November 30, 2011
The ECB seems to be in the background during this crisis – almost helpless due to Treaty obligations and dogmatic adherence to old monetary theories. This column argues that quite the opposite is true. The ECB is a full-blooded political actor engaging in a strategy aimed at forcing EU political leaders to embrace fiscal rectitude and a quantum leap forward in European integration.
When Mario Draghi delivered his first prepared public remarks as ECB President on 8 November 2011, he provided several clues about the coming eight years.
- No surprises on monetary policy, where he announced "continuity, consistency and credibility" as the touchstone, with these principles framed with reference to price stability.
- Knowing that European political leaders cannot curb the ECB’s independence without violating their treaty obligations, Draghi took Eurozone politicians head on.
He scolded them for their lack of progress on reform, demanded action and called for "[s]olid public finances and structural reforms and…. a much more robust economic governance of the union going forward." Mindful of the ECB’s role in the ouster of Silvio Berlusconi, Draghi’s words have unusual impact.
In short, the ECB is a central bank like no other. In this crisis it is a full-blooded political actor. As the sole institution that can affect financial markets, its influence goes beyond monetary policy and is unchecked by Eurozone politicians. As I explain below, the ECB is speeding toward a confrontation, not with Spain or Italy, but with France.