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2017 | OriginalPaper | Buchkapitel

How the ECB Reinterpreted Its Mandate During the Euro-Crisis (and Why It Was Right in Doing So)

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Abstract

During the long years of the Euro-crisis, the European Central Bank (hereinafter ECB) played (and still plays) a really significant role to support states in crisis or banks facing lack of liquidity. As a consequence, it has been accused in the political, but also academic debate to exceed its own powers. First of all, the allegations were related to the scarce respect of its own legal framework (competences and limits established by the EU Treaties); secondly, they regarded her invasion of the field of economic policy while it had to limit its intervention to monetary policy; finally, it was pointed out how it played a too “political” role. This chapter aims to dismantle such criticisms showing how the ECB’s intervention—even if unconventional—was required by the critical moment and felt within the scope and the borders of monetary policy. Finally, it will address the peculiar “political” activity of the ECB, which is a technocratic institution inevitably called to exercise a discretion within the range of multiple policy options. Its freedom of judgment has to be grounded and duly motivated on economic reasoning, relating it to price stability. Nonetheless, it remains relevant.

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Fußnoten
1
ECJ 16 June 2015, Case C-62/14, Gauweiler.
 
2
On the governance and functioning of the ECB we suggest the following readings: Smits (1997), Zilioli and Selmayr (2001), Malatesta (2003), Louis (2009). On its independence see also Beukers (2013).
 
3
So in Article 130 TFEU.
 
4
“[…] such independence does not have the consequence of separating it entirely from the European Community and exempting it from every rule of Community law”, ECJ 10 July 2003, Case C-11/00 Commission of the European Communities v. the European Central Bank (Olaf Case), para. 135.
 
5
The ECB website so defines accountability: “it is a founding principle of democratic societies that any independent institution bestowed with a public function should be accountable to citizens and their elected representatives for the conduct of its policies. Accountability is therefore an important counterpart of central bank independence.” (https://​www.​ecb.​europa.​eu). There are several accountability tools provided by the European Treaties and by the ESCB Statute: the ECB President regularly reports on the bank’s monetary policy and other duties during his quarterly hearings before the European Parliament’s Committee on Economic and Monetary Affairs. In addition, the President of the ECB and the other members of the Executive Board may be heard by the competent Committees of the European Parliament on their own initiative or at the request of these. Besides, MEPs may address written questions to the bank; ECB’s compulsory replies are published in the Official Journal of the EU and on the bank’s website. As part of the ECB’s reporting obligations, the ECB also addresses an Annual Report to the Council and Parliament. This monetary dialogue is grounded on Article 284, para. 3, TFEU—and developed well further than foreseen by the Treaty—as detailed by Article 126 of the EP Rules of Procedure. Other accountability instruments are directly addressed to experts and informed public opinion as communication tools.
As foreseen by Article 15 of the Statute, the ECB has to publish quarterly reports on the activities of the ESCB as well as a consolidated weekly financial statement. There is then the already mentioned Annual Report. Moreover, the ECB also publishes a Monthly Bulletin plus a wide range of other task-related publications. Shortly after each monetary policy meeting of the Governing Council, decisions are explained in a press conference by the President. Since February 2015, the ECB also publishes the summary of the minutes of the governing council, as “account of the monetary policy meeting”.
 
6
The so-called “Six-Pack” entered into force on 13 December 2011. It is composed of five EU Regulations: four adopted by the Council of the Union and the European Parliament (Nos. 1173/2011, 1174/2011, 1175/2011, 1176/2011) and one by the Council (No. 1177/2011) on 16 November 2011 (in OJEU L 306, 23 November 2011); and of one Directive adopted by the Council (2011/85/EU) on 8 November 2011. All these acts apply to the 28 Member States, with some specific rules for Euro area Member States, especially regarding financial sanctions. A second reform package, the so-called “Two-Pack”, entered into force on 30 May 2013 in all Euro area Member States: the Regulations (EU) Nos. 472/2013 and 473/2013 both adopted on 21 May 2013 (in OJEU L 140, 27 May 2013).
 
7
See Martucci (2012), p. 96.
 
8
These are the monetary policy strategy adopted on 13 October 1998 and its amendment, adopted on 8 May 2003, both atypical acts appeared in the form of press release, see www.​ecb.​int/​press/​pr/​date/​2003/​html/​pr030508_​2.​it.​html.
 
