Central Bank Independence, European Central Bank and the financial crisis.

Abstract

This essay examines the political implications of Central Bank independence in the case of the European Central Bank in a period of crisis, using as a guide the two core question of new institutionalism; “how was the institution of ECB selected” and “how is the institution of ECB potentially sustained and changed”. By analyzing the history and the politics of EMU, the function of ECB, the measures undertaken by ECB after the beginning of the financial crisis of 2007-2008 and by constantly comparing ECB with the Federal Reserve System of the U.S., it concludes that ECB’s “obsession” with independence, is an obstacle to the resolution of the current financial crisis in the Eurozone. Finally, this essay provides some predictions for the future of the ECB, taking into account the dynamics of politics and the framework of new institutionalism, having as a main objective to open the road for further academic research on the issue.