19th Mar 2018


New ECB powers: the buck stops where?

  • Compared to national central banks in the UK and Sweden, the ECB is a democratic black hole (Photo: Valentina Pop)

When Alan Greenspan was chairman of the US Federal Reserve, visitors to his office were confronted with a sign on his desk which said "the buck starts here." It was a wry reminder of the power that the Fed wields in the world's largest economy - the power to print money.

It is the defining power of central banks the world over and the main reason that they jealously guard their independence from political pressure. One just has to look at hyperinflation in Zimbabwe to see what happens when central bank policies are dictated by political expediency.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

That independence should not be confused with an absence of accountability. Like any other institution in a democratic society, central banks should be subject to proper scrutiny.

How much transparency this entails, how much accountability and to whom they should be accountable - where exactly the buck stops - are issues which have become the subject of increasingly heated debate.

Nowhere is this debate more heated than in the EU right now, thanks to the European Central Bank's (ECB) pivotal role in resolving the crisis.

The last four years have seen its mandate stretched to the limit as it struggles to save the euro. It has overseen the bailouts of three EU member states, spent billions on the bonds of debt-laden countries and given €1 trillion in cheap loans to eurozone banks.

Whatever one thinks about the merits of these actions, they have had the effect of redistributing economic risks and rewards throughout the eurozone with only a veneer of democratic oversight.

The ECB President currently has a quarterly "dialogue" with the European Parliament and the institution responds to written questions from MEPs, but this falls far short of the powers of other national parliaments.

The UK parliament can summon representatives of the Bank of England to give evidence on monetary policy. The Swedish parliament can dismiss executives of the Riksbanken for misconduct and the US Senate is required to confirm presidential appointments to the Fed.

Unlike the UK and New Zealand, where central bank objectives are tightly specified by democratically elected governments, the ECB has free rein to interpret its legal mandate, sometimes controversially as we have seen.

Now the ECB is being granted even more powers. As announced by European Commission President Jose Manuel Barroso in his State of the Union address last Wednesday (12 September), the bank is to have responsibility for the supervision of 6,000 eurozone banks.

If member states agree and if you add to this the new bond-purchasing programme announced the previous week, this will arguably make the ECB the most powerful institution on the EU landscape right now.

But its accountability mechanisms are woefully inadequate. This is despite the lip service paid by Barroso to "democratic oversight" in his speech and similar pronouncements by ECB chief Mario Draghi over the summer.

In return for the power to revoke banking licenses, fine banks up to 10 percent of their revenues, remove members of their board and - most importantly - co-ordinate future bailouts of failing banks using taxpayer funds, the Barroso proposal contains only the most cursory reference to the ECB's accountability to the European Parliament with no details as to how this will work.

The commission refers to "regular reporting and responding to questions [by the European Parliament]" which simply restates the status quo.

Indeed, despite all the professed concern for democratic legitimacy, the EU Council has decided that the European Parliament will be excluded from any significant role in shaping these proposals before they are implemented, an irony not lost on MEPs in their response last week.

The commission's proposals with regard to transparency give no less cause for concern.

Access to ECB documents will ultimately be regulated by the ECB itself, which has taken a highly restrictive line on this in the past, notably in refusing to release Jean-Claude Trichet's communications with the Irish government immediately preceding its request for EU bailout funds.

The commission proposals say that the bank "may decide to publish its decisions, recommendations and opinions," but it does not publish minutes of meetings or voting records, unlike its peers in the UK and Sweden.

The commission also says at several points that there is a need to ensure "the ECB's independence from undue influences by national authorities and market participants."

We at Transparency International wholeheartedly agree.

But supervision is a contact sport and if the ECB is to make decisions about the fate of individual banks, the public should also be able to assess whether its officials have been subject to undue influence through lobbying.

We think it is high time that the ECB joined the EU transparency register on lobbying, together with the European Commission and the European Parliament.

The Barroso proposal represents the first real opportunity to rethink the transparency and accountability of the ECB in over a decade. To squander that opportunity now could be fatal to its aspirations for legitimacy.

Despite its noble intentions, it is no less vulnerable to conflicts of interest and corruption than any other EU institution.

Jana Mittermaier is a director at the Transparency InternationaI EU liaison office


The European Central Bank: a hamstrung firefighter

The European Central Bank is an important firefighter in the euro-crisis. But increasingly divergent eurozone economies are limiting the effects of its policies and democratic scrutiny remains an issue.


Big banks: From Greek bailout to Hamlet's castle

A lobby for the world's biggest banks - the International Institute of Finance - became a key EU player when it negotiated the debt cut on Greece's second bailout. Its world of rented castles and sopranos shows losses were bearable.

Moria refugee camp is no place for people

Two years on from the highly-controversial EU-Turkey deal, many thousands of refugees are still trapped on Greek islands. One of them offers an open invitation to EU leaders to see their inhospitable conditions at the Moria refugee camp on Lesbos.

Column / Brussels Bytes

EU e-privacy proposal risks breaking 'Internet of Things'

EU policymakers need to clarify that the e-privacy should not apply to most Internet of Things devices. The current proposal require explicit user consent in all cases - which is not practical.

Stakeholders' Highlights

  1. Counter BalanceConmtroversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  2. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  3. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  4. Martens CentreEuropean Defence Union: Time to Aim High?
  5. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  6. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  7. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  8. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  9. EPSUWill the Circular Economy be an Economy With no Workers?
  10. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  11. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  12. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework

Latest News

  1. EU states pledge solidarity with UK on alleged Russian attack
  2. 'Decisive step' in Brexit ahead of EU summit
  3. Moria refugee camp is no place for people
  4. No free EU wifi for UK cities without Brexit deal
  5. Selmayr case symptomatic, warns EU novel author
  6. Germany: Russia is 'partner' despite alleged UK attack
  7. Kiev wants EU sanctions on former German chancellor
  8. North Korea: time to put the 'E' in engagement

Stakeholders' Highlights

  1. Mission of China to the EUDigital Cooperation a Priority for China-EU Relations
  2. ECTACompetition must prevail in the quest for telecoms investment
  3. European Friends of ArmeniaTaking Stock of 30 Years of EU Policy on the Nagorno-Karabakh Conflict: How Can the EU Contribute to Peace?
  4. ILGA EuropeCongratulations Finland!
  5. EUobserverNow Hiring! Sales Associate With 2+ Years Experience
  6. EUobserverNow Hiring! Finance Officer With Accounting Degree or Experience
  7. UNICEFCyclone Season Looms Over 720,000 Rohingya Children in Myanmar & Bangladesh
  8. European Gaming & Betting AssociationEU Court: EU Commission Correct to Issue Guidelines for Online Gambling Services
  9. Mission of China to the EUChina Hopes for More Exchanges With Nordic, Baltic Countries
  10. Macedonian Human Rights MovementCondemns Facebook for Actively Promoting Anti-Macedonian Racism
  11. Nordic Council of MinistersGlobal Seed Vault: Gene Banks Gather to Celebrate 1 Million Seed Collections
  12. CECEIndustry Stakeholders Are Ready to Take the Lead in Digital Construction