IS THE ECB SUFFICIENTLY TRANSPARENT
AND PROPERLY ACCOUNTABLE?
122. In our previous Report, as well as emphasising
the need for the ECB to be independent, we considered the concepts
of transparency and accountability. We argued that ultimately
the ECB would earn credibility by its results, but that "in
the unavoidable interim period the ECB should foster its political
acceptability and its eventual credibility by whole-hearted commitment
to listening and explainingin a word, to transparency".
As for accountability, we laid emphasis on the role of the European
Parliament, saying that we would expect the hearings of the President
of the ECB and members of the Executive Board "to be televised
and to become a prime means of communicating with the people of
the euro-zone countries".
For HM Treasury, Mr Taylor cited the information provided by the
as evidence of its accountability. However, he conceded that the
provision of information did not in itself constitute being called
to accountrather, it was a necessary precursor of being
called to account (as the ECB was by the European Parliament)
(QQ 25-26). We were anxious to distinguish the two concepts.
123. The German Ambassador described the ECB as "one
of the most transparent central banks in the world" (Q 311).
Dr Walter agreed:
"Although the ECB has
done a good job it has nevertheless been heavily criticisedby
academics, analysts and market participantsfor not being
transparent and for pursuing an unclear strategy. To a large extent,
the criticism with regard to transparency seems exaggerated as
the ECB communicates actively with the general public and the
He pointed out that the United States Federal Reserve
Board was far from being transparent, but he did think that the
ECB should increase its transparency even further by revealing
not only the arguments in favour of a key interest rate decision
but also the arguments against (p 123).
124. Mr Trichet said that the ECB had always been
"very, very keen on having as complete transparency as possible
vis-à-vis public opinion and the markets". Its
policy was to produce the evidence on which each decision on interest
rates was based, and to hold a press conference to explain it
"in real time", rather than several weeks later (Q 117).
The ECB recognised that there had to be permanent communication,
responding to "this unique challenge to explain the monetary
policy in nine different languages to eleven different cultures"
(Q 112). The Governor of the Bank of England agreed that the ECB
did "try extremely hard" to explain itself:
"I think if you compare
it with the Bundesbank, its ancestor, as it were, it is just chalk
indeed all our media are absolutely full of
the President of the ECB being too transparent and being too ready
He would look to see a continuing evolution in the
ECB's processes, but he did not agree with the European Parliament
(p 126) that the ECB had to increase transparency in order to
increase credibility (Q 275).
125. There is a particular question as to whether
minutes, including voting records, should be published. During
our previous inquiry, we were persuaded
that although the decisions of the ECB and the reasons for them
should be published promptly
not go so far as to disclose the course of the argument, with
its ebb and flow as minds are made up and changed
to this extent would lead to the identification of individuals
and countries with particular policy positions. This would, we
believe, diminish the collective or collegiate nature of the Governing
Council's decision-making process. It would also risk turning
what should be decisions taken with the whole euro-zone in mind
into contests between national points of view with all the emotion,
publicity and posturing that this would attract".
126. Although it was recognised that failing to publish
minutes and voting records might be arousing suspicions in the
market about what was being concealed, the general view of witnesses
to this inquiry remained that they should not be published. As
HM Treasury put it,
"the members of the Governing Council do not act as national
representatives, but in a fully independent personal capacity.
This is reflected in the principle of 'one person, one vote'"
(p 2). The Governor of the Bank of England opposed publication
on the grounds that it would be an invitation for nationalist
pressure on individual governors of national central bankswhich
would be perceived to happen even if it actually did not (Q 275),
and Mr Trichet said that this was the consensus among governors
of euro-zone central banks (Q 117).
127. Only the European Parliament seemed to be in
any doubt. Mrs Randzio-Plath said that the Parliament would be
in favour of a summary of minutes being published, and that it
was still considering whether to press for the publication of
voting records. It had been argued that publication would lead
Board members to "become particularly attentive to the need
to justify [their] own positions in terms of their mandate to
scrutinise developments in the euro area as a whole rather than
developments in their own Member State".
Nevertheless, the European Parliament had so far taken the view
that at this early stage in the life of the single currency "the
Europeanisation process should not be disturbed by speculation
about voting" (p 126).
128. As for accountability, the European Parliament
was in no doubt that under the Treaty
the ECB was fully accountable to it, "as the sole democratically-legitimised
institution" (p 125). Initially, the Parliament was consulted
on the appointment by Member States of the six members of the
Executive Board. Now that the ECB was in operation, its President
was required to present an Annual Report to the Parliament on
the activities of the ESCB, and on monetary policy. And he, and
other members of the Executive Board, could be asked to give evidence
to the Committee on Economic and Monetary Affairs. Mrs Randzio-Plath
explained that the Parliament was especially concerned with the
appropriateness of the quantitative definition of price stability
and with the two pillars
on which decisions about interest rates were based. She considered
that the Parliament was improving its methods of holding the ECB
to account. At their meetings, "increasingly well-prepared
Members of the European Parliament question the President on the
monetary decisions of the ECB and his views on the economic situation,
thereby holding him to account"; minutes and a verbatim account
of the meetings were to be found on the European Parliament website
129. Just as we were completing this Report, the
ECB announced that it would in future publish its internal economic
forecasts, "to improve the market's understanding of its
monetary policy and dispel criticism of excessive secrecy".
The European Parliament had been calling for this to be done (despite
fears that forecasting inflation rates might turn out to be a
regarding the publication of forecasts as part of implementing
"Simply providing the
European Parliament with information is not sufficient
The ESCB has to make it clear how monetary policy is intended
to contribute to a balanced and appropriate policy mix in order
to promote sustainable growth and employment, without prejudice
to the objective of price stability"
What was needed was a "regular monetary dialogue
where the representatives of the European citizens debate with
the President of the ECB", not merely explanations after
the event (pp 126-127).
130. Mr Power was much more critical of the present
situation, apparently considering that the ECB should be accountable
to individual participating Member States. In his view:
"There is no accountability
that we can be aware of. [The ECB] is a very independent policy-making
body. It is quite clear that most members of the European Central
Bank are not influenced by domestic policy considerations. If
that were not the case, interest rates would not have increased
by as much as they have increased over the last 12 months"
He said that he "would certainly agree"
with the suggestion that the European Parliament was not doing
its job in holding the European Central Bank to account (Q 185).
Mr Peet shared the view that accountability was "not yet
adequate"; he thought that more formal arrangements were
necessary with the European Parliament, "and perhaps, sometimes
the national parliaments as well" (Q 79). In our previous
Report, we had envisaged that the President of the ECB or other
members of the Executive Board "might find it helpful to
appear before national parliamentary committees from time to time".
It appears that the ECB would not agree with the latter suggestion:
in response to an invitation to give evidence to this inquiry,
Dr Issing (the ECB's Chief Economist, and a member of its Executive
Board) told us that "as a matter of principle we do not appear
before national parliaments", though he did offer an informal
exchange of views.