European Central Bank accountability: how the monetary dialogue could be improved. Bruegel Policy Contribution 2014/04, March 2014

According to the European Union Treaties, the European Central Bank (ECB) is accountable to the European Parliament. In practice, this accountability takes mainly the form of a quarterly Monetary Dialogue between the president of the ECB and the European Parliament Economic and Monetary Affairs committee. We assess the impact of the Monetary Dialogue. We describe the ECB’s accountability practices, compare them to those of other major central banks and provide an assessment of the dialogue in the last five years. The Monetary Dialogue could be improved and we make recommendations on this. We also consider what role the Monetary Dialogue could play in the current context of the ECB’s evolving role. We discuss in particular forward guidance and quantitative easing. We review the main features and the way in which those policies have been implemented by other central banks. We then suggest the appropriate role for the Monetary Dialogue in relation to each of those policies. We conclude with some observations on the function of the Monetary Dialogue after the establishment of a banking union in Europe.

Building European Defence: An Architect and a Bank. Security Policy Brief No. 56, May 2014

If a set of investors plan a grand apartment building in which they can each afford just one apartment, they need an architect to design a building that is both affordable and that meets all their needs, to negotiate with the constructor, and to ensure follow-up. When building capabilities for European defence, the sole possible architect is the European Defence Agency (EDA). Those who have to reach consensus and invest are the EU Member States. And there is even a European Investment Bank (EIB) to assist them.

Addressing weak inflation: The European Central Bank's shopping list. Bruegel Policy Contribution 2014/05, May 2014

There are clear benefits to price stability. High inflation can distort corporate investment decisions and the consumption behaviour of households. Changes to inflation redistribute real wealth and income between different segments of society, such as savers and borrowers, or young and old. Price stability is therefore a fundamental public good and it became a fundamental principle of European Economic and Monetary Union. But the European Treaties do not define price stability. It was left to the Governing Council of the European Central Bank (ECB) to quantify it: "Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%"[1]. The Governing Council has also clarified that it aims to maintain inflation below, but close to, two percent over the medium term, though it has not quantified what 'closeness' means, nor has it given a precise definition of the 'medium term'[2]. The clarification has been widely interpreted to mean that the actual target of the ECB is close to, but below, two percent inflation in the medium term.

Supporting Access to Finance by SMEs: Mapping the initiatives in five EU countries. ECMI Research Report No. 9, April 2014

This paper maps the initiatives to support access to finance for small- and medium-sized enterprises (SMEs) that were available at national level in 2012 in the five biggest European economies (Germany, France, the UK, Italy and Spain). This mapping distinguishes initiatives promoted and financed primarily through public resources from those developed independently by the market. A second breakdown is proposed for those sources of finance with different targets, i.e. whether the target is debt financing (typically bank loans at favourable conditions, public guarantees on loans, etc.) or equity financing (typically venture capital funds, tax incentives on equity investments, etc.). A broad set of initiatives has been implemented to close the funding gap of SMEs in these five countries. The total amount of public spending for SMEs, however, has remained well below 1% of GDP. Public subsidisation of bank loans has been by far the most diffused type of intervention. Despite the fact that this strategy might prove to be effective in the short term, it fails to address long-term sustainability issues via a more diversified set of financing tools.