EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 2 December 2003
at the request of the Austrian Federal Ministry of Finance
on a draft Federal law
on the National Foundation for Research, Technology and Development
(CON/2003/27 )
Introduction
1. On 13 November 2003 the European Central Bank (ECB) received a request from the Austrian
Federal Ministry of Finance for an opinion on Article 1 of the draft Wachstums- und Standortgesetz
2003  (Growth and Location Act 2003) adopting the Bundesgesetz über die Nationalstiftung für
Forschung, Technologie und Entwicklung  (Federal Law on the National Foundation for Research,
Technology and Development) (hereinafter the ‘draft law’). The ECB has not been consulted onthe other draft laws that will be presented to the Austrian Parliament as part of the Growth andLocation Act 2003.
2. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing
the European Community, the first indent of Articl e 4(a) of the Statute of the European System of
Central Banks and of the European Central Bank and the third indent of Article 2(1) of CouncilDecision 415/98/EC of 29 June 1998 on the consulta tion of the European Central Bank by national
authorities regarding draft legislative provisions
1, since the draft law contains provisions enabling
the Oesterreichische Nationalbank (OeNB) to restructure its free reserves and to make annualfinancial contributions to the proposed National Foundation for Research, Technology andDevelopment (hereinafter the ‘Foundation’). In accordance with the first sentence of Article 17.5 ofthe Rules of Procedure of the European Central Bank, the Governing Council of the ECB hasadopted this opinion.
3. On 24 November 2003, the ECB received from the OeNB copies of two letters from the OeNB’s
Direktorium  (Governing Board) to the Austrian Minister of Finance, both dated 5 November 2003,
which anticipate the adoption of the draft law. The fi rst of these letters determ ines in detail, in the
form of a declaration of intent that may be seen as a unilateral commitment, how the OeNB plansto implement various provisions of the draft law. The second letter deals with the funds that,according to the draft law, can be transferred from one of the OeNB’s reserves to another. As the
                                                     
1OJ L 189, 3.7.1998, p. 42.
2commitments set out in these letters supplement th e provisions of the draft law, where they are of
relevance to the assessment of the draft law they are referred to below, as appropriate. 
The ESCB’s financial independence
4. § 4(5) lines 1 and 2 of the draft law allow the OeNB to allocate funds to the Foundation. The
question arises as to whether the draft law, read together with the declaration of intent contained inthe first letter from the OeNB’s Governing Board to the Austrian Minister of Finance, dulypreserves the OeNB’s discretion to contribute to the Foundation. This becomes all the morerelevant as this letter of intent could potentially be interpreted as an unilateral commitment by theOeNB (although it is acknowledged that the OeNB’s Governing Board alone could not commit theOeNB to implement the proposed structure, but would require resolutions to that effect to be passedby the OeNB’s shareholders in general meeting. According to the draft law the Foundation will be
established as a gemeinnützige Stiftung  (foundation of benefit to the public) with the sole purpose
of sponsoring research, technology and development in Austria. It is intended that the Foundationwill be funded by annual contributions from (i) the European Recovery Program (ERP) Fund and(ii) the OeNB. According to § 4(5) lines 1 and 2 of the draft law, the OeNB will be entitled totransfer EUR 1.5 billion from its general reserve fund and its free reserves to the Jubiläumsfonds  (a
fund for sponsoring scientific research and teaching tasks) and to make an annual contribution ofEUR 75 million to the Foundation. Read together with the first of OeNB’s letters of5 November 2003, the impression could be created that the OeNB is committed to make an annualcontribution of EUR 75 million to the Foundation. The letter states that the OeNB will make anannual contribution of EUR 75 million to the Foundation, and that if the income on investment ofthe EUR 1.5 billion is less than EUR 75 million, then the difference will be made up from the
OeNB’s surplus profits pursuant to a resolution of its shareholders in general meeting or from otherown funds held by the OeNB (for exampl e by drawing on the general reserve fund). 
