The ECB’s existential dilemma

by Jürgen Stark, Thomas Mayer and Gunther Schnabl

The European Central Bank has been in hazardous waters for years, endangering its political independence and compromising on its goals, as Jürgen Stark, Thomas Mayer, and Gunther Schnabl write.

Our fiat money regime requires an institutional anchor that credibly and decisively ensures a stable price level and long-term confidence in the euro. Credibility is a central bank’s greatest asset, because it underwrites confidence in the purchasing power of money. And credibility, in turn, rests on the central bank’s independence from political influence, and on its commitment to monetary stability.

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