ECB must face closer democratic scrutiny: Transparency

Democratic oversight and accountability must be overhauled at the European Central Bank, which has taken on an increasingly political role since the financial crisis, NGO Transparency International (TI) charged Tuesday.

"The ECB emerged as the decisive actor in the euro crisis, with an extraordinary degree of latitude," the report argues, but "faces a significant decline in public trust" even as politicians have loaded more responsibility onto it, such as bank supervision.

TI grants that the Frankfurt institution has notched up numerous achievements in the years since the crisis, becoming banks' lender of last resort, shutting down financial market speculation against member states, and heading off risks of deflation.

But "each of these achievements has its flip side," the report finds, with the ECB influencing policy in crisis-hit countries like Greece, Spain, Italy and Ireland by making monetary support conditional on economic reforms.

And the bank's "quantitative easing" programme, under which it buys tens of billions of euros in government and corporate bonds per month in a bid to drive up inflation, is "a monetary policy experiment, the distributive, financial and macroeconomic consequences of which vastly exceed conventional monetary policy," TI says.

The NGO calls for the central bank to be made more accountable by requiring political approval from Eurogroup finance ministers and the European Parliament for such controversial measures -- and for its board members to be confirmed by Brussels lawmakers.

Meanwhile, the ECB should be more open about meetings with lobbyists, publish more of its documents and data, update its whistleblowing policy, and more closely probe jobs taken by high-ranking former officials once they leave office, the report finds.

In the long run, TI argues for "fundamental reform of eurozone governance in general and of ECB accountability arrangements in particular".

"It is the duty of European institutions to further strengthen their legitimacy both by reinforcing their democratic accountability and by showing that they meet the objectives they've been entrusted with," ECB president Mario Draghi responded in a statement.

But the central bank also noted that "some of the recommendations in the TI report fall outside the ECB's mandate or are not foreseen in the Treaty" of Maastricht, which created it.

Source: AFP