One country, one vote? Labor market structure and voting rights in the ECB

The pending enlargement of the European Monetary Union (EMU) has brought to the fore the discussion of the voting right distribution in the European Central Bank (ECB) council. We show that, in a model where labor unions internalize the inflationary consequences of wage setting, deviating from a voting scheme based purely on economic size can be beneficial. Preliminary evidence on unemployment and voting rights in the ECB council seems broadly in line with this idea. We also point to possible policy implications for EMU enlargement and ECB restructuring. --monetary policy,wage setting,European Monetary Union,European Central Bank,euro area,ECB reform,EMU enlargement,accession countries

One Country, One Vote? Labor Market Structure and Voting Rights in the ECB

The pending enlargement of the European Monetary Union (EMU) has brought to the fore the discussion of the voting right distribution in the European Central Bank (ECB) council. We show that, in a model where labor unions internalize the inflationary consequences of wage setting, deviating from a voting scheme based purely on economic size can be beneficial. Preliminary evidence on unemployment and voting rights in the ECB council seems broadly in line with this idea. We also point to possible policy implications for EMU enlargement and ECB restructuring.monetary policy, wage setting, European Monetary Union, European Central Bank, euro area, ECB reform, EMU enlargement, accession countries

The limits of legal accountability of the European Central Bank

This article will focus on the state of legal accountability in the relation between the European Court of Justice (“ECJ”) and the European Central Bank (“ECB”) as developed after the unfolding of the so-called Euro Crisis. The underlying hypothesis behind this analysis is twofold: the 2008 crisis has marked a remarkable change in the constitutional balance of the Eurozone, and as a consequence the constitutional function of the ECB has emerged and become visible. To detect these changes, three cases will be discussed in order to show that there has been a shift in the ECJ’s interpretation of the Treaty on the European Union (“TEU”) and the Treaty on the Functioning of the European Union (“TFEU”) (“the Treaties”)1 and, accordingly, of the role of the ECB. The reaction to the Euro crisis has shown that the ECB cannot be deemed to be only an administrative independent agency, but it should be treated as an organ with constitutional functions, whose role has systemic implications for the stability of the European Union itself.2 Such recognition implies that the ECB’s decisions ought to be treated not only procedurally, but in a genuinely political and constitutional way

Who Supports the ECB? Evidence from Eurobarometer Survey Data

This paper addresses empirically the still debated issue of the legitimacy of the European Central Bank (ECB) with regard to European polities, presenting evidence on public opinion support for the ECB as elicited from responses in the recent waves of the Eurobarometer survey. We employ a rich set of potential determinants, combining macroeconomic and socio-demographic data in logistic regressions, to explain trust in the ECB. We find that people with higher level of income and education and centre to right-wing political orientation tend to support the ECB, as well as people with optimistic expectations on the economic situation. Moreover, our results indicate that socio-demographic determinants of trust in the ECB dominate macroeconomic ones, in particular inflation performance, by a considerable margin of magnitude and in a quite robust way. The policy relevance of such results is important for ECB’s communication strategy with the EU public, especially in the years ahead of likely reforms of the European Monetary Union (EMU).European Central Bank, communication, legitimacy, determinants of trust, Eurobarometer survey, logistic regression

EMU-enlargement and the Reshaping of Decision-making within the ECB Governing Council: A Voting-Power Analysis

The monetary policy of the European Central Bank (ECB) is the subject matter of this paper. We analyze the prospects for future price stability in an enlarged European Monetary and Economic Union (EMU). At the heart of this study are the potential e®ects of altering decision-making procedure within the Governing Council of the ECB on price stability in the eurozone. The authors compare the impact of three alternative reform scenarios of the ECB Governing Council with the help of a voting-power analysis. It is presumed that a considerable loss of current EMU-members’ influence power especially in favour of joining Central Eastern European Countries (CEECs) results in a loss of monetary credibility of the ECB: As transparency of the decision-making process within the ECB is lacking, markets may consider the ECB to be too much inclined to the economic performances of the CEECs. This has then a negative impact on the level of price stability in Europe. The voting-power analysis indicates which reform proposal is best with respect to a price-stability benchmark.

