The European Central Bank Between the Financial Crisis and Populisms
This chapter illustrates the need to revisit the European Central Bank’s (ECB) monetary policy and explain how the central bank managed a crisis that began as a financial shock in 2008 but ended up being of a much more systemic nature for the entire Europ
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The European Central Bank Between the Financial Crisis and Populisms
1.1 Introduction This book dissects a decade of financial, economic, and institutional developments in Europe, focusing on the principal supranational institution which found itself tasked with governing the fallout from both the economic and political consequences of the financial and sovereign debt crises: the European Central Bank (ECB). In light of the handover from outgoing ECB president Mario Draghi to his successor Christine Lagarde on 1 November 2019, the book studies, from both a historical and a forward-looking perspective, the events which unfolded from 2008–2009 up until today. The ECB—by now responsible for a euro area of 19 member states—has always faced pertinent challenges owing to the substantial economic and political heterogeneity inside the Economic and Monetary Union (EMU)—an issue highlighted well before the introduction of the single currency (Krugman 1993; Bayoumi and Eichengreen 1993; Klein 1998; Dornbusch et al. 1998; Kontopoulos and Perotti 1999) and not least after the failure of the European Monetary System (Salvatore 1997; De Grauwe and Ji 2015). In particular, the book zooms into the remarkable events of the last ten years, by analysing the implications of the European “double-dip” recession, and how European monetary policy reacted to several economic, financial, and ultimately political challenges. Amid a concert of different institutional reactions to the crisis—by the European Commission, the © The Author(s) 2020 C. Macchiarelli et al., The European Central Bank between the Financial Crisis and Populisms, https://doi.org/10.1007/978-3-030-44348-1_1
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Eurogroup and European Council, the European Stability Mechanism (ESM) and the International Monetary Fund (IMF)—and growing pressures from financial markets’ speculation, the ECB distinctively stepped in both to stabilise the wider euro area economy and to avoid an EMU meltdown. While the subject has been recently discussed, amongst others, by Mody (2018), Mody and Nedeljkovic (2018), Rogers et al. (2014), and Rostagno et al. (2019), we take a novel angle. Our approach highlights the different tensions that the supranational ECB found itself subject to, as well as their broader ramifications, not only in terms of monetary policy- making but also with regard to questions of democratic legitimacy and public reception. In the words of the—then—in-coming president, Christine Lagarde, on 4 September 2019, “[t]he ECB needs to be understood by the markets that transmit its policy, but it also needs to be understood by the people whom it ultimately serves.” In this sense, the book aims at shedding light on the underlying reasons for growing criticism against the European Central Bank as well as recent populist reactions to, and against, it. After setting out the general motivation for the book (Sect. 1.2), the Greek sovereign debt crisis and its spillover to the rest of the euro area (Sect. 1.2.1) are briefly reconstructed—culminating in
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