Spain joins French calls to rewrite ECB mandate

Spain's acting prime minister Mariano Rajoy highlighted the deficit reduction registered over the last four years to avoid being the first country fined in the history of the EU's fiscal rules.

Spanish Prime Minister Mariano Rajoy said on Monday (8 April) that Europe should look at changing the powers that the European Central Bank has, to align it more with other monetary authorities around the world and support pro-growth policies.

"I believe that in Europe among all of us, we should look at whether the ECB should have the same powers as the rest of the world's central banks," Rajoy said in a news conference.

"We should give ourselves the instruments that other countries have," he said, answering a question about the shift in monetary policy recently decided by the Bank of Japan.

The founding treaty of the ECB gives it a primary mandate of price stability, which the central bank's policymaking Governing Council has taken to mean prices rising by close to, but below, 2% a year.

The treaty also states that the ECB may, if price stability allows, also "support general economic policies". Any change to the ECB's mandate would have to be signed off by all 27 EU member states.

Eurozone crisis has revived calls for a more assertive ECB

During the eurozone debt crisis there have been calls to widen these powers but Germany has sought to damp any discussion on the issue, including a latest attempt from France earlier this year.

A barrage of monetary stimulus unleashed last Thursday by the Bank of Japan has revived such talk.

A US Federal Reserve policymaker, Atlanta Fed President Dennis Lockhart, noted Japan's latest move left the ECB as the least accommodative of the developed world's big three central banks.

Some other major central banks have a more flexible mandate. For example, the US Federal Reserve has a dual mandate of maintaining both low inflation and low unemployment.

The European Central Bank has pledged to support debt prices for eurozone countries that sign up to an international aid programme. But unlike the Bank of Japan and other major central banks, its arsenal of stimulus measures does not currently include a quantitative easing programme of sovereign bond purchases.

Supporting growth policies

Last week, at his monthly press conference, ECB president Mario Draghi dismissed such talk and put the ball in the states' court.

"I think one should always be mindful of what the ECB can do and what it cannot do. We cannot replace capital that is lacking in the banking system. That is quite clear. We cannot compensate for lack of action by governments," he said.

"The ECB cannot replace governments' lack of action on the structural reform front."

Since he took office in late 2011, Rajoy has been a major proponent of a banking union that would put the banks of the 17-member eurozone under closer supervision by the ECB and that would aim to sever the link between sovereign borrowers and domestic lenders.

He has also repeatedly called for Europe to take more measures to stimulate growth. But on Monday he declined to detail what measures he has in mind.

As the EU sovereign debt crisis unfolded, the European Central Bank has gradually taken a more assertive role in lowering debt cost and gained new powers in supervising banks.

In September, the ECB agreed to launch a new unlimited bond-buying programme to lower struggling eurozone countries' borrowing costs and draw a line under the debt crisis.

Draghi said the ECB would only help countries that signed up to and implemented strict policy conditions, with the eurozone's rescue fund also buying their bonds, and preferably with the IMF involved in designing and monitoring the conditions.

>> Watch EURACTIV video: ECB's Draghi presents eurozone rescue plan


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