Shock, Horror: ECB Not as “Independent” as it Claims – Report

Transparency International whacks at a central bank.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

The European Central Bank has found itself in the rare position of having to defend itself in the public arena following the release of a scathing report on its perceived lack of political independence. The report, published by anti-corruption watchdog Transparency International, argues that the institution has accrued new power and influence in the wake of the financial crisis but its code of conduct has not kept up with that newfound clout.

It even suggests that the ECB should withdraw from the Eurozone’s Troika of creditors, precisely at a time that calls are rising for the creation of a European Monetary Fund.

“The extraordinary measures taken by the ECB since 2008 have tested the ECB’s mandate (to ensure price stability) to breaking point,” Transparency International EU said. “The ECB’s accountability framework is not appropriate for the far-reaching political decisions taken by the Governing Council.”

The Berlin-based NGO has proposed a range of measures to improve the central bank’s transparency and accountability. They include better management of conflicts of interest, clearer rules on the cooling-off period before former officials accept private-sector jobs; and much higher levels of transparency on the ECB’s meetings with lobbyists. The report also recommends that the central bank should consult the European Parliament and Eurozone finance ministers regarding any crisis measures that go beyond its original low-inflation mandate.

The ECB does not entirely agree. Too much transparency could impinge on its much-cherished political “independence,” it warns. “When it comes to politicians, independence is very much in the eye of the beholder,” Benoît Cœuré, a member of the ECB’s highly influential Governing Council, said in response to the report’s findings. “When they like what we do, we are independent. When they don’t, we are overreaching.”

Alas, the biggest problem with the ECB is not its proximity to European politicians but rather its incestuous relationship with the very institutions it is meant to supervise, as well as monetarily support through its myriad financial welfare programs: the big banks. In 2015, Cœuré himself was caught sharing confidential, privileged information about the ECB’s imminent bond purchases at a meeting of academics, bankers, and hedge funders which was promptly used to front-run the program.

Little has changed since then. Cœuré remains in his post and the ECB is now under investigation by the EU Ombudsman for the close involvement of a number of its high-level officials with the Group of 30, a secretive forum of influential academics, policy makers and senior financial executives representing banks like UBS, Credit Suisse, JP Morgan Chase, Santander and Goldman Sachs.

It’s also come under scrutiny for its purchase of bonds directly from companies behind closed doors as they issued these bonds via “private placements” — a common enough practice for investors but one which raises serious ethical concerns when it’s being done by Europe’s newfound “debt buyer of first resort,” with billions of euros of public funds. There’s also plenty of opportunity for the ECB to inform select hedge funds and certain other market participants of its latest investment decision, so that they can front run the investment.

The problem is not just the ECB’s coziness with the institutions it is supposed to supervise; there’s also the inconvenient fact, much ignored until now, that it is considerably more politically engaged than it often pretends to be.

Case in point: the discreet role the central bank played in the 2011 ouster of former Italian Prime Minister Silvio Berlusconi after he had threatened in private meetings to pull Italy out of the Eurozone. When Italy’s risk premium reached breaking point in the autumn of that year, egged along by the ECB’s uncharacteristic reluctance to intervene in the markets, Berlusconi was forced to resign and was promptly replaced by Mario Monti, a former EU Commissioner and Goldman Sachs advisor who could be counted on to stick with the program.

As its responsibilities have grown, the ECB’s political influence has grown with it. Following the Banking Union of 2014, it became the Eurozone’s sole banking supervisor. In the absence of a genuine European central or federal government with direct fiscal powers, the ECB has become Europe’s most powerful institution.

The Eurozone’s financial system and economy continue to be run, de facto, by the ECB. In the absence of a central government, there’s still no safety net for regions suffering structural decline, like Italy or Greece. As we saw in its standoff with Greece in the summer of 2015, when things get serious, the ECB is not afraid to flex its power, even if that means sparking the early stages of a run on its banks. As Transparency International notes, such actions cannot be divorced from the realm of politics:

In critical situations, technocratic policy issues invariably become political and draw the ECB into political negotiations that are inconsistent with the textbook notion of central-bank or supervisory independence. There are only two remedies: greater democratic control, and thus less independence, or, since that may not be desirable, more transparent decision-making and communication.

