On Tuesday, 27 February 2024, the European Parliament adopted its annual resolution on the Annual Report of the European Central Bank (ECB). While this resolution is non-binding, it serves as an important tool for monitoring and evaluating the ECB’s activities, both past and present. It also provides a platform for the European Parliament to offer recommendations for the Bank’s future policies. Essentially, it is a key instrument for democratic oversight of an independent institution like the ECB, whose decisions significantly impact the lives of Europeans.
This year, the resolution was led by a member of the European Conservatives and Reformists group, Johan Van Overtveldt, and was approved with a majority of 418 votes.
For us at Positive Money Europe, an organisation committed to reshaping the European economic system to benefit people and the planet, this annual event is of paramount importance. Over the years, we have worked closely with partner organisations and Members of the European Parliament so that these parliamentary resolutions highlight the pivotal role the ECB should play in tackling the climate and environmental crisis. This is not only because the Central Bank is legally bound to do so by its secondary mandate to support EU general objectives, but also because climate change and the reliance on fossil fuels directly influence the ECB’s primary objective of maintaining price stability.
What does this year’s resolution imply for the climate?
This year’s resolution, regrettably, represents a step backwards from the progress made in recent years. It perpetuates a dangerous narrative that the ECB’s incorporation of climate considerations into its policies would be an ‘ideological bias’. However, the profound effects of climate change and environmental degradation on price stability and the entire financial system should by now be indisputable.
The reality of the situation requires an understanding that these are not partisan actions, but essential measures in response to the clear and present dangers posed by climate change.
Despite this, the Parliament approved the report without including crucial amendments designed to enhance the ECB’s support for a green transition. The idea of dual interest rates for the green sector, a strategy that could have bolstered green investments and helped counter future inflationary pressures, was overlooked. Consequently, this year’s report represents a missed opportunity to support people and businesses in advancing towards a greener future. However, the journey is far from over.
Recently, former ECB President Mario Draghi has emphasised the importance of monetary policies that support rather than hinder government efforts to stimulate economic growth and address critical issues like climate change. This is exactly where green dual rates could step in.
Moreover, the ECB’s recent climate and nature roadmap itself recognised the importance of integrating climate considerations into the Bank’s remit, so as to succeed in keeping prices stable, although – as the Parliament’s resolution also underlines – without considering bold instruments such as differentiated interest rates.
What other key aspects does the resolution cover?
The resolution goes beyond climate-related issues. This year’s text notably includes a section on the digital euro project, namely the possible introduction of a central bank digital currency in the Eurozone. The Parliament emphasised the crucial point that a digital euro must not endanger the existence or use of cash, and must respect the privacy of citizens and businesses.
The resolution also includes a whole section on accountability, building on last year’s resolution, which was instrumental in defining and interpreting the ECB’s secondary mandate and the relationship between the two institutions.
This year’s text urges the ECB to uphold its commitment to accountability by continuing to publish its written feedback on the Parliament’s resolutions regarding the ECB’s annual reports each year. Members of the European Parliament also encourage the ECB to foster dialogue with national parliaments.