Opinion of the European Central Bank of 6 October 2021 on a law re-enacting the Federal Law on the establishment of a Fiscal Advisory Council and establishing a Productivity Board (CON/2021/29)

OPINION OF THE EUROPEAN CENTRAL BANK of 6 October 2021 on a law re-enacting the Federal Law on the establishment of a Fiscal Advisory Council and establishing a Productivity Board (CON/2021/29) Introduction and legal basis

On 23 August 2021 the European Central Bank (ECB) received a request from the Austrian Federal Ministry of Finance for an opinion on a draft law re-enacting the Federal Law on the establishment of a Fiscal Advisory Council and establishing a Productivity Board (hereinafter the ‘draft law’) . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to the Oesterreichische Nationalbank (OeNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The draft law replicates, with minor adjustments, the existing tasks of the Fiscal Advisory Council, which principally comprise assessing the current and future fiscal situation and analysing the economic effects of financial operations in connection with the financial debt related to public budgets. In the future, the Fiscal Advisory Council will also analyse the quality of macroeconomic and budgetary forecasts on a regular basis. 1.2 The draft law also establishes a Productivity Board in accordance with Council Recommendation 2016/C 349/01 . The Productivity Board’s primary task is to diagnose and analyse developments in productivity and competitiveness in Austria. It will also be entrusted with conducting independent analyses of the challenges that exist and the possible measures that may be taken in the areas of productivity and competitiveness, and with exchanging expertise and best practices with similar institutions. In addition to analytical activities, the Productivity Board is to submit recommendations to the Federal Minister for Digital and Economic Affairs and to prepare reports on these recommendations which the Federal Minister is required to submit to the National Council, the lower house of the Austrian Parliament.

1.3 The explanatory memorandum accompanying the draft law states that Recommendation 2016/C 349/01 leaves it to the Member States to transfer the tasks of a productivity board or committee to an appropriate existing institution or to create a new one. For reasons of administrative efficiency and in order to exploit synergies, the Productivity Board in Austria is to be organisationally co-supervised by the Secretariat of the Fiscal Advisory Council; while for reasons of resource efficiency and, again, in order to exploit synergies, the Board is to be kept small and the President of the Fiscal Advisory Council will act as its Chair. The Fiscal Advisory Council is to be composed of 15 persons and the Productivity Board of five persons. 1.4 As far as the tasks of the OeNB with respect to the Fiscal Advisory Council and the Productivity Board are concerned, the draft law requires the OeNB to provide the necessary staff and equipment to carry out scientific analyses for the Fiscal Advisory Council and the Productivity Board. Furthermore, the draft law provides that the President of the Fiscal Advisory Council, who also acts as the Chair of the Productivity Board, is to receive remuneration for his or her activities and the reimbursement of travel expenses incurred in the performance of his or her duties. The remuneration to be paid shall be determined by the Federal Minister for Finance after consulting the OeNB. The ECB understands from the explanatory memorandum that the OeNB shall be responsible for paying such remuneration. The costs incurred by the OeNB as result of the draft law shall be borne by the Austrian Federation up to an amount of EUR 200,000 per year. For this purpose, the OeNB shall reduce the payment of the Austrian Federation’s share of the net profit pursuant to Section 69(3) of the Law on the Oesterreichische Nationalbank (hereinafter the ‘Law on the OeNB’) accordingly. If the net profit is insufficient, costs up to EUR 200,000 shall be borne directly by the Austrian Federation. This regime is to be applied for the first time for the 2021 financial year, on a pro rata temporary basis with regard to that year.

