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)
Date: 2003-12-02
Institutions: European Central Bank
Subjects: Austria, central bank, national financing, national law, public institution, research and development

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  on

the  other  draft  laws  that  will  be  presented  to  the  Austrian  Parliament  as  part  of  the  Growth  and

Location 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 Article 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  Council

Decision 415/98/EC of 29 June 1998 on the consultation of the European Central Bank by national
authorities regarding draft legislative provisions1, since the draft law contains provisions enabling

the  Oesterreichische  Nationalbank  (OeNB)  to  restructure  its  free  reserves  and  to  make  annual

financial  contributions  to  the  proposed  National  Foundation  for  Research,  Technology  and

Development (hereinafter the ‘Foundation’). In accordance with the first sentence of Article 17.5 of

the  Rules  of  Procedure  of  the  European  Central  Bank,  the  Governing  Council  of  the  ECB  has

adopted 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 first of these letters determines in detail, in the

form of a declaration of intent that may be seen as a unilateral commitment, how the OeNB plans

to  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

1

OJ L 189, 3.7.1998, p. 42.

                                                     
commitments set out in these letters supplement the 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 in

the  first  letter  from  the  OeNB’s  Governing  Board  to  the  Austrian  Minister  of  Finance,  duly

preserves  the  OeNB’s  discretion  to  contribute  to  the  Foundation.  This  becomes  all  the  more

relevant as this letter of intent could potentially be interpreted as an unilateral commitment by the

OeNB (although it is acknowledged that the OeNB’s Governing Board alone could not commit the

OeNB to implement the proposed structure, but would require resolutions to that effect to be passed

by 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 Foundation

will 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  to

transfer 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 of

EUR 75 million  to  the  Foundation.  Read  together  with  the  first  of  OeNB’s  letters  of

5 November 2003, the impression could be created that the OeNB is committed to make an annual

contribution  of  EUR  75  million to  the  Foundation. The  letter  states that  the  OeNB  will  make  an

annual contribution of EUR 75 million to the Foundation, and that if the income on investment of

the  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 other

own funds held by the OeNB (for example 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 Monetary

Institute.  In  these  reports  a  distinction  is  made  between  different  features  of  central  bank

independence,  and  amongst  others,  financial  independence.  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, annual 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 be

under 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  financial

independence,  the  ECB  considers  it  of  utmost  importance  that  the  OeNB  will  be  under  no

2

obligation  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  is

established  to  enable  sustained  financing  of  long-term,  interdisciplinary  research  projects  (which

implies the continuity of contributions by the OeNB). Therefore, the wording of § 4(5) lines 1 and

2 of the draft law should state clearly and explicitly that the OeNB has a discretion to resolve to

make contributions to the Foundation, which means that any commitment deriving from the first of

the OeNB’s letters of 5 November 2003  (once its  provisions  have  been  endorsed  by  the  OeNB’s

shareholders  in  general  meeting)  may  be  withdrawn  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 to

another 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  the

OeNB’s disposal. The ECB understands furthermore that the proposed structure would not lead to a

reduction of the OeNB’s reserves and that consequently the EUR 1.5 billion would continue to be

available to cover potential losses of the OeNB. In this context, the second letter from the OeNB to

the  Austrian  Minister  of  Finance  of  5  November  2003  makes  it  clear  that  if  due  to  specific

circumstances in an economically poor year (and despite other balance sheet provisions) the OeNB

makes  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 clear

that 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  of

Community over national law.

The financing by central banks of non-central bank activities

8. 

The  ECB  takes  note  that  according  to  the  explanatory  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 the

level  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 law

state by way of illustration that estimating OeNB gross profits to be EUR 643 million in 2004, the

establishment  of  the  Foundation  and  the  proposed  redirection  by  the  OeNB  of  reserves  in  the

amount  of  EUR  1.5  billion  would  lead  to  a  reduction  in  income  for  the  Federal  Government  of

EUR  44.3  million  (for  the  benefit  of  the  proposed  sponsoring  of  research,  technology  and

development).