That would certainly be better than nothing — and a great deal better than what we have right now. But it won’t be allowed to happen. Central banks the world over are rarely welcoming places for the bright light of public scrutiny, for an obvious reason: if enough people actually knew — and properly understood — what was going on behind their central bank’s thick walls and closed doors, they would probably not tolerate it for much longer. By Don Quijones.

This trend is not your friend. Read…  Italy at the Grim Edge of a Global Problem

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  24 comments for “Shock, Horror: ECB Not as “Independent” as it Claims – Report

  1. bev kennedy says:

    Canada isn’t so pure either re division between government and our big bad banks

  2. Ishkabibble says:

    Absolute power corrupts absolutely.

    Anyone surprised by any of these ECB machinations please raise your hand.


    Didn’t think so.

    Now, anyone who knows whom to contact to make a complaint and get this intolerable situation fixed, please raise your hand.


    Didn’t think so.

    What are we, the people going to do about this intolerable situation? Just exactly WHAT do we want to replace the intolerable situation we’ve got? (And DO NOT tell me that all we’ve got to do is adjust an interest rate and everything will be just fine!!)

    • Dan Romig says:

      This citizen of the USA wants ‘to replace the intolerable situation we’ve got’ regarding the Federal Reserve’s private banking cartel’s actions, is to return the power to issue currency to the Department of the Treasury. In 1836, under President Jackson, the 20 year charter for the Rothschild controlled Second Bank of the United States expired, and, as many of the Founders of my nation desired, issuance of currency was controlled by Treasury.

      What are the citizens of nations in the European Union who live were they’ve relinquished the power of keeping a sovereign currency going to do about this intolerable situation? Answer: not a damn thing for them to do but to vote for political parties who advocate exiting the Euro. On 7 May of this year the French get to cast their votes. Vive la France!

      • Dan Romig says:

        An interesting read was recently published on ZeroHedge by Konstantin Richter: ‘The Dirty Dozen – 12 ‘Things’ That Ruined The EU’

      • TJ Martin says:

        ” This citizen of the USA wants ‘to replace the intolerable situation we’ve got’ regarding the Federal Reserve’s private banking cartel’s actions, is to return the power to issue currency to the Department of the Treasury ”

        Problem is no-one especially the ‘ so called ‘ president and his sidekicks could care less what you , I or anybody else ‘ wants ‘

        As far as vive le France .. as long as that means the French coming to their senses as the Dutch just did .. throwing Le Pen under the bus where she belongs .. then mais oui and vive le France indeed . If not … then ‘ a bas le racisme neo et le pretexte du populism ‘

        • Dan Romig says:

          That is true TJ; TPTB do not care about you, I or anyone else one bit.

          The question for citizens of Europe is how do they feel, and what can they do about having their fiscal and economic well-being decided by bureaucrats who are unelected and unaccountable in Brussels? I reckon the members of the ECB’s Governing Council should stand before le manneken pis with their mouths open, eh?

    • TJ Martin says:

      ” What are we, the people going to do about this intolerable situation? ”

      A little advice from former Wall Street Baron , Investment banker and Capitalist Supremo Morris Cohon to his son Peter * in 1972 [ censored for profanity only ] ;

      “ Capitalism is dying boy . Its dying of its own internal contradictions . You think the revolution is gonna take five years . Its gonna take fifty . So keep your head down . And hang in there for the long haul because I’ll tell you something , The sons of ( censored ) running things don’t give a damn about their children or their grandchildren and they certainly don’t give a ( censored ) about you . They’ve paid their dues and they want to get out with theirs . They’re gonna sell off everything thats not nailed down to the highest bidder . Don’t get crushed when it topples down . Take care of yourself and your family . If you can make a difference do it but there are huge forces at work here and the have to play themselves out according to their own designs not yours . Watch yourself . “

      Thats what !

      * Better known as Peter Coyote

  3. John Doyle says:

    Never heard of this “Group of 30” . Sounds like the stuff we hear coming out of the USA; The “Deep State”, The “Council for foreign Relations”, “Bilderberg Group”and other secretive organisations.

    The ECB is just part of the whole mess that the EU has become. It cannot last without a wholesale revamping of its organising authorities and ridding itself of Neo-liberal ideology.

