Independent ECB?

Donald Trump's fight against the independence of the Federal Reserve represents a historic break, the consequences of which most investors still underestimate. But the independence of the European Central Bank (ECB) has also been damaged in recent years, even though politicians in the euro zone are not agitating against the central bank and the EU treaties that enshrine the ECB's independence cannot be changed de facto because of the requirement for unanimity.

Fiscal dominance ...,

Instead, risks to the ECB's independence arise from the massive increase in sovereign debt. Similar to France, the left and right wings of the political spectrum are growing stronger in other countries in the monetary union, making it more difficult to organize majorities in favor of reducing budget deficits, which are often far too high. In France and Italy, sovereign debt could rise to around 150% of GDP in ten years – more than double the maximum allowed under the Maastricht Treaty. In this environment, the risk of a sovereign debt crisis is increasing.

If the worst came to the worst, the ECB would no longer focus on its actual mandate of price stability, but would buy government bonds on a large scale to calm the markets. To this end, the ECB had decided in mid-2022 on a bond purchase program that it could activate without any major hurdles.

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