What Is the European Central Bank Supposed to Do? Recommending a Review of the ECB as anInstitution in Light of Two Decades of Crisis

In July 2021, the European Central Bank (ECB) published a new monetary policy strategy, the first time in 17 years that it had undertaken a review of its monetary policy. In the intervening time, the world - and the economic challenges facing the ECB - have changed immensely but partly as a result of the ECB's own maneuvering. In particular, monetary policy has been relied upon for every single malaise facing the global economy, including and up to the coronavirus pandemic. This paper argues that a review of central banks as an institutional mechanism in general, and in particular the ECB, was overdue but should not have been limited to policies;instead, an opportunity was missed to have an institutional review to examine whether or not it has been performing as intended. In particular, the vast experiment of unconventional monetary policy/issuance should have been more scrutinized from an institutional level as it appears to have contributed to the current problems the European economy faces. Europe and the ECB would be well served by taking stock of its actions over the past two decades and especially during the era of unconventional monetary policy to find a sustainable route forward.

The politicisation of the European Central Bank and its emergency credit lines outside the Euro Area

Is the European Central Bank (ECB) increasingly acting on political – rather than technocratic – considerations? This question is of a central concern to students of European Union (EU) political economy. This article contributes to this debate by studying the ECB's credit lines to the central banks of EU member states outside the Euro Area during the Global Financial Crisis and the COVID-19 crisis. Both times the ECB accorded selectively better borrowing conditions to some central banks. The article finds that its selection of who gets favourable borrowing terms has indeed become more political. In 2008, the ECB decided the credit terms based on technocratic criteria, but twelve years later, it granted better lending conditions to countries that were close to adopting the euro. How the ECB balances its mandate for price stability in the Euro Area and its role as a supranational EU institution decides whether it will become more politicised. [ABSTRACT FROM AUTHOR] Copyright of Journal of European Public Policy is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Explaining the response of the ECB to the COVID-19 related economic crisis: inter-crisis and intra-crisis learning

The economic effects of the Covid-19 pandemic have placed a renewed strain on the economic governance of the European Union (EU). The European Central Bank (ECB) was a key player in the EU's response to the crisis induced by the pandemic. This paper adopts a theoretical approach focused on policy learning to explain how and why the ECB responded to the crisis in 2020–2021. By drawing on speeches, newspaper articles and interviews with policy-makers, the paper finds that the ECB was able to rely on earlier crisis experiences in the euro area in forming its response to the pandemic crisis. Although the sovereign debt crisis and the pandemic crisis had both similarities and differences from one another, the ECB was able to engage in inter-crisis and intra-crisis learning. Its learning concerned objectives, instruments as well as an awareness that timely and forceful response was crucial, so that the member states and other EU institutions had time to act. [ABSTRACT FROM AUTHOR] Copyright of Journal of European Public Policy is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The European Central Bank, the Single Supervisory Mechanism and the COVID-19 related economic crisis: a neofunctionalist analysis

The COVID-19 pandemic triggered a major economic crisis worldwide. The monetary policy response of the European Central Bank (ECB) was fast and massive. The ECB also intervened on the supervisory side because, after the establishment of Banking Union, the ECB was given responsibility for banking supervision in the euro area through the Single Supervisory Mechanism (SSM). This paper explains the response of the ECB-SSM to the COVID-19 related economic crisis during 2020 and 2021, up until February 2022. These ECB actions include the reduction of bank capital buffers, the redefinition of non-performing loans, and the limitations on dividends and bonuses paid by banks. We adopt a neofunctionalist approach, which suggests that policies are developed at the EU level in response to need, whereby supranational actors and spillovers are particularly important. We offer some concluding insights into whether the ECB-SSM's responses have led to a further deepening of integration. © 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

Designing the fiscal-monetary nexus: policy options for the EU

In recent decades, and in particular since the shift towards independent central banks, there has been no explicit coordination of fiscal and monetary policy. In the Eurozone, this lack of coordination represents an important flaw, especially since the Eurozone is not an optimal currency area. Complementing monetary union with a transfer union represents one possible solution. This paper argues that the negative impact of post-2008 and post-Covid-19 unconventional monetary policy on income inequalities provides a second reason to coordinate fiscal and monetary policy. Among various institutional arrangements to implement such coordination, the paper defends the idea that the European Central Bank should be sensitive to distributive considerations when formulating its monetary policy. Such an arrangement would help both to contain the distributive side-effects of monetary policy and to at least partially remedy the flaw at the heart of the Eurozone as long as an outright transfer union remains unfeasible.

Can EU Bonds Serve as Euro-Denominated Safe Assets?

A safe asset is of high credit quality, retains its value in difficult times, and is traded in liquid markets. We show that bonds issued by the European Union (EU) are widely considered to be of high credit quality, and that their yield spread over German Bunds remained contained during the 2020 COVID-19 pandemic recession. Recent issuances and taps under the EU's SURE and NGEU initiatives helped improve EU bonds' market liquidity from previously low levels, while also reducing liquidity risk premia. Eurosystem purchases and holdings of EU bonds did not impair market liquidity. Currently, an obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU's COVID-19-related policy responses. © 2022 by the authors.