3

9. 

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.  As

contributions to research, technology and development do not represent a traditional central bank

activity,  task  or  function,  the  OeNB’s  funding  of  the  Foundation  out  of  the  earnings  of  the

Jubiläumsfonds 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  from

democratically  controlled  budgetary  sources.  The  ECB  has  therefore  investigated  whether  the

proposed  financial  contributions  by  the  OeNB  to  the  Foundation  would  be  compatible  with

Article 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 the

purpose  of  these  provisions  has  to  be  considered.  Therefore,  the  ECB  would  like  to  recall

that  Articles  101  of  the Treaty  and  21.1  of  the  Statute  have  the  overall  aim  of  prohibiting

NCBs 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 donation

rather  than  a  credit  facility.  Yet,  where  a  credit  facility  (with  the  obligation  to  repay  such

credit) is prohibited under these provisions, it could perhaps be argued that this prohibition

might 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 OeNB

to  make  donations  to  foster  research,  technology  and  development,  this  may  be  seen  in  a

different light if it has to be considered that under the proposed structure the donations are

construed 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 facilities2. Following this line of

argument,  even  if  formally  speaking  the  proposed  arrangements  would  not  contradict

Article 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  public

nature of financing research, technology and development.

2 

Article  1(1)(b)(ii)  of  Council  Regulation  (EC)  No  3603/93  of  13  December  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’.

4

                                                     
(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.  The

explanatory notes to the draft law (specific part, note on §§ 1, 2 and 4 of the draft law) state

in  this  context  that  the  Foundation  would  be  a  body  sui  generis  and  not  a  foundation

established  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 foundation

for tax-law purposes, which seems to indicate that it is not the overall intention to establish

the Foundation as a public entity. In conclusion, it appears that the Foundation in terms of its

legal  nature  appears  to  be  a  body  sui  generis  with  more  elements  of  a  private  foundation,

although with certain public elements. However, 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 their

Förderrichtlinien (sponsoring guidelines). Therefore, the ECB has also considered whether

these  institutions  could  qualify  as  public  entities  within  the  meaning  of  Article  101  of  the

Treaty and Article 21.1 of the Statute. It is important to assess whether these institutions are

entities to which the OeNB would be prohibited from allocating funds directly (for instance

by  means  of  its  present  annual  sponsoring  of  economics-oriented  research  via  the

Jubiläumsfonds 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 if

the  Foundation  does  not  hold  itself  out  as  a  ‘public’  institution)  would  indeed  represent  a

circumvention of the Treaty. 

The explanatory notes to the draft law (specific 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 the

Government  seems  to  indicate  that  their  institutional  nature  lies  in  the  public  sphere.  The

OeNB has clarified that the ultimate beneficiaries of the funds distributed by the Foundation

will 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.

5

The 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  […]  that

these 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 the

ESCB  is  ‘to  maintain  price  stability’.  The  question  is  therefore  whether  the  investment  of  the

EUR 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  and

development) could have an impact on the objective of maintaining price stability. From a purely

monetary-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  profit

transfer. Transferring EUR 1.5 billion from the OeNB’s general reserve fund and its free reserves

to 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  the

euro area economy. In any case, any possible effects of the proposed structure on liquidity would

need to be taken into account, and such effects on liquidity could be offset, like any other shock to

autonomous  factors,  by  adjusting  the  amount  of  liquidity  provided  via  regular  open-market

operations, 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  of

EUR 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 the

implementation 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  Foundation.  However,  for  the  reasons  stated  above,  the

ECB  is  of  the  opinion  that  vigilance  should  be  applied  as  to  the  way  in  which  the  envisaged

arrangements  will  be  implemented  in  practice  and  that  a  regular  review  of  these  arrangements

would be warranted.

6

Publication

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

7