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Thursday, March 9, 2017

The E.U.’s Central Bank: Beholden to State-Level Politics

Faced with the rise of anti-euro candidates for state offices throughout the E.U., Mario Draghi, the president of the E.U.’s central bank deemed it politically prudent to depart from the light world of cool economic data to mount a spirited defense of the euro and even free trade in March, 2017. With the UK having voted to secede from the Union, he could not assume that the state of the Union would continue to be inherently viable. Indeed, some political candidates at the state level were “questioning the whole idea of a united Europe and the European Central Bank’s fundamental reason for being.”[1] Were such questioning to reach the mainstream across the E.U., the ECB would face an existential crisis. The E.U. itself may have been in such a crisis since the British voted to secede—much like the U.S. faced an existential crisis during the Lincoln administration. Fortunately for the E.U., only one state had voted to secede, so I think the existential crisis facing the E.U. had been overblown since the British referendum. Nevertheless, the political climate in the E.U. was such that Draghi felt the need to take heed of political criticism.

[1] Jack Ewing, “As E.C.B. Charts Economic Course, Politics Complicate the Picture,” The New York Times, March 9, 2017.