Court of Justice Oversight Over the European Central Bank: Delimiting the ECB\u27s Constitutional Autonomy and Independence in the OLAF Judgment

An article devoted to the European Court of Justice\u27s (“ECJ” or the “Court”) judicial review of the European Central Bank\u27s (“ECB”) level of constitutional autonomy and independence may seem a bit arcane in a book dedicated to honor Advocate General Francis Jacobs upon his retirement from the Court. The topic is, however, eminently suitable, because it highlights his influence in a case remote from the many fields of law in which his impact has been so marked-- e.g., free movement of goods, competition law, trademarks and other intellectual property rights, free movement of services and establishment rights, human rights protection, and taxation. This Article will first discuss the high importance of the principle of independence for the ECB in its control of monetary policy and the European currency, noting some aspects of the academic debate concerning the appropriate level of such independence. The first section also observes that a debate about the constitutional nature and autonomy of the ECB has become intertwined with the appraisal of its level of independence. The Article then reviews the EC Treaty\u27s attribution to the Court of jurisdiction within Monetary Union, including a power of judicial review of the ECB\u27s status, measures and decisions. The following section sets out the conflict between the Commission and the ECB in the OLAF case. The Article concentrates upon the text in Advocate General Jacob\u27s opinion and the Court\u27s judgment concerning the constitutional status of the ECB as an organ or body structured within the Community framework and concerning the scope of the ECB\u27s independence. The final section provides several reflections upon the ultimate impact of the judgment and opinion. The reflections stress the importance of the Court\u27s rejection of the ECB\u27s claim to virtual autonomy in constitutional terms and the related subjection of the ECB to the rule of law within the EC. The final commentary also considers the Court\u27s and especially Advocate General Jacobs\u27 demarcation of the functional nature of the ECB\u27s independence. Advocate General Jacobs\u27 discussion of the value and extent of democratic accountability of the ECB is also highlighted

SMEs’ growth under financing constraints and banking markets integration in the euro area

We explore the impact of financing constraints and the role of banking markets integration on SMEs’ growth. The data are drawn from the ECB/SAFE survey on SMEs’ access to finance aggregated at country level for the largest 11 euro-area countries over 2009-2015. Our findings suggest that financing constraints hamper SMEs’ growth and that the effect is stronger for perceived, rather than actual, financing constraints. On the other hand, increased banking market integration in the euro area appears to foster SMEs’ growth. Furthermore, we find that the reduction in financing constraints is crucial in the transmission channel from banking markets integration to growth. This effect appears significantly stronger when integration is measured by the intensity of cross-border lending than through convergence in interest rates to loans to non-financial corporations

The European Central Bank and the eurosystem: An analysis of the missing central monetary institution in European Monetary Union

The Eurosystem is the fifth decentralized system in the history of central banks. It consists of the European Central Bank (ECB) and twelve National Central Banks (NCBs) forming the European Monetary Union (EMU). The stark decentrality of this System is so little known that ubiquitous statements by high level Euro experts on its supposed similarity with other decentralized systems, like the former Bundesbank System and the existing Federal Reserve System, are met with no protest. A closer look on European documents and the balance sheet of the ECB reveals, however, that the ECB – far from being the monopoly supplier of central bank money – cannot set the refinancing conditions to credit institutions in EMU. The latter are determined by the Council of Governors of the Eurosystem, while the main refinancing operations are executed by the NCBs leaving to the ECB the role of vicarious agent. The ECB can neither control all types of securities accepted for the NCBs’ credit operations nor is it able to act as lender of last resort. Yet, every possible manoeuvre to make the ECB look like a central bank of the NCBs is relentlessly employed, most obviously in the design of the Euro banknotes which are issued by the NCBs but carry only the imprint of the ECB, as well as by the ECB’s balance sheet as at 31 December 2002. The latter contains for the first time the item “banknotes in circulation” that are, however, issued by the NCBs and only allocated to the ECB. --

Holding the Supervisor to Account: The European Parliament and the European Central Bank in Banking Supervision. Bertelsmann Stiftung Policy Paper 19 November 2018

In the aftermath of the euro crisis, the European Central Bank (ECB) took over responsibilities for banking supervision in the euro area in the framework of the Single Supervisory Mechanism (SSM). This expansion of the original ECB mandate in monetary policy was coupled with the establishment of additional accountability mechanisms to balance the newly acquired competences. In terms of political accountability, the relationship with the European Parliament (EP) was placed front and centre — with regular interactions between the two institutions since late 2013. This paper analyses the accountability interactions between the EP’s Economic and Monetary Affairs (ECON) Committee and ECB Banking Supervision in the first 4.5 years of the functioning of the SSM. In particular, it aims to: 1) situate the relationship between the ECB and the EP in the broader context of political accountability in banking supervision; 2) provide an overview of the frequency and patterns of interactions between the two institutions, describing types of questions asked and answers provided; and 3) identify strengths and weaknesses in the process, with a forward-looking focus on prospects for improvement

Look Who’s Talking: ECB Communication during the First Years of EMU

This paper studies ECB and Bundesbank communication on monetary policy during the first years of the European Economic and Monetary Union. We study whether statements by different (groups of) central bankers have been contradictory and whether differences have diminished over time. We find that statements on the interest rate, inflation and economic growth have indeed been contradictory. Furthermore, national central banks continue to dominate communication on monetary policy. Finally, only the ECB Executive Board has observed radio silence before ECB Governing Council meetings. A positive conclusion is that, over time, interest rate statements have become less contradictory.central bank communication, European Central Bank, Bundesbank