publication

Limits to the independence of the ECB

Authors:
Charles WYPLOSZ
2019

The ECB might seem to be the most independent central bank in the world. Its statutes were carefully designed to ensure independence and they are enshrined in an international treaty. Yet, while serving many governments may be a protection, it can also act as a constraint on policy decisions. This essay explains how the ECB has faced limits during the Eurozone crisis. First, it had to find ways to circumvent limitations to its essential function of lender in last resort to both banks and governments. Second, the procedure to appoint members of the Executive Board is open to political interferences. Finally, it is not well protected from fiscal dominance.