its competence in the future restricted. Mayes, David G. (1998), p. 24.

150 According to Arndt the possibility to change the judicial status and objectives of the central bank functions as an alarm system. The law the regulating the status of the central bank must be based on the will of the citizens. Therefore it should not be possible for a central bank to function in the long run without the acceptance of the citizens. Arndt, Hubertus (1998), p. 223. Also Cooper suggests that the European Parliament should be given the power to amend the Statute, by analogy with independent national central banks (perhaps by special majority), without the much more arduous (and unanimous) process required to change the whole of the Treaty. Cooper, Richard (1994), p. 71.

151 Scheinin suggests that greater transparency and accountability could be created through a process through which the ECB and the Council together would determine a numeric inflation target for a fixed period of time in order to concretise the primary objective. Scheinin, Martin (1998), p. 30.
According to Gormley and de Haan, the objective of the monetary policy should be decided according to normal democratic procedures, i.e. logically by the European Parliament, but the game should be delegated to the ECB. Against this background, the ECB falls short of democratic accountability. Gormley and de Haan (1998), p. 112. The article is analysed in Francis Snyder (1999), p. 466.

152 In the case of the EU, neither the European nor the national parliaments have the power to amend the objective. Scheinin, Martin (1998), p. 32.

153 Scheinin, Martin (1998), p. 30.

154 Scheinin, Martin (1998), p. 30. According to Scheinin the idea of transferring the power to make decisions from "politicians" to "experts" is fundamentally undemocratic. Idem. According to De Grauwe, political independence of the ECB has been based on a very primitive theory according to which the ECB consists of wise men, whereas politicians are wicked people eager to undermine the good policies of the central bank. De Grauwe, Paul (1998), p. 1. Also according to Arndt the theory he calls "Verständnis-Argument" including that only experts being capable of making monetary policy decisions sounds somewhat exaggerated. Arndt underlines that the national parliaments take continuously decisions within other very complicated areas and therefore it is not motivated to claim that specifically monetary policy would be an area needing a separate independent government. Arndt, Hubertus (1998), p. 218. See also Scheinin, Martin (1997b), p. 181.

155 Scheinin, Martin (1998), p. 30. According to Scheinin the independence of the central bank would undoubtedly be compromised in case the Governor of a NCB could at any time be given a vote of non-confidence.

156 Idem., p. 31. Gros points out that the reporting obligation can still be useful for parliamentarians in helping develop understanding of the policies of the central bank. Gros, Daniel (1998), p. 359. Greater powers to the European Parliament with regard to the ECB, through a regular report by the ECB president and a formal veto power over the ECB leaders and this way a transformation in the distribution of power in the EU system of multi-level governance signifies, however, according to Snyder, increased legitimation without increased democratisation. Snyder, Francis (1999), p. 466.

157 Scheinin, Martin (1998), p. 31. The seriousness of this defect will according to Scheinin depend on the role of the national Parliaments in relation to NCBs and the operation of national Governments in the Council. According to Dashwood et al, the political accountability of the ECB makes a domain where the European Parliament will have to play a role in a context very different from that prevailing at national level. See Dashwood, Alan et al (1999), p. 519. An important aspect of the future role of the European Parliament is its ability to exert control on the Commission and the new independent agencies, among them the ECB. According to the authors, the Parliament has several times asked for greater powers e.g. in the appointment procedure of the Executive Board members in the same way it participates in the appointment of the Commission. See Dashwood, Alan et al., p. 519. Greater powers to the Parliament in this area would, however, mean taking a new step towards a federal Europe. Cooper, Richard (1994), p. 71.

158 Edwards, Geoffrey (1998), p. 129. Still, the European Court for Human Rights established in the case Matthews v. the UK that "the European Parliament represents the principal form of democratic and political accountability in the Union". "Despite its limits the legitimacy of the organ it "derives its legitimation from the direct elections by universal suffrage" and therefore the organ "must be seen as that part of the Community structure which best reflects concerns to "effective, political democracy" (point 52).

159 Scheinin, Martin (1998), p. 32-33.

160 Idem.,p. 33.

161 Idem.

162 Gros, Daniel (1998), p. 359.

163 Studt, Detlef (1993), p. 249. See also Padoa-Schioppa, Tommaso (1994), p. 189 who mentions the ratification of the Treaty by all Member States and the judicial review guaranteeing its implementation by the ECJ; the national appointment procedures of the ECB leadership; the right of the president of the Ecofin Council to attend meetings of the ECB Council and the annual report of the Bank. Consequently, according to Padoa-Schioppa, the Bank clearly fits into the political structure of the Community and interact directly with the other institutions. Thus, its legitimacy is achieved in four ways.

164 Lastra, Rosa Maria (1992), p. 499.

165 Cooper Richard (1994), p. 71. This idea is based on the model in use in the Netherlands. In practice this might be both complicated and time consuming with reference to the rapid changes in the market.

166 Cooper, Richard (1994), p. 71 ; Scheinin, Martin (1997b), p. 202.

167 Padoa-Schioppa, Tommaso (1994), pp. 171-172 making reference to the Delores report; Antola, Esko (1997), p. 20. This kind of an organ has been successfully in use in some Member States, e.g. in Finland where the Parliamentary Trustees of the Bank of Finland have guaranteed parliamentary supervision at least at some level. A similar organ could supervise the ECB and eventually review or at least discuss decisions taken by the Bank.

168 Elgie, Robert (1998), p. 67. According to others the organ should possibly not have binding power on the acts of the Bank. Antola, Esko (1997), p. 20.

169 Elgie, Robert (1998), p. 67.

170 Mayes, David G. (1998), p. 27.

171 Obradovic, Daniela (1996), p. 194.

172 Gustafsson, Sverker (1999), p. 19.

173 Brentford, Philip (1998), p. 109. According to Brentford, "it is arguable that a lack of broad public support or the total absence of political involvement in monetary policy would lead to a central bank eventually being overridden." Idem.

174 Brentford, Philip (1998), p. 109.

175 Gustavsson, Sverker (1999), p. 18.

176 Gustavsson, Sverker (1999), p. 18.

177 Chryssochou, Dimitris N. (1998), p. 47.

178 Majone, Giandomenico (1998), p. 155.

179 MacCormick, Neil (1994-95), p. 296. According to MacCormick, this can be avoided through control of sovereign government and with full and equal participation of all citizens, or at least those who wish to involve themselves.

180 Louis, Jean-Victor (1990), p. 57. According to Louis, in case of persistent disharmony between the government and the central bank its importance depends greatly on the degree of autonomy granted to the central bank.

181 Ward, Ian (1996), p. 95. Gustavsson argues that even if it has become politically correct to believe that influential politicians actually wish to abolish the democratic deficit it is not necessarily so. Gustavsson, Sverker (1996), p. 123. Governments wish to avoid making the Union democratic. For functionalists, the deficit is a central element of the Union, which becomes problematic only in the area of public opinion. Idem, p. 108. Thus, governments do not wish to empower the European organs with the same legitimacy they enjoy. Therefore the democratic deficit turns into a weapon against the powers of the EU in their hands.

182 According to De Búrca, "the reality may be that, despite many years of high-sounding Treaty preambles and general declarations of peace and prosperity, the legitimacy and relevance of the EU is not felt by large sections of the public. Much of the Community law which affects people's lives seems either trivial or irritating, or important but at such a level of remoteness that there seems little prospect of any influence over the policy and little understanding of why it ought to be decided at a European rather than at any other level." De Búrca, Gráinne (1996), p. 374-375.



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