Abstract

Does the Purchase of Government Bonds by the ECB endanger its Independence?

Since May 2010 at the latest, the ECB has been criticized for financing government bonds – at least indirectly – and for tolerating to be put under pressure by the fiscal side. The ECB itself has justified its securities markets programme and, thus, its government bond purchases by the need to maintain the functioning ability of the transmission channel. Is this procedure tantamount to endangering its independence? Or are their noticeable differences between the ECB as the central bank of a monetary union and a central bank of a single state? Answers to this are provided by a detailed examination of the different areas of independence as well as through coordination of the programme with the other monetary policy instruments: The ECB has taken on a quasi-fiscal role by purchasing government bonds, which has restricted its political as well as its financial independence. Moreover, it has possibly lost reputation as well. (E40, E42, E50, E52, E58, F34)