5. The requirement of ESCB independence as laid down in Article 108 of the Treaty is further
elaborated on in the convergence reports of the ECB and its predecessor, the European MonetaryInstitute. In these reports a distinction is made between different features of central bankindependence, and amongst others, financial inde pendence. Concerning the notion of financial
independence it is stated, inter alia , that ‘NCBs should be in a position to avail themselves of the
appropriate means to ensure that their ESCB-related tasks can be properly fulfilled’ . Formally, in
view of the size of the OeNB’s balance sheet, a nnual contributions of EUR 75 million by the OeNB
to the Foundation are unlikely to impede the proper fulfilment of the OeNB’s ESCB-related tasks,particularly if such donations are offset against the profits to be distributed to the State. However,as a matter of principle, it would not be consistent with the Treaty for a member of the ESCB to beunder a legal obligation to provide financial support , potentially by drawing on its own funds, for
activities that are normally sponsored by the State.
With a view to the compatibility of the envisaged structure with the ESCB’s financialindependence, the ECB considers it of utmost  importance that the OeNB will be under no
3obligation to contribute to the Foundation, either under the draft law or otherwise. This may,
however, be unclear since the explanatory notes to the draft law state that the Foundation isestablished to enable sustained financing of long-term, interdisciplinary research projects (whichimplies the continuity of contributions by the OeNB). Therefore, the wording of § 4(5) lines 1 and2 of the draft law should state clearly and explicitly that the OeNB has a discretion to resolve tomake contributions to the Foundation, which means that any commitment deriving from the first ofthe OeNB’s letters of 5 November 2003 (once its provisions have been endorsed by the OeNB’sshareholders in general meeting) may be with drawn at any point in time, the amount of the
contributions reviewed or the method for its funding revised. 
6. The ECB understands that from an accounting perspective, the envisaged transfer of
EUR 1.5 billion in accordance with § 4(5) of the draft law is a transfer from one OeNB reserve toanother and that these funds, once allocated to the Jubiläumsfonds , (i) will remain on the OeNB’s
balance sheet (ii) will continue to be managed by the OeNB and (iii) will remain fully at theOeNB’s disposal. The ECB understands furthermore that the proposed structure would not lead to areduction of the OeNB’s reserves and that consequently the EUR 1.5 billion would continue to beavailable to cover potential losses of the OeNB. In this context, the second letter from the OeNB tothe Austrian Minister of Finance of 5 November 2003 makes it clear that if due to specificcircumstances in an economically poor year (and despite other balance sheet provisions) the OeNBmakes a loss, recourse could be had to the EUR 1.5 billion transferred to the Jubiläumsfonds  in
order to cover the OeNB’s annual losses. The draft law should contain a provision making it clearthat contributions to the Foundation by the OeNB are subordinate to any financial needs relating to
the ESCB’s tasks and functions and to covering potential losses of the OeNB.
7. Finally, the OeNB’s income may be subject to Articles 32 and 33 of the Statute. Any distribution of
such income to the Foundation in implementation of the draft law and of the OeNB’s commitments
should respect the priority of the aforementioned articles, which derives from the supremacy ofCommunity over national law.
The financing by central banks of non-central bank activities
8. The ECB takes note that according to the expl anatory notes to the draft law, funding the
Foundation with interest income from the ERP Fund  and the OeNB will not directly affect the
Federal budget. However, the funds flowing to the Foundation from the OeNB will influence thelevel of national central bank (NCB) profits payable to the Bund  (Federal Government) and
therefore will have an indirect effect on the Federal budget. The explanatory notes to the draft lawstate by way of illustration that estimating OeNB gross profits to be EUR 643 million in 2004, theestablishment of the Foundation and the proposed redirection by the OeNB of reserves in theamount of EUR 1.5 billion would lead to a reduct ion in income for the Federal Government of
EUR 44.3 million (for the benefit of the proposed sponsoring of research, technology anddevelopment).
