By Clément Fontan
On 16 March 2015, Mario Draghi, the ECB chairman, delivered a speech at the Süddeutsche Zeitung Finance Day, an event organized by the well-known German newspaper. Eurozone economic governance reforms were the topic of the day; a theme that has been addressed by the ECB since its creation in 1999. The structure and the content of the proposed reforms were not so much of a surprise either: the crisis “should be used as a window of opportunity” to reach economic convergence “through structural reforms”. To do so, new supranational institutions should be created so they can use “constrained discretion” to “bypass vested interests” and implement these reforms; this process would need to “strengthen channels of democratic participation” in Europe beforehand.
Amongst the central bankers’ community, ECB agents are the only ones to specify in such details how national economies should be reformed. Central banks’ independence from political power implies that they should refrain to engage into political debate; no American or English central banker would publicly state how their respective political systems should be reformed.
The structural reforms proposed by Mario Draghi are ideologically loaded and the creation of new institutions might worsen the democratic troubles in Europe rather than solve them. Indeed, the OECD coined the concept in 1994 in order to flexibilize goods and labour market. Since then, the OECD itself stated that these reforms should be revised since they weakened significantly the least well-off in society. Yet, despite the worst economic crisis since 1929, the ECB has been repeating at least once a month the need to implement them for more than 15 years. If your doctor would still prescribe you the same drugs for different diseases even though you have been taking them for years, would you call it good medicine or pure dogma?
The structural reforms proposed by Mario Draghi are ideologically loaded and the creation of new institutions might worsen the democratic troubles in Europe rather than solve them.
In fact, structural reforms have not been fully implemented since they trigger acute social tensions and political sanctions. Creating supranational institutions to bypass the citizens’ resistances would undermine the European integration project rather than strengthen it; the ECB’s actions proved it very well during the eurozone crisis. Irish citizens have singled out the ECB’s responsibility when it forced the Irish government in November 2010 to ask for a bail-out by threatening to cut the financial assistance to their banking system. Since then, the former EU poster-child has been crippled by a tremendous rise of skilled labour leaving the country and support to EU integration has been falling.
The ECB has also been conditioning its bond buying in Italy in August 2011; a leaked letter revealed the measures which should be implemented in a very precise manner by the government. Since it failed to do so, the ECB stopped buying Italian bonds in order to force the resignation of Silvio Berlusconi in November 2011. Later on, he was replaced by the unelected former European commissioner Mario Monti. Monti’s heavy defeat in the following elections was part of a strong reaction against EU policies as the M5S, an anti-establishment movement, emerged as the main winner.
Finally, the ECB has been part of the Troïka expert groups, an ex-nihilo institutional creation without any legal basis, which have been exerting unprecedented pressures on eurozone countries to implement structural reforms in exchange of financial assistance. The Greek case is the most striking one since the cut of public health expenses to 6% of the GDP was correlated to a sharp increase of the HIV infections, a comeback of the malaria and a steep rise of infancy mortality. In the meantime, there has been no notable improvement in the fight against corruption and fiscal evasion, by far the most important Greek problems. The growing popular resentment against the Troïka led to an electoral victory of Syriza, a radical opponent of EU policies. Strikingly, in 2014, both the European Parliament and a general advocate of the European Court of Justice have underlined that the preeminent role played by the ECB in the Troïka trigger legal and democratic problems; thus it should abstain from any further participation.
To conclude, the ECB and other EU authorities have already been exploiting the crisis as a window of opportunity to implement structural reforms in a coercive manner for more than four years. The results have been worrying, to say the least, from an economic, social and political perspective. At a time when far right wing parties are on the rise all over Europe, the ECB should not delve further in its technocratic dream.
Clément Fontan is currently a post-doctoral fellow at the Centre for Research in Ethics, University of Montreal in Canada. He received his PhD from the University of Grenoble in 2012 and afterwards taught at the University of Lille, France. He specializes in the role of central banks in politics, with an emphasis on the influence of the ECB in the European integration process.