Photo: AP/Riccardo De Luca
Contra some pundits, Nomura argues that it would absolutely be legal and mandate consistent for the ECB to use a bazooka to stop the crisis.To pick up on the last point, the ECB would appear to have more legal authority to take radical action to quell the eurozone crisis than many would assume, particularly if the very existence of the euro is under threat. It is often represented that the ECB has a sole mandate of pursuing price stability, as if that puts the shackles on it and relieves it of wider eurozone responsibilities. But this is wrong. Article 105(1) of the Treaty on the Functioning of the European Union states that “The primary objective of the European System of Central Banks [the ESCB] [at the top of which lies the ECB] … shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union” (EU). Among these objectives is to “promote economic, social and territorial cohesion, and solidarity among Member States”. Among the “basis tasks” assigned to the ESCB (and therefore to the ECB) are “to promote the smooth operation of payment systems”, as well as to “contribute to the smooth conduct of policies pursued by the competent authorities relating to … the stability of the financial system” [emphasis added throughout].