COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 
COM(1998) 789 final 
98/0365 (CNB) 
98/0366 (CNB) 
98/0367 (CNB) 
Recommendation for a 
COUNCIL DECISION 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Principality of Monaco 
Recommendation for a 
COUNCIL DECISION 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Republic of San Marino 
Recommendation for a 
COUNCIL DECISION 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Vatican City 
(presented by the Commission) 

Recommendation for a Council Decision 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Principality of Monaco 
EXPLANATORY MEMORANDUM 
As from 1 January 1999, the Community will have the exclusive competence for 
monetary and exchange rate matters in the Member States adopting the euro. Any 
agreement with third countries concerning monetary or foreign exchange rate matters 
needs to reflect this allocation of competence. Therefore, the Community must decide on 
the future of such agreements which exist between Member States adopting the euro and 
third countries. 
For this purpose, the Commission is presenting a draft Council Decision which is 
addressed to France and which defines the position to be taken in the negotiation of a 
new agreement between the Community and the Principality of Monaco. 
I. General considerations 
France has particular monetary links with the Principality of Monaco, which are based on 
different legal instruments1 and which ensure that banknotes and coins issued by France 
have legal tender status in the Principality of Monaco. Coins issued by the Principality of 
Monaco have legal tender status in the Principality of Monaco only. The Principality of 
Monaco has neither an own currency nor a central bank. 
Financial institutions located in the Principality of Monaco have access to the refinancing 
facilities of the Banque de France, which they have not used in the past and to some 
French payment systems under the same conditions as French banks. On the other hand 
they are subject to the same minimum reserve and statistical reporting requirements as 
French banks. Moreover, they are subject to the same conditions with regard to the 
granting of a banking license and are supervised by the competent French authorities. 
As from 1 January 1999, France will adopt the euro as its currency. In accordance with 
the Treaty, the European System of Central Banks will define and implement the 
1 Ordonnance monégasque fixant le cours légal et le cours forcé des monnaies et billets 
du 2 janvier 1925; Convention franco-monégasque relative au contrôle des changes, 14 avril 1945 ; 
Echange de lettres entre la France et Monaco du 18 mai 1963 relatif à la réglementation bancaire dans 
la Principauté, as amended by the Echange de lettres du 27 novembre 1987 
ls 
monetary policy of the Community. Therefore a new agreement needs to be concluded 
between the Community and the Principality of Monaco. 
The draft Council decision determines the principles on which the negotiations with the 
Principality of Monaco should be based. The Commission recommends that the 
Community allows the Principality of Monaco to use the euro as its official currency and 
to grant legal tender status to euro banknotes issued by the European System of Central 
Banks and to euro coins issued by the Member States which have adopted the euro. 
Moreover, financial institutions located in the Principality of Monaco may be granted 
access to the payment systems offered by the ESCB under conditions to be determined by 
the ECB. 
On the other hand, the Principality of Monaco is expected to undertake not to issue any 
banknotes, coins or monetary surrogates of any kind unless the conditions for such 
issuance are agreed with the Community. Moreover, the Principality of Monaco is 
expected to make Community rules on euro banknotes and coins applicable in the 
Principality of Monaco and to cooperate closely with the Community with regard to 
measures against counterfeiting of euro banknotes and coins. 
The draft Council decision is based on Article 109 (3) of the Treaty, which stipulates that 
"By way of derogation from Article 228, where agreements concerning monetary or 
foreign exchange regime matters need to be negotiated by the Community with one or 
more States or international organizations, the Council, acting by a qualified majority, on 
a recommendation from the Commission and after consulting the ECB, shall decide the 
arrangements for the negotiations and for the conclusion of such agreements." 
Given the close historical links between France and the Principality of Monaco, the 
Commission recommends that France negotiates and concludes the new agreement on 
behalf of the Community. In accordance with Article 109 (3) of the Treaty, the 
Commission will be fully associated with the negotiations. The Commission 
recommends that the European Central Bank is fully associated with the negotiations in 
its fields of competence. The draft agreement will have to be submitted to the Economic 
and Financial Committee for opinion. The draft agreement will have to be submitted to 
the Council in the case that the Commission or the European Central Bank or the 
Economic and Financial Committee are of the opinion that this is necessary. 
II. Comments on the articles 
Article 1 
This article reflects the fact that the agreements between France and the Principality of 
Monaco in their present form are not compatible with the allocation of competence for 
monetary and exchange rate matters as laid down in the Treaty. The arrangements 
therefore need to be amended or replaced at the earliest possible date. France is requested 
to give notice to the Principality of Monaco with a view to amend the agreements at the 
earliest date which is possible under trie existing agreements. 
3 
Article 2 
Article 2 stipulates that the principles laid down in Articles 3 to 6 should form the basis 
for the position to be taken by France on behalf of the Community in the negotiations 
with the Principality of Monaco on an agreement concerning monetary matters. 
Article 3 
Article 3 stipulates that the Community may allow the Principality of Monaco to use the 
euro as its official currency and to grant legal tender status to euro banknotes issued by 
the European System of Central Banks and to euro coins issued by the Member States 
which have adopted the euro. This would ensure that the Principality of Monaco and 
France could continue to have the same currency, i.e. the euro, and that banknotes and 
coins which have legal tender status in France, would have the same status in the 
Principality of Monaco. 