9
We read in the Press release: “This strategy, which was announced on 13 October 1998, consists of three main elements: a quantitative definition of price stability, a prominent role for money in the assessment of risks to price stability, and a broadly based assessment of the outlook for price developments”. More than 4 years of implementation have worked satisfactorily. Nevertheless, the Governing Council deemed it useful to evaluate the strategy in the light of this experience, taking into account the public debate and a series of studies undertaken by staff of the Eurosystem. “Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. Price stability is to be maintained over the medium term.” Today, the Governing Council confirmed this definition (which it announced in 1998). At the same time, the Governing Council agreed that in the pursuit of price stability it will aim to maintain inflation rates close to 2% over the medium term. This clarification underlines the ECB’s commitment to provide a sufficient safety margin to guard against the risks of deflation. It also addresses the issue of the possible presence of a measurement bias in the HICP and the implications of inflation differentials within the Euro area. The Governing Council confirmed that its monetary policy decisions will continue to be based on a comprehensive analysis of the risks to price stability. Over time, analysis under both pillars of the monetary policy strategy has been deepened and extended. This practice will be continued. However, the Governing Council wishes to clarify communication on the cross-checking of information in coming to its unified overall judgement on the risks to price stability. To this end, the introductory statement of the President will henceforth follow a new structure. It will start with the economic analysis to identify short to medium-term risks to price stability. As in the past, this will include an analysis of shocks hitting the euro area economy and projections of key macroeconomic variables. The monetary analysis will then follow to assess medium to long-term trends in inflation in view of the close relationship between money and prices over extended horizons. As in the past, monetary analysis will take into account developments in a wide range of monetary indicators including M3, its components and counterparts, notably credit, and various measures of excess liquidity.
 
10
As it is clearly explained by Mario Draghi in the speech opening the academic year at Università Bocconi (Milan) on 15 November 2012.
 
11
As stated by Cœuré (2013) “When we look at the history of central banks, contributing to financial stability was one of their roles in most countries, although to varying degrees. Even when central banks were assigned a relatively narrow mandate, such as that of inflation targeting in recent years, they often played a decisive part as soon as financial instability struck. In particular, their ability to act as lender of last resort in the financial system and to manage liquidity in the interbank market typically made them a key player in crisis management. Even in normal times, the central role of bank deposits in the stock of money makes monetary stability dependent on the soundness of the banking sector. In sum, in the late Tommaso Padoa-Schioppa’s words, financial stability has been part of the ‘genetic code’ of central banks”.
 
12
Cafaro (2013), pp. 49–68.
 
13
In late November 2011, the Federal Reserve, the ECB and Canadian Swiss, Japanese and English central banks announced a coordinated action “to enhance their capacity to provide liquidity support to the global financial system, an intervention of strong symbolic impact showing the will central banks to actively participate in the restoration of financial stability”, see the press release by the Federal Reserve’s Board of Governors, 30 November 2011, http://​www.​federalreserve.​gov/​newsevents/​press/​monetary/​20111130a.​htm.
 
14
On the topic see Bini Smaghi (2009), Bossone (2013), Bassan (2014).
 
15
Cafaro (2013), p. 49 et seq.
 
16
Viterbo and Cisotta (2010, 2012).
 
17
Draghi (2012b).
 
19
Library of the EP (2012).
 
20
In its famous London speech on 26 July 2012, Mario Draghi declared that he was prepared to do “whatever it takes to preserve the euro”; Draghi (2012a).
 
21
See Roubini (2016).
 
22
See ECJ 16 June 2015, Case C-62/14, Gauweiler.
 
23
See the ECB Monthly Bulletin, September 2012, p. 12, on the website www.​ecb.​int.
 
24
See para. 278 “For an acquisition of government bonds on the secondary market by the European Central Bank aiming at financing the Members’ budgets independently of the capital markets is prohibited as well, as it would circumvent the prohibition of monetary financing (see also recital 7 of Council Regulation (EC) No. 3603/93 of 13 December 1993 (OJEC L 332, 31 December 1993, p. 1)). This is taken account of by the Treaty establishing the European Stability Mechanism, whose recital 4 calls for strict observance of the European Union framework, the integrated macroeconomic surveillance, in particular the Stability and Growth Pact, the macroeconomic imbalances framework and the economic governance rules of the European Union. Article 123 TFEU is one of these rules.”.
 
25
As reported by Ruffert (2011), p. 1785; Allemand and Martucci (2012), p. 21.
 
26
See the resignations presented by Axel Weber on 14 February 2011 and by Jürgen Stark on 30 April 2011.
 
27
See the Opinion of Advocate General Cruz Villalón, delivered on 14 January 2015 in the Case C-62/14.
 
28
The already mentioned decision of ECJ in Case C-62/14, adopted on 16 June 2015, for a detailed analysis see Munari (2015).
 
29
The first “account of the monetary policy meeting”, published on 19 February 2015, reveals how controversial the adoption of the “quantitative easing” policy was http://​www.​ecb.​europa.​eu/​press/​accounts/​2015/​html/​mg150219.​en.​pdf.
 
30
As underlined by Smits (2015); see also Hinarejos (2015).
 
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Metadaten
Titel
How the ECB Reinterpreted Its Mandate During the Euro-Crisis (and Why It Was Right in Doing So)
verfasst von
Susanna Cafaro
Copyright-Jahr
2017
DOI
https://doi.org/10.1007/978-3-319-53895-2_11