Recommendation for a Council Decision on the position to be taken by the European Community regarding the renegotiation of the Monetary Agreement with the Republic of San Marino
Date: 2009-10-16
Institutions: European Commission
Subjects: Italy, San Marino, euro, international negotiations, monetary policy, single monetary policy

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.10.2009 
COM(2009) 572 final 

2009/0159 (CNB) 

Recommendation for a 

COUNCIL DECISION 

on the position to be taken by the European Community regarding the renegotiation of 
the Monetary Agreement with the Republic of San Marino 

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EXPLANATORY MEMORANDUM 

The Monetary Agreements were concluded between the European Community and Monaco, 
San Marino and Vatican in order to give legal continuity to the arrangements which existed 
between  these  countries  on  the  one  hand  and  France  and  Italy  on  the  other  before  the 
introduction of the euro.  

Ten years after the euro replaced the legacy currencies of Italy and France used by Monaco, 
San Marino and Vatican, the Council invited the Commission to review the functioning of the 
Monetary  Agreements1.  The  results  of  the  assessment  were  adopted  in  the  'Commission 
Communication  on  the  functioning  of  the  Monetary  Agreements  with  Monaco,  San  Marino 
and  Vatican'2.  The  Commission  concluded  that  the  Monetary  Agreements  in  their  present 
form need to be amended with a view to ensuring a more consistent approach in the relations 
between the Community and the countries having signed the Agreements. The present draft 
Recommendation for a Council Decision defines the position to be taken by the Community 
in the renegotiation of the Agreement with the Republic of San Marino. 

The Commission proposes to renegotiate and amend the following provisions:  

•  Transposition of relevant EC legislation 

The  obligations  of  Monaco,  San  Marino  and  Vatican  stemming  from  their  respective 
Monetary Agreements with the Community are very unequal. 

The Monetary Agreement with the Principality of Monaco comprises the biggest number of 
obligations. Contrary to the Agreement with Monaco, the Agreements with San Marino and 
Vatican  do  not  entail  any  specific  obligation  to  transpose  EU  legislation  in  the  domain  of 
protection  of  euro  cash  against  counterfeiting  and  the  ways  of  cooperation  with  the 
Community  in  this  area.  In  order  to  create  a  level  playing  field  and  ensure  appropriate 
protection  of  euro  banknotes  and  coins  against  counterfeiting  San  Marino,  together  with 
Vatican, shall apply the relevant Community legislation.  

The  financial  institutions  carrying  out  their  activities  in  the  countries  having  signed  the 
Monetary Agreements may have access to interbank settlement and payments and securities 
settlement system in the European Union. The Principality of Monaco is effectively using this 
possibility and for this purpose it has to apply the relevant Community financial and banking 
legislation. Given the size of the banking sector in San Marino and its close interaction with 
the banks active in the euro area (i.e. the financial institutions of San Marino are accessing the 
payment  systems  via  Italy's  banks),  the  Republic  of  San  Marino  should  also  align  its 
banking and financial sector legislation with that applicable in the Community. Due to the 
volume of the Community legislation and limited administrative capacities of San Marino, the 
transitional period of 5 years should be granted to San Marino. 

•  Follow-up mechanisms 

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Council  Conclusions  on  'Common  guidelines  for  the  national  sides  and  the  issuance  of  euro  coins 
intended for circulation', 2922nd ECOFIN Council meeting of 10 February 2009. 
COM (2009)359 of 14 July 2009 

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In contrast with the procedure envisaged for the Agreement with Monaco, no provision was 
made for a follow-up procedure in the Agreements signed with San Marino and Vatican. In 
the absence of regular formal follow-up, San Marino and Vatican do not regularly report on 
the  implementation  of  the  Agreements  and  they  are  not  properly  informed  of  legislative 
developments in the fields covered by the Agreements. The Commission therefore proposes 
creating  two  new  joint  committees  -  similar  to  the  one  existing  with  the  Principality  of 
Monaco - with the Republic of San Marino and the Vatican City State. 

The  Joint  Committee  with  the  Republic  of  San  Marino  would  be  composed  of 
representatives  of  San  Marino,  Italy,  the  European  Commission  and  the  European  Central 
Bank. The Committee would be in charge of facilitating the implementation of the Agreement 
and discussing possible amendments to the list of the Community legislation to be applied by 
San Marino. It would also have a decision making power with regard to a limited number of 
issues  conferred  to  it  by  the  Monetary  Agreement  (e.g.  approving  the  change  of  a  Mint 
producing San Marino euro coins). 