Article 4 
Article 4 stipulates that the Principality of Monaco is expected to undertake not to issue 
any banknotes, coins or monetary surrogates unless the issuance is expressly foreseen in 
the agreement. This applies not only to banknotes, coins or other monetary surrogates 
denominated in euro but to all kind of banknotes, coins and monetary surrogates 
independent of their denomination. 
Article 5 
The purpose of the first paragraph is to ensure that Community rules on euro banknotes 
and coins such as those on the enforcement of copyright, the exchange of damaged 
banknotes z?A the reproduction of banknotes and coins, are respected in the Principality 
of Monaco. 
The second paragraph stipulates that the Principality of Monaco is expected to undertake 
to co-operate closely with the Community in the protection euro banknotes and coins 
against counterfeiting. This concerns, inter alia, the exchange of technical and statistical 
data concerning counterfeited banknotes and coins and the exchange of operational and 
strategic information between the competent authorities.- The Principality of Monaco is 
expected to ensure adequate sanctions against counterfeiting and falsification of euro 
banknotes and coins. 
Article 6 
Article 6 stipulates that, the Community may allow financial institutions located in the 
Principality of Monaco to have access to some or all French national payment systems 
under conditions to be determined with the agreement of the European Central Bank. 
This provisions is not meant to allow the imposition of an obligation on the ESCB to 
grant access ?.o the ESCB payment systems. Such access can only be granted if the ECB 
agrees. 
Article 7 and 8 
Article 7 and 8 stipulate that France shall conduct the negotiations with the Principality 
of Monaco and conclude the agreement on behalf of the Community. The Council makes 
thereby use of it competence to define the arrangements for the negotiations and for the 
conclusion of agreements concerning monetary or foreign exchange regime matters. In 
accordance with Article 109 (3) of the Treaty, it is recalled that the Commission shall be 
fully associated with the negotiations. 
Given the relevance of most of the aspects of this agreement for the European Central 
Bank, the European Central Bank shall be fully associated with the negotiations in its 
fields of competence. 
Before the conclusion of the agreement, France shall submit the draft agreement to the 
Economic and Financial Committee for opinion. If the Commission or the European 
Central Bank, which have been fully associated to the negotiations or the Economic and 
Financial Committee are of the opinion that the agreement should be submitted to the 
Council, the conclusion of the agreement has to wait for the Council to take a decision in 
accordance with Article 109 (3) of the Treaty. 
Article 9 
Article 9 reflects the requirement that any persisting bilateral agreements between France 
and the Principality of Monaco have to be compatible not only with the allocation of 
competence for monetary and exchange rate matters as laid down in the Treaty, but also 
with the new agreement between the Community and the Principality of Monaco 
concerning their monetary relations. 
Article 10 
This article clarifies that the decision is addressed to France. It will be effective as soon 
as it is notified to France. 
f 
Recommendation for a Council Decision [ ] of... 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Principality of Monaco 
93/ 0365(CNB) 
The Council of the European Union, 
Having regard to the Treaty establishing the European Community, and in particular 
Article 109 (3) thereof, 
Having regard to the recommendation from the Commission, 
Having regard to the opinion of the European Central Bank, 
(1) Whereas according to Council regulation (EC) No 974/98 of 3 May 19981 the euro 
will be substituted as from 1 January 1999 for the currency of each participating 
Member State at the conversion rate; 
(2) Whereas the Community will have the competence for monetary and exchange rate 
matters in the Member States adopting the euro as from the same date; 
(3) Whereas the Council is to determine the arrangements for the negotiation and 
conclusion of agreements concerning monetary or foreign exchange regime matters; 
(4) Whereas France has particular monetary links with the Principality of Monaco which 
are based on different legal instruments2; whereas financial institutions located in the 
Principality of Monaco have the potential right to access the refinancing facilities of 
1 OJL 139, 11.5.1993, p.l 
2 Ordonnance monégasque fixant le cours légal et le cours forcé des monnaies et billets 
du 2 janvier 1925; Convention franco-monégasque relative au contrôle des changes, 14 avril 1945 ; 
Echange de lettres entre la France et Monaco du 18 mai 1963 relatif à la réglementation bancaire dans 
la Principauté, as amended by the Echange de lettres du 27 novembre 1987 
G 
the Banque de France and whereas they participate in some French payment systems 
under the same conditions as French banks; 
(5) Whereas the euro will be substituted for the French Franc on 1 January 1999; 
(6) Whereas according to declaration No 6 annexed to the final act of the Treaty on 
European Union, the Community undertakes to facilitate the renegotiations of 
existing arrangements with the Principality of Monaco as might become necessary as 
a result of the introduction of the single currency; 
(7) Whereas the arrangements between France and the Principality of Monaco in their 
present form need to be amended or, as the case may be, replaced at the earliest 
possible date, taking into account the allocation of competence to the Community for 
monetary and exchange rate matters as laid down in the Treaty; 
(8) Whereas given the close economic relations between the Principality of Monaco and 
the Community, it is appropriate that an agreement concerning banknotes and coins, 
the access to payment systems and the legal status of the euro in the Principality of 
Monaco is concluded between the Community and the Principality of Monaco; 
whereas given the historical links between France and the Principality of Monaco, it 
is appropriate that France negotiates and may conclude the new agreement on behalf 
of the Community; 
(9) Whereas in order to allow the Principality of Monaco to have the same currency as 
France, it is appropriate to agree that the Principality of Monaco uses the euro as its 
