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The Politicisation of the European Central Bank and the Bundestag

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The Politicisation of the European Central Bank and the Bundestag View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Open Repository and Bibliography - Luxembourg Politics and Governance (ISSN: 2183–2463) 2019, Volume 7, Issue 3, Pages 291–302 DOI: 10.17645/pag.v7i3.2214 Article The Politicisation of the European Central Bank and the Bundestag Anna-Lena Högenauer Institute of Political Science, University of Luxembourg, 4366 Esch-sur-Alzette, Luxembourg; E-mail: [email protected] Submitted: 6 May 2019 | Accepted: 25 June 2019 | Published: 27 September 2019 Abstract The European Central Bank (ECB) became one of the key actors during the Eurozone crisis. However, its prominent role was not without controversy. On one hand, the Eurozone was stabilised, no member state defaulted, and no state had to leave the Euro. On the other hand, the ECB had to stretch its mandate, expand its policy remit, and adopt so-called ‘unconventional’ monetary policies. These attempts to depoliticise political challenges through a technocratic approach reduced the opportunities for democratic contestation, but they also bred frustration that led to politicisation. This article studies to what extent this politicisation affected the perception of the ECB in national parliaments. For this purpose, it studies the extent to which ECB policy has become politicised in the German Bundestag through an analysis of plenary debates from 2005 to 2018. The Bundestag represents an unlikely case for politicisation despite wide-spread criticism of the ECB in the media, as Germany was traditionally attached to creating a highly independent ECB, until recently had no major Eurosceptic right-wing parties, and parliamentary scrutiny of the national central bank is low. However, by studying the salience of ECB policies, the polarisation of opinion in the parliament, as well as the range of actors participating in the debates, this article finds that the ECB’s policies have become politicised and the subject of scrutiny and dissatisfaction. Keywords banking union; Bundestag; European Central Bank; Eurozone crisis; Germany; national parliaments; plenary debates; politicisation Issue This article is part of the issue “Parliamentary Impact on “Politicised” Policies”, edited by Christine Neuhold (Maastricht University, The Netherlands) and Guri Rosén (University of Oslo, Norway). © 2019 by the author; licensee Cogitatio (Lisbon, Portugal). This article is licensed under a Creative Commons Attribu- tion 4.0 International License (CC BY). 1. Introduction the opportunities for regular democratic contestation, the EU may be fuelling frustration and thus politicisation As the EU has been shaken by multiple crises in the last and contestation. In addition, with the creation of the 15 years, more and more aspects of it have become politi- European banking union, the ECB gained new powers in cised. The European Central Bank (ECB) was one insti- recent years and now supervises the largest banks under tution whose policies proved controversial despite the the Single Supervisory Mechanism. These powers have technocratic nature of central banking. The ECB filled a now become more salient, as weak banking supervision vacuum when national governments failed to agree on is seen as one of the factors contributing to the financial a way to tackle high levels of sovereign debt. In the pro- crisis of 2008. cess, it became the ‘key actor in the EU’s economic gov- The problem with technocratic governance is that it ernance’ (Fromage & Ibrido, 2018, p. 295). The task of has the potential to pit non-majoritarian actors that are keeping the Euro stable required it to expand its poli- meant to be independent and apolitical (e.g., the ECB) cies. As a result, ‘its competences stretched to their lim- against political actors (e.g., parliaments) that feel that its’ (Fromage & Ibrido, p. 296). However, in this em- issues that ought to be resolved politically are removed powerment, Scicluna and Auer (2019) see a wider prob- from their grasp by the former. Studies into the scrutiny lem, namely the tendency to resolve political challenges of EU affairs in national parliaments since the crisis have through a technocratic approach. However, by reducing shown that EU governance, in general, is becoming more Politics and Governance, 2019, Volume 7, Issue 3, Pages 291–302 291 salient and controversial among parliamentarians (Auel also expect parliamentary scrutiny of the ECB to be low in & Raunio, 2014; Closa & Maatsch, 2014; Wendler, 2014). Germany, as the ECB was created as a highly independent In EU policy-making, there is thus a certain fight emerg- central bank on the insistence of Germany and based on ing for competencies between non-majoritarian and po- the model of the Bundesbank. In addition, Wonka (2016) litical actors, making it particularly interesting to inves- argues that Germany is an unlikely case for politicisation tigate the extent to which parliaments have