Une nouvelle solidarité européenne ?

La solidarité financière européenne en période de crise a été inscrite dans les traités dès les débuts de la construction européenne et a été mise en œuvre à partir des années 1970. Les instruments de solidarité mis en place, adaptés à des crises classiques, se sont avérés insuffisants pour faire face à une crise d'un genre nouveau telle que la crise de la Covid-19. L'Union européenne et l'Union économique et monétaire ont alors usé d'expédients pour manifester une solidarité de circonstance, qui a cependant ouvert la voie à une solidarité renforcée, sur le moyen terme, qui n'apparaît cependant pas pérenne.Alternate : European financial solidarity in times of crisis was enshrined in the treaties from the very beginnings of European construction and was implemented from the 1970s. The instruments of solidarity put in place, adapted to classic crises, have proven to be true insufficient to cope with a crisis of a new kind such as the covid-19 crisis. The European Union and the Economic and Monetary Union then used all the ingredients to show solidarity for the occasion, which however opened the way to reinforced solidarity in the medium term, which does not appear to be sustainable.

What Is the European Central Bank Supposed to Do?

In July 2021, the European Central Bank (ECB) published a new monetary policy strategy, the first time in 17 years that it had undertaken a review of its monetary policy. In the intervening time, the world - and the economic challenges facing the ECB - have changed immensely but partly as a result of the ECB's own maneuvering. In particular, monetary policy has been relied upon for every single malaise facing the global economy, including and up to the coronavirus pandemic. This paper argues that a review of central banks as an institutional mechanism in general, and in particular the ECB, was overdue but should not have been limited to policies;instead, an opportunity was missed to have an institutional review to examine whether or not it has been performing as intended. In particular, the vast experiment of unconventional monetary policy/issuance should have been more scrutinized from an institutional level as it appears to have contributed to the current problems the European economy faces. Europe and the ECB would be well served by taking stock of its actions over the past two decades and especially during the era of unconventional monetary policy to find a sustainable route forward.

Post-Pandemic Greenness? How Central Banks Use Narratives to Become Green

Suggested only a few years ago, green central banking has received a new impetus with the central bank interventions implemented in the wake of the COVID-19 pandemic. Several central banks, with the European Central Bank (ECB) and the Bank of England (BoE) being prominent examples, have stepped up their public communication on this issue in an effort to explain and justify their planned or ongoing policy actions. Carefully recorded and easy to find, these public communication messages are a rich source of insight into the process of monetary policy formation. In this article, we analyze the messages from two central banks, with the primary objective of identifying the narratives they use (if any) and describing the key features of these narratives, thus shedding new light on an ongoing process of policy change. A secondary objective of the article is to contribute to the growing literature related to the use of narratives in public policy by studying narratives in monetary policy through qualitative means, an approach that, to date, has received relatively little attention from scholars. To this end, we discuss two expectations related to the use of policy narratives derived from the literature. Thus, we hope to show how the two central banks devise and deploy narratives to help implement an unprecedented turnaround in monetary policy. © 2023 by the authors.

Drivers of trust in the ECB during the pandemic

Trust in the European Central Bank (ECB) is vital. However, little is known about trust in the ECB during the COVID-19 pandemic. We use the rich pilot microdata from the ECB Consumer Expectations Survey during 2020–2021 on six key euro area countries to shed light on trust in the ECB during the pandemic. Our findings suggest that there is ample room to improve consumers' trust in the ECB. Personal COVID-19 experiences play a role: respondents who reduced the number of hours worked due to COVID-19 have lower trust in the ECB than those with unchanged working hours. Trust in the ECB varies within countries. It is highest among males and people with a good financial situation. It increases with financial knowledge, education, income, and wealth.

Central Banking in Pandemic Times

The sense of extreme disruption brought by Covid-19 led to the fast adoption of unprecedented containment policies. Central banks played a key role in this regard by adopting bold and unprecedented forms of financial stabilization as well as support for government debt in the bond markets. The overall effect has been the blurring of the boundary between monetary and fiscal policy, a key pillar of the “neoliberal” era. Furthermore, the Fed acted as a de facto lender of last resort in dollars of the global financial system, thus playing a global stabilization role even as the Trump administration worked to weaken traditional US ties to global economic governance.

The promises and pitfalls of the ECB’s ‘legitimacy-as-accountability’ towards the European parliament post-crisis

This article argues that the European Central Bank’s legitimacy mainly rests upon ‘throughput legitimacy’ in practice and, in particular, upon perceptions of accountability among the ECB’s main political audiences, including the members of the European Parliament. This thin and contingent ‘legitimacy-as-accountability’ gives rise to a tension post-crisis: on the one hand, the ECB’s enlarged monetary policy role requires ever-wider scrutiny and parliamentary debate;on the other hand, the quality of accountability hinges on the specialisation of those involved. To address the paradoxical challenge of both wider and more in-depth oversight, the article discusses a number of recent policy proposals. Empirically, it draws on survey and interview data covering the decade 2009–2019, i.e. the ‘crisis parliament’ of 2009–2014 and the ‘post-crisis parliament’ of 2014-2019. It concludes with a reflection on the promises and pitfalls of the ECB’s legitimacy-as-accountability towards the European Parliament(s) during the COVID-19 crisis. [ FROM AUTHOR] Copyright of Journal of Legislative Studies is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Drivers of trust in the ECB during the pandemic

