29 Sep 2017

The Single Monetary Policy and Its Decentralised Implementation: An assessment

Daniel Gros

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The statutes of the European Central Bank (ECB) stipulate that it should have recourse to national central banks (NCBs) to carry out monetary policy operations. Such a structure would not be a problem if these operations were all identical across member states and if the resulting profits and losses were shared. But this is not the case today. In this sense, the euro area no longer has a ‘single’ monetary policy.

There is little one can do about this situation, except to wait until the government purchase programme ends and is then reversed.

However, two steps could be undertaken already now: i) the granting of emergency liquidity assistance should be shifted to the ECB, and ii) the NCBs should be forbidden to undertake any financial operation that is not a direct consequence of their execution of the ECB’s monetary policy decisions. The existing stocks of assets (and liabilities), the so-called ANFA (Agreement on Net Financial Assets) holdings, which are not related to monetary policy, should be transferred to either national finance ministries or national special purpose vehicles.

Daniel Gros is Director of CEPS. This policy contribution was prepared for the Committee on Economic and Monetary Affairs of the European Parliament (ECON) as an input for the Monetary Dialogue of 25 September 2017 between members of the Committee and the President of the European Central Bank (http://www.europarl.europa.eu/committees/en/econ/monetary-dialogue.html). Copyright remains with the European Parliament at all times.