The European Central Bank between the Financial Crisis and Populisms

Corrado Macchiarelli,Mara Monti,Claudia Wiesner,Sebastian Diessner

• Éditeur: Palgrave Macmillan
• Année: 2020
• ISBN:
  9783030443481
• Sujet: Économie
• Sous-sujet: Économie politique

?In light of the handover from the European Central Bank President Mario Draghi to Christine Lagarde in November 2019, this book provides an in-depth analysis of the events which unfolded since the euro area sovereign debt crisis in 2010 up until today. The book focuses on the far-reaching implications of the last decade, shedding light on a wide spectrum of political, economic and financial aspects of the European poly-crises and how monetary policy reacted to these challenges. The book places particular emphasis on the tensions that the supranational central bank was subject to during this period, and on their outcomes in terms of the policies, their legitimacy, and their public reception. As such, this book will be relevant not only to understand the political implications of the past crisis but also, and foremost, in understanding "what is next".

© The Author(s) 2020

C. Macchiarelli et al.The European Central Bank between the Financial Crisis and Populismshttps://doi.org/10.1007/978-3-030-44348-1_1

Begin Abstract

1. The European Central Bank Between the Financial Crisis and Populisms

Corrado Macchiarelli¹ , Mara Monti² , Claudia Wiesner³ and Sebastian Diessner²

(1)

Brunel University Kingston Ln, London, UK

(2)

London School of Economics and Political Science, London, UK

(3)

Fulda University of Applied Sciences, Fulda, Germany

Corrado Macchiarelli (Corresponding author)

Email: [email protected]

Mara Monti

Email: [email protected]

Claudia Wiesner

Email: [email protected]

Sebastian Diessner

Email: [email protected]

Keywords

Financial crisisMonetary policyEuro areaECBPopulismLegitimacy

End Abstract

1.1 Introduction

This book dissects a decade of financial, economic, and institutional developments in Europe, focusing on the principal supranational institution which found itself tasked with governing the fallout from both the economic and political consequences of the financial and sovereign debt crises: the European Central Bank (ECB). In light of the handover from outgoing ECB president Mario Draghi to his successor Christine Lagarde on 1 November 2019, the book studies, from both a historical and a forward-looking perspective, the events which unfolded from 2008–2009 up until today. The ECB—by now responsible for a euro area of 19 member states—has always faced pertinent challenges owing to the substantial economic and political heterogeneity inside the Economic and Monetary Union (EMU)—an issue highlighted well before the introduction of the single currency (Krugman 1993; Bayoumi and Eichengreen 1993; Klein 1998; Dornbusch et al. 1998; Kontopoulos and Perotti 1999) and not least after the failure of the European Monetary System (Salvatore 1997; De Grauwe and Ji 2015).

In particular, the book zooms into the remarkable events of the last ten years, by analysing the implications of the European “double-dip” recession, and how European monetary policy reacted to several economic, financial, and ultimately political challenges. Amid a concert of different institutional reactions to the crisis—by the European Commission, the Eurogroup and European Council, the European Stability Mechanism (ESM) and the International Monetary Fund (IMF)—and growing pressures from financial markets’ speculation, the ECB distinctively stepped in both to stabilise the wider euro area economy and to avoid an EMU meltdown. While the subject has been recently discussed, amongst others, by Mody (2018), Mody and Nedeljkovic (2018), Rogers et al. (2014), and Rostagno et al. (2019), we take a novel angle. Our approach highlights the different tensions that the supranational ECB found itself subject to, as well as their broader ramifications, not only in terms of monetary policy-making but also with regard to questions of democratic legitimacy and public reception. In the words of the—then—in-coming president, Christine Lagarde, on 4 September 2019, “[t]he ECB needs to be understood by the markets that transmit its policy, but it also needs to be understood by the people whom it ultimately serves.” In this sense, the book aims at shedding light on the underlying reasons for growing criticism against the European Central Bank as well as recent populist reactions to, and against, it.