2. Conferral of new tasks on the OeNB in relation to the Productivity Board

2.1 The draft law confers new tasks on the OeNB, namely carrying out scientific analyses for the Productivity Board. While the OeNB carries out scientific analyses for the Fiscal Advisory Council for many years and must provide the necessary staff and equipment to do so, the draft law newly establishes the Productivity Board. Therefore, the task of the OeNB to carry out scientific analyses for the Productivity Board is a genuinely new task of the OeNB. The ECB underlines that, in the context of a proposed conferral of new tasks on a national central bank (NCB) in the European System of Central Banks (ESCB), it is necessary to assess such a conferral against the prohibition on monetary financing under Article 123 of the Treaty. For the purposes of that prohibition, Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/93 defines ‘other type of credit facility’, inter alia, as ‘any financing of the public sector’s obligations vis-à-vis third parties’. 2.2 Ensuring that Member States implement a sound budgetary policy is one of the key objectives of the monetary financing prohibition . Therefore, the task of financing measures, which are normally

the responsibility of the Member States, and which are financed from their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To decide what constitutes financing of the public sector’s obligations vis-à-vis third parties, which can be translated as the provision of central bank financing outside the scope of central bank tasks, it is necessary to carry out, on a case-bycase basis, an assessment of whether the task to be undertaken by an NCB is a central bank task or a government task, i.e. a task within the responsibility of the Member States. 2.3 As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and Article 35.6 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), to ensure that NCBs honour the obligations laid down by the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for determining what may be seen as falling within the scope of a public sector’s obligation within the meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in other words, constitute a government task as follows: First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and recategorised but may be reassessed if they are subject to legislative amendments of substance . Second central bank tasks are in particular those tasks that are related to the tasks that have been conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are mainly defined in Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 22 and Article 25.1 of the Statute of the ESCB. Third, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, are not precluded per se. However, new tasks that are undertaken by an NCB and which are atypical of NCB tasks or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public sector entities should be considered government tasks. Fourth, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly discharged on behalf of and in the exclusive interest of the government or other public sector entities is the impact of the task on the institutional, financial and personal independence of that NCB. In particular, the following aspects should be taken into account: (a) whether the performance of the new task creates conflicts of interest with existing central bank tasks which are not adequately addressed and does not necessarily complement those existing central bank tasks. If a conflict of interest arises between existing and new tasks, sufficient safeguards to mitigate that conflict should be in place. The complementarity between a new task and the existing central bank tasks should not be interpreted broadly, so as to lead to the creation of an indefinite chain of ancillary tasks. Such complementarity should also be

examined in relation to the financing of those tasks; (b) whether without new financial resources the performance of the new task is disproportionate to the NCB’s financial or organisational capacity and may have a negative impact on the capacity to perform properly the existing central bank tasks; (c) whether the performance of the new task fits into the institutional set-up of the NCB in the light of central bank independence and accountability considerations; (d) whether the performance of the new task harbours substantial financial risks; whether the performance of the new task exposes the members of the NCB decision-making bodies to political risks which are disproportionate and may also have an impact on their personal independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the Statute of the ESCB. 2.4 Assessment of the conferral of new tasks on the OeNB in relation to the Productivity Board On the basis of the criteria set out above, the following paragraphs assess whether the OeNB’s new tasks are in line with the monetary financing prohibition. 2.4.1 Tasks related to the tasks conferred upon the ESCB and the Eurosystem by the Treaty and the

Statute of the ESCB and the ECB

The task of carrying out scientific analyses for the Productivity Board is indirectly linked to the tasks conferred upon the ESCB and the Eurosystem by the Treaty and the Statute of the ESCB insofar as the ECB and the NCBs closely monitor and analyse both fiscal and structural economic developments in euro area Member States in order to effectively exercise the tasks conferred upon the ESCB and the Eurosystem. However, they only do so in relation to the tasks conferred upon the ESCB and the Eurosystem, not the tasks of public entities such as the Productivity Board. 2.4.2 Tasks which are atypical of NCB tasks The ECB notes that Member States have followed different approaches when implementing Council Recommendation 2016/C 349/01. The majority of Member States that have established productivity boards benefit in some way from existing institutions. Some Member States have established productivity boards within existing institutions and broadened the mandates of those institutions to carry out the envisaged tasks. Other Member States have created new bodies, which typically rely on support from an existing structure such as a ministerial department or a research institute . However, Austria is the only Member State to have created a new productivity board that relies on its NCB for the provision of scientific analyses. For that reason, the new task conferred on the OeNB is atypical of central bank tasks. 2.4.3 Extent to which the new tasks are performed on behalf of and in the exclusive interest of the

