The Constraints of Central Bank Independence: The European Central Bank's Unconventional Monetary Policy and Incremental Accountability in the Euro Crisis (original) (raw)

The Single Supervisory Mechanism in Action: Institutional Adjustment and the Reinforcement of the ECB Position

This article discusses some aspects of the functioning of the Single Supervisory Mechanism (SSM) since its launch in November 2014. By examining a number of practices developed by the European Central Bank (ECB), it argues that two important and complementary processes have characterized the functioning of the SSM so far. First, the ECB has regulated its interactions with the national authorities in such a way to consolidate and promote supranationalism within the SSM: more precisely, transnationalism has been put at the service of supranationalism. Second, the ECB has expanded its supervisory powers, by making an extensive use of the narrow regulatory powers that it enjoys under the SSM Regulation and by using its adjudicatory powers in a quasi-regulatory manner. Admittedly, both processes were largely predictable and do not alter the fundamental legal and institutional features of the SSM. However, they should not be considered as marginal adjustments of the legal framework established by the SSM Regulation. They are important developments, raising some concerns and capable of conditioning the future developments in the SSM.

The Rising Power of the ECB: The Case of the Single Supervisory Mechanism

2015

Introduction: The euro area was routinely criticized for its handling of the sovereign debt crisis, charged with doing ‘too little, too late’ in order to alleviate market pressure. Its inaction / delayed reaction may have worsened the impact of the crisis. Within the context the European Central Bank emerged as an indispensable institution in euro area governance. ECB President Mario Draghi is even credited with saving the euro thanks to his speech in July 2012 in which he vowed to do “whatever it takes.” This article considers the evolving role of the ECB in euro area governance, specifically financial supervision. Whereas at the start of the crisis, the ECB’s increasingly important role in crisis management was termed as largely incremental (cf Salines et al. 2012; Schwarzer 2012), the ECB has increased its capacity and its competences significantly since onset of the global financial crisis. From a technical standpoint, this decision could be viewed as a natural outgrowth of cent...

Banking on Sovereignty: A Genealogy of the European Central Bank's Independence

LSE PhD Disseration , 2019

This thesis analyses the idea of central bank independence, how it shaped the creation of the European Central Bank (ECB) and its management of the Euro Crisis. Based on a genealogical analysis, the thesis identifies the central normative commitments undergirding the insulation of monetary policy from ordinary democratic politics. It argues that central bank independence is an institutional response to the ‘problem of politics’ in relation to money: the problem that money is simultaneously founded on political authority and fundamentally threatened by the ordinary exercise of this authority. Central bank independence, then, constitutes a way of grounding the value of money politically while at the same time depoliticising its government. The form that central bank independence takes in practice, however, differs substantially, reflecting different ways of wedding the idea to broader constitutional imaginaries. Drawing comparisons to other major central banks, the thesis details the ECB’s form of independence and argues that the creation of the ECB not as a government agency (as the Fed) or a societal power on a par with the government (as the Bundesbank), but as a sovereign representative on a par with the Member States altered the constitutional make-up of the Eurozone. As the existential crisis of the euro shows, general tensions within central bank independence become irresolvable contradictions in this constitutional construct. Without institutional mechanisms for resolving them through ordinary politics, the emergency politics of the Euro Crisis placed the ECB centre-stage, engaged in the ‘higher lawmaking’ of changing the Eurozone’s constitution in order to save it. In doing so, however, the ECB redefined the meaning of its independence and reignited ‘the problem of politics’ by undermining its underlying social contract.

ECB independence and accountability today: towards a (necessary) redefinition?

Maastricht Journal Special issue: The ECB's accountability in a multilevel European order, 2019

This introductory article sets the ground for the analysis performed in the articles included in this Special Issue. It shows why a new analysis of the European Central Bank (ECB)'s accountability is required by referring to recent developments, and by underlining how much the ECB's role and standing have changed since its creation 20 years ago. Indeed, its resorting to unconventional monetary policies in response to the recent economic and financial crisis, as well as the creation of the Banking Union, have significantly affected the ECB. This introduction also recalls the main elements of the debate on the balance between accountability and independence, and shows how this balance has evolved. On the basis of the findings of the articles included in this Special Issue, some conclusions and hypotheses as to the way forward are formulated.

The European Central Bank's Independence and Its Relations with Economic Policy Makers

2007

In this Essay, written for the Fifty Years of European Union (“EU”) Law Conference organized by Fordham Law School, I intend to sketch the independent position of the European Central Bank (“ECB”) in the context of economic policy making within the European Union. I will briefly describe the law and the practice in respect of independence and economic-policy making, both the internal (domestic policies) and the external aspects (international policies). The law is stated as of February 25, 2008.

Changing Banking Supervision in the Eurozone: the ECB as a Policy Entrepreneur. Bruges Political Research Paper No. 38, December 2014

2014

In 2012, the European Union adopted a transformational change to its banking policy for the Eurozone. It dropped the model of decentralized supervision and regulatory competition between countries, and replaced it with a single supervisor and harmonization. Transferring banking supervision to the ECB also alters the existing constitutional order. The policy process leading to this transformational change was rapid and highly political, which was different compared to earlier incremental changes to banking policy. Kingdon's model, whereby policy entrepreneurs seize opportunities at times when the independent streams of solutions, problems and politics converge, partly explains this transformation. The study of EU banking policy suggests, however, that the multiple streams framework should pay more attention to the way in which entrepreneurs engineer fluctuations within the streams and thereby contribute to creating opportunities for change. This paper identifies the ECB as an eff...

Dependent and Accountable: Evidence from the Modern Theory of Central Banking

Journal of Economic Surveys, 2000

In this paper we take another look at the literature on central bank independence. We show that the representative-agent approach to monetary policy is seriously flawed and does not provide a sound basis for deriving institutional solutions to the inflationary-bias. We then argue that the political approach to monetary policy provides a better account of the inflationary-bias and that this has important implications for the set-up of institutional arrangements, like central-bank independence, and the role of contractual arrangements, like indexation. Central bank independence, if appropriately modeled, can fail to reduce inflationary pressures in plausible circumstances. We then identify some issues in the theory of central banking that have not been clearly resolved and we offer some intuition as to the way they could be studied. We conclude by showing some potentially worrisome implications for the future of the European Monetary Union.