The ECB: a reluctant leading character of the EMU play

This paper assesses the performance of the European Central Bank (ECB) during the crisis that started in 2008. The ECB statute is consistent with a view of the economy that was predominant in the 1990s, that postulates a very limited role for discretional policies in managing the business cycle. The ECB had therefore to stretch its mandate in several occasions, during the crisis, to avoid severe outcomes. It was unable to avoid a slow but inexorable slide of the Eurozone towards deflation and a liquidity trap. To restore robust growth, fiscal policy should be used, and institutions should be redesigned away from the Berlin–Washington Consensus framework that shaped the Maastricht Treaty. Better rules for fiscal governance and a wider ECB mandate are proposed.