I just came across this brief interview of Jean-Claude Trichet, President of European Central Bank where he stresses the importance of independence of ECB to deliver its objective of price stability.
DIE ZEIT: You mentioned independence as the legacy of the Bundesbank. Do you have an absolute independence in mind? An independence that forbids even critique from the political side?
Trichet: It is simpler than that: I refer to Article 108 of the Maastricht Treaty. It says the executive branches in particular should not try to influence our decisions. It is a very clear wording. So it’s not the ECB who defines its independence, it is the Treaty, which was approved by the people of the member states, by the people of all our democracies. Everybody is welcome to criticise our policy – the media, the analysts, the academics. And we are, as an independent institution, as a last resort, accountable to the people of Europe. By the way it is not known that I go more often to the European Parliament than our friends from the American Federal Reserve go to the US Congress.
For the uninitiated, Bundesbank (The German Central Bank) was hugely successful in fighting inflation and most Central Banks try and follow the path adopted by the former.
The interview tells of the instances when both, Bundesbank and ECB clashed with the polity over interest rates. It is pretty interesting. I loved this quote:
DIE ZEIT: Wim Duisenberg once said, the Bundesbank is like Cream – the more you whip it the harder it gets. The same is true for the ECB…..
His mantra for growth:
Monetary stability. Independence. Credibility. These principles are very favourable for sustained growth and job creation. Today it’s globally recognized that this is the right way for monetary policy to deliver price stability and, by way of consequence, sustainable growth.
He also stresses the importance of communicating to the public. Worth a read.