49. The ECB notes that the funding of research, technology and development is a field where the State
is normally active and where funds are normally provided from budgetary sources. Ascontributions to research, technology and development do not represent a traditional central bankactivity, task or function, the OeNB’s funding of the Foundation out of the earnings of theJubiläumsfonds could be seen as sponsoring activities that would otherwise have to be funded at
the State’s expense, following budgetary procedures, and which are normally financed fromdemocratically controlled budgetary sources. The ECB has therefore investigated whether theproposed financial contributions by the OeNB to the Foundation would be compatible withArticle 101 of the Treaty of the Statute prohibiting monetary financing.
Article 101 of the Treaty states that ‘[o]verdraft facilities or any other type of credit facilities with
the ECB or with the national central banks […] in favour of […] central governments, regional,local or other public authorities, other bodies governed by public law, or public undertakings […]shall be prohibited […]’.  Article 21.1 of the Statute mirrors this provision
(i) When assessing the proposed structure’s compatibility with Article 101 of the Treaty and
Article 21.1 of the Statute, not only a strict literal interpretation is of relevance, but also thepurpose of these provisions has to be considered. Therefore, the ECB would like to recallthat Articles 101 of the Treaty and 21.1 of the Statute have the overall aim of prohibitingNCBs from financing the public sector. 
(ii) The OeNB’s annual contributions to the Foundation would not represent an ‘overdraft’ or
‘any other type of credit facilities’  within the literal meaning of Article 101 of the Treaty and
Article 21.1 of the Statute. Indeed, the proposed arrangement provides for a yearly donationrather than a credit facility. Yet, where a credit facility (with the obligation to repay suchcredit) is prohibited under these provisions, it could perhaps be argued that this prohibitionmight also apply a fortiori to a donation ‘ à fonds perdu ’. Whilst it is, of course, in principle
not incompatible with Article 101 of the Treaty and Article 21.1 of the Statute for the OeNBto make donations to foster research, technology and development, this may be seen in adifferent light if it has to be considered that under the proposed structure the donations areconstrued as a regular and permanent financing mechanism for such activities. As a result,they may be seen as coming in effect rather close to credit facilities
2. Following this line of
argument, even if formally speaking the proposed arrangements would not contradictArticle 101 of the Treaty and Article 21.1 of the Statute under a strict literal interpretation,caution is still warranted taking into account the spirit of these provisions and the publicnature of financing research, technology and development.
                                                     
2 Article 1(1)(b)(ii) of Council Regulation (EC) No 3603/93 of 13 D ecember 1993 specifying definitions for the
applications of the prohibition referred to in Article 104 and 104(b)(1) of the Treaty [now Article 101 of the Treaty]defines as ‘other type of credit facility’ ‘any financing of the public sector’s obligation vis-à-vis third parties’.
5(iii) The ECB has also considered whether the Foundation could come close to being a ‘regional,
local or other public authority, other body governed by public law, or public undertaking’within the meaning of Article 101 of the Treaty and Article 21.1 of the Statute. Theexplanatory notes to the draft law (specific part, note on §§ 1, 2 and 4 of the draft law) statein this context that the Foundation would be a body sui generis and not a foundationestablished under the Privatstiftungsgesetz  (Federal Law on Private Foundations) or under
the Bundes-Stiftungs- und Fondsgesetz  (Federal Law on Federal Foundations and Funds).
§ 16 of the draft law provides that the Foundation shall only constitute a public foundationfor tax-law purposes, which seems to indicate that it is not the overall intention to establishthe Foundation as a public entity. In conclusion, it appears that the Foundation in terms of itslegal nature appears to be a body sui generis with more elements of a private foundation,although with certain public elements. Howeve r, as stated under point (i) above, caution is
still warranted, since the Foundation’s sole purpose is to provide financial means for the(public) activity of financing research, technology and development.
