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ECB voting rotation

by Ben Robinson

Fri 19 Feb 2016

ECB voting rotation Enlarge Chart loading Image

Voting rights on the European Central Bank’s monetary policy committee have, since Lithuania’s accession to the euro in January 2015, rotated on a monthly basis. The principle of rotation was established in 2003 on the premise that an expanding number of euro area members with monetary policy votes would ‘hamper efficient and timely decision-making’ (click here for a first hand account of the decision).

Rotation ensures that voting rights are capped at 21, including six permanent votes for the ECB Executive Board. The remaining 15 votes are split between euro members, which are divided into two groups based on their ECB share capital. The five largest countries share four votes, giving each an 80% voting frequency. The remaining 14 countries share 11 votes, giving them a 79% voting frequency. As membership of this group expands, the voting frequency of each member declines, to 73% for when there are 15 members in this category, and 69% for 16 members.

The rotation was designed to come into force when the euro reached 16 member states. However the European Council voted in 2008 to delay implementation until membership exceeds 18 states, as it did in January last year.

In addition to the monthly rotation of voting rights, the frequency of monetary policy meetings has since 2015 reduced from 12 a year to eight, occurring every six weeks. As a result, some months in which a country may have the right to vote coincide with months in which no monetary policy decisions are made.

The monetary policy meeting on 10 March was only the second time that Bundesbank President Jens Weidmann did not have a vote on monetary policy in a month that the monetary policy committee met. At the other such occasion, in October last year, a decision on the ECB’s monetary policy stance was postponed to December, by which time Weidmann had regained his vote.

The rotation of voting rights along national lines raises the risk of governing council members pursuing national interests in policy decisions. A future decision on European monetary policy at which Weidmann did not have a vote and which went against perceived German interests might raise criticisms within Germany that the needs of the largest European economy and largest contributor to the ECB’s share capital were not being adequately represented.

Similarly it raises the incentives for other members to pursue further monetary stimulus when they have a vote. This may make consensus more difficult to achieve, rather than less, as was the ECB's intention in introducing the rotation principle.

Importantly, this situation increases the risks of domestic criticism of the ECB within Germany. As reigonal elections on 13 March demonstrated, popular discontent with the ECB and criticism of Chancellor Merkel's support for its policies have weakened her Christian Democratic Union party.