official currency and grants legal tender status to euro banknotes and coins issued by 
the European System of Central Banks and the Member States which have adopted 
the euro; 
(10) Whereas it is important that the Principality of Monaco ensures that Community 
rules on banknotes and coins denominated in euro are applicable in the Principality 
of Monaco; whereas euro banknotes and coins need appropriate protection against 
counterfeiting; whereas it is important that the Principality of Monaco takes all the 
necessary measures to combat counterfeiting and to cooperate with the Community 
in this area; 
(11) Whereas the European Central Bank and the national central banks may engage in 
all types of banking transactions in relation to financial institutions located in third 
countries; whereas the European Central Bank and the national central banks may 
under appropriate conditions allow financial institutions in third countries access to 
their payment systems; whereas the agreement between the Community and the 
Ir 
Principality of Monaco shall not impose any obligations on the European Central 
Bank or on any national central bank; 
(12) Whereas the Commission and the European Central Bank in its fields of competence 
will have to be fully associated with these negotiations; whereas it is appropriate that 
France submits the draft agreement to the Economic and Financial Committee for its 
opinion; whereas the draft agreement will have to be submitted to the Council in the 
case that the Commission or the European Central Bank or the Economic and 
Financial Committee are of the opinion that this is necessary; 
(13) Whereas existing agreements between France and the Principality of Monaco should 
be amended or, as the case may be, replaced so as to avoid any inconsistencies 
between such agreements and the agreement between the Community and the 
Principality of Monaco concerning their monetary relations; 
HAS ADOPTED THIS DECISION: 
Article 1 
France shall notify' the Principality of Monaco of the need to amend the existing 
arrangements between France and the Principality of Monaco at the earliest possible date 
as far as monetary' matters are concerned and offer negotiations for a new agreement. 
Article 2 
The position to be taken by the Community in the negotiations with the Principality of 
Monaco for an agreement concerning matters referred to below shall be based on the 
principles laid down in Articles 3 to 6. 
Article 3 
(1) The Principality of Monaco shall be entitled to use the euro as its official currency. 
(2) The Principality of Monaco shall be entitled to grant legal tender status to euro 
banknotes and coins. 
Article 4 
The Principality of Monaco.shall undertake not to issue any banknotes, coins or monetary 
surrogates of any kind unless the conditions for such issuance have been agreed with the 
European Community. 
Article 5 
(1) The Principality of Monaco shall undertake to make Community rules on euro 
banknotes and coins applicable in the Principality of Monaco. 
(2) The Principality of Monaco shall undertake to cooperate closely with the Community 
with regard to measures against counterfeiting of euro banknotes and coins. 
Article 6 
Financial institutions located in the Principality of Monaco may have access to some or 
all French payment systems under appropriate conditions to be determined with the 
agreement of the European Central Bank. 
Article 7 
France shall conduct the negotiations with the Principality of Monaco on the above-
mentioned matters on behalf of the Community. The Commission shall be fully 
associated with the negotiations. The European Central Bank shall be fully associated 
with the negotiations in its fields of competence. France shall submit the draft agreement 
to the Economic and Financial Committee for opinion. 
Article 8 
France shall be entitled to conclude the agreement on behalf of the Community unless the 
Commission or the European Central Bank or the Economic and Financial Committee 
are of the opinion that the agreement should be submitted to the Council. 
3 
Article 9 
France and the Principality of Monaco shall review their existing arrangements in order 
to make them compatible with the agreement between the Community and the 
Principality of Monaco concerning their monetary relations. 
Article 10 
This decision is addressed to France. 
Done at Brussels, 
For the Council 
The President 
A o 
Recommendation for a Council Decision 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Republic of San Marino 
EXPLANATORY MEMORANDUM 
As from 1 January 1999, the Community will have the exclusive competence for 
monetary and exchange rate matters in the Member States adopting the euro. Any 
agreement with third countries concerning monetary or foreign exchange rate matters 
needs to reflect this allocation of competence. Therefore, the Community must decide on 
the future of such agreements which exist between Member States adopting the euro and 
third countries. 
For this purpose, the Commission is presenting a draft Council Decision which is 
addressed to Italy and which defines the position to be taken in the negotiation of a new 
agreement between the Community and the Republic of San Marino. 
I. General considerations 
Italy has concluded several agreements with the Republic of San Marino which include 
provisions on monetary matters' and which ensure that banknotes and coins issued by 
Italy have legal tender status in the Republic of San, Marino. Coins issued by the 
Republic of San Marino, in a material other than gold, are identical in shape, dimension 
and composition to those circulating in Italy. The issuing volume of these coins, which 
have legal tender status in the Republic of San Marino and in Italy is limited by the 
agreements. The Republic of San Marino has undertaken not to issue any other coins, 
banknotes or monetary surrogates. The Republic of San Marino has neither an own 
currency nor a central bank, even though the Istituto di Credito Sammarinese performs 
some functions similar to those of a central bank. 
Financial institutions located in the Republic of San Marino do not have access to the 
refinancing facilities of the Banca d'Italia. On the other hand, one financial institution 
located in the Republic of San Marino has access to the Italian RTGS system. There is no 
formal relationship between the Banca d'Italia and the Istituto di Credito Sammarinese. 