government or of other public entities

While the ECB understands that carrying out scientific analyses for the Productivity Board might create useful inputs for the OeNB’s own scientific analyses, it nevertheless notes that the new task for the provision of scientific analyses to the Productivity Board is performed on behalf of this public

entity and for the benefit of the Federal Minister for Digital and Economic Affairs. 2.4.4 Extent to which the performance of the new tasks creates conflicts of interest with existing central

bank tasks

In common with other central banks, the OeNB closely monitors and analyses both fiscal and structural economic developments in euro area Member States in order to effectively exercise the tasks conferred upon the ESCB and the Eurosystem. From this perspective, the OeNB’s provision of scientific analyses for the Productivity Board carries synergies with its central bank tasks, and will enhance the OeNB’s level of expertise. However, as repeatedly emphasised by the ECB, an NCB’s role in monitoring and analysing economic, fiscal and structural developments should not go beyond activities that result from or are linked – directly or indirectly – to the discharge of their monetary policy and central banking mandate . 2.4.5 Extent to which the performance of the new tasks is disproportionate to the OeNB’s financial and

organisational capacity

2.4.5.1 The principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB-related and national tasks, both from an operational and financial perspective. Furthermore, when allocating specific non-ESCB-related tasks to the NCBs, additional personnel and financial resources must also be allocated so that these tasks may be carried out in a manner that will not affect the NCBs’ operational or financial capacity to perform their ESCB-related tasks . 2.4.5.2 The draft law entrusts the OeNB with the potentially resource-intensive task of carrying out scientific analyses. The ECB understands from the explanatory memorandum that the OeNB will also pay the remuneration of the Chair of the Productivity Board, who is also to act as President of the Fiscal Advisory Council. Furthermore, the OeNB will reimburse costs incurred by members of the Productivity Board. In this regard, the ECB notes that Section 4(12) of the draft law states that the costs incurred by the OeNB as a result of the draft law shall be borne by the Austrian Federation up to an amount of EUR 200,000. However, the draft law does not state that the Austrian Federation is to be responsible for reimbursing the OeNB in respect of the costs related to its new tasks for any amount above EUR 200,000. The ECB understands that the actual annual costs are likely to be considerably in excess of EUR 200,000. While the ECB understands that the new task is not disproportionate to the OeNB’s financial and organisational capacity, it cannot be entirely excluded that the costs for the Productivity Board, in connection with the costs for the Fiscal Advisory Board, might have a negative impact on the OeNB’s financial resources. 2.4.6 Extent to which the performance of the new tasks is aligned with the OeNB’s institutional set-up in the light of central bank independence and accountability considerations The performance of the OeNB’s new tasks under the draft law appears to be consistent with its institutional set-up and seems not to raise any issues in terms of central bank independence and accountability considerations.