(iv) According to the draft law, the Foundation will not allocate sponsored funds directly to the
applicants, but instead to Einrichtungen  (institutions) borne by the Federal Government,
which then will further distribute the money to individual applicants in accordance with theirFörderrichtlinien  (sponsoring guidelines). Therefore, the ECB has also considered whether
these institutions could qualify as public entities within the meaning of Article 101 of theTreaty and Article 21.1 of the Statute. It is important to assess whether these institutions areentities to which the OeNB would be prohibited from allocating funds directly (for instanceby means of its present annual sponsoring of economics-oriented research via theJubiläumsfonds which will cease once the Foundation has been established). If this were the
case, an indirect allocation of OeNB funds to these institutions via the Foundation (even ifthe Foundation does not hold itself out as a ‘public’ institution) would indeed represent acircumvention of the Treaty. 
The explanatory notes to the draft law (specifi c part, note on § 3 of the draft law) mentions
the following as potential beneficiaries of the Foundation: the Forschungsförderungsfonds
(the Research and Development Fund), the Austria Wirtschaftsservice Gesellschaft, the
Österreichische Akademie der Wissenschaften  (the Austrian Academy of Sciences), the
Ludwig Boltzmanngesellschaft  and other research associations. No detailed information has
been provided to the ECB concerning these entities, but the fact that they are borne by theGovernment seems to indicate that their instit utional nature lies in the public sphere. The
OeNB has clarified that the ultimate beneficiaries of the funds distributed by the Foundationwill without exemption be private beneficiaries.  Furthermore, the OeNB has already in the
past directly contributed to some of these institutions via its Jubiläumsfonds . Nonetheless,
the ECB strongly recommends carefully assessing this aspect before adopting the draft law.
6The ESCB’s functional independence
10. It was also assessed whether the proposed structure would interfere with the ESCB’s objectives and
tasks. Indeed, if this were to be the case ( quod non  as explained below), Article 14.4 of the Statute
would perhaps become relevant. This Article states that ‘[n]ational central banks may perform
functions other than those specified in this Statute unless the Governing Council finds […] thatthese functions interfere with the objectives and tasks of the ESCB’.
According to Article 105(1) of the Treaty and Article 2 of the Statute, the primary objective of theESCB is ‘to maintain price stability’. The question is therefore whether the investment of theEUR 1.5 billion in the framework of the Jubiläumsfonds  or the annual transfer of up to
EUR 75 million to the Foundation (and the use of this amount for research, technology anddevelopment) could have an impact on the objective of maintaining price stability. From a purelymonetary-policy perspective, the draft law would not necessarily have an impact on liquidity and
interest rate developments different from the one prevailing under the current system of profittransfer. Transferring EUR 1.5 billion from the OeNB’s general reserve fund and its free reservesto the Jubiläumsfonds  (both of which are liabilities on the OeNB’s balance sheet) and distributing
some of the proceeds from this investment to the Foundation rather than to the Federal Government(by way of profit allocation) would not per se constitute a different net liquidity injection to theeuro area economy. In any case, any possible effects of the proposed structure on liquidity wouldneed to be taken into account, and such effects on liquidity could be offset, like any other shock toautonomous factors, by adjusting the amount of liquidity provided via regular open-marketoperations, leaving interest rates and liquidity conditions unchanged.
The ECB notes that the proposed structure does not conflict with the ESCB’s tasks as defined in
Article 105(2) of the Treaty and Article 3 of the Statute, as neither the investment ofEUR 1.5 billion in the framework of the Jubiläumsfonds  nor the annual transfer of up to
EUR 75 million to the Foundation seem to be activities that could have any negative impact on theimplementation of any of the ESCB’s tasks as defined in the Treaty and the Statute.
Conclusion
11. In view of the above, the ECB does not oppose the arrangements envisaged by the draft law
enabling the OeNB to contribute to the Foundati on. However, for the reasons stated above, the
ECB is of the opinion that vigilance should be applied as to the way in which the envisagedarrangements will be implemented in practice and that a regular review of these arrangementswould be warranted.
7Publication
12. The ECB confirms that it has no objection to the competent national authorities making this
opinion publicly available at their discretion. This  opinion will be published on the ECB’s website
six months after the date of its adoption.
Done at Frankfurt am Main on 2 December 2003.
The President of the ECB
[signed]
Jean-Claude TRICHET