20 years of the euro

Legal framework up to 2018 20 years of the euro

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Many European currencies become one: the road to the euro
9 February 1971 – The Council of Ministers of the European Community and the member country governments agree to work towards achieving economic and monetary union (EMU) over the course of the next ten years.
13 March 1979 – The central bank agreement on the European Monetary System is concluded as a successor to the European Exchange Rate Mechanism set up in 1972. Under this arrangement, a system of fixed but adjustable exchange rates with mutual, restricted ob-ligations for exchange rate intervention is established.
7 February 1992 – The Maastricht Treaty on European Union is signed by EU Member States. It envisages establishing EMU in several stages; accession by an EU country depends on the fulfilment of certain “convergence criteria”.
1 January 1994 – The second stage of EMU commences. The European Monetary Institute (EMI) is established. The members of the EMI are the central banks of the EU Member States, which coordinate their monetary policy from this point on.
16-17 June 1997 – The European Stability and Growth Pact is adopted by the European Council. Its objective is to secure stability-oriented fiscal policy even after the establishment of European monetary union. Balanced budgets are envisaged in the medium term; the permitted ceiling for annual budget deficits is set at 3% of gross domestic product (GDP).
The transition to the euro: European monetary union
1 January 1999 – The third stage of EMU begins. The euro becomes the shared currency of eleven EU countries, including Germany. The Eurosystem assumes joint responsibility for monetary policy in the euro area. The Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB) forms the legal basis for cooperation in the Eurosystem. The Bundesbank President, just like every other member, has one vote in the ECB Governing Council. The Bundesbank is involved in joint projects managed by the Eurosystem.
1 January 2002 – The euro is also introduced as cash in the euro area, where it now becomes the sole legal tender.
30 April 2002 – The amendment to the Bundesbank Act (Bundesbankgesetz) comes into force. The Executive Board becomes the Bundesbank’s sole management body. The Land Central Banks become subordinate regional offices. As part of this structural reform, the Bundesbank thins its branch network significantly.
The euro during the financial and sovereign debt crisis: strengthening monetary union
27 September 2012 – In response to the financial and sovereign debt crisis, the European Stability Mechanism (ESM) is set up as a permanent crisis resolution mechanism (“permanent bailout fund”). The ESM’s task is to protect the solvency of euro area countries experiencing temporary financing difficulties by providing financial assistance, which is granted if it is crucial so as to safeguard the financial stability of the euro area as a whole and its member countries. It has a range of instruments in its toolkit for this purpose, such as granting loans or purchasing government bonds. The ESM only makes use of its effective lending capacity of €500 billion subject to strict conditionality, to which borrowing member countries must adhere.
Start of 2011 – The European System of Financial Supervision (ESFS) starts operating. The system of regulatory and supervisory authorities aims to coordinate national authorities and ensure both microprudential and macroprudential oversight of the financial system. The ESFS comprises the three European Supervisory Authorities for banking, securities and insurance (EBA, ESMA, EIOPA) and the European Systemic Risk Board (ESRB). It also includes the Joint Committee of the European Supervisory Authorities and the competent supervisory authorities of the EU Member States.
December 2011 – The reform of the Stability and Growth Pact enters into force. The reformed Pact sets out sets out a number of provisions, including stricter rules for government budget policy if a country exceeds the debt-to-GDP ratio of 60%. For the first time, a debt reduction benchmark is specified: the percentage by which the threshold is “overshot” must be reduced by one-twentieth per year. The sanction mechanism triggered in the event of non-compliance is also tightened slightly.
1 January 2013 – The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) enters into force. It is an expanded, stricter version of the reformed Stability and Growth Pact. The Treaty envisages limiting the structural deficit in a government budget to 0.5% of GDP. The provision of financial assistance through the European Stability Mechanism (ESM) is tied to the Fiscal Compact. A prerequisite for receiving assistance from the ESM is that the Fiscal Compact is ratified and debt brake provisions are transposed into national law. The majority of EU Member States adopt a debt brake.
1 January 2013 – The Financial Stability Act (Finanzstabilitätsgesetz) enters into force. It tasks the Bundesbank with macroprudential oversight in Germany. The German Financial Stability Committee (Ausschuss für Finanzstabilität) becomes the central body for macroprudential oversight.
2 July 2014 – The new European Deposit Guarantee Schemes Directive, aimed at harmonising deposit guarantee schemes within the European Union, enters into force. Germany transposes this Directive into law on 3 July 2015 with the Deposit Guarantee Act (Einlagensicherungsgesetz).
4 November 2014 – The Single Supervisory Mechanism (SSM) enters into force as the first pillar of banking union. The ECB assumes responsibility for banking supervision in the euro area. The ECB and the national supervisory authorities monitor euro area banks jointly in accordance with uniform rules. The legal basis is formed by the SSM Regulation.
1 January 2016 – The Single Resolution Mechanism (SRM) for the euro area enters into force as the second pillar of banking union. The SRM Regulation and the Bank Recovery and Resolution Directive (BRRD) form the basis for this in EU law. In Germany, the BRRD is transposed into law on 1 January 2015 with the Recovery and Resolution Act (Sanierungs- und Abwicklungsgesetz). Within the scope of its tasks in banking supervision, the Bundesbank is involved in banks' precautionary recovery planning.