European Parliament Takes Historic Step with Resolution on ECB
Quick Summary
On Thursday (16 February), the European Parliament adopted a resolution calling on the European Central Bank to explain how its monetary policy affects society. Lead negotiator Rasmus Andresen, Green MEP, affirmed that interest rates only affect domestic spending and will not resolve issues such as imported goods’ prices. The resolution also urges the ECB to follow its secondary mandate of supporting government policies such as fighting climate change and alleviating inequality. Andresen called on ECB head Christine Lagarde to dedicate a specific chapter in the annual report to this topic, stressing that it is legally-binding for the central bank.
Full Story – MEPs adopt ‘historic’ resolution on ECB
On Thursday (16 February), MEPs adopted their annual recommendations to the European Central Bank, calling on it to explain how its monetary policies are affecting society.
“I welcome that we have been able to win a majority in favor of greater caution with regard to the current aggressive rate hikes,” said Rasmus Andresen, Green MEP and lead negotiator of the file.
High inflation is a “concern”, said Andresen, but interest rates only affect domestic spending. It does not directly affect the price of imported goods like gas, the dominant driver of inflation over the past year.
Moreover, every monetary choice — even efforts to reduce the inflation rate — inevitably benefits some at the expense of others. This makes monetary policy political. Yet due to fierce central bank independence, there is no political debate. One of the concerns raised by Andresen on behalf of the parliament is that the bank has “ignored” explaining how its policies affect the economic objectives of governments such as preventing climate change or policies aimed at employment and alleviating inequality.
The ECB is primarily mandated to manage price stability, but under its lesser-known but equally important second mandate, it is also obligated to support government policies. “Let me state this in no uncertain terms: the ECB’s secondary mandate is legally-binding,” Andresen told Lagarde on Thursday and called on her to devote a specific chapter in the bank’s annual report explaining…