1 Convenzione di amicizia e di buon vicinato fra San Marino e L'ltalia del 31 marzo 1939, as amended, 
Convenzione monetaria tra la Repubblica Italiana e la Repubblica di San Marino, 21-X1I-1991; 
Convenzione in materia di rapporti finanziari e valutari tra la Repubblica Italiana e la Repubblica di 
San Marino con atto aggiuntivo corredato da Processo Verbale fïrmato a Roma il 4 marzo 1994. 
M 
As from 1 January 1999, Italy will adopt the euro as its currency. In accordance with the 
Treaty, the European System of Central Banks will define and implement the monetary 
policy of the Community. Therefore a new agreement needs to be concluded between the 
Community and the Republic of San Marino. 
The draft Council decision determines the principles on which the negotiations with the 
Republic of San Marino should be based. The Commission recommends that the 
Community allows the Republic of San Marino to use the euro as its official currency 
and to grant legal tender status to euro banknotes issued by the European System of 
Central Banks and to euro coins issued by the Member States which have adopted the 
euro. Moreover, financial institutions located in the Republic of San Marino may be 
granted access to the payment systems offered by the ESCB under conditions to be 
determined by the ECB. 
On the other hand, the Republic of San Marino is expected to undertake not to issue any 
banknotes, coins or monetary surrogates of any kind unless the conditions for such 
issuance are agreed with the Community. Moreover, the Republic of San Marino is 
expected to make Community rules on euro banknotes and coins applicable in the 
Republic of San Marino and to cooperate closely with the Community with regard to 
measures against counterfeiting of euro banknotes and coins. It is confirmed that Italy 
may choose to issue coins with a specific symbol relating to the Republic of San Marino. 
The draft Council decision is based on Article 109 (3) of the Treaty, which stipulates that 
"By way of derogation from Article 228, where agreements concerning monetary or 
foreign exchange regime matters need to be negotiated by the Community with one or 
more States or international organizations, the Council, acting by a qualified majority, on 
a recommendation from the Commission and after consulting the ECB, shall decide the 
arrangements for the negotiations and for the conclusion of such agreements." 
Given the close historical links between Italy and the Republic of San Marino, the 
Commission recommends that Italy negotiates and concludes the new agreement on 
behalf of the Community. In accordance with Article 109 (3) of the Treaty, the 
Commission will be fully associated with the negotiations. The Commission 
recommends that the European Central Bank is fully associated with the negotiations in 
its fields of competence. The draft agreement will have to be submitted to the Economic 
and Financial Committee for opinion. The draft agreement will have to be submitted to 
the Economic and Financial Committee for opinion. The draft agreement will have to be 
submitted to the Council in the case that the Commission or the European Central Bank 
or the Economic and Financial Committee are of the opinion that this is necessary. 
II. Comments on the articles 
Article 1 
This article reflects the fact that the agreements between Italy and the Republic of San 
Marino in their present form are not compatible with the allocation of competence for 
monetary and exchange rate matters as laid down in the Treaty. The arrangements 
therefore need to be amended or replaced at the earliest possible date. Italy is requested to 
/Il 
give notice to the Republic of San Marino with a view to amend the agreements at the 
earliest date which is possible under the existing agreements. 
Article 2 
Article 2 stipulates that the principles laid down in Articles 3 to 6 should form the basis 
for the position to be taken by Italy on behalf of the Community in the negotiations with 
the Republic of San Marino on an agreement concerning monetary matters. 
Article 3 
Article 3 stipulates that the Community may allow the Republic of San Marino to use the 
euro as its official currency and to grant legal tender status to euro banknotes issued by 
the European System of Central Banks and to euro coins issued by the Member States 
which have adopted the euro. This would ensure that the Republic of San Marino and 
Italy could continue tc have the same currency, i.e. the euro, and that banknotes and coins 
which have legal tender status in Italy, would have the same status in the Republic of San 
Marino. 
Article 4 
Article 4 stipulates that the Republic of San Marino is expected to undertake not to issue 
any banknotes, coins or monetary surrogates unless the issuance is expressly foreseen in 
the agreement. This applies not only to banknotes, coins or other monetary surrogates 
denominated in euro but to all kind of banknotes, coins and monetary surrogates 
independent of their denomination. 
Article 5 
The purpose of the first paragraph is to ensure that Community rules on euro banknotes 
and coins such as those on the enforcement of copyright, the exchange of damaged 
banknotes and the reproduction of banknotes and coins, are respected in the Republic of 
San Marino. 
The second paragraph stipulates that the Republic of San Marino is expected to undertake 
to co-operate closely with the Community in the protection euro banknotes and coins 
against counterfeiting. This concerns, inter alia, the exchange of technical and statistical 
data concerning counterfeited banknotes and coins and the exchange of operational and 
strategic information between the competent authorities. The Republic of San Marino is 
expected to ensure adequate sanctions against counterfeiting and falsification of euro 
banknotes and coins. 
Article 6 
^ 
Article 6 stipulates that the Community may allow financial institutions located in the 
Republic of San Marino to have access to the Italian national RTGS system2 under 
conditions to be determined by the European Central Bank. This provisions is not meant 
to allow the imposition of an obligation on the ESCB to grant access to the ESCB 
payment systems. Such access to the Italian national RTGS system can only be granted 
if the ECB agrees and under the conditions specified by the ECB. 
