The European Central Bank

Created in 1998 on the model of the German Bundesbank and installed in Frankfurt-am-Main in Germany, the European Central Bank (ECB) is the European institution responsible for applying monetary policy in the eurozone [1] . The Treaty on European Union, commonly known as the Maastricht treaty (1992) created the ECB and defined its missions (art. 105):

• to define and implement the monetary policy of the Community;
• to conduct foreign exchange operations;
• to hold and manage the official foreign reserves of the Member States;
• to promote the smooth operation on payment systems.

Its principal mission along with that of the national central banks of the eurozone is to maintain price stability [2] around an annual inflation level of 2%.

The eurozone’s national central banks’ monetary competences have been transferred to the ECB. Proclaimed independent, the ECB is governed by bankers in pure banking logic. If European populations demanded other democratic monetary choices, the ECB can quite simply ignore them and continue with its dogmatisms favourable to big business and the wealthiest individuals. This so called independence is no more than a front leading us to believe that the ECB’s choices may not be questioned. In fact, it is the big banks and financial institutions, along with the European leaders that impose neoliberal politics on their peoples that have the ear of the ECB. Although labour market policies are not the competence of the ECB, it intervenes regularly to criticise labour rights, and promote the interests of big business.

It must be mentioned that the ECB does not directly buy from the states the public bonds that they emit. The founders of the ECB chose to give the private sector the exclusive right to finance public borrowing. Since 2010 the ECB buys public bonds on the secondary market from the bankers who bought them on the primary market and have difficulties to unload those it no longer wants. This is another way the ECB finances the banks. If the ECB would buy public bonds on the primary market it could directly finance the states. The ECB only bolsters in this way the bonds having been issued by the countries that submit themselves to its brutal austerity policies.

The Lisbon treaty and the ECB statutes prohibit the ECB, as indeed the national central banks, from lending directly to the states. They lend to the private banking sector who in their turn lend to the states at higher interest rates. Article 101 of the Maastricht treaty, reproduced as article 123 of the Lisbon treaty states: “Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.” This is one of the reasons why this treaty must be abrogated in favour of a truly democratic European Union.