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Abstract
The sovereign debt crisis made it clear that, to be sustainable and serve its initial purpose (notably price stability), EMU would require enhanced policy coordination, increased sovereignty- and risk-sharing and further centralisation at the EU level of various competencies. In the crisis context, the ECB has emerged as an anchor of stability and confidence within a highly fragmented political system. It started to focus on the sustainability of EMU as its foremost objective, engaging in more active (and non-standard) policies and wider economic policy debates than otherwise required from a traditional central bank. This article departs from a gap in the literature with respect to the legitimacy of delegations to a supranational and independent institution like the ECB. It adopts an interdisciplinary view, bringing together various concepts (broad categories) of legitimacy and various types constraints that the common monetary authorities face. The framework is applied to examine the ECB’s rationale to act strategically and its quest to legitimate its strategic political role through a renewed monetary dialogue with the EP.
Acknowledgements
The author (on leave from Universidade Católica, Lisbon) would like to thank the editors of this special issue, an anonymous referee, Iain Hardie, Adrienne Heritier, David Howarth Jorge Braga de Macedo, Waltraud Schelkle, Chiara Zilioli and other participants in earlier workshops in Bruges, Edinburgh, Oxford, Florence and Porto for very valuable comments and discussions.
Notes
1. See ruling of Germany’s Federal Constitutional Court of 7 September 2011 (2 BvR 987/10, 1485/10 and 1099/10). It established the decision-making rights of the German parliament in any rescue package, and by analogy in any further centralization of competencies that could exceed the capacity of the federal budget and the contingency on reforms by the receiving country. In September 2012, the Bundesverfassungsgericht opened the way for Germany’s ratification of the ESM but specified additional conditions, reinforcing the rights of the national parliament.
2. As put by Magnette (2000, 331), the initial act of delegation makes the ECB a legal institution but ‘legality does not produce legitimacy on its own’.
3. Political science approaches to principal–agent problems in the EU, encompassing the main theories of and approaches to European integration, do in general not address the case of a fully independent agency like the ECB. See Kassim and Menon (2005).
4. See Keohane and Nye (2003), Buiter (2008) and Dyson (2009) for a discussion of these issues for the specific case of the ECB and the classical debate between Buiter (1999) and Issing (1999). For the ECB (2002, 48), the notion of ‘being accountable’ entails being held responsible for one’s decisions but only implies an ex post explanation and justification.
5. See Persson and Tabellini (1990, 2000), Drazen (2000) and, for a link between constitutional systems and economic policy, Persson and Tabellini (2003).
6. Ex-post preference heterogeneity is equivalent to the spill-over effects of the legitimation of EU supranational governance (in this case monetary policy) to national level democracy and legitimacy. This question is also related to wider considerations on the qualitative change in the nature of EU and international governance.
7. Such optimal degree of politicisation parallels Rogoff’s (1985) optimal degree of commitment in monetary policy as a means of dealing with credibility constraints.
8. Unlike in the cases of the US Fed or the Bank of England, the ECB faces a situation that potentially puts at risk the entire monetary construct and stability of the Union. In another sense, its role is reduced as compared to the one of other central banks that are also assumed lenders of last resort. However, one can argue that, with the financial and sovereign debt crises, the ECB is catching up.
9. The ECB (2011a, 58) recognises that the benefits of non-standard measures increase with the severity of economic shocks whereas their costs (strains induced on central bank operations and the risk exposure of its balance sheet) will tend to exceed their benefits in normal times.
10. Besides having to ‘conduct their economic policies with a view to contributing to the achievement of the objectives of the Union, as defined in Article 3 of the Treaty on European Union, and in the context of the broad guidelines referred to in Article 121(2)’, the member states and the Union shall also, according to article 120 of the TFEU, ‘act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 119’.
11. This is consistent with ECB president Draghi’s first address to the European Parliament on 1 December 2011, pressuring the European Council for a fundamental restatement of EMU’s fiscal rules.
12. The ECB, as a strong central bank in a weak polity or in a polity in the making suffered from what Padoa-Schioppa (2000, 37) termed institutional loneliness. See also Jabko (2009, 401) and Dyson (2009), who refers to the ECB as an isolated central bank in an institutionally fuzzy polity.
13. As put by the ECB president (Draghi 2012): ‘The ECB is not a political institution. But it is committed to its responsibilities as an institution of the European Union… The banknotes that we issue bear the European flag and are a powerful symbol of European identity’.
14. See Kirkegaard (2011) for various examples of the ECB strategy aimed at ‘getting recalcitrant Eurozone policy-makers to do things they otherwise would not do’. Acting strategically, the ECB has also been able to get either explicit or implicit support from creditor countries for some of its more controversial non-conventional measures.
15. This is even more so with respect to new tasks that shall be attributed to the ECB, notably financial supervision.
16. Notably, articles 284(3) and 283(2) of the TFEU, formerly articles 109-B (3) and 109(2b) of the Treaty establishing the European Community (TEC). See Torres (2006) for a detailed analysis.
17. ‘Inventing a European tradition of accountable independence’ in the words of Magnette (2000, 339).
18. See http://www.ecb.int/ecb/orga/accountability/html/index.en.html, last consulted on 29 August 2012. This more recent formulation goes beyond the ECB’s views on accountability (with respect to the EP) in 2002 (ECB 2002, 45).
19. The fact that RQMV was agreed by France and Germany in December 2011 to be enshrined in the treaties in forthcoming revisions is a good example of a potential recursive relationship (in the terminology coined by Farrell and Héritier 2003) between formal and informal (in this case the role of monetary dialogue in advancing EMU cum EU governance) institutions.
20. A European Parliament resolution, adopted on 1 December 2011 on the European Semester for Economic Policy Coordination (2011/2071(INI)), called for the Annual Sustainable Growth Guidelines to be subject to a co-decision procedure that should be introduced by the next Treaty change.
21. It is not to be expected that say the German or Portuguese opposition would come to rescue their respective countries from an early warning under the excessive deficit procedure as it happened in the Council (Heipertz and Verdun 2010; Schuknecht et al. 2011).