The Euro in Crisis: Decision Time at the European Central Bank
“The Role of the
European Central Bank in the Financial Crash and the
Crisis of the Euro-Zone”
Report based on a WEED Expert Meeting
Franziska Richter
Peter Wahl
1
Imprint:
Richter Franziska, Wahl, Peter: The Role of the European Central Bank in the Financial Crash and the Crisis of the Euro-Zone. Report based on a WEED Expert Meeting
Published by: WEED - World Economics, Environment & Development Assoc.
Eldenaer Straße 60
D-10247 Berlin
2011
All rights reserved
This publication has been co-financed by the Ford Foundation.
The views expressed are those of the authors, and cannot be attributed to the
Ford Foundation.
2
CONTENT
Page
Summary 3
1. Introduction 4
2. Some basics on central banking 5
3. Historical changes in central banking 5
4. Institutional design and tasks of the ECB 6
4.1. Official Mandate of the ECB 7
4.2. Independence 7
4.3. Tasks 8
4.4. Accountability 8
5. ECB, FED, Bank of Japan, Bank of England in comparison 8
5.1. Mandate 9
5.2. Independence 9
5.3. Accountability 11
5.4. A paradigmatic change is needed 11
6. Pragmatic Keynesianism – the ECB in the crisis 12
7. The ECB in a new financial architecture 13
7.1. Enlarging the mandate to include macroeconomic stability? 13
Micro- and macro-prudential regulation 14
The case for macro-prudential regulation within the ECB 14
Macro-prudential instruments 14
7.2. A too broad mandate for the ECB? 15
7.3. More or less discretion for Central Bankers? 15
7.4. Further proposals 16
Control of credit expansion? 16
Combating inflation of asset prices and bubbles 16
Funding government budget 16
Tighter control of exchange rates 17
8. Conclusion 17
3
Executive Summary
The European Central Bank (ECB) is one of the most important actors in the Financial
Crisis and the sovereign debt crisis in the Euro-zone. The way, how the ECB was operating before the crisis was strictly based on the monetarist concept of central banking, reducing central banks to the guardian of
European Central Bank in the Financial Crash and the
Crisis of the Euro-Zone”
Report based on a WEED Expert Meeting
Franziska Richter
Peter Wahl
1
Imprint:
Richter Franziska, Wahl, Peter: The Role of the European Central Bank in the Financial Crash and the Crisis of the Euro-Zone. Report based on a WEED Expert Meeting
Published by: WEED - World Economics, Environment & Development Assoc.
Eldenaer Straße 60
D-10247 Berlin
2011
All rights reserved
This publication has been co-financed by the Ford Foundation.
The views expressed are those of the authors, and cannot be attributed to the
Ford Foundation.
2
CONTENT
Page
Summary 3
1. Introduction 4
2. Some basics on central banking 5
3. Historical changes in central banking 5
4. Institutional design and tasks of the ECB 6
4.1. Official Mandate of the ECB 7
4.2. Independence 7
4.3. Tasks 8
4.4. Accountability 8
5. ECB, FED, Bank of Japan, Bank of England in comparison 8
5.1. Mandate 9
5.2. Independence 9
5.3. Accountability 11
5.4. A paradigmatic change is needed 11
6. Pragmatic Keynesianism – the ECB in the crisis 12
7. The ECB in a new financial architecture 13
7.1. Enlarging the mandate to include macroeconomic stability? 13
Micro- and macro-prudential regulation 14
The case for macro-prudential regulation within the ECB 14
Macro-prudential instruments 14
7.2. A too broad mandate for the ECB? 15
7.3. More or less discretion for Central Bankers? 15
7.4. Further proposals 16
Control of credit expansion? 16
Combating inflation of asset prices and bubbles 16
Funding government budget 16
Tighter control of exchange rates 17
8. Conclusion 17
3
Executive Summary
The European Central Bank (ECB) is one of the most important actors in the Financial
Crisis and the sovereign debt crisis in the Euro-zone. The way, how the ECB was operating before the crisis was strictly based on the monetarist concept of central banking, reducing central banks to the guardian of