Editing European Central Bank (section)

=== Debates on ECB independence ===
[[File:DSCI0115 Blockupy 2014 Transparent EZB.jpg|thumb|Demonstration of the [[Blockupy movement]] in front of the ECB (2014)]]
{{Essay-like|section|date=May 2020}}The debate on the independence of the ECB finds its origins in the preparatory stages of the construction of the EMU. The German government agreed to go ahead if certain crucial guarantees were respected, such as a European Central Bank independent of national governments and shielded from political pressure along the lines of the German central bank. The French government, for its part, feared that this independence would mean that politicians would no longer have any room for manoeuvre in the process. A compromise was then reached by establishing a regular dialogue between the ECB and the Council of Finance Ministers of the euro area, the Eurogroup.

==== Arguments in favour of independence ====
There is strong consensus among economists on the value of central bank independence from politics.<ref>{{Cite web|last=Vaitilingam|first=Romesh|date=May 13, 2019|title=Fed Appointments|url=https://www.igmchicago.org/surveys/fed-appointments/|url-status=live|archive-url=https://web.archive.org/web/20211204174401/https://www.igmchicago.org/surveys/fed-appointments/|archive-date=December 4, 2021|access-date=December 4, 2021|website=IGM Forum}}</ref><ref>{{Cite web|last=Rampell|first=Catherine|date=July 15, 2009|title=Petition for Fed Independence|url=https://economix.blogs.nytimes.com/2009/07/15/petition-for-fed-independence/|url-status=live|archive-url=https://web.archive.org/web/20210128110926/https://economix.blogs.nytimes.com/2009/07/15/petition-for-fed-independence/|archive-date=January 28, 2021|access-date=4 December 2021|website=NY Times}}</ref> The rationale behind are both empirical and theoretical. On the theoretical side, it's believed that time inconsistency suggests the existence of political business cycles where elected officials might take advantage of policy surprises to secure reelection. The politician up to the election will therefore be incentivized to introduce expansionary monetary policies, reducing unemployment in the short run. These effects will be most likely temporary. By contrast, in the long run, it will increase inflation, with unemployment returning to the natural rate negating the positive effect. Furthermore, the credibility of the central bank will deteriorate, making it more difficult to answer the market.<ref>{{Cite journal|last=Mishkin|first=Frederic|date=September 2006|title=Monetary Policy Strategy: How Did We Get Here?|url=http://www.nber.org/papers/w12515.pdf|journal=|language=en|location=Cambridge, MA|pages=w12515|doi=10.3386/w12515|s2cid=154595734}}</ref><ref>{{Cite book|last=European Central Bank.|url=https://data.europa.eu/doi/10.2866/908675|title=The case for central bank independence.|date=2020|publisher=Publications Office|location=LU|doi=10.2866/908675|isbn=9789289944243}}</ref><ref>{{Cite journal|last1=Barro|first1=Robert|last2=Gordon|first2=David|date=February 1983|title=Rules, Discretion and Reputation in a Model of Monetary Policy|url=http://www.nber.org/papers/w1079.pdf|journal=|language=en|location=Cambridge, MA|pages=w1079|doi=10.3386/w1079}}</ref> Additionally, empirical work has been done that defined and measured central bank independence (CBI), looking at the relationship of CBI with inflation.<ref>{{Cite journal|last1=Cukierman|first1=Alex|last2=Web|first2=Steven B.|last3=Neyapti|first3=Bilin|date=1992|title=Measuring the Independence of Central Banks and Its Effect on Policy Outcomes|url=https://doi.org/10.1093/wber/6.3.353|journal=The World Bank Economic Review|volume=6|issue=3|pages=353–398|doi=10.1093/wber/6.3.353|issn=0258-6770}}</ref>

==== The arguments against too much independence ====

===== An independence that would be the source of a democratic deficit. =====
According to Christopher Adolph, the alleged neutrality of central bankers is only a legal façade and not an indisputable fact.<ref name="Adolph, Christopher, 1976–2013">{{Cite book|last=Adolph |first=Christopher |title=Bankers, bureaucrats, and central bank politics : the myth of neutrality|date=2013|publisher=Cambridge University Press|isbn=978-1-139-61681-2|location=New York|oclc=844940155}}</ref>

'''The crisis: an opportunity to impose its will and extend its powers''':

