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Lithuania changes the ECB’s voting system – membership threshold triggers change in the ECB’s Governing Council’s voting system

Merler, S. (2014) “Lithuania changes the ECB’s voting system – membership threshold triggers change in the ECB’s Governing Council’s voting system, which starts rotating“, Bruegel Institute, 25 July.

 

Lithuania will become the 19th member of the Euro area on the 1st of January, following Wednesday’s Council endorsement. The most important part of the story – however – is not that someone is still brave enough to join the Euro area, but that Lithuania’s accession will trigger a change in the voting system of the ECB.

Lithuania’s accession to the euro area will be effective on the 1st of January 2015. This will bring the number of eurozone members to 19 and the Governing Council’s members to 25 (6 members of the executive board and 19 National Central Bank governors). Enough to trigger a change in the ECB’s Governing Council’s voting system, which will start rotating.

Actually, the statutes of the European System of Central Banks and of the ECB already envisaged the switch to a rotating system when the number of euro area countries exceeded 15 (which has been the case since quite some time). However, in December 2008, the Governing Council decided to defer the decision until the number of governors exceeded 18. This was an exception possible under the letter of the Treaty, but no other escape clause is offered and the rotation is therefore unavoidable.

The idea behind the rotation is to ensure the effectiveness of the ECB’s decision making even with an increased number of participants. The Federal Open Market Committee (FOMC) of the US Federal Reserve uses a similar system, with 12 voting members, 7 of whom are members of the Board of Governors and hold permanent voting rights. Differently from the ECB’s case, in the US specific regional governors enjoy special treatment. The President of the New York Fed has a permanent voting right, the Presidents of the Federal Reserve Banks of Chicago and Cleveland vote every other year and the Presidents of the other nine Federal Reserve Districts vote every third year.

 

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