Parliament steps up fight to make the ECB more accountable

Date: 18/11/1999

By Tim Jones

AMONG the secretaries in Frankfurt's Eurotower, the European Central Bank's austere chief economist Otmar Issing is known as a bit of a joker.

Yet his performance over the past two weeks would test even his sense of irony.

This is the man who has fought hardest, most notably in a pamphleteering skirmish with Bank of England (BoE) policy-maker Willem Buiter, to keep the ECB's deliberations under wraps.

The Dutch economics professor, who sits on the BoE's monetary policy committee, has become a proselytiser for the British model. Minutes of their meetings, which set out the arguments in favour of that day's policy decision, are released within two weeks. Voting records are also published.

The very idea horrifies Issing, who believes that disagreements should be kept quiet because they could spook the markets and subject national central bankers on the governing council to political pressure at home.

But who was it, just days after the ECB raised interest rates by 0.5 of a percentage point to 3.0% earlier this month, who told the French business daily newspaper Les Echos that the council had been "very split"?

At the press conference following the rate hike, ECB President Wim Duisenberg was reluctant even to admit that the decision had been put to a vote, but Issing the monetary trappist was happy to spill quite a few more beans to French business executives.

Some council members had argued for a "relatively limited" rate rise of 0.25 of a percentage point, he said, but they were outgunned by the majority who feared that "a smaller increase would give the impression that it was a first step toward other hikes".

It was left up to ECB-watchers to guess who the minimalists were. Within hours, research notes from bank economists were suggesting that governors from slow-growth economies - Bundesbank President Ernst Welteke and Bank of Italy Governor Antonio Fazio - were the reluctant half-pointers.

This informed guesswork is precisely what concerns Buiter most about the ECB's half-hearted approach to openness. Buiter himself has been seen by economists as an interest rate 'dove' and then a 'hawk' within the space of two months on the basis of his voting record. Circumstances change but guesswork ensures that Welteke, unlike Buiter, will forever have 'dove' attached to his name.

But Issing, with Duisenberg's whole-hearted support, believes the ECB has gone far enough in revealing its inner thoughts.

The bank produces a monthly bulletin including a 20-page round-up of recent economic and monetary developments, a detailed statistical annex and fiscal policy analysis. Duisenberg holds a press conference every month to explain that day's decision and a verbatim transcript is posted onto the ECB's website within 24 hours. The bank also publishes selected research papers on the site.

All this adds up to a bank which is more transparent than many people think. There is, however, a huge difference between transparency and accountability.

"Does the lack of publication of individual voting records undermine the accountability of the ECB? I believe that the answer is no," said Issing in a speech last month. Indeed, even some supporters of the idea of publishing regular minutes are opposed to revealing voting records.

But British Liberal MEP Christopher Huhne, the author of a European Parliament report on the ECB's accountability, disagrees. "Publishing votes is a great incentive to make sure that the summary minutes are a proper and accurate account of council members' views," he insists.

Huhne's report called on the bank to publish minutes and voting records as well as its internal forecasts and the mathematical model through which it runs economic assumptions.

It was the first shot across the ECB's bows by the Parliament's new economic and monetary affairs committee.

This is the only Union body with the powers, however circumscribed, to scrutinise the ECB. Duisenberg is cross-examined at the committee four times a year. It has, however, been hamstrung in this task by parliamentary traditions which never foresaw the establishment of a lean and mean policy oversight committee rather than a legislative panel.

Although the committee's chairwoman, German Socialist Christa Randzio-Plath, has discarded the old practice of 'stacking up' a string of MEPs' questions to be answered in one go, enabling Duisenberg to ignore the ones he did not want to answer, structural problems remain.

Like everything else at the Parliament, the right to ask questions is shared out according to the 'D'Hondt rules' under which each of the assembly's political groups is allotted a certain amount of time regardless of the question's - or the questioners' - worth. This makes following up on Duisenberg's evasions difficult.

Randzio-Plath is looking into ways of using D'Hondt more flexibly. Large-scale reform has, however, been ruled out. "It is not necessary at this stage of the game," says Huhne. "We could go a long way by improving our questioning and our external advice."