EMULEG: The Governance of Monetary Policy: The EMU’s Legitimacy Conundrum

by J. Mendes and A-L. Högenauer

The role of European Central Bank (ECB) in monetary policy and in European Economic and Monetary Union (EMU) law and politics has changed fundamentally in the past decade.

Just as during the sovereign debt crisis, in 2020 it is again at the forefront of economic responses that are essential to preserve the Eurozone, and, many claim, the EU itself. While it has so far been successful, the evolution of the ECB remains deeply problematic, both in terms of legality and legitimacy. It faces a conundrum of independence and democracy that remains unsolved. EU legal and political science scholarship has hitherto avoided addressing the problems that the ECB’s redistributive policies pose to democratic legitimacy in the EU, not least because of how they fundamentally constrain Member States’ economic policies.

EMULEG proposes to re-define the institutional framework of the EMU. It analyses whether the ECB’s independence is too high in light of the increasing polarisation of opinions on its policies and the growing importance of its decisions, and whether there are better alternatives that allow for a rebalancing of independence and democratic legitimacy. For this purpose, we will compare the legal framework of the independence of the ECB to three other central banks, as well as the institutional reality of accountability towards political institutions and the public. The aim is to formulate advice on possible reforms including both changes to the ECB’s legal framework and the institutional practice of central bank accountability in the EU, to find a better balance between effective policies in the pursuance of collective goals and democratic legitimacy.

Dimitrios is focusing on the adequacy of the independence apparatus of the European Central Bank (ECB) in light of the Bank’s adapted role during the last decade and the concomitant democratic legitimacy challenges. From a political science perspective, Dimitrios seeks to compare the model of the ECB with the models of other central banks with a view to identifying policy lessons. His research concentrates on the evolution of economic policy beliefs of central bank officials and other stakeholders and their impact on institutional arrangements. The study includes the methods of Organizational Discourse Analysis, Elite Interviewing and Comparative Analysis. 

Nikolas is focusing mainly on the ECB’s role within the European Economic and Monetary Union (EMU) as established in the EU legal framework and as developed through the ECB’s institutional practices especially since the financial crisis erupted. Given that the ECB’s role within the EMU has raised issues of democratic legitimacy, this study will rethink this role, especially by comparing it to the role of other central banks. The research will end up with devising reform proposals to strengthen the democratic accountability of the ECB. These proposals will be linked with the formulation of advice on a redefinition of the ECB’s role within the EMU and on a possible redesign of the EMU’s institutional framework to address the democratic legitimacy concerns.