2.4.7 Extent to which the performance of the new tasks entails substantial financial risks The performance of the new tasks does not seem to entail substantial financial risks for the OeNB. In the ECB’s view, it is unlikely that carrying out scientific analyses for the Productivity Board will lead to damages for which the OeNB may potentially be held liable. 2.4.8 Extent to which the performance of the new tasks exposes members of the OeNB’s decisionmaking bodies to disproportionate political risks and impacts on their personal independence The performance of the new tasks does not appear to expose the members of the OeNB’s decisionmaking bodies to disproportionate political risks or to impact their personal independence. However, it cannot be entirely excluded that the OeNB and/or the members of its decision-making bodies might be exposed to reputational risks in the performance of the new tasks. 2.5 Conclusion 2.5.1 The OeNB’s new tasks in relation to the Productivity Board are not related to the tasks conferred upon the ESCB and the Eurosystem by the Treaty and the Statute of the ESCB. Moreover, the tasks in connection with the Productivity Board are atypical of central bank tasks. Austria is the only Member State implementing Recommendation 2016/C 349/01 that has created a new body which relies on its NCB for the provision scientific analyses. To ensure compliance with the monetary financing prohibition, it will be necessary to ensure that the new tasks in relation to the Productivity Board are fully and adequately remunerated. 2.5.2 In this respect, the draft law raises two concerns. First, the ECB understands from the wording of the draft law that the Austrian Federation will bear costs up to a maximum annual limit of EUR 200,000 in any event and that it will only bear such costs directly if the OeNB’s net profit is insufficient to cover an amount of up to EUR 200,000. In order to comply with the monetary financing prohibition, it will be necessary to ensure that all costs of the OeNB related to the performance of the new tasks in relation to the Productivity Board are fully and adequately remunerated. Second, the ECB understands that the OeNB is to reduce the payment of the Austrian Federation’s share of the net profit pursuant to Section 69(3) of the Law on the OeNB to cover its costs. Where the remuneration of the new tasks in relation to the Productivity Board takes place in the context of the distribution of the OeNB’s profits, the reduction must be distinct from and subsequent to the OeNB’s profit disbursement in order for such financing to be regarded as being compliant with the monetary financing prohibition . In addition, profits that have been fully realised, accounted for and audited may be used to remunerate the new tasks in relation to the Productivity Board insofar as the OeNB has a distributable profit within the meaning of Section 69(3) of the Law on the OeNB. In this regard, the ECB understands that the OeNB’s costs are borne by the Austrian Federation after the end of the respective financial year, subject to the approval of the annual financial statements by the General Council and the General Meeting. This mechanism is inappropriate for the present draft law. In contrast to the laws on which the ECB has opined previously, under the draft law the OeNB must cover ongoing costs relating to the fulfilment of its tasks during the financial year. The ongoing coverage of costs in advance under the draft law by the OeNB qualifies as granting credit facilities in favour of the Austrian Federation and accordingly

constitutes a breach of the monetary financing prohibition. The draft law should therefore be amended in order to remedy this breach.

3. The OeNB’s financing of the Fiscal Advisory Council

3.1 The systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to the NCBs in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to legislative amendments of substance . Under the current legal framework, the OeNB’s obligations in relation to the Fiscal Advisory Council are to bear its costs and to provide the necessary staff and expenses, but no explicit reference is made to the OeNB discharging these duties with a view to carrying out scientific analyses for the Fiscal Advisory Council. However, the ECB understands that in practice the OeNB provides the necessary staff to the Fiscal Advisory Council in order to carry out such scientific analyses. The draft law now explicitly clarifies that the OeNB is to provide the necessary staff and equipment in order to carry out such scientific analyses. The ECB understands this clarification as merely expressing what was already implicit in the current legal framework. Accordingly, the draft law does not substantially amend the OeNB’s existing tasks as regards the Fiscal Advisory Council. 3.2 Although the draft law does not substantially amend the OeNB’s existing tasks in relation to the Fiscal Advisory Council, it substantially amends the existing arrangements governing the OeNB’s financing of the Fiscal Advisory Council. While under the current legal regime the OeNB bears the entirety of the Fiscal Advisory Council’s costs, in the future the costs incurred by the OeNB as a result of the draft law in relation to both the Fiscal Advisory Council and the Productivity Board are to be borne by the Austrian Federation up to an amount of EUR 200,000 per year. Furthermore, the draft law entitles the President of the Fiscal Advisory Council to receive remuneration which is to be paid by the OeNB. 3.2.1 The systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to tasks that did not form an integral part of the central banking tasks already assigned to the NCB in the past. The exemption from reassessments is therefore only applicable to tasks currently discharged by an NCB as central banking tasks. The ECB has repeatedly emphasised that the tasks assigned to independent fiscal institutions, in particular under Regulation (EU) No 473/2013 of the European Parliament and of the Council , are neither central banking tasks, nor do they facilitate the performance of such tasks, and that the government is exclusively competent for compliance with the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union and Regulation (EU) No 473/2013 . Accordingly, the OeNB’s