•  Ceiling for the issuance of euro coins 

For historical reasons, the ceilings for maximum yearly issuance of Monaco, San Marino and 
Vatican were fixed in two different ways (Monaco is currently authorised to issue a maximum 
of 1/500th of the quantity of coins minted in France while San Marino and Vatican have fixed 
quotas) leading to very different results. 

With  a  view  to  ensuring  fair  treatment  to  all  countries  with  the  Monetary  Agreements,  the 
Commission  proposes  to  introduce  a  new  uniform  method  for  calculating  the  ceilings  of 
euro coins issuance (i.e. to be also used in all future Agreements). 

The new ceilings would be composed of a fixed and a variable part: 

(1) 

(2) 

The  fixed  part  should  aim  at  covering  the  demand  of  coin  collectors.  According  to 
common estimates, a total value of around €2 100 000 should be sufficient to cover the 
demand of the collectors' market.3  

The  variable  part  would  be  based,  in  the  case  of  San  Marino,  on  the  average  per 
capita issuance of Italy. The average number of coins per capita issued in Italy in (n-1) 
would be multiplied by the number of inhabitants of San Marino.  

•  Rules for minting euro coins 

The current Monetary Agreements reserve the right to produce the euro coins of San Marino 
and Vatican to the national Mint of Italy. This rule was introduced for historical reasons, at a 
time  when  euro  cash  was  not  yet  in  circulation  and  nearly  all  the  euro-area  countries  were 
minting euro coins only for their own needs. The situation has now evolved, with a number of 
euro-area countries today having their coins minted in another euro-area country.  

The Commission therefore proposes to open the possibility for San Marino and Vatican to 
order  their  euro  coins  in  another  EU  Mint  experienced  in  producing  euro  coins.  The 
change of Mint would however have to be approved by the Joint Committee. 

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San  Marino  has  for  instance  concentrated  on  striking  selected  euro  denomination  coins  with  some 
success: these coins are now used at face value for transactions.  

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•  Election of jurisdiction 

The present Monetary Agreements have not given the Community any leverage in the event 
that the countries having signed the Monetary Agreements do not fulfil their obligations (e.g. 
do not transpose the relevant Community legislation in due time), apart from the ultimate – 
and  therefore  unlikely  -  possibility  to  withdraw  unilaterally  from  the  Agreement.  The 
Commission  therefore  proposes  to  elect  the  European  Court  of  Justice  as  the  jurisdiction 
responsible  for  settling  disputes  which  may  arise  from  the  application  of  the  Monetary 
Agreements. 

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2009/0159 (CNB) 

Recommendation for a 

COUNCIL DECISION 

on the position to be taken by the European Community regarding the renegotiation of 
the Monetary Agreement with the Republic of San Marino 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
111.3 thereof, 

Having regard to the recommendation from the Commission4, 

Having regard to the opinion of the European Central Bank5, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

The Community has the competence for monetary and exchange rate matters as of the 
date of the introduction of the euro; 

The  Council  is  to  determine  the  arrangements  for  the  negotiation  and  conclusion  of 
agreements concerning monetary or foreign exchange regime matter; 

The Italian Republic, on behalf of the Community, concluded on 29 November 2000 a 
Monetary Agreement with the Republic of San Marino 

The Council concluded on 10 February 2009 that the Commission should review the 
functioning of the existing agreements and consider possible increases in the ceilings 
for coin issuance; 

The  Commission  concluded  in  the  'Communication  on  the  functioning  of  the 
Monetary  Agreements  with  Monaco,  San  Marino  and  Vatican'6  that  the  Monetary 
Agreement with the Republic of san Marino in its present form needs to be amended 
with  a  view  to  ensuring  a  more  consistent  approach  in  the  relations  between  the 
Community and the Countries having signed a monetary agreement; 

The Monetary Agreement with San Marino should therefore be renegotiated as soon as 
possible  so  that  the  new  regime  enters  into  force  on  1st  January  2010,  together  with 
the new rules on the modalities of introduction of euro coins set by the Commission 
Recommendation  of  19  December  2008  on  common  guidelines  for  the  national  side 

4 
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OJ C , , p. . 
OJ C , , p. . 
COM(2009)359 

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and the issuance of euro coins intended for circulation, endorsed by the Council in its 
conclusions of 10 February 2009. 

