Thu, Sep 13, 2012 - Page 9 News List

ECB’s growing power may save the euro, but destroy democracy

Sweeping new supervisory powers, the bond market intervention under Mario Draghi and the ECB’s influence over budgetary policies are raising concerns

By Ian Traynor  /  The Guardian, FRANKFURT, Germany

Ten minutes walk from Frankfurt’s main railway station, through a warren of sex shops and seedy gambling dens, two dozen of the most powerful unelected people on the European continent gather once every two weeks to try to save Europe from itself.

Around a large circular table on the 36th floor of the Eurotower that soars over the city center’s red-light district, European Central Bank (ECB) President Mario Draghi chairs the meetings of the governing council of the bank which have supplanted EU summits and finance ministers’ sessions as the key events deciding the fate of the euro — testimony to the failures and fecklessness of the EU’s elected leaders.

The Italian central banker radiates understated gravitas and charm, has been in office not even a year, and has already been dubbed the euro’s savior, the most important central banker on the planet, as well as the most powerful person in Europe, with the possible exception of German Chancellor Angela Merkel.

Draghi’s expanding battery of weapons for combating the euro crisis was to be strengthened immensely yesterday when the European Commission unveiled new draft legislation putting the ECB in charge of supervising the eurozone’s 6,000 banks, with the power to grant and withdraw licenses.

Within a month of taking office in November last year, Draghi delivered a coup, launching a trillion-euro program of cheap loans for Europe’s banks. On Thursday last week, he went much further, announcing a new policy of limitless purchasing of eurozone government bonds known as OMT — outright monetary transactions.

The markets went quiet — Spain, Italy and Ireland rejoiced — as Draghi emphasized for the third time in six weeks that the euro is irreversible. He framed his bold intervention as solidly within his remit to defend the embattled currency.

However, German monetary purists erupted in howls of protest, although it was the German on the ECB’s six-strong executive, Joorg Asmussen, who played a key role in drafting the new policy.

“Only a currency whose existence is out of the question can be stable,” Asmussen told the Guardian in an interview. “What for us is clearly within our mandate is to guarantee the stability of the euro.”

Extreme times generate extreme moves. There is no doubt that the eurozone’s exhausted political leaders are quietly relieved that Draghi is taking some of the heat out of the crisis. While Merkel, the central actor in the euro drama, could never say so publicly, her aides have been known to concede that Draghi is the only person who can rescue the euro — so let him get on with it.

Since the stakes could hardly be higher, for Asmussen the end would appear to justify the means.

“I see an incomplete currency area,” he said. “We’re at a very decisive moment. We need to aim for more Europe, define our place on the globe in the 21st century. If we’re not willing or able to embark on that route, all the achievements of the monetary union, and even of the single market, could be at risk. We don’t know if we’ll succeed, but we’ll work for it.”


However, the sweeping new banking supervisory powers, the bond market intervention and the increasing influence the ECB wields over the fiscal and budgetary policies of the eurozone governments have many worried that the ECB president and the 22 others on the governing council — the 17 central bank chiefs of the eurozone plus the six-strong ECB executive, all men in suits, not a woman among them — are getting too big for their boots.

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