After setting out the general motivation for the book (Sect. 1.2), the Greek sovereign debt crisis and its spillover to the rest of the euro area (Sect. 1.2.1) are briefly reconstructed—culminating in the president’s historic speech to avail markets’ trust and signal the ECB’s readiness to “do whatever it takes to preserve the euro” (see also Chap. 2) (Hodson 2013; Saka et al. 2015; Demertzis and Wolff 2016; Rostagno et al. 2019: 196–202). The introduction then moves on to discuss the book’s contested core concepts of legitimacy and populism (Sect. 1.3).

It is argued overall that the ECB was forced to act beyond its mandate to fill an institutional void at the European Union (EU) level, which resulted in a stance which was both “quasi-fiscal” and political (see Offe 2015; Belke 2010; Schelkle 2013; Sibert 2012; De Grauwe and Ji 2013; Fontan 2018). This role stretched beyond the use of unconventional monetary policy, with the creation of new tools and functions for the central bank, including the ECB’s participation in the Troika (see Sibert 2012) and its role in banking supervision as part of an ensuing new European governance structure (Gros and Schoenmaker 2014; Gerba and Macchiarelli 2015; Macchiarelli 2016). These developments eventually called into question the central bank’s independence and legitimacy (see Alcidi and Giovannini 2013; De Grauwe 2016).

The focus of the book is thus on the actions of the ECB at a time when the economic, financial, as well as political “credibility” of the Union—as Weber (1991) puts it—was at stake. In highlighting the challenge of populism for the ECB, we also note that populism was not always intended as directly oriented against the central bank and its policies. On the contrary, we will articulate that the institutional void that an “incomplete” union has created (De Grauwe 2018) left, in many instances, the ECB exposed to such criticism.

To better understand how and why the perception of the ECB has changed in the eyes of the public (see also Fraccaroli et al. 2018; Farvaque et al. 2017), we will first look at the evolution of the ECB’s role in the broader framework of the EU and EMU governance reforms and the diverse reactions to it over time. When searching for empirical evidence about the legacy of the ECB during these crucial years, both the ECB’s market impact and the public reaction in terms of citizens’ support will be discussed, by looking at financial markets (see Drechsler et al. 2016; Eser and Schwaab 2016) as well as survey data (Eurobarometer and own survey data): particularly, Chap. 5 will draw on a set of interviews with elected representatives and their staff from Collignon and Diessner (2016). In this sense, the book will uniquely seek to integrate a range of different theoretical backgrounds and perspectives—ranging from economics to financial journalism, political economy, and politics.

1.2 The Motivation in Brief: Why a Book on the European Central Bank, Financial Crisis, and Populisms?

The official creation of the European Central Bank on 1 June 1998 represented a crucial step towards the introduction of a single currency in Europe. Not only that. It also represented the triumph of an idea: the idea of central bank independence to achieve stable low inflation. Over the preceding decade—starting with the Reserve Bank of New Zealand in 1989—central banks across the globe were granted operational independence to set monetary policy (see Balls et al. 2016).

In Europe, in particular, the consensus on a macroeconomic—inflation-focused—policy toolkit which favoured an independent monetary policy as the foremost tool of business-cycle stabilisation has often been credited with having facilitated the Maastricht Agreement on Economic and Monetary Union in the first place, as opposed to previous attempts at monetary unification (Dyson and Featherstone 1999; De Grauwe 2006; Torres 2008; Diessner 2017).

While never free from critiques, such a consensus held firm for another decade. The ECB’s record on price stability for an entire currency union eventually came to beat that of the Bundesbank—widely considered...

Table des matières

• Cover
• Front Matter
• 1. The European Central Bank Between the Financial Crisis and Populisms
• 2. The Sovereign Crisis, Its Aftermath, and How Monetary Policy Has Changed
• 3. The EU’s Crisis Governance Versus Populism
• 4. The Fiscal and Political Implications of the ECB’s Non-conventional Roles
• 5. The Growing Challenge of Legitimacy Amid Central Bank Independence
• 6. How Popular Has the ECB Been? Popularity, Protest, and Populism Post Crisis
• 7. Conclusion: Going Forward—What Are the Political and Economic Challenges Ahead?
• Back Matter