The European Central Bank The New European Leviathan? David Howarth and Peter Loedel The European Central Bank 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page i Also by David Howarth THE FRENCH ROAD TO EUROPEAN MONETARY UNION CONTEMPORARY FRANCE: an Introduction to French Politics (with Georgios Varouxakis) Also by Peter Loedel DEUTSCHE MARK POLITICS: Germany in the European Monetary System THE PROMISE AND REALITY OF EUROPEAN SECURITY COOPERATION (with Mary M. McKenzie) 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page ii The European Central Bank The New European Leviathan? David Howarth Lecturer in European Politics Queen Mary College University of London Peter Loedel Associate Professor and Chair Department of Political Science West Chester University 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page iii © David Howarth and Peter Loedel 2003 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan ® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–92493–2 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Howarth, David J., 1967– The European Central Bank: the new European leviathan?/David Howarth, Peter Loedel. p. cm. Includes bibliographical references and index. ISBN 0–333–92493–2 (cloth) 1. European Central Bank. 2. Banks and banking, Central–European Union countries. 3. Monetary policy–European Union countries. I. Title: New European leviathan?. II. Loedel, Peter H., 1965– III. Title. HG2976 .H697 2003 332.1´1´094–dc21 2002042452 10987654321 12 11 10 09 08 07 06 05 04 03 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page iv To Gilly, my lovely wife To Belinda, Christian, Katarina, and Kyle, thank you for your unending support of ‘Dad’ – the teacher 0333_924932_02_prexviii.pdf 2/24/03 8:06 AM Page v This page intentionally left blank Contents Preface The European Central Bank: the New European Leviathan? xi Introduction: Hobbes and the European Central Bank xi Objectives of the book xvi Outline of the book xvii Acknowledgements xviii 1 Analytical and Theoretical Approaches to the Study of the European Central Bank 1 Introduction: theorizing the European Central Bank 1 International relations theories 3 Comparative political science approaches 13 Conclusion 23 2 The Long and Winding Road to the ECB: European Monetary Authority in the Prehistory of EMU 25 Introduction 26 The early years of central bank cooperation 27 The Werner Committee and the European Monetary Cooperation Fund 29 Reinforced monetary co-ordination 31 The French drive for EMS reform and the Genscher initiative 33 The Delors Committee and the ECB 36 The Committee of Governors in Stage One of EMU 39 The European Monetary Institute in Stage Two of EMU 42 3 National Attitudes on the ECB and Central Bank Independence 51 Introduction 51 German monetary interests and attitudes: independence and price stability 52 French attitudes on European monetary authority: a story of persistent reluctance 62 The United Kingdom, central bank independence and the vii 0333_924932_02_prexviii.pdf 2/24/03 8:06 AM Page vii EMU project 80 Conclusion 85 4 Managing Europe’s Money: the Organization, Powers and Functions of the ECB 87 Introduction 87 Four levels of co-ordination 98 Conclusion 115 5 The Independence of the ECB 117 Introduction: the institutional dilemmas of an independent central bank 117 Debating central bank independence 118 Democratic accountability 121 Independence and accountability: a balancing act for the ECB? 126 The independence of the European Central Bank 127 Summarizing ECB independence 136 Institutional expectations of the ECB 139 Conclusion 142 6 A Question of Credibility: a Short History of ECB Monetary Policy 143 Introduction 143 The ECB gets started: early controversies and successes 145 Launching the euro: ‘an abrupt change in regime’ 147 The euro’s continued slide (July–December 1999) 154 The ECB moves toward year two (January–May 2000) 156 The euro-gloom continues (June–December 2000) 159 A stabilizing euro? (January–June 2001) 163 Euro-day approaches: Euro-Zone battles heat up (July 2001–February 2002) 165 Conclusion 173 7 Conclusion the ECB and the Future of Europe 175 Introduction 175 Institutional challenges and the ECB 178 Enlargement and the future of the ECB 185 Conclusion: credibility and creating a ‘vision’ for the euro 188 Appendices 189 viii Contents 0333_924932_02_prexviii.pdf 2/24/03 8:06 AM Page viii 1 Protocols on the Statute of the ESCB and of the ECB and the Protocol on the Statute of the EMI 189 2 Resolution on the Stability and Growth Pact 210 Notes 213 References 225 Subject Index 236 Author Index 243 Contents ix 0333_924932_02_prexviii.pdf 2/24/03 8:06 AM Page ix [...]