FRANKFURT AM MAIN, GERMANY - MAY 6, 2017: Sign of the European Central Bank with the headquarters in the background.

WHATEVER IT TAKES - The European Central Bank, the European Parliament, and Mario Draghi in the aftermath of the financial crisis

mai 2019

The years leading up and following the financial crisis of 2008 saw a significant shift in public opinion towards the Euro. According to a Eurobarometer survey, the share of Eurozone nationals who believed in the benefits of the single currency went from 59% in September 2006 to 47% in September 2008. Confidence in the euro has since been restored to levels exceeding the pre-crisis levels (as of October 2018, confidence levels are estimated at 64%). This article provides an overview of the interaction between the European Central Bank (ECB), the institution in charge of regulating the single currency, and the European Parliament (EP), the body which effectively represents the interests and opinions of EU citizens, with a specific focus on the role of the ECB President, Mario Draghi. The EP, in fact, is essential in ensuring that ECB’s policies and practices are properly vetted and fall in line with the interests of Eurozone citizens – and it has been so since the very founding of the Bank. 

By Tea Cimini

What is the ECB?

The European Central Bank is the European body tasked with carrying out monetary policies with the 19 countries currently part of the Eurozone. The bank has been established in 1998 with the goals of “[maintaining] price stability” and of providing support to the “general economic policies in the Union.” The Bank is arguably one of the most ambitious projects of its kind, managing a single currency for 19 different countries, 340 million citizens, effectively regulating the world’s largest banking system. Its leadership – called Executive Board – is comprised of the President, Vice-President, and other members, and presents a complex governing structure featuring many sub-entities, whose portfolio vary from international and European relations to macro-prudential policy and financial stability. In accordance with 284(2) of the Treaty on the Functioning of the European Union, the ECB is required to compile an annual report on the monetary policies adopted and executed in the current and previous years for the European Parliament (EP), the Commission, the Council and the European Council. The EP can then request to hold hearings between relevant committees in Parliament and the Executive Board with the purpose of discussing the outcome of the report and the developments foreseen for the future.

The President

A well-known name in the world of international finance and often referred to as Super Mario, Mario Draghi took the reins of the ECB in November 2011. Prior to joining the ECB, he served as the Governor of the Banca D’Italia (the Italian Central Bank) and worked in numerous other financial institutions including the Goldman Sachs Group and the Bank for International Settlements. Interestingly, Draghi had the opportunity to shape the outlook of the Executive Board itself, as he inherited a boardroom almost totally made up of new board members. He also instituted a new leadership style defined by the Financial Times as more “consensual,” and view by many with suspicion as it stood in stark contrast with the modus operandi of the ECB up until his appointment. Holding his post in the middle of the Greek debt crisis, among fears of a potential exit of the country from the Eurozone, he became the symbol of the institutional struggle to ensure the survival of the euro, a defining feature of the EU project. He memorably declared that “the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Since then, the ‘whatever it takes’ attitude has become a known element of Draghi’s leadership of the ECB who, during his mandate, has adopted controversial policies, such as the Outright Monetary Transaction, a substantial public debt buying program, and the Securities Markets Programme, an asset purchasing program, among other things. In this vein, it is important to point out that the very role of the ECB has largely expanded in the aftermath of the crisis, as shown in graph 1, further making the institution a key element of EU policy-making in the public eye.

Graph 1. BBVA, “The ECB played a fundamental role in the crisis” 

The Hearings

The Parliamentary hearings take place four times a year and are essentially a discussion between a member of the ECB Executive Board, usually the President, and members of the European Parliament (MEPs) assigned to the Committee on Economic and Monetary Affairs. The ECB President kicks off the hearing by providing introductory remarks, which are followed by a question and answer period. Typically, MEPs have around two to three minutes to pose a question while the President has a roughly similar amount of time to respond. Only MEPs who are part of the Committee on Economic and Monetary Affairs are able to ask oral questions. The question time slots are allocated based on the number of parliamentarians belonging to each group, meaning that larger political groups will have a higher chance of presenting their questions to the ECB President. However, MEPs are also able to submit questions in writing, a mechanism which serves various purposes. Firstly, while the President is expected to have a detailed understanding of ECB policies and a broad understanding of economic and financial issues of all Eurozone countries, the questions proposed by MEPs might require a degree of expertise in niche topics outside of the competencies of the ECB President. For this reason, the more technical questions can be submitted in writing and a detailed, fact-based answer is then posted on the ECB public website. Secondly, written questions allow MEPs who do not sit on the Committee on Economic and Monetary Affairs to interact with the ECB. Lastly, written question can be a useful tool for MEPs belonging to political groups with a low number of seats in the EP whose odds of speaking up during the hearing are very low. Additionally, MEPs also have the power to submit amendments to the ECB Annual report.

Preparing for the Hearing

At this point, it is apparent that the parliamentary hearings are more than just a mere formality. As such, the process of preparing the President for the hearings is quite extensive. Much of the preparation centres around the work of the Committee on Economic and Monetary Affairs. The ECB, in fact, monitors the discussion and takes notes of topics of particular importance for the MEPs in the Committees in order to better address their needs during the hearings and to better prepare the President for the question and answer period. Moreover, the coordinators of the Committees select up to two topics that need to be discussed and hire external experts to provide briefing material to all MEPs. This step is essential to ensure that all MEPs are provided with satisfactory and objective information on topics of interest to their Committee work that can be rather technical and might require extremely specialised knowledge. The President’s introductory statement usually addresses said topics to frame the conversation.

