The European Central Bank (ECB) and the euro crisis

Abstract

The quality of institutions is an essential element in the making of public policy. Weak institutions place a heavy burden on public decision-makers and threaten the credibility of their actions. The financial crises of recent years have revealed the profound weaknesses of the eurozone's institutional architecture in terms of central bank governance. Understanding these weaknesses is essential to :

1. understand the nature of the European Central Bank's (ECB) responses to the varied and shifting challenges posed by the financial crisis ;
2. assess the effectiveness of the policies implemented by the ECB at each stage of the crisis;
3. be able to anticipate the institutional and governance reforms needed to make the euro zone work better in the future.

In the opening lecture, I will describe the challenges faced by the ECB since 2008, and assess its crisis management skills and the effectiveness of its monetary policy.

This lesson will introduce the general themes that will be developed in greater detail throughout the lecture.

Lucrezia Reichlin

Italian economist and professor at the London Business School, Lucrezia Reichlin will hold the European Chair at the Collège de France for a year. The first woman to head the European Central Bank's research department, she is a renowned specialist in macroeconomics. Her work on real-time valuation systems and short-term economic forecasts using very large data sets is authoritative and widely used in the field of finance.

The European Central Bank is a unique institution in its capacity as a central bank located at the heart of a group of nineteen countries, each with national responsibilities for fiscal policy and, until recently, banking regulation. The absence of an explicit relationship between the ECB and a common European fiscal authority hinders its actions and limits their impact. In this respect, the ECB can be seen as part of a particular institutional framework, where, as a central bank, it has no political support in budgetary and fiscal matters. As such, it makes an interesting case study for comparison with the behavior and performance of central banks operating within a strong fiscal and budgetary framework. This approach can be used to shed new light on the importance of governance and the management of monetary and fiscal interactions. Analysis of this case also provides a better understanding of the future of central banking and the eurozone.