Article 7 and 8 
Article 7 and 8 stipulate that Italy shall conduct the negotiations with the Republic of San 
Marino and conclude the agreement on behalf of the Community. The Council makes 
thereby use of it competence to define the arrangements for the negotiations and for the 
conclusion of agreements concerning monetary or foreign exchange regime matters. In 
accordance with Article 109 (3) of the Treaty, it is recalled that the Commission shall be 
fully associated with the negotiations. 
Given the relevance of most of the aspects of this agreement for the European Central 
Bank, the European Central Bank shall be fully associated with the negotiations in its 
fields of competence. 
Before the conclusion of the agreement, Italy shall submit the draft agreement to the 
Economic and Financial Committee for opinion. If the Commission or the European 
Central Bank, which have been fully associated to the negotiations or the Economic and 
Financial Committee are of the opinion that the agreement should be submitted to the 
Council, the conclusion of the agreement has to wait for the Council to take a decision in 
accordance with Article 109 (3) of the Treaty. 
Article 9 
Article 9 reflects the requirement that any persisting bilateral agreements between Italy 
and the Republic of San Marino have to be compatible not only with the allocation of 
competence for monetary and exchange rate matters as laid down in the Treaty, but also 
with the new agreement between the Community and the Republic of San Marino 
concerning their monetary relations. 
Article 10 
This article clarifies that the decision is addressed to Italy. It will be effective as soon as 
it is notified to Italy. 
2 Real-Time Gross Settlement System /?y 
Recommendation for a Council Decision [ ] of... 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with the Republic of San Marino 
98/ 0366(CNB) 
The Council of the European Union, 
Having regard to the Treaty establishing the European Community, and in particular 
Article 109 (3) thereof, 
Having regard to the recommendation from the Commission, 
Having regard to the opinion of the European Central Bank, 
(1) Whereas according to Council regulation (EC) No 974/98 of 3 May 19981 the euro 
will be substituted as from 1 January 1999 for the currency of each participating 
Member State at the conversion rate; 
(2) Whereas the Community will have the competence for monetary and exchange rate 
matters in the Member States adopting the euro as from the same date; 
(3) Whereas the Council is to determine the arrangements for the negotiation and 
conclusion of agreements concerning monetary or foreign exchange regime matters; 
(4) Whereas Italy has concluded several agreements with the Republic of San Marino 
which include provisions on monetary matters2; 
(5) Whereas the euro will be substituted for the Italian Lira on 1 January 1999; 
1 OJ L 139, 11.5.1998, p.l 
Convenzione di amicizia e di buon vicinato fra San Marino e PItalia del 31 marzo 1939, as amended, 
Convenzîcne monetaria tra la Repubblica Italians e la Repubblica ai San Marino, 21-XH-Î99Î; 
Convenzione in materia di rapport! ftnanziari e valutari tra la Repubblica Itaiiana e la Repubblica di 
San Marino con atto aggiuntivo corredato da Processo Verbale ilrmato a Roma ïl 4 marzo 1994. 
/i 
(6) Whereas according to declaration No 6 annexed to the final act of the Treaty on 
European Union, the Community undertakes to facilitate the renegotiations of 
existing arrangements with the Republic of San Marino as might become necessary 
as a result of the introduction of the single currency; 
(7) Whereas the agreements between Italy and the Republic of San Marino in their 
present form need to be amended or, as the case may be, replaced at the earliest 
possible date, taking into account the allocation of competence to the Community for 
monetary and exchange rate matters as laid down in the Treaty; 
(8) Whereas given the close economic relations between the Republic of San Marino 
and the Community, it is appropriate that an agreement concerning banknotes and 
coins, the access to payment systems and the legal status of the euro in the Republic 
of San Marino is concluded between the Community and the Republic of San 
Marino; whereas given the historical links between Italy and the Republic of San 
Marino, it is appropriate that Italy negotiates and may conclude the new agreement 
on behalf of the Community; 
(9) Whereas in order to allow the Republic of San Marino to have the same currency as 
Italy, it is appropriate to agree that the Republic of San Marino uses the euro as its 
official currency and grants legal tender status to euro banknotes and coins issued by 
the European System of Central Banks and the Member States which have adopted 
the euro; 
(10) Whereas it is important that the Republic of San Marino ensures that Community 
rules on banknotes and coins denominated in euro are applicable in the Republic of 
San Marino; whereas euro banknotes and coins need appropriate protection against 
counterfeiting; whereas it is important that the Republic of San Marino takes all the 
necessary measures to combat counterfeiting and to cooperate with the Community 
in this area; 
(11) Whereas the European Central Bank and the national central banks may engage in all 
types of banking transactions in relation to financial institutions located in third 
countries; whereas the European Central Bank and the national central banks may 
under appropriate conditions allow financial institutions in third countries access to 
their payment systems; whereas the agreement between the Community and the 
Republic of San Marino shall not impose any obligations on the European Central 
Bank or on any national central bank; 
(12) Whereas the Commission and the European Central Bank in its fields of competence 
will have to be fully associated with these negotiations; whereas it is appropriate that 
Italy submits the draft agreement to the Economie and Financial Committee for its 
AG 
I 
il opinion; whereas the draft agreement will have to be submitted to the Council in the 
case that the Commission or the European Central Bank or the Economic and 
Financial Committee are of the opinion that this is necessary; 
(13) Whereas existing agreements between Italy and the Republic of San Marino should 
be amended or, as the case may be, replaced so as to avoid any inconsistencies 
between such agreements and the agreement between the Community and the 
Republic of San Marino concerning their monetary relations; 
HAS ADOPTED THIS DECISION: 
Article 1 
Italy shall notify the Republic of San Marino of the need to amend the existing 
agreements between Italy and the Republic of San Marino at the earliest possible date as 
far as monetary matters are concerned and offer negotiations for a new agreement. 
