“The Role of the
European Central Bank in the Financial Crash and the
Crisis of the Euro-Zone”
Report based on a WEED Expert Meeting
Franziska Richter
Peter Wahl
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Imprint:
Richter Franziska, Wahl, Peter: The Role of the European Central Bank in the Financial Crash and the Crisis of the Euro-Zone. Report based on a WEED Expert Meeting
Published by: WEED - World Economics, Environment & Development Assoc.
Eldenaer Straße 60
D-10247 Berlin
2011
All rights reserved
This publication has been co-financed by the Ford Foundation.
The views expressed are those of the authors, and cannot be attributed to the
Ford Foundation.
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CONTENT
Page
Summary 3
1. Introduction 4
2. Some basics on central banking 5
3. Historical changes
The most important are:
- its monetarist obsession with consumer price inflation and
- its completely undemocratic, non-transparent and unaccountable status in the institutional arrangement of the EU.
Of course, inflation is an issue to be taken serious, but reducing the role of central banking to the one and only function of inflation targeting reflects a dogmatic point of view, which with the financial crisis has definitively proven to be flawed.
The financial crisis has been transformed into a sovereign debt crisis, which is threatening not only Greece, Portugal and Ireland. The future of the Euro as the common currency of 17 European countries is at stake, and hence the future of the central bank for this currency. The traditional receipts of structural adjustment with painful austerity programs for the ordinary people don’t’ work, as the case of Greece demonstrates. In spite of dramatic reductions in public spending with highly negative consequences for future growth perspectives, the debt burden is increasing. The crisis is far from being over. New and innovative ways out of the crisis have to be found.
This means also, that the ECB cannot continue with business as usual. Substantial changes are required, otherwise the collapse of the Euro-zone will be inevitable.
This report is trying to put the future role of the ECB as part of an overall alternative to the present crisis management on the agenda of