The ECB: Accountability Is No Longer Enough

ECON Committee – Monetary Dialogue with Christine LAGARDE, President of the European Central Bank

In Warsaw, the possible referral of the central bank’s governor to the State Tribunal has revived the debate on independence. The case concerns one man’s conduct. But it does not settle a separate question: who can reopen a central bank’s objectives when it acts lawfully?

A Trial Is Not a Doctrine

On October 9, a parliamentary committee recommended that Adam Glapiński be brought before the State Tribunal for indirectly financing the deficit and for asset purchases made without the required authorizations. The Sejm has yet to vote. The governor had already made headlines in September 2023, when rates were cut by three-quarters of a percentage point six weeks before the parliamentary elections, while inflation was above 10%. The cut fueled suspicions of partisanship. Under the rule of law, it must be possible both to protect a governor against unlawful removal and to examine his conduct. But that does not tell us how a democracy debates lawful choices and the sacrifices they impose.

Who Decides the Sacrifice?

In his defense, Glapiński points to the debt purchases of the Fed, the ECB and the Bank of England. The comparison has its limits: Article 123 TFEU prohibits the direct financing of governments; purchases on the secondary market remain possible, provided they do not circumvent that prohibition. That is precisely what the committee accuses him of. Yet his argument highlights the essential point: central banks weigh on the cost of borrowing and on the value of securities.

In Frankfurt, the TPI illustrates this power. Created in July 2022 to protect monetary policy transmission, it allows purchases on the secondary market, with no limit set in advance, when market tensions are judged unwarranted and disorderly. The criteria are public. The decision, however, rests with the Governing Council, without a parliamentary vote.

For France, the line between an unwarranted crisis of confidence and a penalty for its own weaknesses is no longer theoretical. On October 22, the yield on France’s ten-year government bond (OAT) climbed to 5.14%, its highest level since 2002, while the spread over the German Bund widened to around 170 basis points, levels not seen since the sovereign debt crisis. Frankfurt’s judgment can then weigh on financing conditions and on fiscal room for maneuver. Legally compliant does not mean politically neutral.

This power is also exercised in ordinary times. From July 2022 to September 2023, the ECB raised its rates by 4.5 percentage points, the fastest tightening in its history. In France, the average rate on new mortgages rose from 1.06% at the end of 2021 to 4.04% at the end of 2023. Inflation, too, imposes losses, unevenly distributed. Between the cost of credit and the cost of inflation, the pace of tightening decides who pays. Yet the mandate sets the objective; it does not dictate each step.

The London Lesson, and Its Limits

In the United Kingdom, the Chancellor sets the inflation target every year; the Bank of England has chosen the means since 1997. Elected officials define the ends; central bankers answer for the means.

This model does not transfer mechanically. The Bank of England faces a single Treasury. The ECB conducts a single monetary policy alongside twenty-one national fiscal policies. In a union of several states, subjecting the target to a political decision would, among other things, raise fears that a coalition might favor easing debt burdens at the expense of monetary stability. This asymmetry explains why the target has remained in Frankfurt’s hands. But the British example shows that instrument independence does not require the central bank to set the target itself.

Making the Delegation Contestable

The ECB is accountable to the European Parliament and remains subject to the EU courts. Hearings make it possible to demand explanations; they confer no power to change the numerical target, currently 2% over the medium term, which the Bank sets for itself.

At the same time, the treaty requires the ECB to support, without prejudice to price stability, the general economic policies of the Union. This obligation justifies discussing its strategy, including the target and the horizon for returning to it, in light of its economic and social consequences.

A 2023 exchange of letters already organizes Parliament’s annual resolutions on the ECB’s policies and the ECB’s detailed replies, published on its website, as well as hearings and written answers. This arrangement, though, comes after the fact. Following its 2025 assessment, the ECB plans to review its strategy again in 2030. That timetable should also become the timetable for a European political deliberation, held before the Bank settles its choices.

Without treaty change, the existing arrangements between Parliament and the ECB could be extended: before each strategy review, a public debate would bring together members of the European Parliament, representatives of the Eurogroup and the Bank. Parliament would express a reasoned preference. In presenting its strategy, the ECB would set out the proposals it has adopted and its reasons for rejecting the others. This exercise would not set interest rates. It would create an organized right of challenge and reply.

Handing elected officials the power to set the target would require treaty change; organizing the debate better requires no such transfer. That leaves the risk of volatility: a debate in which some called for a 3% target could create a risk premium if markets anticipated a loosening. This predictable framework, insulated from market emergencies, would reduce that risk without eliminating it.

To Delegate Is Not to Abdicate

The risk of a central bank subordinated to political power is real: its autonomy protects the currency from the pressures of the electoral cycle. That autonomy must not, for all that, place its strategic choices beyond organized debate. A democracy delegates the management of its currency. It does not abdicate the right to contest its ends.