Article 2 
The position to be taken by the Community in the negotiations with the Republic of San 
Marino for an agreement concerning matters referred to below shall be based on the 
principles laid down in Articles 3 to 6. 
Article 3 
(1) The Republic of San Marino shall be entitled to use the euro as its official currency. 
(2) The Republic of San Marino shall be entitled to grant legal tender status to euro 
banknotes and coins. 
/ 
Article 4 
The Republic of San Marino shall undertake not to issue any banknotes, coins or 
monetary surrogates of any kind unless the conditions for such issuance have been agreed 
with the European Community. 
Article 5 
(1) The Republic of San Marino shall undertake to make Community rules on euro 
banknotes and coins applicable in the Republic of San Marino. 
(2) The Republic of San Marino shall undertake to cooperate closely with the 
Community with regard to measures against counterfeiting of euro banknotes and coins. 
Article 6 
Financial institutions located in the Republic of San Marino may have access to the 
Italian national RTGS under appropriate conditions to be determined by the European 
Central Bank. 
Article 7 
Italy shall conduct the negotiations with the Republic of San Marino on the above-
mentioned matters on behalf of the Community. The Commission shall be fully 
associated with the negotiations. The European Central Bank shall be fully associated 
with the negotiations in its fields of competence. Italy shall submit the draft agreement to 
the Economic and Financial Committee for opinion. 
Article 8 
Italy shall be entitled to conclude the agreement on behalf of the Community unless the 
Commission or the European Central Bank or the Economic and Financial Committee 
are of the opinion that the agreement should be submitted to the Council. 
t 
Article 9 
Italy and the Republic of San Marino shall ensure that existing agreements are 
compatible with the agreement between the Community and the Republic of San Marino 
concerning their monetary relations. 
Article 10 
This decision is addressed to Italy. 
Done at Brussels, 
For the Council 
The President 
/ G 
Recommendation for a Council Decision 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with Vatican City 
EXPLANATORY MEMORANDUM 
As from 1 January 1999, the Community will have the exclusive competence for 
monetary and exchange rate matters in the Member States adopting the euro. Any 
agreement with third countries concerning monetary or foreign exchange rate matters 
needs to reflect this allocation of competence. Therefore, the Community must decide on 
the future of such agreements which exist between Member States adopting the euro and 
third countries. 
For this purpose, the Commission is presenting a draft Council Decision which is 
addressed to Italy and which defines the position to be taken in the negotiation of a new 
agreement between the Community and Vatican City. 
I. General considerations 
Italy has particular monetary links with the Vatican City, which are based on a monetary 
convention1 which ensures that coins issued by Italy have legal tender status in Vatican 
City. Banknotes issued by the Banca dTtalia do not have the status of legal tender but 
circulate de facto within the territory of Vatican City. Coins issued by Vatican City, in a 
material other than gold, are identical in shape, dimension and composition to those 
circulating in Italy. The issuing volume of these coins, which have legal tender status in 
Vatican City and in Italy, is limited by the monetary convention. Vatican City has neither 
an own currency nor a central bank, 
Financial institutions located in Vatican City have neither access to the refinancing 
facilities of the Banca d'ltalia nor to the Italian RTGS system. They are not subject to 
any prudential supervision by Italian authorities. 
As from 1 January 1999, Italy will adopt the euro as its currency. In accordance with the 
Treaty, the European System of Central Banks will define and implement the monetary 
policy of the Community. Therefore a new agreement needs to be concluded between the 
Community and Vatican City. 
1 Convenzione monetaria tra la Repubblica Italiana e lo Stato délia Città del Vaticano il 
3 dicembre 1991 
& 
The draft Council decision determines the principles on which the negotiations with 
Vatican City should be based. The Commission recommends that the Community allows 
Vatican City to use the euro as its official currency and to grant legal tender status to euro 
banknotes issued by the European System of Central Banks and to euro coins issued by 
the Member States which have adopted the euro. Moreover, financial institutions located 
in Vatican City may be granted access to the payment systems offered by the ESCB 
under conditions to be determined by the ECB. 
On the other hand, Vatican City is expected to undertake not to issue any banknotes, 
coins or monetary surrogates of any kind unless the conditions for such issuance are 
agreed with the Community. Moreover, Vatican City is expected to make Community 
rules on euro banknotes and coins applicable in Vatican City and to cooperate closely 
with the Community with regard to measures against counterfeiting of euro banknotes 
and coins. It is confirmed that Italy may choose to issue coins with a specific symbol 
relating to Vatican City. 
