Full Compliance Summary
Italy adopted the euro at its launch in January 1999, and thus, its monetary policy is no longer governed by the Italian central bank. Rather, the Governing Council of the European Central Bank (ECB) determines Italian monetary policy, and the Eurosystem (consisting of the ECB and the central banks of the member states that have adopted the euro) is responsible for its implementation. According to the International Monetary Fund (IMF), the Eurosystem and the ECB maintain high transparency standards and a commitment to openness. The ECB observes the IMF's codes and standards for monetary policy transparency and pursues an active policy of communication with the public. In 2009, the IMF voiced its support for the ECB’s accommodative monetary policy in response to the global financial crisis and recession in the European Union (EU). The Fund urged continued monetary easing in order to prevent a still-possible deflationary spiral, and called for quicker action from the EU in order to repair the financial system.
General Overview
Since the launch of the European Monetary Union (EMU) on January 1, 1999, monetary policy is no longer determined by the Italian central bank. Rather, it is crafted by the governing council of the European Central Bank (ECB), and implemented by the Eurosystem, consisting of the ECB and the National Central Banks of the member states that have adopted the euro. According to a 2001 International Monetary Fund’s (IMF) Report on the Observance of Standards and Codes (ROSC) for monetary policy in the euro area, the Eurosystem complies with nearly all monetary policy transparency standards and has demonstrated a strong commitment to communicating with the public. The ECB offers a wide range of publications regarding its policies, practices, and procedures, and most are available on its website. The ECB also welcomes visits by the press and the public. The IMF's 2001 ROSC for the euro area noted that the Eurosystem implements the ECB's monetary policy decisions. The functioning of the Eurosystem is complicated by "its complex architecture, the varied monetary and legal heritages of participating National Central Banks and uncertainties about the structural characteristics of the euro area" (p. 7). The fact that the central bank of each member nation has developed its own transparency practices has given rise to difficulties in establishing comparability of policy and data across the euro area.
The 2001 ROSC noted that "the Eurosystem observed all 46 principles contained in the Code (except for two, which were regarded as not applicable), and only eight of these were considered to be only 'broadly' or 'partly' observed" (p. 12). In an ECB's 2005 Annual Report, the bank announced that it would not publish the minutes of its Governing Council discussions, "in order to maintain the confidentiality of its meetings" (p. 143). Instead, it reaffirmed its opinion that other channels of communication permitted greater timeliness, such as the press conferences that it held after such meetings. These, the ECB argued, provided "in real time, a comprehensive account of the reasons underpinning the Governing Council's decisions, and thus essentially serve the same purpose as minutes" (p. 143), without the delay that would result from the publication of formally adopted minutes.
The ECB's 2005 annual report also stressed that the combination of press conferences, the Monthly Bulletin, and the monthly communication on Governing Council decisions taken in addition to interest rate decisions, make the ECB "one of the most transparent central banks in the world" (p. 144). In the same report, the ECB president noted that the disclosure of specific voting behavior could result in undue pressure being brought to bear on individual council members, with the result that they might lose sight of the broader euro-area perspective that should govern their deliberations. An ECB’s 2008 Annual Report notes that this issue was once again considered by the European Parliament in its 2008 analysis of the work performed by the ECB. The report also stated that “the European Parliament acknowledged the full independence of the ECB and recognized that publishing the minutes of Governing Council meetings could lead to political pressure on Governing Council members” (p. 185).
In its official statement on the 2005 Article IV Consultation with the euro area countries, the IMF noted that the Eurosystem has helped to foster macroeconomic stability and reform. According to the Consultation, "peer-driven, multilateral surveillance has encouraged the adoption of better policies. And thanks in part to the ECB's hard-won credibility, wage pressures are subdued and long-run interest rates are at historical lows in all euro-area member countries, notwithstanding large shocks to prices." Meanwhile, an IMF’s 2009 Article IV Consultation for the euro area was published in July of the same year, well into the global financial crisis and subsequent recession in the EU. The report stated that there were “tentative signs of improvement” (p. 3), but that the economic outlook remained uncertain. Per the same report, the Fund shared the ECB’s concern that deflation continued to be a major risk in the EU, and thus called for continued low interest rates and urged that “all unconventional measures . . . remain under consideration” (p. 3) as long as prolonged deflation remained a possibility. At the same time, the ECB was considering a responsible exit strategy, and stated that, if necessary, it could issue its own paper and provide short-term deposit facilities to reduce liquidity. Of further concern to the IMF was the slow pace of bank recapitalization and other measures to shore up the financial system. The Fund called for the EU to be more “proactive” in its approach to stabilization, and urged speedier action on the coordination of policy responses. Beyond immediate measures, the Article IV report stated that central banks across the EU would need to play a crucial role in the European Systemic Risk Board in order to provide early warnings to prevent future crises.
