A central bank in times of crisis: the ECB’s developing role in the EU’s currency union

The author provides a critical description of the forays into unconventional monetary policy measures by the European Central Bank (ECB) and discusses the court case on the ECB’s competences on one such unconventional measure, Outright Monetary Transactions (OMT). The legal basis of the non-standard measures adopted since the beginning of the crisis, from collateral widening through negative interest, forward guidance and long-term refinancing to quantitative easing, are discussed, with a special focus on the situation for (banks in) the EU Member States whose governments have been financially supported (e.g., Greece). The author finds that the ECB’s mandate has been stretched, but not too far, in the crisis circumstances although, in normal times, the economic-policy role taken might be ultra vires. The ECB itself should assume the role of provider of Emergency Liquidity Assistance (ELA) now that banking union has given it wide-ranging prudential powers, notably over the most significant banking groups in the Euro Area.