Preface It is the political side of the European System of Central Banks environment that is in my interests for the purpose of this paper. Last year, during my study program in Paris, at the Institut d’Études Politiques, Sciences-Po, I attended a course taught by Professors Philippe Braud and Brigitte Fouilland on political power at different levels, from local authorities up until the European Union, where I concentrated my in-class activities and personal works on the democracy of the European setting. What I am going to report in this analytical work is then an articulated synthesis of the results of all my readings and studies in France on the European Central Bank as one of the most powerful instances of the constantly evolving European Union, interpreted in a comprehensive perspective, which is geared to underline the democratic, or rather undemocratic, aspects of the subject.
Introduction The European Central Bank, the ECB, based in Frankfurt, is a unique, complex and problematic institution. It is unique because it has been established by the political will of 15 Member States expressed in a treaty and no other central bank had ever been set up this way. It is complex due to its head role in the European System of Central Banks (ESCB). It is problematic since monetary power has always been a symbol, if not a basis, of national identity and is, therefore, a source of power. The ECB is an independent central bank and a supranational institution at the same time. It is a central bank because it has been in charge of the Euro monetary system since the beginning of 1999 and it has the mission of issuing the currency for the whole banking system, not to mention its powerful position on economic grounds. But, at the same time, it doesn’t only coordinate and organize the relations between different countries; being in fact a supranational institution, it is the central bank of the countries belonging to the Euro zone and it is a fundamental institution in the political setting up of the whole Union, since for the first time the Member States have delegated their own monetary competences to a higher level built-up entity. Still, a fully integrated political union is not in place yet. The main objective of the ECB, that is to say, keeping price stability, not supported by sound coordination of other fields of policy, brings up some controversial issues on its efficiency and effectiveness: the Bank retains (at least in principle) all the monetary authority of the Member States and this power allows it to limit their economic independence.
The European Central Bank is then an interesting case-study: it faces critiques from all sides, especially on the grounds of its supposed lack of democratic legitimization of its powers. I will have to go through an historical introduction of the negotiations and positions which paved the way to the Union and I will try to describe the ECB’ s structure and functions laid down in the legislation in order to show how the Bank is “de jure” legitimized in its acting in the clear institutional setting it operates in.
At the same time, I will present the different critiques which have been posed to its functioning and implementation, in particular to its general founding principles, trying to identify the problematic issues at stake and eventually showing that “de facto” legitimacy is still lacking. In the words of W.H.Buiter in his famous article “Alice in Euroland” the ECB could be defined as “a great idea, shame about the execution”, in its being detached from the citizen and in its representing a totally peculiar powerful supranational entity: it will be shown how it can be considered an exception rather than a modification to the concept of democracy.
What will emerge is that the European Central Bank, as a powerful institution, survives through a mechanism of technocratic legitimacy, since the motives that inspired the process of monetary union had more to do with élitarian empowerment rather than the democratic principles of accountability, transparency, identity and participation.