By seizing the parliament to obtain the vote of the Law of approval of the monetary cooperation agreement, the French Government is taking an important step in the implementation of the reforms announced at the end of the year in Abidjan concerning monetary cooperation between the waEMU France and countries.  Aymar BINASSOUA, Tax Inspector, Lawyer, Expert in  Law and Governance of Public Financial Systems discusses the implications of the new agreement : Role of the French Parliament and the WAEMU National Parliaments, Role of the Monetary Authorities of the Euro Zone, consequences for the ECOWAS single currency project and new  constraints and  challenges for the parties.

1-  The consequences of the name change on monetary cooperation between France and WAEMU countries

The project aims to ratify the cooperation agreement signed on 21 December 2019 which suggests a change of name and other no less important developments in the arrangements for monetary cooperation. This does not call into question the idea of monetary cooperation which has existed for several decades;  the CFA franc is a denomination enshrined in the monetary agreements established since 1945 between the France and the former colonies and confirmed in 1973 with these countries now united within waMU. The December 2019 agreement replaces that of December 1973 and suggests, among other things, that the currency used the CFA, be renamed " Eco ".

2-  The basis of the referral to the French Parliament on the reform of the WAEMU common currency

The approach is constitutionally founded. Indeed, the agreement and the inherent amendments relate to aspects that engage France with other countries. However, according to the French Constitution, a certain number of international agreements, particularly those that commit its finances, can only be ratified or approved by the competent authorities if they have been authorized to do so by law, which implies the intervention of parliament alone, which has the power to vote on laws. 

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A decision dated 23 November 1998, taken by the Council of the Union which is the supreme body of the European Union it considers that unlimited convertibility under monetary and guarantee agreements for the benefit of FCFA (renamed "  Eco ") is a budgetary commitment of the French Treasury even if according to the assurances given by the France, the financial implications are not Substantial. It is due process that requires that the executive, which is the political authority with (the administration) of the Treasury competent to institute this budgetary commitment (by guarantee to the WAEMU countries), can request the agreement of the parliament.

3-  The implications of referral to the French Parliament

What should be remembered is that this is a request for prior authorization for allow the government to ratify or approve the reforms suggested by the new monetary agreement, including the change of name. Parliament may or may not agree. It is not a question of Parliament changing the terms of the agreement or convention unless it rejects it or sends it back to committee for discussion.

If the vote of the parliament is obtained, the executive under the control of the President of the Republic will be authorized e to ratify and implement the agreement with the intervention of the Ministers in charge of finance and foreign affairs, technically concerned. After this authorization it is not excluded that other texts on the technical modalities of the implementation of the changes decided. Of course, the refusal of the parliament makes it impossible for the government to endorse the reform. 

4-  The role of the national parliaments of the WAEMU States

The due process requires that the national parliaments of WAEMU countries be consulted at in turn, for the full and complete amendments to the cooperation agreement to take effect.

In international law, the principle of reciprocity implies that the stipulations of a treaty are not applicable provided that they are applied by the other Party. However, the application of a treaty by a State requires in principle the intervention of parliament in the form of authorization or information in accordance with the normative provisions of each country. I do not know of any WAEMU country that exempts itself from this rule of democratic common sense and normally taken up by the constitutional texts of all modern states.

5-  The advent of Eco in the context of the continuation of WAEMU/France monetary cooperation and ECOWAS decisions relating to the " Eco " single currency project between ECOWAS countries ECOWAS

The name change is a totally different process from the thirty-year project to implement the single currency " Eco ", ECOWAS project. The approach initiated by the WAEMU countries in agreement with the France is however considered by the other ECOWAS countries members of the West African Monetary Zone (WAMZ) as an " action that is not in accordance with the decisions " of ECOWAS, according to the terms of the press release published on January 16, 2020.

This updates the voices of those who think that the ECOWAS single currency " Eco " is inscribed d Now in a distant time horizon. Moreover, on the technical level, experts including the economist Kakpo Nubukpo in an analysis published in the French                         online daily Le Point.fr/afrique, believe that from a theoretical and empirical point of view both ECOWAS and UEMOA do not meet the conditions for an optimal monetary zone. The prosopography of the countries that compose it and the nature of their relationship would not lead to the conclusion that the institutional, political and economic characteristics are combined to make the use of a common currency beneficial for each of them. It is therefore to be hoped, on the one hand, that the reform will be supported by measures to stimulate monetary cooperation that is beneficial to all stakeholders. It is also to be hoped, on the other hand, that ECOWAS will work to lay the foundations for a satisfactory monetary zone.

