Independence, discretion and accountability in the evolving monetary policy framework of the European Central Bank
| Published date | 01 August 2023 |
| DOI | http://doi.org/10.1177/1023263X231224728 |
| Author | Alicia Hinarejos,Drazen Rakic |
| Date | 01 August 2023 |
| Subject Matter | Articles |
Independence, discretion and
accountability in the evolving
monetary policy framework of
the European Central Bank
Alicia Hinarejos * and Drazen Rakic**
Abstract
The role of the European Central Bank (ECB) has expanded substantially in recent years due to
subsequent crises. As a result, its accountability has been a matter of growing concern. This paper
focuses on recent monetary policy decisions (specifically, the 2020–21 monetary policy strategy
review and the Transmission Protection Instrument) and the evolving accountability practices
of the ECB. After discussing three relevant key dimensions of central bank design (independence,
discretion and accountability) and their relationship over time, the article shows that the high-
lighted recent developments will lead to a much greater degree of discretion on the part of the
ECB, and that accountability practices have not evolved in a commensurate manner. The article
concludes by making specific proposals to improve, to some degree, the accountability of the
ECB to the European Parliament, and address the current imbalance between independence, dis-
cretion and accountability.
Keywords
Accountability, ECB, Economic and Monetary Union, EU law, European Central Bank, monetary
policy
1. Introduction
The creation of the European System of Central Banks (ESCB) and the European Central Bank
(ECB) with the Maastricht Treaty presented a new mode of democratic accountability in the
*
McGill University, Montreal, Canada
**
European Parliament, Brussels, Belgium
Corresponding author:
Alicia Hinarejos, Faculty of Law, McGill University, Chancellor Day Hall, 3644 Peel, Montreal, Quebec, H3A 1W9,
Canada.
Email: alicia.hinarejos@mcgill.ca
Article
Maastricht Journal of European and
Comparative Law
2023, Vol. 30(4) 473–490
© The Author(s) 2024
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/1023263X231224728
maastrichtjournal.sagepub.com
European Union (EU) institutional framework, the so-called ‘accountable independence’.
1
The
institutional design of the ECB, including accountability arrangements and the legitimacy it
enjoys when conducting monetary policy, has been subject to intense debate since the beginning.
2
The Bank’s legitimacy to conduct monetary policy includes three dimensions: (i) ‘input legitimacy’,
achieved initially with the ratification of the Maastricht Treaty, and subsequently with successive
appointments of Executive Board and Governing Council members, (ii) ‘output legitimacy’
when successfully attaining defined objectives, and (iii) as a form of ‘throughput legitimacy’, con-
tinuous accountability to justify to the European citizens and their elected representatives ‘how [the
ECB] uses the powers and prerogatives with which it has been entrusted to pursue its objectives’.
3
Up to the global financial crisis (GFC), ‘output legitimacy’was possibly sufficient because the
ECB had largely achieved price stability by using conventional instruments (interest rate policy)
with limited distributional and other side effects. The GFC and European sovereign debt crisis
brought new challenges related to monetary policy objectives and instruments, with the key
tenets of the pre-GFC balance between independence and accountability coming into question.
4
Fundamental changes to the central banking model exposed even further the weak accountability
framework elaborated in the Maastricht Treaty.
5
Central banks worldwide emerged from the
crisis with new roles (financial stability, micro- and macro-prudential supervision) and new (non-
standard) monetary policy instruments. What is unique in the ECB’s case is that it also assumed a
controversial crisis management role (with the participation in the so-called ‘Troika’, but also
increasingly having to offset shortcomings on the fiscal side of the Economic and Monetary
Union (EMU) through its monetary policy). This was a catalyst for a discussion about the appro-
priateness of the ECB’s accountability framework.
The debate on ECB accountability is now once again reinvigorated.
6
This renewed interest can
be traced back to three main factors. First, post-GFC, central banks were forced, due to the low-
inflation environment and constraints of the effective lower bound on their traditional monetary
1. R.M. Lastra, ‘The Independence of the European System of Central Banks’,33Harvard International Law Journal
(1992).
2. See F. Amtenbrink, The Democratic Accountability of Central Banks: A Comparative Study of the European Central
Bank (Hart Publishing, 1999); W.H. Buiter, ‘Alice in Euroland’, 37(2) Journal of Common Market Studies (1999);
O. Issing, ‘The Eurosystem: Transparent and Accountable or “Willem in Euroland”’,37Journal of Common Market
Studies (1999); J. De Haan and S.C.W. Eijffinger, ‘The Democratic Accountability of the European Central Bank: A
Comment on Two Fairy-tales’,38Journal of Common Market Studies (2000).
3. ECB, ‘The Accountability of the ECB’, November Monthly Bulletin (2002).
4. M. Draghi, ‘Central Bank Independence’. First Lamfalussy Lecture at the Banque Nationale de Belgique, Brussels, 26
October 2018, www.ecb.europa.eu/press/key/date/2018/html/ecb.sp181026.en.html; P. Tucker, ‘How the European
Central Bank and Other Independent Agencies Reveal a Gap in Constitutionalism: A Spectrum of Institutions for
Commitment’,22German Law Journal (2021).
5. D. Fromage et al., ‘ECB Independence and Accountability Today: Towards a (Necessary) Redefinition?’,26Maastricht
Journal of European and Comparative Law (2019); F. Amtenbrink, ‘The European Central Bank’s Intricate
Independence Versus Accountability Conundrum in the Post-crisis Governance Framework’,26Maastricht Journal
of European and Comparative Law (2019).
6. See e.g. D. Fromage et al., 26 Maastricht Journal of European and Comparative Law (2019) ; F. Amtenbrink, 26
Maastricht Journal of European and Comparative Law (2019); L. Dragomir, ‘The ECB’s Accountability: Adjusting
Accountability Arrangements to the ECB’s Evolving Roles’,26Maastricht Journal of European and Comparative
Law, (2019); D. Fromage, ‘Guaranteeing the ECB’s Democratic Accountability in the Post-Banking Union Era: An
Ever More Difficult Task?’,26Maastricht Journal of European and Comparative Law (2019); S. Diessner, ‘The
Promises and Pitfalls of the ECB’s‘Legitimacy as Accountability’towards the European Parliament Post-crisis’,28
Journal of Legislative Studies (2022). More broadly, see also M. Markakis, Accountability in the Economic and
474 Maastricht Journal of European and Comparative Law 30(4)
To continue reading
Request your trial