Who is shaping Europe’s economic future?

Brussels has been buffeted by more than one type of unseasonal storm this summer. The volatility on the financial markets meant that policy makers were racing back from Greek islands and Tuscan villas to issue soothing noises about the state of Europe’s banks and the ability of EU countries to repay their debts.  The European Central Bank (ECB) has been in the eye of the storm, filling the gap left by political indecision. Since last March it has spent more than 115Bn on Spanish and Italian government bonds in an attempt to shore up their economies in the face of growing market scepticism. In return for these extreme measures, there have been accusations that the ECB has been dictating fiscal policy to these governments, demanding strict and rapid austerity measures to improve market confidence.

This is all a long way from the ECB’s primary mandate when it was established over a decade ago, which was to ensure price stability in the Eurozone. ECB officials may argue that desperate times call for desperate measures but it is troubling that an agency that is unaccountable to European voters is playing such a large role in forging economic policy. It might be less worrying if the agency was more transparent in its decision making, but unlike central banks in Sweden and the UK, for example, the ECB does not publish voting records or even the minutes of its Governing Council meetings.

In a bid to improve this record, ECB President Jean-Claude Trichet appeared at an extraordinary meeting of the European Parliament in Brussels last Monday for a public debate on the recent volatility. As TI EU took note of Trichet’s characteristically evasive answers, we observed that it was a good PR move. It gave a patina of accountability to the ECB’s recent interventions, and he and MEPs have a common enemy in the national governments who have largely ignored their respective pleas in their handling of the crisis. Most MEPs heaped praise on Trichet for the leadership role that had been thrust upon him.

The vacillation of democratic leaders in response to the possible break-up of the Eurozone should not blind us to the fact that unaccountable and untransparent institutions are silently shaping the future of millions of European citizens. We have written here before about the new European supervisory architecture that will assume growing importance in the post-crisis landscape. This was again demonstrated by the role of the European Securities Market Agency (ESMA) in coordinating the European-wide ban on short selling in August. Meanwhile the European Banking Agency (EBA) is  proposing to directly bail out ailing banks with EU tax-payers money. It is vital that these institutions develop the highest standards of transparent governance to match their far-reaching powers if they are to enjoy the legitimacy they require.

Carl Dolan, Transparency International Liaison Office to the EU