Governance and Monetary Policy Decision-Making at the ECB

Abstract

A long debate about the appropriate reform of the Governing Council (GC), the European Central Bank (ECB)’s decision-making body, took place earlier this decade in the context of the imminent enlargement of the European Union (EU) and the Eurozone. Since its creation, the ECB GC has been composed of six Executive Board (EB) members and all of the Eurozone national central bank (NCB) governors. Each has the same de jure voting weight in monetary policy decisions. The pros and cons of various voting proposals were discussed in light of enlargement in academic and policy circles as reflected, inter alia, in Baldwin et al. (2001), Berger (2002), Gros (2003) and Heisenberg (2003). Following an ECB recommendation, the Council of the EU decided in March 2003 to introduce a rotation system in the GC once the number of governors (or, equivalently, Eurozone countries) reached 15, wherein countries would receive voting weights as a function of their economic and demographic significance. In December 2008, the ECB decided to postpone the actual implementation of the reform until the number of governors reaches 18.