“With great power comes great responsibility”.You know where this quote comes from 🙂
I think it perfectly applies to the ECB.
When I started to study it (OMG, about 20 years ago!), I found out that its almost exclusive competence in managing the Eurozone monetary policy and its well-guaranteed independence were mirrored by a panoply of accountability tools.
The democratic legitimacy of the ECB is grounded on the respect of the rule of law and specifically on the fact that (i) it has been established by a treaty ratified by all member states; (ii) its Executive Board is appointed by the European Council, acting by a qualified majority on a recommendation from the Council after it has consulted the European Parliament; (iii) its decisional bodies act in accordance with decision-making procedures codified in the Treaties and in the Statute annexed thereto.
This legitimacy ground is complemented by the accountability of the ECB towards the European Parliament. 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. The content of the “monetary dialogue” has evolved over time and now covers all aspects of economic and monetary policy. 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 own initiative or at the request of these; MEPs may address written questions to the bank and ECB’s compulsory replies are published in the Official Journal of the EU and on the bank’s website.
The aim of these exchanges between the Parliament and the ECB is monitoring its compliance with the objective of price stability: in all documents and interviews the ECB is required to justify its work and does it by making known its monetary policy strategy in detail. The definition of price stability rests on ECB’s competence and can be found in two important decisions, adopted in 1998 and 2000.
As part of the ECB’s reporting obligations, the ECB publishes quarterly reports, weekly financial statements, and a Monthly Bulletin plus a wide range of other task-related publications. It also addresses an Annual Report to the Council and Parliament. This document is presented by the President of the ECB to the Parliament’s plenary which –few months after – adopts a resolution after a general debate. This exercise is far from being a mere formality: in 2005 the Bank’s annual report was rejected (even if this vote didn’t have any binding effect). The Members of the Governing Council deliver numerous speeches to address relevant topics of concern for the public and the ECB President and Vice-President provide an in-depth explanation of the ECB’s assessment of the economic situation and the rationale for its monetary policy decisions during regular press conferences – monthly- after each meeting of the ECB’s Governing Council.
All this was already in place before the financial crisis.
Only on December 18th 2014, the European Central Bank communicated its intention to start publishing summary minutes of its policy deliberations beginning four weeks after its next meeting, as a key part of its communications strategies. For sure it is a step forward in terms of the institution’s transparency and accountability.
A few days ago somebody made me notice that if “with great power comes great responsibility”, the contrary is also true: with great responsibility comes great power.
Once again, the ECB is a perfect example. During the financial crisis and especially after the Greek crisis exploded, the ECB took on more and more responsibility, stretching its mandate to guarantee the price stability and – ultimately – committing itself to save the very existence of the euro.
Draghi’s London speech (July 26, 2012), was a turning point:
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Starting from then, new unconventional monetary instruments were created – the Outright Monetary Transactions, the Quantitative Easing – and the communication strategy became one of them. Now, in front of this (undeniable) increased power, one legitimately asks if the accountability tools foreseen by the Treaties are still adequate. Maybe it is time to introduce a new one: a monetary dialogue with a Parliament (or a Parliament configuration) specific to the Euro area.
The proposal of signing a specific Euro Treaty for the Eurozone economic governance -establishing an executive body responsible in front of an Euro-Parliament – has been advanced by three political manifestos appeared in 2013 and 2014. The first was presented by the German Glienicker Gruppe, the other two were French: the proposal by the Groupe Eiffel and the Manifeste pour une Union Politique de l’Euro. Such a Parliament would add a new dimension in holding the ECB accountable and could contribute significantly to the democratization of the Euro-governance. In the meantime, it would be possible to establish in the European Parliament a subcommittee to the ECON Committee composed of MEPs from the Eurozone, to prepare the ECON Committee’s work on legislative proposals and overseeing activities specific to the Eurozone, including the monetary dialogue with the ECB.
This last proposal could be easily implemented without any treaty change, not amending the European Parliament’s Rules of Procedure (where couldn’t be allowed any differential status among MEPs), but with informal agreements among political groups.