Lhe President of the Republic, Emmanuel Macron, called, on April 25, in his Sorbonne speech on Europe, to debate the objectives of the European Central Bank (ECB) and to change them to take into account “at least a growth objective, or even a decarbonization objective, in any case climate objective for our economies”. Such a call seems laudable to us, because it is fundamental today to rethink macroeconomic policies in the light of the climate imperative.
But it also comes from an illusion, based on the hypothesis that the policy of a Central Bank would be perfectly determined by law. European treaties have repeatedly proven very difficult to revise (requiring ratification by all member states), and, even if successful, such revision would in no way guarantee a change in ECB policy. However, this already has, in fact, an environmental mandate.
The objectives of central banks enshrined in law are always necessarily very general, not to say vague. This generality, which has always prevailed in history, is not a design flaw; it is due to the fact that, to protect the value of money and financial stability, central banks potentially have to react to very different economic situations. Economists and lawyers talk about “incomplete contract” to characterize the fact that the central bank must itself provide the interpretation of the law, without the legitimacy to decide on this interpretation and the way of deciding being always clearly established. In two recent judgments, the Court of Justice of the European Union thus refrained from specifying the objectives of the ECB, recognizing it “complex assessments, broad discretion”.
The European treaties define a primary objective and secondary objectives for the ECB. The first is price stability. But what prices are we talking about, and how can we define “stability”? The ECB today interprets its objective as a “2% inflation target in the medium term” for consumer prices, but its own terms have changed over time and will no doubt change again. Even more vaguely, the European treaties impose a secondary objective on the ECB: “provide support for general economic policies in the EU”which explicitly includes social progress, full employment and “protecting and improving the quality of the environment”. The environmental objective is therefore already present, even if it is conditional on price stability.
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