The European Central Bank

Chapter 6 discusses the ECB’s pathway to legitimacy, as it moved from following “one size fits none” rules to doing “whatever it takes” in monetary policy. The chapter begins with the ECB’s sources of power, based in its autonomy as a central bank and its leaders’ charismatic qualities, and with its grounds for throughput legitimacy. These largely depend upon ECB accountability to technical forums, since it has minimal formal accountability to political forums (only to the European Parliament), although it has informally increased its accountability through dialogue with political leaders. The chapter follows with a discussion of the Janus-faced public perceptions of the ECB’s governance of the euro during the crisis, split between views of the ECB as hero saving the euro or as ogre imposing austerity and structural reform while railroading countries into programs. As hero, the chapter details ECB President Mario Draghi’s increasingly flexible reinterpretation of his mandate, hid “in plain view” as he transitioned from his predecessor’s “credibility” discourse to a “stability” discourse and from denials of the ECB being a lender of last resort (LOLR) to coming very close to one through quantitative easing (QE). As ogre, the chapter delineates the ways in which ECB President Jean-Claude Trichet coerced vulnerable countries into harsh conditionality programs and Draghi made his active interventions a quid pro quo for austerity and structural reform, as well as the ECB’s initial inefficacy; the continuing orthodoxy of its ideas, especially in contrast to the IMF; and its role in the Troika.