The ECB and the Public

Due to the intrinsic complexity of the ECB’s areas of competence – how many people can truthfully claim to understand the subtle complexities of maintaining a currency stable? – the operations of the Bank have not been a matter of concern for a majority of the public in the Eurozone. The situation has changed since 2008. In the aftermath of the financial and debt crises, it became apparent to many Eurozone citizens that their future and fortunes were inexorably tied to the fiscal decisions of 19 different countries, each with its very own set of policy priorities and objectives. This new interest in the work of the ECB by the public is essential in understanding the relation between the Bank and the EP, and is an important key to analyse Draghi’s hearing at the EP. In this sense, analysing the MEPs’ engagement during the hearings provides an effective lens to gauge the actual interest of the public in the operations of the ECB. 

The Parliamentary Hearings and Public Interest

The parliamentary hearings have proved to be a powerful tool for the ECB to engage Parliament and vice versa. Firstly, insofar as MEPs are elected officials, we can expect them to respond to the interests and demands of their constituencies, partly due to their desire to fulfil their mandates and partly because of an intrinsic interest in a potential re-election campaign (where applicable). With this premise in mind, it is possible to analyse the interactions between the MEPs and the ECB during the parliamentary hearings as a proxy for citizens’ interest in the work of the Bank. The ECB itself published an article on the accountability measures and the increased interest in the work of Bank in the aftermath of the financial crisis. The financial and debt crises brought about a renewed interest in the monetary policies spearheaded by the ECB in the MEPs as demonstrated, for example, in the increased number of written questions submitted to the ECB in the years after the crises. Graph 2 provides a visual representation of the exponential increase in the number of questions submitted by MEPs during the hearings. 

Graph 2. ECB, “The evolution of the ECB’s accountability practices during the crisis

Note: The shaded areas represent written questions on supervisory matters

Another proxy utilised by the ECB to assess the public’s interest in the work of the ECB is tracking the number of amendments to the ECB Annual Report tabled during each session. As shown in Graph 3, this is another area in which increased attention to the work of the ECB is clearly visible.

Graph 3. ECB, “The evolution of the ECB’s accountability practices during the crisis

New Year, New Leadership

2019 is and will continue to be a year of major changes in Europe. European citizens have been called to the polls to elect new representatives to the EP in May. Moreover, 2019 also marks the end of Mario Draghi’s eight-year tenure at the ECB and, while many names have been floating around, a successor is yet to be appointed. In short, all top leadership roles in the EU are now up for grabs. In this context of uncertainty regarding the future outlook of the EU leadership, one cannot help but wonder whether the increased attention paid by the public to the ECB will stay. While this is a matter of speculations, it is true that a different political configuration in the EP could lead to a new set of concerns for the newly-elected MEPs – it is impossible to exclude the possibility that monetary policy will disregarded as a top priority. What is more, it is yet to be seen to what extent and in what capacity the ECB will engage with Parliament in the absence of Draghi at the helm of the Bank. As European countries scramble to allocate key leadership positions to their nationals, the ECB could be faced with a drastic change in leadership. Some have called for continuity and have stressed the importance of selecting a candidate with the conciliatory approach exhibited by Draghi during his tenure. On his part, Draghi has reiterated his firm belief in the importance of strong supervision and scrutiny by the EP of the ECB. In fact, during the plenary debate of the EP about the 2017 ECB Annual Report, the President declared that: “The European Parliament in holding the ECB to account gives legitimacy to its independence.” His belief in the necessity for strong oversight by Parliament has been restated time and time again. In a speech delivered at the University of Bologna, he once again drew a clear connection between oversight by Parliament and the perceived legitimacy of the ECB. These statements not only provide an indication of Draghi’s leadership priorities but also shed light on points of interest he might want his successor to uphold in the future. Looking back at his tenure, there are reasons to believe that Mario Draghi will be credited with truly having embraced the “whatever it takes” approach to safeguard the stability of the single currency. On top of this, by endorsing the monitoring function of the EP, he has strengthened the ECB’s reputation as an independent body, operating in the interest of Eurozone citizens. As the elections approach and a successor to Super Mario is selected, the relationship of the ECB and EP will continue to involve and to shape the future of the single currency and, to a large extent, to the European project as a whole. 

I would like to thank Mr. Alessandro Giovannini, an Economist at the ECB, for kindly providing vital information to complete this article. 

Références bibliographiques

Voir aussi
© Caroline Maufroid / Sciences Po
Comment démocratiser l'Europe ? Quelle européanisation des vies politiques nationales ? Quelles implications citoyennes ? Autour de la thématique de l'existence d'une vie politique européenne, échange entre Loïc Azoulai de l'École de Droit , Bruno Cautrès du Cevipof et Olivier Rozenberg du Centre d’études européennes et de politique comparée .
Sculpture of Europa riding the bull at the European parliament - STRASBOURG, FRANCE, APRIL 16, 2013

Éléments de chronologie

Cette chronologie présente les grands jalons de la vie politique européenne (élargissements successifs, référendums nationaux, élections européennes, etc.) et s'articule autour des différentes thèmes abordés dans les articles du dossier "Une vie politique européenne ?".