HAS ADOPTED THIS DECISION:  

Article 1 

The  Italian  Republic  shall  notify  the  Republic  of  San  Marino  of  the  need  to  amend  the 
existing  Monetary  Agreement  between  the  Italian  Republic,  on  behalf  of  the  European 
Community,  and  the  Republic  of  San  Marino  at  the  earliest  possible  date  and  offer 
renegotiation on the relevant provisions of the Agreement.  

The Community shall seek the following changes in the renegotiation of the Agreement with 
the Republic of San Marino: 

Article 2 

(a) 

(b) 

– 

– 

The Agreement shall be concluded between the Community and the Republic 
of San Marino. The text of the agreement shall be a codified text of the current 
agreement with the amendments.  

The Republic of San Marino shall undertake to adopt all appropriate measures, 
through direct transpositions or possibly equivalent actions : 

for the application of all relevant Community banking and financial legislation, 
in  particular  legislation  relating  to  the  activity  and  supervision  of  the 
institutions concerned;  

for the application of all relevant Community legislation on the prevention of 
money  laundering,  on  the  prevention  of  fraud  and  counterfeiting  of  cash  and 
non-cash means of payment, on medals and tokens and on statistical reporting 
requirements.  

The Republic of San Marino shall ensure that all relevant Community banking and financial 
legislation  is  implemented  in  its  territory  before  1st  January  2015.  The  Agreement  shall 
contain an annex detailing the deadlines for the adoption of the measures above mentioned. 

(c) 

(d) 

The method for determining the ceiling of issuance of San Marino euro coins 
shall be revised. The new ceiling shall be calculated using a method which will 
combine  a  fixed  part  aimed  at  avoiding  excessive  numismatic  speculation  on 
San Marino coins by satisfying the demand of the collector coin market and a 
variable part, calculated as the average per capita coin issuance of Italy in the 
year n-1 multiplied by the number of inhabitants of San Marino.  

A Joint Committee shall be established in order to monitor the progress in the 
implementation  of  the  Agreement.  It  shall  be  composed  of  representatives  of 
the  Republic  of  San  Marino,  the  Republic  of  Italy,  the  Commission  and  the 
ECB. It shall have the possibility to revise each year the fixed part with a view 
to  taking  into  account  inflation  and  the  evolution  of  the  collector  market.  It 

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shall  adopt  decisions  unanimously.  The  Joint  Committee  shall  adopt  its  own 
rules of procedure.  

(e) 

The euro coins of the Republic of San Marino shall be minted by the Instituto 
Poligrafico  e  Zecca  dello  Stato.  The  Republic  of  San  Marino  shall  however 
have  the  possibility  to  take  another  contractor  among  the  EU  Mints  striking 
euro  coins,  with  the  agreement  of  the  Joint  Committee.  The  volume  of  coins 
issued  by  the  Republic  of  San  Marino  shall  be  added  to  the  volume  of  coins 
issued by the home country of the producing mint for the purpose of the ECB 
approval of the total volume of the issuance.  

(f) 

The Court of Justice of the European Communities shall be elected as the body 
in  charge  of  settling  disputes  which  may  arise  from  the  application  of  the 
Agreement. 

If the Community or San Marino consider that the other Party has not fulfilled an obligation 
under  the  Monetary  Agreement,  it  may  bring  the  matter  before  the  Court  of  Justice.  The 
judgment of the Court shall be binding on the Parties, which will take the necessary measures 
to comply with the judgment within a period to be decided by the Court in its judgment. In 
case  the  Community  or  San  Marino  fail  to  take  the  necessary  measures  to  comply  with  the 
judgment within the period, the other Party can terminate immediately the Agreement. 

Article 3 

The negotiations with the Republic of San Marino shall be conducted by the Italian Republic 
and the Commission on behalf of the Community. The European Central Bank shall be fully 
associated  with  the  negotiations  in  its  field  of  competence.  The  Italian  Republic  and  the 
Commission shall submit the draft agreement to the Economic and Financial Committee for 
opinion. 

The Council shall conclude the agreement.  

This Decision is addressed to the Italian Republic and the Commission. 

Article 4 

Done at Brussels,  

For the Council 
The President 

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