Trust in the European Central Bank (ECB) is vital. However, little is known about trust in the ECB during the COVID-19 pandemic. We use the rich pilot microdata from the ECB Consumer Expectations Survey during 2020-2021 on six key euro area countries to shed light on trust in the ECB during the pandemic. Our findings suggest that there is ample room to improve consumers' trust in the ECB. Personal COVID-19 experiences play a role: respondents who reduced the number of hours worked due to COVID-19 have lower trust in the ECB than those with unchanged working hours. Trust in the ECB varies within countries. It is highest among males and people with a good financial situation. It increases with financial knowledge, education, income, and wealth.

ECB’s Pandemic Emergency Purchase Programme from Legal Perspective

Following the unconventional monetary policy tools of the last decade, ECB introduced a special monetary policy response to the COVID 19 pandemic, which occurred as a global challenge in early 2020. Aside from the measures aimed at providing ample liquidity, such as the targeted longer-term refinancing operations (TLTROs) and the pandemic emergency longer-term refinancing operations (PELTROs), collateral easing and the ongoing asset purchase programme (APP), ECB designed a special non-standard monetary policy measure, the Pandemic emergency purchase programme (PEPP). This new programme is of temporary nature and targets both private and public securities. Given the fact that some of the previous ECB’s unconventional programmes (OMT, PSPP) were challenged before the Court of Justice of the EU, one can expect the PEPP to be subject to judicial review as well. In this chapter, the author focused on the legal aspects of the PEPP. He outlined the core requirements arising from EU primary law and from the CJEU case law and considered compliance of PEPP with the EU law. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.

Understanding the transmission of COVID-19 news to French financial markets in Early 2020

News of COVID-19 cases roiled the French stock market in 2020. Finance theory indicates that changes in returns across many assets are driven by economy-wide rather than firm-specific factors. To identify these factors, this paper investigates the time series exposure of 174 French assets to macroeconomic variables. It then uses these exposures to examine the cross-sectional pattern of asset price changes due to coronavirus news. The results indicate that investors responded to COVID-19 news by bidding down the prices of assets that do badly when oil prices fall and the euro appreciates and by bidding up the prices of assets that do well when the European Central Bank eases. Banking sector stocks were not harmed by COVID-19 news, indicating that fears of a sovereign-bank nexus were not driving the response.

Completing the Monetary Union? The European Recovery Fund

According to a widely-shared opinion, the eurozone suffers from a fiscal capacity deficit. The»Next Generation EU« (NGEU) program adopted in December 2020 comes close to providing such a capacity. The paper examines how the logic of the monetary union would change if the NGEU were to be implemented on a permanent basis. It turns out that the decisive advantage of NGEU is on the revenue side: vis-à-vis the newly-created European government bonds, the ECB is likely to behave like a lender of last resort. © The Author(s), 2021.

COVID-induced sovereign risk in the euro area: When did the ECB stop the spread?

This paper studies how the announcement of the ECB's monetary policies stopped the spread of the COVID-19 pandemic to the European sovereign debt market. We show that up to March 9, the occurrence of new cases in euro area countries had a sizeable and persistent effect on 10-year sovereign bond spreads relative to Germany: 10 new confirmed cases per million people were accompanied by an immediate spread increase of 0.03 percentage points (ppt) that lasted 5 days, for a total increase of 0.35 ppt. For periods afterwards, the effect falls to near zero and is not significant. We interpret this change as an indicator of the success of the ECB's March 12 press conference, despite the "we are not here to close spreads" controversy. Our results hold for the stock market, providing further evidence of the effectiveness of the ECB's March 12 announcements in stopping the financial turmoil. A counterfactual analysis shows that without the shift in the sensitivity of sovereign bond markets to COVID-19, spreads would have surged to 4.2% in France, 12.5% in Spain, and 19.5% in Italy by March 18, when the ECB's Pandemic Emergency Purchase Programme was finally announced.

The trilemma of expansionary monetary policy in the Euro area during the COVID-19 crisis.

The economic crisis spurred by the Corona virus (COVID-19) confronts central banks worldwide with new kinds of challenges, as in many countries a stop in production and sales due to lock downs meets enormous fiscal and monetary impulses to overcome the crisis. In Europe the situation is more than ever complicated, as a multitude of monetary policy emergency measures implemented during the financial and European debt crisis of 2007 to 2012 are still in place, such as negative interest rates and central bank bond buying programs. Especially the bond buying programs have been intensified once more during the current Corona crisis. This article contributes to the existing knowledge by proposing a new theoretic trilemma model for the case of a monetary union. Accordingly, there exists a trade-off between stabilizing a monetary union, maintaining free capital mobility and reducing expansionary monetary policy. The results underscore the importance of resolving the trilemma without jeopardizing the currency and financial stability.