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Friday, June 5, 2009
Posted by Thomas Oatley at 9:42 AM . Friday, June 5, 2009
Angela Merkel seems not to understand what it means for the central bank to be independent. She said, "Unconventional monetary policies being pursued by the world’s main central banks could aggravate rather than ease the economic crisis...We must return to independent and sensible monetary policies, otherwise we will be back to where we are now in 10 years’ time.” She then continued, “Even the European Central Bank has somewhat bowed to international pressure with its purchase of covered bonds.”
The implication of course, is that she wishes the ECB would adopt a different policy and is willing to speak publicly to pressure it to do so (and thereby subordinate ECB independence to her more immediate concern). This is atypical: "Ms Merkel’s decision to ignore one of the cardinal rules of German politics – an unwritten ban on commenting on monetary policy out of respect for central bank independence – suggested Berlin is far more concerned about the ECB’s approach than has so far been apparent."
Which suggests that Merkel (and other German elite, perhaps) is happy to have an independent ECB as long as it follows her ideal monetary policy. Once the ECB's commitment to that policy appears less secure, she, like her French counterparts, is less keen on the idea of letting the ECB make its decisions independently. This isn't really a commitment to central bank independence, and it hints at the deeper underlying problem in EMU. It is nice to see, however, that the French and Germans aren't that different after all.