The Geography of the Euro Crisis: The ECB, Its Institutional Form, Functions, and Performance

In their different ways, the European Central Bank (ECB) and the US Fed combine expertise with representation: key members of these institutions along with their staff are appointed on the basis of their expertise and professional qualifications whereas each organisation is conceived, in part, so as to represent the constituent nation-states or regions that make-up their currency zones. In this paper, the tension between expertise and representation apparent in the constitution in each institution is explored with emphasis on the ways in which geography is represented in monetary policy decision-making. The formal representation of nation-states in the ECB, their voting rights, and the significance or otherwise of large Eurozone countries is also considered. Being an analytical assessment of the effectiveness of the ECB compared to the Fed, the effectiveness of each institution is assessed in the light of financial risk and uncertainty and the complex interplay between monetary authorities and fiscal federalism. Implications are drawn as to the process whereby the Euro crisis has been managed, and the ways in which the welfare of peripheral countries have been discounted notwithstanding the possibility of out-voting the major countries of western Europe. The paper closes with brief comments on the prospects for reforming the ECB.