The ECB's conundrum and 21st century monetary policy: How European monetary policy can be green, social and democratic

The ECB’s mandate was drafted 30 years ago and focuses narrowly on preventing inflation. As a consequences, the ECB lacks clear democratic guidance concerning the challenges it faces today: how to deal with government debt and what to do to fight climate change. This lack of guidance undermines the legitimacy of its choices and the effectiveness of its programmes. The EU’s political institutions can solve the ECB’s conundrum by providing it with renewed democratic authorisation.

Possible scenarios for European monetary policy in 2021

The article analyzes the proposed directions (scenarios) of fi ne-tuning of monetary policy of the European Union and the likely consequences of global pandemic volatility. The article also points to the need to continue to reform the European monetary policy, particularly considering the role of the euro in the modern system of international fi nance, the EU debt problems and competition with the U.S. dollar. The widespread prevalence of COVID-19 and the related periods of self-isolation and lockdowns have exacerbated monetary and fi nancial problems even in the world’s leading countries such as the European Union. The solution of monetary problems in its multi-level structure is entrusted to the European Central Bank, which acts as a regional (and at the same time supranational) regulator of the monetary and fi nancial sphere at the system level. The pursued unconventional monetary policy, aimed at getting out of the prolonged recession and defl ation, is facing new challenges, including those of a global nature. Therefore, it is necessary to analyze the current situation and identify the real reasons that prevent the achievement of these goals. The author comes to conclusion that they can be classifi ed into external and internal causes, exogenous and endogenous, fundamental and force majeure. However, the coronavirus formally related to the latter, as it seems in view of the onset of the second wave and the projected third, can, to a certain extent, be considered a hybrid one, beginning to exert a comprehensive infl uence, aff ecting all spheres of human activity and certainly monetary and fi nancial sphere as well. Exchange rates are becoming more volatile, and traditional measures to regulate them are no longer eff ective. Consequently, the need to fi nd new approaches to monetary policy, especially for the European Union, with its becoming permanent debt problems, capital under-regulation and unfi nished regional currency digitalization, is becoming increasingly evident.

German Ordoliberalism and the Future of the EU

Far from enabling France to enhance its power over European monetary policy, the Euro has served to consolidate the Federal Republic of Germany’s primacy in Europe. We argue that German policies that have underwritten this primacy are determined not primarily by the ordoliberal ideas of German state managers, but rather because these ideas correspond to the requirements of Germany’s neo-mercantilist export model and the interests of its most powerful socio-economic actors. Germany’s material/corporate interests—and its particular domestic and regional predicament—create enormous obstacles to the abandonment of ordoliberalism and the adoption of the more expansive fiscal policies that most observers believe are necessary to sustain the Eurozone.

20 YEARS OF EUROPEAN MONETARY POLICY. FROM DOCTRINARISM TO REALPOLITIK

This paper describes the monetary policy of the European Central Bank since the birth of the Euro. The different economic situations and the monetary policies implemented during the mandate of each one of the three ECB presidents are analysed as a process of evolution. We study the situations of cyclical asynchrony together with the response given to it by the European monetary authority. We also assess the change experienced by the main economic indicators of the twelve founding countries during the 20 years of the single currency. The main conclusion obtained is that monetary policy has evolved from the strict approach defined in the Treaty on the Functioning of the European Union to an approach closer to that of the rest of central banks, which we have called “monetary realpolitik”.