    • Wolf Richter says:

      Why don’t you just Google it:

      • Ishkabibble says:

        Thanks for the link.

        Noam Chomsky nails the underpinning concept of such people and such groups (along with the origin of the term “bewildered herd”) here:

        Groups like this are an important part of the Elite who decide how we will live or, after deciding that war would be the most appropriate thing to have at the moment, die.

        • John Doyle says:

          Thanks, Wolf. for the link. So it’s just another group representing the parasite class.
          Ishkabibble, no link to Chomsky sorry. But I’ve listened to him many, many times. Funny thing about America. You have all the criminal dysfunction etc, but you also have the antidote and it’s all transparent, visible to all. The Deep state stuff is maybe secret, but it’s critics are fellow Americans.
          We outsiders don’t have to actually live there to get a handle on what’s up.

    • Frederick says:

      Group of 30 psychopaths and parasites That ” group of 30″ ? Sounds an awful lot like the ” big club” Carlin said we ain’t in

    • Peter Forsyth says:

      It is Neo liberalism itself so do you suggest shutting it down?

      • John Doyle says:

        Excellent idea. But it’s not all neo-liberal. The idea of corporatising the world economy goes back to Cecil Rhodes and his cohort long preceding neo-liberalism. We are reversing that now due to crashing the TTIP and TPP etc. There are a host of other treaties or proposals around as well. NAFTA hasn’t worked out so it should be on the chopping block. You can’t have free trade with protected and subsidised industries.

        • TJ Martin says:

          … and what major industry today isn’t subsidized in one form or another across the globe ? Go ahead … name just one .

          And ‘ free ‘ trade ? A pleasant little myth on the best of days . FYI ; NAFTA isn’t one tenth the disaster Captain Chaos and his swamp rat cohorts claim it to be . Like the ACA its in need of revising , tweaking and adjusting to meet the current needs and realities .

        • Wolf Richter says:

          In this comment section, you need to use “Trump” when talking about Trump. This goes for all Presidents of the US. I no longer tolerate name-calling on Presidents. Thank you for your understanding.

        • John Doyle says:

          That’s right TJ. Can you name one either?
          I agree “Free trade” is a myth, a contradiction in fact. It’s all managed.
          As Steve Keen said; A free trade agreement only needs one sentence. The TPP has 6000 pages.

        • Maximus Minimus says:

          And the reality is that according to NAFTA, Mexico was to be the cheap supplier, and it lost out to China. An 800-pound gorilla which you cannot push around so easily.

        • John Doyle says:

          Mexico lost out over US subsidised corn flooding its markets. This put 8 million out of work, and a mass migration, now stopped, to the US. I bet those in the know understood all this well before the MSM got hold of any news. Not maybe deliberate, but definitely not caring.

  4. jerry says:

    The EU is as independent as a breast fed baby

  5. d says:

    Me thinks these important matters will get buried in the next years of brexit Bruhar.

    The Brexit circus should push greece and italy of the major attention pedestal for some time. Allowing both club med nations to get away with Genocide of their taxpayers and possibly some German ones as well.

    The ECB has never been know to let any crisis go to waste..

  6. Maximus Minimus says:

    Truly shocking. The job on ECB is really only a testing ground for the really big thing: the international deep state, the Bilderberg Group, like the honorable predecessor.

  7. randombypasser says:

    Mr. Cœuré and ECB,
    “Government of the people, by the people, for the people.”

    Did You forget something? You can win a fight, a lots of them, but You can’t win the war without recognizing the major point of the Gettysburg speech. You can try, You’re allowed to but not recommended, as You will fail, You’re destined to fail. As long as people is what You try govern without recognizing that the people are You, also, the people is the power behind You and everything is tied to the people.

    Do You want new global version of the French Revolution, the Arab Spring, the American Civil War? Why do You bang Your heads against the inevitable wall when the people, as sheepish as they may be, are still in power? Wait for time when machines are in power and You’ll have Your chance, if ever.

  8. Boo Randy says:

    The “former” Goldmanites at the Fed and central banks are the monkeys; GS is the organ grinder.

    Stop the oligarchy’s financial warfare against the 99% – End the Fed!

Comments are closed.