The draft Council decision is based on Article 109 (3) of the Treaty, which stipulates that 
"By way of derogation from Article 228, where agreements concerning monetary or 
foreign exchange regime matters need to be negotiated by the Community with one or 
more States or international organizations, the Council, acting by a qualified majority, on 
a recommendation from the Commission and after consulting the ECB, shall decide the 
arrangements for the negotiations and for the conclusion of such agreements." 
Given the close historical links between Italy and Vatican City, the Commission 
recommends that Italy negotiates and concludes the new agreement on behalf of the 
Community. In accordance with Article 109 (3) of the Treaty, the Commission will be 
fully associated with the negotiations. The Commission recommends that the European 
Central Bank is associated with the negotiations in its fields of competence. The draft 
agreement will have to be submitted to the Economic and Financial Committee for 
opinion. The draft agreement will have to be submitted to the Economic and Financial 
Committee for opinion. The draft agreement will have to be submitted to the Council in 
the case that the Commission or the European Central Bank or the Economic and 
Financial Committee are of the opinion that this is necessary. 
II. Comments on the articles 
Article 1 
This article reflects the fact that the agreements between Italy and Vatican City in their 
present form are not compatible with the allocation of competence for monetary and 
exchange rate matters as laid down in the Treaty. The arrangements therefore need to be 
amended or replaced at the earliest possible date. Italy is requested to give notice to 
Vatican City with a view to amend the agreements at the earliest date which is possible 
under the existing agreements. 
u 
Article 2 
Article 2 stipulates that the principles laid down in Articles 3 to 6 should form the basis 
for the position to be taken by Italy on behalf of the Community in the negotiations with 
Vatican City on an agreement concerning monetary matters. 
Article 3 
Article 3 stipulates that the Community may allow Vatican City to use the euro as its 
official currency and to grant legal tender status to euro banknotes issued by the 
European System of Central Banks and to euro coins issued by the Member States which 
have adopted the euro. This would ensure that Vatican City and Italy could continue to 
have the same currency, i.e. the euro, and that banknotes and coins which have legal 
tender status in Italy, would have the same status in Vatican City. 
Article 4 
Article 4 stipulates that Vatican City is expected to undertake not to issue any banknotes, 
coins or monetary surrogates unless the issuance is expressly foreseen in the agreement. 
This applies not only to banknotes, coins or other monetary surrogates denominated in 
euro but to all kind of banknotes, coins and monetary surrogates independent of their 
denomination. 
Article 5 
The purpose of the first paragraph is to ensure that Community rules on euro banknotes 
and coins such as those on the enforcement of copyright, the exchange of damaged 
banknotes and the reproduction of banknotes and coins, are respected in Vatican City. 
The second paragraph stipulates that Vatican City is expected to undertake to co-operate 
closely with the Community in the protection euro banknotes and coins against 
counterfeiting. This concerns, inter alia, the exchange of technical and statistical data 
concerning counterfeited banknotes and coins and the exchange of operational and 
strategic information between the competent authorities. Vatican City is expected to 
ensure adequate sanctions against counterfeiting and falsification of euro banknotes and 
coins. 
Article 6 
Article 6 stipulates that the Community may allow financial institutions located in 
Vatican City to have access to the Italian national RTGS system2 under conditions to be 
determined by the European Central Bank. This provisions is not meant to allow the 
imposition of an obligation on the ESCB to grant access to the ESCB payment systems. 
2 Real-Time Gross Settlement System 
It 
Such access to the Italian national RTGS system can only be granted if the ECB agrees 
and under the conditions specified by the ECB. 
I* 
Article 7 and 8 
Article 7 and 8 stipulate that Italy shall conduct the negotiations with Vatican City and 
conclude the agreement on behalf of the Community. The Council makes thereby use of 
it competence to define the arrangements for the negotiations and for the conclusion of 
agreements concerning monetary or foreign exchange regime matters. In accordance with 
Article 109 (3) of the Treaty, it is recalled that the Commission shall be fully associated 
with the negotiations. 
Given the relevance of most of the aspects of this agreement for the European Central 
Bank, the European Central Bank shall be fully associated with the negotiations in its 
fields of competence. 
Before the conclusion of the agreement, Italy shall submit the draft agreement to the 
Economic and Financial Committee for opinion. If the Commission or the European 
Central Bank, which have been fully associated to the negotiations or the Economic and 
Financial Committee are of the opinion that the agreement should be submitted to the 
Council, the conclusion of the agreement has to wait for the Council to take a decision in 
accordance with Article 109 (3) of the Treaty. 
Article 9 
Article 9 reflects the requirement that any persisting bilateral agreements between Italy 
and Vatican City have to be compatible not only with the allocation of competence for 
monetary and exchange rate matters as laid down in the Treaty, but also with the new 
agreement between the Community and Vatican City concerning their monetary 
relations. 
Article 10 
This article clarifies that the decision is addressed to Italy. It will be effective as soon as 
it is notified to Italy. 
