ECB Study: Central Bank Independence vs Democratic LegitimacyPublished on Wed Sep 27 2023 by Dustin Van Tate Testa A person is checking the authenticity of a 20 euro bank note. Real or counterfeit money? | Ivan Radic on Flickr
In a thought-provoking new paper, researchers raise provocative questions about the European Central Bank's (ECB) approach to its own legitimacy, examining its strategic actions throughout the first two decades of the European Monetary Union (EMU). The paper titled "The Politics of Monetary Union and the Democratic Legitimacy of the ECB as a Strategic Actor" delves into the intricate balance between a central bank's need for independence and its democratic accountability. It reveals that the ECB, although technically independent, is very much entangled with political processes and must navigate the diverse interests of the member states it represents.
The study exposes how the ECB has shifted its strategies for securing democratic legitimacy in response to varying circumstances. Traditionally, the ECB has prioritized 'output legitimacy,' focusing on achieving its primary objective of price stability. However, as the financial crises unfurled and the limits of this approach became evident, the ECB was forced to adapt. This adaptation led to an increased emphasis on 'throughput legitimacy,' involving greater transparency and accountability, particularly in non-acute, post-crisis times when the ECB's output legitimacy would diminish due to policy shortcomings.
This paper is revealing not only for scholars and policymakers interested in the intricacies of EU governance but also for an average citizen concerned with how the entities controlling their currency operate within the democratic framework. In spotlighting the ECB's legitimation strategies, the paper ultimately raises critical questions about whether the current strategies will suffice to sustain the central bank's democratic legitimacy in the long run.
The value of these findings lies in the broader discussion of the ECB's evolving role during crises and its constant battle to maintain independence while serving the diverse needs of its member states. Understanding this evolution helps to demystify the operations of a central bank that plays a vital role in the day-to-day lives of European citizens, securing the stability of the euro and, by extension, their economies. The paper not only dissects the ECB's strategies for legitimacy but also prompts a reflection on the health of democratic processes in supranational financial institutions.