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Policy‐Maker of Last Resort? Drivers of Discretion at the European Central Bank

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  • Shawn Donnelly

    (Public Administration Section, University of Twente, The Netherlands / Institute of Political Science, Leiden University, The Netherlands)

Abstract

Under what conditions does the ECB become the policy-maker of last resort? This article surveys five incidences in which the ECB created its own rules or exercised discretion beyond the effective control of political principals. ECB rule-making took place where the Bank had an initial legal mandate to be present in the policy space, where it could exploit unique institutional interfaces with the banking community and Economic and Monetary Union system, where it had advantages in expertise and information, and where the Council either fully supported the ECB to design new powers, or was divided on whether to retrench ECB freedom. The article examines discretion in macroeconomic policy instruments, capital requirements for banks, including choices that have industrial policy (targeted sectoral) effects, the design of the digital euro, and ECB efforts to force the migration of UK-based financial services to the EU.

Suggested Citation

  • Shawn Donnelly, 2025. "Policy‐Maker of Last Resort? Drivers of Discretion at the European Central Bank," Politics and Governance, Cogitatio Press, vol. 13.
    • Handle: RePEc:cog:poango:v13:y:2025:a:8958
    DOI: 10.17645/pag.8958
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    References listed on IDEAS

    as
    1. Shawn Donnelly, 2018. "Advocacy coalitions and the lack of deposit insurance in Banking Union," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 21(3), pages 210-223, July.
    2. Shawn Donnelly, 2018. "Advocacy coalitions and the lack of deposit insurance in Banking Union," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 21(3), pages 210-223, July.
    3. Jack Copley, 2024. "Green Vulcans? The political economy of steel decarbonisation," New Political Economy, Taylor & Francis Journals, vol. 29(6), pages 972-985, November.
    4. Nicolas Jabko & Nils Kupzok, 2024. "The Crossover between Climate Politics and Central Banking: How Green Central Banking Emerged in the US, the EU, and the UK," Politics & Society, , vol. 52(4), pages 662-690, December.
    5. Jérôme Deyris, 2023. "Too green to be true? Forging a climate consensus at the European Central Bank," New Political Economy, Taylor & Francis Journals, vol. 28(5), pages 713-730, September.
    Full references (including those not matched with items on IDEAS)

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