30 June 2006

EZA 746 Briefing Note: ECB Observer

EZA746/30Jun06:

Job changes in ECB and Bundesbank Executive Boards signal no change in policy but emphasise continuity and collective responsibility

·Issing's 'Chief Economist' hat split between Stark (economics) and Papademos (research).

·Primary policy function stays in ex-Bundesbank hands but significant role in policy formulation goes to ECB Vice-President.

·Enhances co-operative, collective responsibility within Executive Board.

·President Weber takes over economic portfolio at Bundesbank, enhancing his influence in both Bundesbank's Executive Board and ECB's Governing Council.

·Net effect likely to be continuity of ECB policy and credibility and improved balance between Executive Board and national central banks on ECB Governing Council.

EZA Conclusion: The re-distribution of responsibilities within the Executive Boards of the ECB and the Bundesbank signal continuity of eurozone monetary policy and enhance the collegial nature of the ECB's board, thus sustaining the ECB's inherited credibility as the guarantor of price stability despite Issing's departure, while slightly tilting the balance of influence within the Governing Council from the Executive Board members towards the national central bank governors.

© Graham Bishop