tried to ex- of EU affairs in general because the public and elites are tend their scrutiny of the ECB and whether this has led broadly pro-European and anti-European right-wing par- to politicisation. ties were not yet represented in the Bundestag during The question of whether ECB policy has become the early crisis years. Thus, if the Bundestag were to in- politicised in the German parliament, the Bundestag, is creasingly debate ECB policy, it would be a very strong particularly important in this context. The German case indication of the politicisation of a policy area that—in is important due to the political and economic weight the German case—was traditionally barely scrutinized. of the country in the Eurozone. Also, the German par- This article aims to analyse through the case of liament is not a likely case for politicisation. Of course, the German Bundestag whether ECB policy has be- the ECB’s Eurozone crisis policies did not resonate well come politicized in the course of the Eurozone cri- with the German public and media, providing an in- sis. Politicisation will be analysed through three dimen- centive to scrutinise the ECB. There were, in partic- sions, based on the framework developed by De Wilde, ular, wide-spread fears about the negative impact of Leupold and Schmidtke (2016): the salience of the pol- low interest rates on savers and the fear that TARGET2 icy, the polarisation it triggers, and the range of actors (Trans-European Automated Real-time Gross Settlement involved in the debate. Express Transfer System) imbalances, the bail-out pro- grammes, the ECB’s quantitative easing1 measures, and 2. A Brief Overview over the ECB’s Policies since the the banking union would create a ‘transfer union’. In ad- Financial Crisis dition, the Bundestag has fairly strong scrutiny powers in EU affairs in general (Auel, Rozenberg, & Tacea, 2014), When the financial crisis first erupted in 2007/2008, and particularly with regard to specific Eurozone crisis the ECB’s response was initially muted. Unlike the US policies. The German parliament, the Bundestag, has ex- Federal Reserve, which lowered interest rates to stimu- tensive oversight and veto powers over the European late the economy, the ECB initially maintained and even Financial Stability Fund, for example (Höing, 2013). increased the interest rate to stave off inflation. It was Moschella also emphasizes that the Bundestag is the only in late 2009 that the ECB also rapidly lowered the only Eurozone parliament that has both ex-ante and ex- interest rate when faced with the threat of an economic post scrutiny powers over lending programmes that af- recession, from 3.25 per cent in October 2008 to 0.25 fect the German budget (Moschella, 2017). Finally, Auel per cent in April 2009 (ECB, n.d.). The monetary policy of and Höing (2014) show that the Bundestag is one of the the ECB then became increasingly expansionary as the more active debaters of crisis policies. Eurozone crisis took hold. On the other hand, while the Bundestag has consid- Over time, the ECB deployed both ‘conventional’ and erable scrutiny powers over EU affairs in general and cri- ‘unconventional’ policies to stabilize the Eurozone. As sis policies in particular, neither the European nor the part of its conventional policies, the ECB continued its German legal framework provide it with formal scrutiny low interest rate policy. In 2014, it decided to impose a powers over the ECB. It can, of course, debate ECB policy, negative interest rate on deposits at the ECB: This means but it has no formal means of influence nor can it sum- that banks that ‘parked’ liquidity at the ECB no longer re- mon ECB representatives. As an extremely independent ceived interest, but had to pay interest to the ECB. The central bank, the ECB is protected against undue political goal was to prevent the credit market from drying up influence, which also means that formal parliamentary by encouraging banks to invest in the economy instead. powers of oversight are extremely weak—even with re- In addition, the ECB lowered the base interest rate to gard to the European Parliament (EP). Furthermore, the zero per cent in 2016. More controversially, it moved to- German parliament has no tradition of actively scrutin- wards fixed-rate full allotment in 2008, i.e., it agreed to ising central banks. The Bundesbank was already inde- provide unlimited credit to banks at a fixed interest rate pendent before the Euro was created, and recent stud- (Flachmeyer & Paul, 2018). ies show that the Bundestag is barely scrutinizing the In addition, the ECB used so-called ‘unconventional’ Bundesbank due to how strictly it respects its indepen- policies that were not part of its standard approach dence (Högenauer & Howarth, 2018). Högenauer and to monetary policy. One of these was the provision of Howarth (2018) show that the Bundesbank was only emergency liquidity assistance (ELA) that allowed cen- mentioned in 12 debates in a 3-year period, and then tral banks to provide solvent banks with liquidity in re- only in 1–2 speeches per debate.
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