The European Central Bank (ECB) has a 'robust degree of democratic legitimacy', according to Professor Otmar Issing, a member of the ECB's Executive Board. Issing, writing in a new paper from the Institute of Economic Affairs*, says that because the ECB's primary objective of maintaining price stability is enshrined in an international treaty concluded by fifteen governments the Bank not only has protection from political interference but is democratically accountable.
Professor Issing explores the constitutional position of the ECB and the social value of price stability. He argues strongly that stable money is a common good and that it makes sense to create an independent institution which can pursue this good with minimum distraction. Stable money, he says, is '..too important to be left to the day-to-day political process' (page 27). However, independent central banks should have clear and limited mandates which constrain their discretionary power and make them accountable to the public.
'...independent central banks fulfil an important function for the benefit of society. Their job is to maintain price stability, trust and confidence in the currency. Nothing more and nothing less should be asked of them.'(page 37).
The ECB, unlike the Bundesbank and the Bank of England, has a very limited track record. Nevertheless, according to Issing, it has so far lived up to its promise, and '...there is every reason to believe that price stability in the euro area will continue to be maintained over the medium term' (page 19).
Monetary union in Europe, says Professor Issing, is unprecedented in history because it has severed the link between the currency and the nation state. Thus,
'...European economic and monetary union has been and will continue to be part of the wider economic and political project that the process of European integration has represented from the very start.' (pages 38-39) .