“The European Central Bank: Europe’s unelected government” by Charis Polycarpou, member of C.C. of AKEL and AKEL’s Economic and Social Research Bureau
Sunday, 24th January 2016, “Haravgi” newspaper
On the occasion of the Hearing[1] held recently in Brussels by the Group of the Left in the European Parliament about the impact of the European Central Bank’s decisions on EU member-state’s economic policy two fundamental questions are again raised:
Who controls the European Central Bank in the taking of its decisions?
What interests are served by the European Central Bank through its decisions?
In trying to answer these questions it is correct to present some key findings:
- The European Central Bank is a quasi-unelected European government, given that is has numerous executive powers over the banking sector and consequently over EU Member States themselves.
- The experience of Cyprus and Greece lead us to the conclusion that in the majority of cases during the current economic crisis, the European Central Bank has acted as a “Mafia”, blackmailing for the imposition of austerity measures and Memoranda, instead of helping Member States to overcome the crisis in their banking sector.
- The crisis in the banking sector, not only at a local but also at a European level, is ongoing. It is continuing even more so since the new structure of the newly formed banking union of the European banks and the creation of the new single European bank supervisory mechanism include a series of rules and obligations for banks which will have a very negative effect on their relationships with local communities.
- The example of the Cooperative sector in Cyprus is among the most characteristic. Its subordination to the new supervisory framework is gradually altering its character as well. And clearly I am not referring to good governance and transparency in the work that is imperative and must be universal. I am referring to the new framework’s impact on the handling of borrowers and how customers are approached. When the principal goal for a bank is to fulfil the strict targets set by the Single Supervisory Mechanism (SSM), then inevitably the human-centred character comes second. This is so because now the dilemma is very clear: either the banks comply or the European Central Bank will impose compliance.
It is therefore logical to say that the European Central Bank does not operate as a European institutional body, but rather it acts much more as the guardian of the major banks in the EU, which, within the framework of the full freedom of capital within the European Union, have a much greater possibility of complying to these rules and undeniably to the detriment of the small credit institutions. As a result we are facing a new cycle of the concentration of capital from the periphery to the centre, where the large banking groups are developing today.
Furthermore, it should also be said that the European Central Bank acts without legitimacy and without any democratic control exercised over it. Control over the ECB is restricted to a question submitted by each member of the European Parliament’s Finance Committee to the Governor of the European Central Bank during the annual session of the Committee on the functioning of the European Central Bank.
The need for democratic control of the public banking sector is therefore timely. The banking sector must serve first and foremost the needs of society and the developmental character of the economy.
[1] The ECB – Europe’s unelected government: title of the Hearing organized by the European United Left/Nordic Green Left in the European Parliament on 14th January 2016 regarding the policies being pursued by the ECB.