existing tasks in relation to the Fiscal Advisory Council can also not be regarded as central banking tasks but as government tasks. In this context, it is noted that the vast majority of Member States have not assigned to their NCBs the task of carrying out scientific analyses and providing the necessary staff and equipment to their independent fiscal institutions (IFIs), and neither do NCBs finance this task. There are three Member States (the Czech Republic, Germany and Hungary) the NCBs of which are represented in the IFI or in an advisory body to the IFI, albeit without conferring any tasks on these NCBs . There are three further Member States (Austria, Estonia and Slovakia) the NCBs of which finance IFIs . The NCBs of two of these Member States (Estonia and Slovakia) are entitled to be fully compensated by their governments for expenses incurred in this respect . The OeNB is currently the only NCB within the ESCB that is required to provide the necessary staff and to bear the costs of an IFI without any right to compensation from the respective Member State. While the draft law improves the situation, as it stipulates an annual compensation of the OeNB’s costs up to EUR 200,000, the ECB understands that the OeNB’s annual costs in respect of the Fiscal Advisory Council and the Productivity Board are likely to be considerably in excess of the EUR 200,000 threshold. 3.2.2 The ECB has repeatedly noted that the financing by NCBs of independent fiscal institutions or of government tasks relating to the monitoring of fiscal developments breaches the prohibition of monetary financing . To ensure compliance with the monetary financing prohibition, it will therefore be necessary to ensure that OeNB’s existing tasks in relation to the Fiscal Advisory Council are fully and adequately remunerated. In this respect, the draft law raises the same two concerns as are outlined above in relation to the Productivity Board (see paragraph 2.5.2 above). First, the ECB understands from the wording of the draft law that the Austrian Federation will bear costs up to a maximum annual limit of EUR 200,000 in any event and that it will only bear such costs directly if the OeNB’s net profit is insufficient to cover an amount of up to EUR 200,000. In order to comply with the monetary financing prohibition, it will be necessary to ensure that all costs of the OeNB related to the performance of the existing tasks in relation to the Fiscal Advisory Council are fully and adequately remunerated. Second, the ECB understands that the OeNB is to reduce the payment of the Austrian Federation’s share of the net profit pursuant to Section 69(3) of the Law

on the OeNB to cover its costs. Where the remuneration of the OeNB’s existing tasks in relation to the Fiscal Advisory Council takes place in the context of the distribution of the OeNB’s profits, the reduction must be distinct from and subsequent to the OeNB’s profit disbursement in order for such financing to be regarded as being compliant with the monetary financing prohibition . In addition, profits that have been fully realised, accounted for and audited may be used to remunerate the OeNB’s existing tasks in relation to the Fiscal Advisory Council insofar as the OeNB has a distributable profit within the meaning of Section 69(3) of the Law on the OeNB. In this regard, the ECB understands that the OeNB’s costs are borne by the Austrian Federation after the end of the respective financial year, subject to the approval of the annual financial statements by the General Council and the General Meeting. This mechanism is inappropriate for the present draft law. In contrast to the laws on which the ECB has opined previously, under the draft law the OeNB must cover ongoing costs relating to the fulfilment of its tasks during the financial year. The ongoing coverage of costs in advance under the draft law by the OeNB qualifies as granting credit facilities in favour of the Austrian Federation and accordingly constitutes a breach of the monetary financing prohibition. The draft law should therefore be amended in order to remedy this breach.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 6 October 2021.

[signed]

The President of the ECB

Christine LAGARDE