The Principles
FCClarity of roles, responsibilities and objectives of central banks.
Since the launch of the EMU on January 1, 1999, Italy’s monetary policy has come under the direction of the Eurosystem and the ECB. The IMF's 2001 ROSC for the euro area stated that "in terms of the clarity of roles, responsibilities, and objectives of the Eurosystem, there is a high degree of observance of the Code" (p. 8). The goals and responsibilities of the ECB and national central banks in the euro area are clearly set forth in the Maastricht Treaty and the Statute of the European System of Central Banks (ESCB) of 1992. The ROSC noted, however, that there remains a lack of clarity as to foreign exchange policy and how it is allocated between the Council of Ministers and the Eurosystem. The 2001 ROSC specifically observed that "operationally, the varied disclosure practices by National Central Banks on the terms and conditions for government deposits and participation in government securities markets could be improved by the National Central Banks adopting a common approach to greater disclosure" (p. 8).
The 2001 ROSC also cited the ECB position on this issue, which maintains that the Maastricht Treaty and the 1992 Statute provide sufficient clarity in this regard, because their "provisions ensure that regular exchanges of information and views take place between the Council of Ministers and the ECB on the exchange rate of the euro" (p. 12). The ESCB and ECB are established by Articles 105 through 108 of the Maastricht Treaty. Article 105, paragraph 1 establishes the primary responsibility of the ESCB as the maintenance of price stability and the support of the European Community's (EC) general economic policies. Paragraph 2 of the same article enumerates ESCB responsibilities as follows: it shall define and implement the monetary policy of the euro area; conduct foreign exchange operations; hold and manage the official foreign reserves of the Member States; and promote the smooth operation of payment systems. Paragraph 5 of the same article requires that the ESCB contribute to the smooth conduct of prudential supervision of credit institutions and the stability of the financial system.
The Maastricht Treaty, in conjunction with the provisions of the 1992 Statute, confers upon the ECB (with the National Central Banks) the task of making and implementing monetary policy decisions. Article 109 of the Maastricht Treaty establishes the rules by which the ECB's Governing Council (as well as the council's Executive Board) is to be constituted, and enumerates its responsibilities in the formulation of monetary policy of the euro area. Article 109a, Paragraph 1 stipulates that the Governing Council of the ECB shall comprise the Executive Board and the Governors of the National Central Banks of the member states.
In 2003, an IMF Article IV Consultation with the Euro-Area countries reported that earlier weaknesses in the ECB's monetary framework had been addressed. Previously existing problems in communication had been alleviated, and greater clarity was achieved in the terms according to which price stability would be maintained, reducing the threat of area-wide deflation.
The 2001 ROSC lauded the Eurosystem's "high degree of legal and operational independence" (p. 6). The Maastricht Treaty prohibits the ECB and the National Central Banks and members of their decision-making bodies from taking instructions from any external body, and prohibits attempts on the part of member states or other bodies to influence the decisions or activities of the ECB or National Central Banks. The ESCB/ECB Statute of 1992 provides for secure tenure for National Central Bank governors and sets the minimum term of office at five years. Executive Board members serve 8-year, non-renewable terms. The statute stipulates that governors and members of the Executive Board may be removed from office only in the event of incapacity or gross misconduct. The Maastricht Treaty designates the European Court of Justice (ECJ) as the competent authority to adjudicate questions arising from the removal from office of a governor or board member.
FCOpen process for formulating and reporting monetary policy decisions.
