Monday, April 16, 2012

Why should the ECB have more power?

A few weeks ago, I made a public wish that British politicians will not meddle in Ireland’s referendum campaign on the EU fiscal treaty. My wish was motivated by fear. As a left-winger opposed to the Union’s austerity agenda, I don’t want anyone reminding me that my desire to see the treaty rejected is shared by the xenophobes of the UK Independence Party.

It came as something of a relief that the first English MEP to visit Dublin in connection with the end-of-May vote wasn’t UKIP’s Nigel Farrage but Sharon Bowles from the Liberal Democrats. Bowles backed the treaty on the grounds that it would strengthen the European Central Bank. The ECB was the only institution with “substantial credibility” in solving the euro-zone’s woes, Bowles, chairwoman of the European Parliament’s committee on economic affairs, contended.

Am I alone in finding Bowles’s intervention distasteful? For centuries, Ireland was controlled by Britain (part of the island still is). Now we are being told to accept rule – over key economic matters - from a bank in Germany.

A more condescending attitude has been displayed by the ECB’s own leadership. Mario Draghi, the bank’s president, said earlier this month he was “fully confident” that Ireland, the only country actually putting the treaty to a referendum, will vote Yes. Like a sadistic parent telling a child that corporal punishment is for his or her own good, Draghi told the Irish to accept cuts to public services in order to reboot the economy. “The Irish government and the Irish people have undergone a very, very hard and harsh fiscal consolidation programme and I would say from all angles they deserve to be praised for their efforts,” he said.

The message from Frankfurt to Portugal and Greece, two other countries being forced to swallow social misery disguised as “fiscal consolidation”, has been pretty much identical. In a new assessment of the Portuguese economy, the ECB describes the country’s acceptance of austerity as “remarkable by any standards”. The paper goes on to applaud Portugal for “raising working time flexibility”.

Inaccurate typecasting

Typecasting the Portuguese as indolent is both prejudiced and inaccurate. In 2011, the Organisation for Economic Cooperation and Development published a survey of working hours in 28 countries. At eight hours, 48 minutes, Portugal had the third longest working day in the sample. (Mexico and Japan were at numbers one and two respectively, both with more than nine hours). The only purpose behind “raising working time flexibility” is to please corporations who would dispense with employment law completely if left to their own devices.

Because many of its reports are turgid, the ECB is able to present itself as focused purely on the technical. “I am not a politician,” Jean-Claude Trichet insisted, when interviewed by Le Monde Diplomatique in 2011. In the sense that he did not stand for elections, Trichet was correct. In every other way, Trichet is a deeply political animal. Before stepping down as ECB chief last year, Trichet urged an end to all automatic wage indexation agreements and “when appropriate the privatisation of services today performed by the public sector”.

What democratic mandate did Trichet have to make such far-reaching recommendations? None.

By virtue of the EU’s treaties, the ECB enjoys a level of independence unrivalled by the Federal Reserve in the US and other central banks around the world. Having a clause in a treaty cannot be mistaken for a democratic mandate; most of the Union’s citizens are given no say over the content of its core rulebooks. Worse, the independence enables the ECB to put the preservation of rotten, sometimes even insolvent, banks and the interests of unnamed bondholders above everything else. A direct link can be made between the unchecked powers of the ECB and the 25% reduction in pensions paid to the elderly in Greece, whose suffering was highlighted so dramatically by the suicide of 77-year-old Dimitris Christoulas.

Exclusively male

I am weary of attending events in Brussels, where well-fed speakers bemoan the EU’s “democratic deficit” and then endorse measures that widen the same deficit. The fiscal treaty subtly but explicitly puts the unelected ECB higher on the pecking order than the elected European Parliament. Whereas it states the ECB president “shall be invited” to euro-zone summits, it merely provides that the Parliament’s chief “may be invited”.

Sharon Bowles, to be fair, has drawn attention to another way in which the ECB is out of touch with ordinary Europeans. Every single member of the ECB’s executive board and its governing council (which includes the heads of the central banks for the EU’s 27 member states) is male. According to Bowles, this makes the bank one of the EU bodies “where gender balance is most blatantly disregarded”.

Though she is right to be outraged on that point, Bowles must be scolded for how she blatantly disregards many of the ECB’s flaws. Her committee is less than transparent, too. A section on the ECB in a briefing paper it published in December last was written by Daniel Gros from the Centre for European Policy Studies (CEPS). I had to search elsewhere to learn that CEPS’s activities are partly financed by Goldman Sachs, Barclays and Deutsche Bank. Gros, therefore, cannot be considered a neutral “expert”.

And besides, I’ve had enough of “experts” telling me to live with the ECB’s strictures. When we are told to accept something over which we have no say, revolt becomes imperative.

●First published by New Europe, 15-21 April 2012.

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