Unity and disunity among central bankers in an asymmetric Economic and Monetary Union

ECB monetary policy making was designed to disguise real, and to counter imagined, disunity within the bank itself, and among its component national central banks (NCBs) and their governors. The unity of the Eurosystem of central banks and the appearance of unity depended upon the assumption that central bankers keenly supported the German model – which they endorsed in the Delors Report on EMU in 1989. However, several features of the ECB undermined its unity and reputation for impartiality even prior to the start of EMU: notably, the greater representation of individuals from larger member states in the Governing Council. Crucially, though, the potential for disunity is in the Maastricht Treaty (Treaty on European Union) and the asymmetrical design of EMU. Euro area economic governance was insufficiently developed and, notably, fiscal policy rules were inadequately clarified and enforced. Similarly, in the Treaty, the responsibilities of the ECB to promote financial stability were left imprecise. Notably, due to central banker fears on the monetisation of debt, the ECB was not assigned the typical central bank function of ‘lender of last resort’. The disunity in the Eurosystem of central banks that erupted during the sovereign debt crisis from late 2009, demonstrated that unity relied on consensus around German and notably Bundesbank preferences. Disunity stemmed above all from the absence of a road map for ECB policy making in a context of severe existentialist crisis.