In 2001, the IMF's ROSC for the euro area noted that both the Eurosystem and the ECB demonstrate high compliance with the Code. According to this report, "the ECB provides extensive information on the framework and procedures underlying the implementation of monetary policy" (p. 8). The ECB publishes its guidelines for Eurosystem monetary policy instruments and procedures in the Official Journal of the European Communities. It also publishes a Monthly Bulletin and regularly issues press releases, transcripts of press conferences, and other public statements in an effort to communicate both its policy stance and the considerations underlying that policy. In addition, the ECB publishes a broad range of information on the framework and procedures employed in monetary policy making and implementation. The 2001 ROSC noted that the ECB's program of data dissemination is extensive, and that its publications are of high quality. Italian monetary policy is governed by the ECB, for which the Maastricht Treaty sets forth precise reporting requirements. According to the treaty, quarterly reports, weekly financial statements, and an annual report must be published. The ECB meets and exceeds these requirements, publishing a monthly report in place of the quarterly publication mandated by the treaty. As noted in an ECB's 2008 Annual Report, "the European Parliament – as the body which derives its legitimacy directly from the citizens of the EU – has continued to play a key role in holding the ECB to account" (p. 184). Article 113 of the Treaty requires the president to present the ECB's Annual Report to the plenary session of the European Parliament. In addition, the ECB's 2008 Annual Report noted that the president "[reports] regularly on the ECB's monetary policy and its other tasks during his quarterly appearances before the European Parliament’s Committee on Economic and Monetary Affairs" (p. 184).
Other examples of the ECB's commitment to transparency can be drawn from the 2008 Annual Report, which documented the visit by the Committee on Economic and Monetary Affairs to the ECB for a discussion of issues relevant to monetary policy, and discussions held between the Committee and European Parliament members about EU policies regarding securities clearing and settlement. The 2008 Annual Report also detailed the ECB's practice of responding to Parliamentary requests for information in the ECB’s areas of expertise.
FCPublic availability of information on monetary policy.
As mention earlier, since the launch of the EMU in 1999, Italy has been a member of the euro area and its monetary policy has been governed by the Eurosystem through the ECB. The IMF's 2001 ROSC for the euro area noted that the Eurosystem "maintains a high degree of observance of the Code in the area of public availability of information on monetary policy" (p. 8). The ECB complies with nearly all of the IMF's Special Data Dissemination Standard principles regarding coverage, periodicity, timeliness, and access by the public for central bank, banking sector, and foreign reserves data. Among the ECB's freely available publications are detailed annual balance sheets and a weekly consolidated financial statement for the Eurosystem. The quality and accessibility of these publications are high, and they are available in all EU languages. The ECB also offers an active public information service, including press releases and addresses made by the Bank's Executive Board. Regulations and other documentation are provided on the ECB website.
The IMF's 2009 Article IV Consultation for the euro area determined that Eurostat and ECB statistics maintain appropriate standards of quality, scope, and timeliness, and that major progress has been made since the euro was introduced. A new regulation passed in 2009 improved the legal basis for collecting and compiling EU statistics. Nonetheless, the report states that the financial crisis that began in late 2007 “has exposed new needs, notably, new data and information systems to allow better macrofinancial risk monitoring and support the work of the new European Systemic Risk Board” (p. 42). To this end, the ECB is planning to expand statistical compilation of non-bank financial intermediaries that pose systemic risks, such as hedge funds, insurance companies, and pension funds.
The 2007 ECB Annual Report stated that "the ECB's other statutory publications – the Annual Report, the quarterly issue of the Monthly Bulletin and the Convergence Report – are also made available in the official EU languages" (p. 172). Through the Bank of Italy the ECB also makes available its key publications and issues press releases on changes in monetary policy, macroeconomic projections, and other information of public interest, again, in all EU languages.
FCAccountability and assurances of integrity by the central bank.
In 2001, the IMF's ROSC for the euro area ascertained that "the Eurosystem practices a high degree of accountability and assurances of integrity in the conduct of its operations, and has a high degree of observance of the Code" (p. 9) In practice, the ECB Executive Board members, including the president of the board, make regular reports to the European parliament and its Committee on Economic and Monetary Affairs. The publication of annual reports occurs on a regular schedule, with a lag of no more than four months from the end of the prior fiscal year. Other documentation includes a report released by the Anti-Fraud Committee, a management efficiency report produced by the Court of Auditors (both released annually), and data on the ECB's internal governance, including its employee code of conduct. The 2001 IMF’s ROSC did identify areas in which the ECB might make improvements. These include a review of the way in which the ECB carries out consultations on payment issues, and a recommendation that it actively engage the public, for example via the internet, on proposed technical, regulatory, and policy changes.
