The EU’s Most Influential Economic Policy-maker: Mario Draghi at the European Central Bank

2020 ◽  
Vol 31 (1) ◽  
pp. 345-352
Author(s):  
Michael Waibel
Keyword(s):  
Central Bank ◽  
Euro Area ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Member States ◽  
Asset Price Bubbles ◽  
European Central ◽  
Economic Policy Maker

Abstract This article assesses the legacy of Mario Draghi as president of the European Central Bank (ECB) from 2011 to 2019, with particular reference to the Greek’s sovereign debt crisis. Most macro-economic indicators improved over the course of Draghi’s tenure at the ECB, including inflation, budget deficits, yield spreads among euro-area borrowers and unemployment. Draghi played a decisive role in turning the tide on the crisis of confidence that afflicted the euro area and threatened the survival of Europe’s single currency in the wake of Greece’s sovereign debt crisis. Yet the ECB’s unconventional policies prompted sustained controversy and contributed to a low level of trust in the central bank among people in the euro-area member states. The focus of controversy has been on possible asset-price bubbles and ‘hidden’ transfers between euro-area member states. When and how to normalize its policies is a major challenge for the ECB, as it is for other major central banks that adapted similar policies in response to the global financial crisis.

scholarly journals THE MONETARY POLICY OF THE EUROPEAN CENTRAL BANK IN THE PERIOD OF SOVEREIGN DEBT CRISIS

Ekonomika ◽  
2013 ◽  
Vol 92 (2) ◽  
pp. 20-31
Author(s):  
Deimantė Andriuškevičiūtė ◽  
Norbertas Balčiūnas
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Credit Risk ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Balance Sheet ◽  
Sovereign Debt Crisis ◽  
Government Bonds ◽  
European Central

Abstract. The European Central Bank was forced to start using non-standard measures in order to manage the situation determined by the global financial and sovereign debt crisis, namely to sort out liquidity problems and expand credit supply. The European Central Bank is criticized for applying non-standard tools because of increase in inflation risk. However, the analysis shows that the inflation could be managed by the absorption of liquidity surplus. However, there is a negative side of using non-standard measures, such as a significant increase in the credit risk, which arises due to having government bonds in the balance sheet of the European Central Bank. In addition, this indicates that the European Central Bank indirectly finances governments.Key words: monetary policy, inflation, sovereign debt crisis, credit risk, quantitative easing

scholarly journals The democratic deficit and European Central Bank crisis monetary policies

2019 ◽  
Vol 26 (1) ◽  
pp. 81-93 ◽  
Author(s):  
Anna-Lena Högenauer ◽  
David Howarth
Keyword(s):  
Central Bank ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Policy Making ◽  
Debt Crisis ◽  
Democratic Legitimacy ◽  
Sovereign Debt Crisis ◽  
Monetary Policies ◽  
European Central ◽  
International Financial Crisis

This article presents the argument that European Central Bank (ECB) policy-making from the start of the sovereign debt crisis in 2010 undermined the democratic legitimacy of the ECB. We start with the argument – defended by a number of scholars including Majone and Moravcsik – that where European Union (EU) policy-making is technocratic and does not have significant redistributive implications it can benefit from depoliticization that does not undermine the democratic legitimacy of this policy-making. This is notably the case where EU institutions have narrow mandates and are constrained by super-majoritarian decision-making. Prior to the international financial crisis, the ECB’s monetary policies were shaped entirely by the interpretation that its mandate was primarily to ensure low inflation. From the outbreak of the sovereign debt crisis, the ECB adopted a range of policies which pushed its role well beyond that interpretation and engaged in a form of redistribution that directly undermined treaty provisions.

Eurobonds: Three Lessons from China’s “Debt Centralization/Decentralization” Experience

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Zhiyong An
Keyword(s):  
Moral Hazard ◽  
Euro Area ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Budget Constraint ◽  
Sovereign Debt Crisis ◽  
The European Union ◽  
Member States ◽  
Institutional Mechanism ◽  
Previous Series

Abstract Eurobonds, dubbed as Coronabonds in the context of the current coronavirus crisis, are being hotly debated among the euro area member states amid the COVID-19 pandemic. The debate is in many ways a retread of the euro area sovereign debt crisis of 2011–2012. As China’s “debt centralization/decentralization” experience is comparable with the introduction of Eurobonds in the European Union (EU) in terms of institutional mechanism design, we review our previous series of studies of China’s “debt centralization/decentralization” experience to shed some light on the Eurobonds debate. We obtain three key lessons. First, the introduction of Eurobonds in EU is likely to soften the budget constraint of the governments of the euro area member states. Second, it is also likely to strengthen the moral hazard incentives of the governments of the euro area member states to intentionally overstate their budget problems. Finally, the magnitudes of the moral hazard effects generated by the introduction of Eurobonds in EU are likely larger than their respective counterparts in China.

The European Central Bank

2020 ◽  
Author(s):  
Michael Ioannidis
Keyword(s):  
Central Bank ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Central Banking ◽  
Defining Moment ◽  
European Central ◽  
Economic Constitution ◽  
Rules And Principles ◽  
History Of

The European Central Bank (ECB) is the only central bank governed by supranational constitutional law. As such, it is not only the most important institution of the Economic and Monetary Union (EMU), but it also marks a new stage in the history of central banking in general. Historically, the tasks and functions of the ECB have reflected the different stages of development of the EMU. The basic principles governing its function were set out in Maastricht, reflecting the interests and ideas about Europe’s economic constitution prevailing at that time. The sovereign debt crisis that hit Europe in 2010 was the second defining moment for the ECB after Maastricht. It posited the ECB–like the rest of the EMU–to challenges that some of the drafters of the Maastricht Treaty had not fully anticipated. These new challenges led to the adoption of novel instruments and the further clarification of fundamental rules and principles. Most important of these developments was the entrustment of the ECB with a new task, banking supervision, and the adoption of unconventional measures, which proved necessary to fulfil its monetary-policy mandate. Ultimately, not only did the ECB withstand the crisis but it emerged as a protagonist in securing the unity and integrity of the EMU.

(No) Haircut for Hellas?

2016 ◽  
Vol 12 (03) ◽  
pp. 520-537
Author(s):  
Alexander Thiele
Keyword(s):  
Central Bank ◽  
Public Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Public Institutions ◽  
Debt Ratio ◽  
Member States ◽  
European Central ◽  
Budgetary Policy ◽  
Political Question

Smouldering European debt crisis: overall public debt ratio as problem – Haircut as possible solution – Greece’s current creditors: public institutions (Member States and European Central Bank) – Insuring a sound budgetary policy as main goal of Article 125 TFEU – Consequences for a haircut by the Member States – The mandate of the European Central Bank and the prohibition of direct purchases of Member State bonds – Consequences for a haircut by the European Central Bank – Haircut as political question open for democratic debate

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