– ''Its participation in the [[European troika|troika]]'': Thanks to its three factors which explain its independence, the ECB took advantage of this crisis to implement, through its participation in the troika, the famous structural reforms in the Member States aimed at making, more flexible the various markets, particularly the labour market, which are still considered too rigid under the [[ordoliberal concept]].<ref name="Delaume 2015 75">{{Cite journal|last=Delaume|first=Coralie|date=2015|title=Où va la Banque centrale européenne ?: De la technique à la politique, sans la démocratie|url=http://www.cairn.info/revue-le-debat-2015-5-page-75.htm|journal=Le Débat|language=fr|volume=187|issue=5|pages=75|doi=10.3917/deba.187.0075|issn=0246-2346}}</ref>

- ''[[Macro-prudential supervision]]'' : At the same time, taking advantage of the reform of the financial supervision system, the Frankfurt Bank has acquired new responsibilities, such as macro-prudential supervision, in other words, supervision of the provision of financial services.<ref>{{Cite journal|last=Fontan|first=Clément|date=2010|title=Chantiers de recherche transfert d'idée et résistances au changement : le cas de la banque centrale européenne après la crise.: Questionnement scientifique et objectifs de la thèse|url=http://www.cairn.info/revue-politique-europeenne-2010-1-page-225.htm|journal=Politique Européenne|language=fr|volume=30|issue=1|pages=225|doi=10.3917/poeu.030.0225|issn=1623-6297|doi-access=free}}</ref>

-''Take liberties with its mandate to save the Euro'' : Paradoxically, the crisis undermined the ECB's ordoliberal discourse "because some of its instruments, which it had to implement, deviated significantly from its principles. It then interpreted the paradigm with enough flexibly to adapt its original reputation to these new economic conditions. It was forced to do so as a last resort to save its one and only raison d'être: the euro. This Independent was thus obliged to be pragmatic by departing from the spirit of its statutes, which is unacceptable to the hardest supporters of ordoliberalism, which will lead to the resignation of the two German leaders present within the ECB: the governor of the Bundesbank, Jens WEIDMANN<ref>{{Cite web|last=Raymond|first=Grégory|title=Jens Weidmann, l'homme qui dit "non" à toute l'Europe|url=https://www.huffingtonpost.fr/2012/08/30/jens-weidmann-bundesbank-draghi-merkel-euro_n_1843003.html|website=huffingtonpost.fr|date=31 August 2012}}</ref> and the member of the executive board of the ECB, Jürgen STARK.<ref>{{Cite web|agency=Reuters|date=11 September 2011|title=La démission de Jürgen Stark de la BCE vient au pire moment|url=https://www.lexpress.fr/archives/economie/2011/09/11/|website=lexpansion.lexpress.fr/}}</ref>

– ''Regulation of the financial system'' : The delegation of this new function to the ECB was carried out with great simplicity and with the consent of European leaders, because neither the Commission nor the Member States really wanted to obtain the monitoring of financial abuses throughout the area. In other words, in the event of a new financial crisis, the ECB would be the perfect scapegoat.<ref>{{Cite journal|last=Lebaron|first=Frédéric|date=2014|title=Quand le gardien du Temple devient le sauveur des marchés financiers|url=http://www.cairn.info/revue-savoir-agir-2014-1-page-5.htm|journal=Savoir/Agir|language=fr|volume=27|issue=1|pages=5–9|doi=10.3917/sava.027.0005|issn=1958-7856}}</ref>

- ''Capturing exchange rate policy'' : The event that will most mark the definitive politicization of the ECB is, of course, the operation launched in January 2015: the [[quantitative easing]] (QE) operation. Indeed, the Euro is an overvalued currency on the world markets against the dollar and the euro zone is at risk of deflation. In addition, Member States find themselves heavily indebted, partly due to the rescue of their national banks. The ECB, as the guardian of the stability of the euro zone, is deciding to gradually buy back more than EUR 1 100 billion Member States' public debt. In this way, money is injected back into the economy, the euro depreciates significantly, prices rise, the risk of deflation is removed, and Member States reduce their debts. However, the ECB has just given itself the right to direct the exchange rate policy of the euro zone without this being granted by the Treaties or with the approval of European leaders, and without public opinion or the public arena being aware of this.<ref name="Delaume 2015 75"/>

===== The arguments in favour of a counter power =====
In the aftermath of the euro area crisis, several proposals for a countervailing power were put forward, to deal with criticisms of a democratic deficit. For the German economist German Issing (2001) the ECB as a democratic responsibility and should be more transparent. According to him, this transparency could bring several advantages as the improvement of efficiency and credibility by giving the public adequate information. Others think that the ECB should have a closer relationship with the European Parliament which could play a major role in the evaluation of the democratic responsibility of the ECB.<ref name="Barbier-Gauchard, Amélie 1978-....">{{Cite book|last=Barbier-Gauchard, Amélie (1978–....).|title=La gouvernance économique de la zone euro : réalités et perspectives|date=15 May 2018|others=Sidiropoulos, Moïse., Varoudakis, Aristomène (1958–....)., De Grauwe, Paul (1946–....).|isbn=978-2-8073-2010-9|location=Louvain-la-Neuve|oclc=1041143371}}</ref> The development of new institutions or the creation of a minister is another solution proposed:

'''Towards democratic institutions ?'''

