The Eurosystem: Transparent and Accountable
Or 'Willem In Euroland'

Professor Otmar Issing

European Central Bank ‘among the most transparent and accountable in the world’

Observers of the European Central Bank (ECB) often start from outdated premises. This is one of many points made by Professor Otmar Issing of the Executive Board of the ECB in answer to the criticisms levelled against it by Professor Willem Buiter of the Bank of England's Monetary Policy Committee. Professor Issing's rebuttal appears in a Policy Paper published by the Centre for Economic Policy Research, where he argues that the perception of many commentators of what the ECB is doing ‘is still heavily coloured by different national frames of reference.’ In particular the ECB needs to be judged on the basis of its stability-oriented monetary policy strategy and not as if it were pursuing some other strategy such as direct inflation targeting or monetary targeting.

Issing continues, ‘Professor Buiter is, therefore, not alone in suffering from cognitive dissonance and bafflement in Euroland’. The original criticisms appeared in the first CEPR Policy Paper, Alice in Euroland, which argued that the ECB was not sufficiently open, transparent and accountable while its strategy and objectives needed clarifying. In Buiter’s view, minutes and the individual voting records of the 17 members of the ECB's Governing Council should be published.

In his reply, Issing says he regards both accountability and transparency as desirable for any monetary authority, especially for the ECB. The only issue of dispute was how best to achieve this under the particular conditions of monetary union. ‘Professor Buiter seems to start from the opposite presumption in creating the impression that the ECB, and I personally, champion secrecy and obfuscation. Nothing could be further from the truth’. He also argues that ‘at least in some respects’ the ECB can already be regarded as ‘the most transparent and accountable central bank in the world’. He believes that transparency and accountability need to be distinguished.

Transparency can never be complete and must balance openness (the public’s ‘right to know’), with clarity (the public’s ‘need to understand’). The ECB’s stability-oriented monetary policy strategy provides the framework for internal decision making and for communicating with the public in a clear and transparent manner. The ECB’s accountability is based on its clear mandate and its performance must ultimately be judged on its track record in achieving its overriding objective of price stability.

Addressing the specific proposals advanced by Buiter, Issing says that the publication of minutes is not by itself an indicator of openness and need not always contribute to clarity:

‘Everybody knows that that official “minutes” published elsewhere with considerable delays are carefully drafted and edited documents, which have normally been checked and approved by individual members’. Instead the ECB holds monthly press conferences where the decisions and the reasoning of the governing council are explained and subjected to instant scrutiny. The publication of members' voting records would be damaging: the public would focus excessively on the opinions of individual members and it would be impossible for them to demonstrate that their voting behaviour had not been affected by national pressures in one way or the other.

Issing argues that a substantial degree of individual accountability within a collective decision-making body would not be desirable in principle nor practically feasible. 

It may, to a limited extent, be possible in a smaller decision-making body and the far more favourable circumstances of a single nation state but ‘expecting it to work for the Eurosystem appears to be highly unrealistic’. It is not easy to have even an identical message understood the same way across the euro area. ‘Speaking with one voice’ was therefore particularly important in a multi-country monetary union.

Buiter also called for the publication of a clear inflation target and of an inflation forecast. Issing replies that the ECB does not have an operational inflation target but has provided a quantitative definition of price stability as a yardstick to evaluate its performance. ‘Publishing an inflation forecast is no substitute for an explanation of the underlying reasoning and assumptions’ even under a strategy of direct inflation targeting. Such publication could actually be misleading in the case of the ECB unless the much more limited role of forecasts in its strategy was clearly understood by the public. 

None of Buiter’s proposals could therefore be regarded as a ‘litmus test of transparency and accountability’.  

Notes for Editors:

CEPR is a network of over 450 Research Fellows based throughout Europe, who collaborate through the Centre in research and its dissemination. CEPR helps its Research Fellows to develop projects, obtain their funding, administer them and disseminate their results. The Centre’s research ranges from open economy macroeconomics to trade policy, from the economic transformation of Central and Eastern Europe to regionalism in the world economy. For further information about CEPR, please contact Emma Busby, Tel: (44 20) 7878 2916 or email: [email protected], or contact James Morgan, Tel: (44 20) 8225 7262.


The Author:

Professor Otmar Issing is Executive Board Member of the European Central Bank.  He served on CEPR’s Executive Committee between 1992 and 1996 and has maintained a close involvement with macroeconomic research in Europe despite the pressures of his responsibilities first in the Bundesbank and now at the ECB.


‘The Eurosystem: Transparent and Accountable’
Or ‘Willem in Euroland’
Professor Otmar Issing
CEPR Policy Paper No. 2

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‘Alice in Euroland’
Willem H Buiter 
CEPR Policy Paper No. 1

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