6-  The role of the European Union in maintaining the fixed-parity exchange rate regime between the Euro and the currency used by WAEMU countries

In the Decision of 23 November 1998, the Council of the (European)  Union considers that nothing in the agreements Existing monetary instruments, including the guarantee given by the France, of convertibility at fixed parity cannot be interpreted as implying the obligation for the European Central Bank and the national central banks to support the convertibility of the CFA. While on occasion its position of principle is that the France may negotiate and conclude amendments to the agreements to the extent that the nature or scope of those agreements is not changed, the Council refrains from involving the ECB and the national central banks since it maintained on occasion that the changes which would take place in the Monetary cooperation framework would not entail any obligation for the ECB or the national central banks.

7-  The concrete action of the monetary authorities of the European Union in the current process

In this case, the obligation to inform the organs of the union by the France should suffice for the 'exclusion from approval or consultation. If we confine ourselves to official information, it appears that the current reform retains the essential elements of the system of monetary cooperation, the evolution of which could have determined to involve its organs more actively, namely the fixed parity with the euro and " free convertibility ". Rather, the obligation imposed by the Council of the Union which commits the France to require the prior opinion and, if necessary, the approval of the competent bodies of the EU concerns any substantial change, in particular that affecting the parties to the agreement and the principle of free convertibility at a fixed parity between the euro and the CFA francs (renamed Eco). If we accept that we are not dealing with a change affecting the scope (i.e. the fixed parity with the euro and the " guarantee of unlimited convertibility"), the nature, the parts (the countries remain the same), it should be concluded that the monetary authorities of the euro area must be simply advised, since the limits that should allow to go beyond are not crossed.

8-  The evolution of the relationship between France and states at the monetary level

The cooperation now continues without a cfa franc name but under another name (Eco), without the presence of repré French speakers in the technical bodies of the Central Bank of West African States (BCEAO) and without the obligation for the BCEAO to place 50% of its reserves in the French Treasury.

These elements qualified as political irritants are removed for the purposes of the aggiornamento. They were seen as the apparent clues fuelling scabrous critics suspecting subordination by WAEMU member countries.

9-  Closing trading accounts

Deleted  the transaction account ends deposits that are expensive for the France but are extremely generous for African central banks. Indeed, by a relatively recent economic assistance, the interest on the operating accounts is served by the France to the BCEAO, at the rate of 0.75%. According to technicians quoted by the German online newspaper Deutsche Welle (DW),  this liberal remuneration is much higher than the rate at which the BCEAO could finance itself on Markets. With this action, the France will certainly no longer pay the generous remuneration it paid to central banks. The information on the new agreement and especially on the additional acts that will clarify its contours,  will make it possible to draw all the consequences of this closure of account.

10-  the consequences of the withdrawal of French representatives from bodies including the Board of Directors and the Monetary Policy Committee of the BCEAO as well as from the Commission WAEMU Banking

The French Government in the minutes of the Council of Ministers of 20 May 2020 indicates on its official website gouvernement.fr that 'in place of the physical presence of its representatives, new mechanisms are foreseen to monitor and control the financial risk that it will continue to take in the context of the support provided by its guarantee. Without being present, it establishes in conjunction with the BCEAO a framework of Reporting, on elements of financial information, monetary developments, volution of reservations, allowing it to have the same level of information as before, in addition to informal meetings with the various authorities and institutions of the Union.

Ever else according to the official press release, the role of the France tends to transform into a simple financial guarantor, without physical presence. The French Council of State in a decision in 2012, indicated that the mission of guarantor to the African Central Bank participates in a function whose exercise presents on behalf of the French State a particular interest for the economy. If the terms of the mission of financial guarantor are transformed by the new agreement, this mission of particular interest for the French Council of State does not disappear. We are therefore moving from a guarantor in situ to " a simple financial guarantor" who now defines and implements means of controlling his risk as a guarantor of  ex situ.  

The future of monetary cooperation France/WAMU

The provision of the most comprehensive information on the agreement will allow a better understanding of the situation. Nothing is yet known, for example, about the future of the maintenance of fiduciary circulation, which, – according to the French news site Médiapart  through the writings of journalist Fanny Pigeaud  and economist Samba Sylla reporting on the remarks made on February 12, 2020 before French deputies by experts from the Treasury and the Banque de France-, includes for the WAEMU countries, the purchase of monetary signs, their transport, insurance, or about 45 million dollars (about 27 billion CFA francs)  of services per year at the expense of the BCEAO and invoiced by the Bank of France. There is also a lack of information on the impact of the new agreement on the management of gold reserves which, according to the PEFA 2017 report, of the Côte d'Ivoire Country Assessment on Public Financial Management, financed by the European Union, are recorded on the BCEAO's balance sheet while 90% of these reserves are physically deposited in the vaults of the Banque de France.