The absence of democratic institutions such as a Parliament or a real government is a regular criticism of the ECB in its management of the euro area, and many proposals have been made in this respect, particularly after the economic crisis, which would have shown the need to improve the governance of the euro area. For Moïse Sidiropoulos, a professor in economy: "The crisis in the euro zone came as no surprise, because the euro remains an unfinished currency, a stateless currency with a fragile political legitimacy".<ref>{{Cite web|date=2019|title=L'euro reste une monnaie inachevée|url=http://www.recherche.unistra.fr/index.php?id=30096|website=Université de Strasbourg}}</ref>

French economist [[Thomas Piketty]] wrote on his blog in 2017 that it was essential to equip the eurozone with democratic institutions. An economic government could for example enable it to have a common budget, common taxes and borrowing and investment capacities. Such a government would then make the euro area more democratic and transparent by avoiding the opacity of a council such as the Eurogroup.

Nevertheless, according to him "there is no point in talking about a government of the eurozone if we do not say to which democratic body this government will be accountable", a real parliament of the eurozone to which a finance minister would be accountable seems to be the real priority for the economist, who also denounces the lack of action in this area.<ref>{{Cite news|last=PIKETTY|first=Thomas|date=1 February 2017|title=Pour un gouvernement enfin démocratique de la zone euro|work=Le Monde|url=https://www.lemonde.fr/blog/piketty/2017/02/01/pour-un-vrai-gouvernement-de-la-zone-euro/|access-date=28 March 2020}}</ref>

The creation of a sub-committee within the current European Parliament was also mentioned, in the model of the Eurogroup, which is currently an under-formation of the ECOFIN Committee. This would require a simple amendment to the rules of procedure and would avoid a competitive situation between two separate parliamentary assemblies. The former President of the European Commission had, moreover, stated on this subject that he had "no sympathy for the idea of a specific Eurozone Parliament".<ref>{{Cite web|date=September 2014|title=RÉFORMER LA " GOUVERNANCE " EUROPÉENNE POUR UNE FÉDÉRATION D'ÉTATS NATIONS PLUS LÉGITIME ET PLUS EFFICACE|url=https://institutdelors.eu/wp-content/uploads/2018/01/reformergouvernanceue-bertoncini-vitorino-ne-ijd-sept14.pdf|website=Institut Jacques Delors}}</ref>

==== Debates on the role of central bank reserves in monetary policy ====
In "Towards monetary policies that do not subsidise banks"<ref>{{Cite journal |last1=de Grauwe |first1=Paul |last2=Ji |first2=Yuemei |date=2023-06-13 |title=Towards monetary policies that do not subsidise banks |url=https://www.ceps.eu/ceps-publications/towards-monetary-policies-that-do-not-subsidise-banks/ |journal=CEPS }}</ref> published in July 2023 and co-authored with Yuemei Ji, [[Paul De Grauwe|Paul de Grauwe]] criticizes the prevailing role of central bank reserves in monetary policy.<ref>{{Cite web |last=de Grauwe |first=Paul |date=2023-09-04 |title=The role of central bank reserves in monetary policy: Bundesbank Invited Speakers Series |url=https://www.bundesbank.de/en/service/dates/the-role-of-central-bank-reserves-in-monetary-policy-913968 |access-date=2023-11-26 |website=Deutsche Bundesbank}}</ref> De Grauwe states that major central banks are currently operating in a regime of abundance of bank reserves. This abundance, he argues, is a consequence of massive government bond-buying programs and a fundamental change in the operating procedures of these central banks. Since late 2021, in response to rising interest rates aimed at combating inflation, central banks have adopted a procedure of increasing interest rates by raising the remuneration on bank reserves. This approach has resulted in substantial interest payments to commercial banks. Due to past Quantitative Easing, bank reserves are now massive, leading to huge transfers of profits. Paul de Grauwe highlights the magnitude of these interest payments, comparing them to significant public expenditures:  the interests received by [[commercial bank]]s to the yearly spending of the EU (€165 billion) to the interest payments of the ECB during the same period (€152 billion). De Grauwe argues that these transfers lack economic rationale.