... worse Thomas Hobbes, Leviathan (XX, 136)1 Introduction: Hobbes and the European Central Bank With the 1 January 2002 changeover to the euro complete, one could provocatively argue that the European Central Bank has become the most important institutional creation in Europe since the institutionalization of the nation state in the seventeenth century While the European Union (EU) may be the larger institutional... shaped these attitudes Chapters 4 and 5 complement each other with a focus on the institutional structure of the ECB and an analysis of ECB independence Chapter 4 describes the European System of Central Banks (ESCB) and the interaction of the ECB with other EU institutions – especially the Eurogroup, but also other institutions, for example, the European Parliament Chapter 5 then evaluates the institutional... compete for limited resources, because their mistrust of one another forces them to try to protect themselves by dominating others, and because some people seek the glory of appearing superior to others Considering the selfish passions of people, their fear of the Leviathan is the only reliable way to keep peace among them In the immortal words of Hobbes, ‘Covenants without the sword are but words, and of... Introduction: theorizing the European Central Bank As scholars of the process of European integration, we are aware of the limitations and deficiencies of the state of theory in international relations and comparative politics Susan Strange’s dissatisfaction with the state of theorizing should warn us of the dangers and pitfalls of employing too deterministic a mode of theoretical analysis The diversity of theories... in the determination of monetary policy, given that the asymmetric operation of the EMS forced them to follow German policy Grieco assumes that dissatisfaction with the operation of the EMS meant the necessary embrace of EMU His explanation quite reasonably presents the imposition of the German design for the European System of Central Banks (ESCB) as the necessary quid pro quo for the surrender of the. .. examine the current development of EMU in terms of these pre-existing norms: the development of economic policy coordination at the European level, the macroeconomic policies adopted in the participating member states, the role of the ECB in relation to political authorities (the Eurogroup, the Commission and the European Parliament) and the ECB’s own policy-making are all seen in terms of how they reinforce... dominance – motivated French support for an expanded European currency from the creation of the ECU – the European Currency Unit, the precursor to the euro – in 1979 (Howarth 2001) In the 1970s, French interest in European monetary cooperation was initially sparked by the collapse of the Bretton Woods System and the inability of the French to convince the Americans to re-establish an International Monetary... of the qualified governor of the Greek central bank, Lucas Papademos, with the exception of the Belgians, who sought the appointment of the Belgian senator and monetary policy expert, Daniel Gros The Belgians abstained on the final vote but also made it clear that they would block the appointment of a Frenchman – probably Jean-Claude Trichet – as the ECB President in 2003, if the next appointment to the. .. macroeconomic policy-making and the role of powerful business interests; neo-functionalism; and liberal institutionalism and regime theory These theories tend to focus on the logic of the move to EMU: the creation and design of the ECB is given less consideration Nonetheless, traditional theories of European integration provide some insight into the logic behind the structure of the ECB and its operation... system, and the debates about its institutional structure The book explores the history of European central bank cooperation and co-ordination in the context of European monetary integration The book also examines the preferences of key national actors (in particular French, German and British) that determined both the organization and independence of the ECB as well as the on-going debates about the Bank’s . The European Central Bank The New European Leviathan? David Howarth and Peter Loedel The European Central Bank 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page i Also by David Howarth THE FRENCH. available from the British Library. Library of Congress Cataloging-in-Publication Data Howarth, David J., 1967– The European Central Bank: the new European leviathan? /David Howarth, Peter Loedel. p System THE PROMISE AND REALITY OF EUROPEAN SECURITY COOPERATION (with Mary M. McKenzie) 0333_924932_01_preiv.pdf 2/24/03 8:04 AM Page ii The European Central Bank The New European Leviathan? David Howarth Lecturer