Accountability, Transparency and
17. It was important for the ECB to be accountable,
transparent and open, according to Professor Buiter, because the
institution needed "political legitimacy", which he
believed was "necessary for any institution to survive".
In this regard, the lack of publication of the minutes of Governing
Council meetings could undermine the ECB's position. However,
Dr Issing, of the ECB, has pointed out that the Bank holds a monthly
press conference, the transcript of which is available from the
ECB's website and which he believed comes "very close to
representing 'summary minutes'".
The CEPS was more critical, arguing that the information revealed
in the press conference "falls short" of that contained
in minutes produced by other central banks. It added that publication
of edited minutes could "contribute to a better understanding
of the decision in question, of the true motives behind it and
of the main concerns of the ECB about the future", and would
be useful if they were produced on a timely basis.
Credit Lyonnais UK thought that minutes might not be published
in order to preserve the notion that decisions are reached by
consensus and the Economic Secretary believed that it would be
"difficult" for the ECB to publish voting records.
The Centre for Economic Policy Research (CEPR) has argued that
the ECB should be collectively accountable because it can set
its own targets and to avoid speculation that larger countries
dominate ECB decision-making; it therefore advocates that voting
records and minutes should remain secret to prevent opening a
"can of political worms".
The CEPS, however, argued that such openness would "not necessarily
lead to nationalist battles in the media" and could improve
understanding of the ECB's interest rate policy.
18. The ECB also communicates its economic assessment
and strategy through a number of other channels. A monthly report
is published which was judged to be of a "generally high
quality" according to a recent CEPR paper,
but tends to be "backwards looking" according to the
The Economic Secretary said that the inclusion of inflation forecasts
would be welcomed.
Professor Wyplosz, of the Graduate Institute of International
Studies, Geneva, has argued to the European Parliament that their
inclusion could avoid "loss of face" by the ECB if euro-area
inflation was to rise temporarily above 2 per cent in the coming
Professor Thygesen, of Copenhagen Business School, added that
the inclusion of inflation forecasts would improve the ex ante accountability
of the ECB.
In addition to the monthly report, the ECB produces an annual
report and members of the Governing Council make frequent, widely-reported
speeches. Professor Buiter warned against the danger of "six
people singing six slightly different songs" and advocated
"either nobody saying anything or everybody talking from
the same report card".
The ECB considers itself to be accountable to the Committee on
Economic and Monetary Affairs of the European Parliament, and,
through that, to the public.
Dr Gros suggested this process could be improved if observers
from national parliaments of the euro-area countries attended
the European Parliament discussions to assist scrutiny.
Commissioner Solbes believed the ECB could probably improve its
accountability and that it had to improve its communications,
although he emphasised that the institution had only recently
come into being.
The Economic Secretary argued that the ECB had progressed "far
further" in achieving accountability than many of the national
central banks of the euro-area.
Strategy and Objectives
19. The primary objective of monetary policy in the
euro-area, stated in the Maastricht Treaty, is price stability.
The ECB has defined this as being the "yearonyear
increase in the Harmonised Index of Consumer Prices (HICP) for
the euro area of below 2%" over the medium term.
The CEPS argued that this was vague on two accounts: no lower
boundary is stated, and the timeframe referred to in the phrase
"medium term" is not determined. Additionally, Mr Forder
cautioned that the ECB's "exclusive primary focus on inflation",
together with a desire to gain credibility, may lead it to set
an "excessively counter-inflationary" monetary policy.
However, the ECB has indicated that reflationary action had been
and would be taken if the rate of inflation sank too far below
the target rate.
In order to achieve price stability, the ECB has adopted a "twin
pillar" approach: the first pillar refers to broad money
supply growth (M3), which has a reference value of 4.5 per cent
annual growth; the second pillar consists of a broadlybased
assessment of the outlook for price developments and the risks
to price stability in the euro area, which Mr Barty described
as a "very sensible, pragmatic" approach to monetary
Professor Buiter was critical of the need to target money supply,
however, believing that the ECB had decided to use this target
out of "nostalgia" for the Bundesbank.
Instead, he preferred that the ECB should "dethrone the monetary
reference value and come out of the closet with their inflation
While admitting there were some difficulties with the money supply
pillar of monetary policy, Commissioner Solbes said that it was
"important" and had been used by the ECB in its policy
Figure 3: ECB key (refinancing) interest
20. In order to achieve price stability, the ECB
has so far changed the key refinancing interest rate six times
as shown by Figure 3. Because of lags in the transmission mechanism,
the CEPS argued that it was too early to assess the ECB's monetary
policy actions although it thought that "no major monetary
policy mistakes have been committed" to date,
a view shared by others.
Commissioner Solbes was more definite, saying that the ECB had
played a "crucial" role in suppressing inflation.
The Economic Secretary was of the opinion that the ECB was "clearly
meeting its remit".
21. In the first eighteen months of Stage Three
of EMU, euro-area inflation remained relatively stable, an achievement
for which the ECB can take some credit, though we note rising
inflation in both Ireland and Spain. However, there exists a broad
consensus that the ECB's communications with the financial markets
and the presentation of its policy actions could be improved.
While the differences between the structure of the ECB and the
Monetary Policy Committee (MPC) of the Bank of England might mean
that it is unrealistic to expect the ECB to adopt the same procedures
as used by the MPC to enhance transparency, scope exists to improve
the presentation of information by the ECB and the transparency
of its operations.
84 Qq36-37 Back
EC Treaty, Article 105, paragraph 1 (as amended by the Treaty
on European Union, Maastricht, 7 Feb 92) (hereafter Maastricht
Q32; also see Q29 and Ev, p11 Back
Qq29, 32, 44 Back
The Eurosystem: Transparent and Accountable or 'Willem in Euroland',
Dr Otmar Issing, Policy Paper No. 2, Centre for Economic Policy
Research, Sep 99, p11 Back
Quo Vadis Euro?, pp25-6 Back
Q457; App 27 Back
One Money, Many Countries-Monitoring the European Central Bank
2, Carlo Favero, Xavier Freixas,
Torsten Persson and Charles Wyplosz, Centre for Economic Policy
Research, Jan 00 (hereafter One Money), pp30-1 Back
Quo Vadis Euro?, p26 Back
One Money, p8 Back
Quo Vadis Euro?, p. 25 Back
Briefing Paper for the Committee on Economic and Monetary Affairs
of the European Parliament,
Professor Charles Wyplosz, 14 Mar 00, p3 Back
App 29 Back
Q 40 Back
Maastricht Treaty, Article 105, paragraph 1 Back
The President's Introductory Statement,
Press Conference by Dr Wim Duisenberg, ECB, 13 Oct 98 Back
App 23, paragraph 17 Back
Quo Vadis Euro?, p2; also see EMU: Growth through Stability,
speech by Dr Wim Duisenberg, 27 Apr 99 Back
116 Q107 Back
Quo Vadis Euro?, p27 Back
Ev, pp2, 4, 11 Back