1\ 
Recommendation for a Council Decision [ ] of... 
on the position to be taken by the Community regarding an agreement 
concerning the monetary relations with Vatican City 
98/ 0367(CNB) 
The Council of the European Union, 
Having regard to the Treaty establishing the European Community, and in particular 
Article 109 (3) thereof, 
Having regard to the recommendation from the Commission, 
Having regard to the opinion of the European Central Bank, 
(1) Whereas according to Council regulation (EC) No 974/98 of 3 May 19981 the euro 
will be substituted as from 1 January 1999 for the currency of each participating 
Member State at the conversion rate; 
(2) Whereas the Community will have the competence for monetary and exchange rate 
matters in the Member States adopting the euro as from the same date; 
(3) Whereas the Council is to determine the arrangements for the negotiation and 
conclusion of agreements concerning monetary or foreign exchange regime matters; 
(4) Whereas Italy has concluded an agreement with Vatican City which includes 
provisions on monetary matters2; 
(5) Whereas the euro will be substituted for the Italian Lira on 1 January 1999; 
(6) Whereas according to declaration No 6 annexed to the final act of the Treaty on 
European Union, the Community undertakes to facilitate the renegotiations of 
existing arrangements with Vatican City as might become necessary as a result of the 
introduction of the single currency; 
1 OJ L 139, 11.5.1998, p.l 
2 Convenzione monetaria tra la Repubblica Italiana e lo Stato délia Città del Vaticano il 
3dicembre 1991. 
*V 
(7) Whereas the agreement between Italy and Vatican City in its present form need to 
be amended or, as the case may be, replaced at the earliest possible date, taking into 
account the allocation of competence to the Community for monetary matters as laid 
down in the Treaty; 
(8) Whereas given the close economic relations between Vatican City and the 
Community, it is appropriate that an agreement concerning banknotes and coins, the 
access to payment systems and the legal status of the euro in Vatican City is 
concluded between the Community and Vatican City; whereas given the historical 
links between Italy and Vatican City, it is appropriate that Italy negotiates and may 
conclude the new agreement on behalf of the Community; 
(9) Whereas in order to allow Vatican City to have the same currency as Italy, it is 
appropriate to agree that Vatican City uses the euro as its official currency and grants 
legal tender status to euro banknotes and coins issued by the European System of 
Central Banks and the Member States which have adopted the euro; 
(10) Whereas it is important that Vatican City ensures that Community rules on 
banknotes and coins denominated in euro are applicable in Vatican City; whereas 
euro banknotes and coins need appropriate protection against counterfeiting; whereas 
it is important that Vatican City takes all the necessary measures to combat 
counterfeiting and to cooperate with the Community in this area; 
(11) Whereas the European Central Bank and the national central banks may engage in 
all types of banking transactions in relation to financial institutions located in third 
countries; whereas the European Central Bank and the national central banks may 
under appropriate conditions allow financial institutions in third countries access to 
their payment systems; whereas the agreement between the Community and Vatican 
City shall not impose any obligations on the European Central Bank or on any 
national central bank; 
(12) Whereas the Commission and the European Central Bank in its fields of competence 
will have to be fully associated with these negotiations; whereas it is appropriate that 
Italy submits the draft agreement to the Economic and Financial Committee for its 
opinion; whereas the draft agreement will have to be submitted to the Council in the 
case that the Commission or the European Central Bank or the Economic and 
Financial Committee are of the opinion that this is necessary; 
(13) Whereas the existing agreement between Italy and Vatican City should be amended 
or, as the case may be, replaced so as to avoid any inconsistencies between this 
agreement and the agreement between the Community and Vatican City concerning 
their monetary relations; 
K 
HAS ADOPTED THIS DECISION: 
Article 1 
Italy shall notify Vatican City of the need to amend the existing agreement between Italy 
and Vatican City at the earliest possible date as far as monetary matters are concerned 
and offer negotiations for a new agreement. 
Article 2 
The position to be taken by the Community in the negotiations with Vatican City for an 
agreement concerning matters referred to below shall be based on the principles laid 
down in Articles 3 to 6. 
Article 3 
(1) Vatican City shall be entitled to use the euro as its official currency. 
(2) Vatican City shall be entitled to grant legal tender status to euro banknotes and coins. 
Article 4 
Vatican City shall undertake not to issue any banknotes, coins or monetary surrogates of 
any kind unless the conditions for such issuance have been agreed with the European 
Community. 
Article 5 
(1) Vatican City shall undertake to make Community rules on euro banknotes and coins 
applicable in Vatican City. 
(2) Vatican City shall undertake to cooperate closely with the Community with regard to 
measures against counterfeiting of euro banknotes and coins. 
ft 
Article 6 
Financial institutions located in Vatican City may have access to the Italian national 
RTGS under appropriate conditions to be determined by the European Central Bank. 
Article 7 
Italy shall conduct the negotiations with Vatican City on the above-mentioned matters on 
behalf of the. Community. The Commission shall be fully associated with the 
negotiations. The European Central Bank shall be fully associated with the negotiations 
in its fields of competence. Italy shall submit the draft agreement to the Economic and 
Financial Committee for opinion. 
Article 8 
Italy shall be entitled to conclude the agreement on behalf of the Community unless the 
Commission or the European Central Bank or the Economic and Financial Committee 
are of the opinion that the agreement should be submitted to the Council. 
Article 9 
Italy and Vatican City shall ensure that any existing agreement is compatible with the 
agreement between the Community and Vatican City concerning their monetary 
relations. 
Article 10 
This decision is addressed to Italy. * 
Done at Brussels, 
For the Council 
The President 
11 
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