Table of Contents: I. Introduction. – II. The ECB’s conditionality in context. – III. Conditionality applied to collateral eligibility for Eurosystem credit operations. – IV. Conditionality applied to the provision of Emergency Liquidity Assistance. – V. Conditionality applied to the Securities Markets Programme. – VI. Conditionality applied to the transfer of SMP profits to Greece. – VII. The shift to explicit conditionality in the Outright Monetary Transactions and the Public Sector Purchase programmes. – VIII. Conclusions.
Abstract: The aim of this research is to clarify the legal framework under which the ECB applies its conditionality policy, by making a distinction between implicit and explicit conditionality. In the first years of the sovereign debt crisis, the ECB resorted to an implicit form of conditionality, driving Euro area Member States towards acceptance of an economic adjustment programme or the adoption of significant economic, fiscal and structural reforms. Implicit conditionality has been applied in the context of the ECB’s collateral policy, to the provision of Emergency Liquidity Assistance (ELA), to the purchase of sovereign bonds under the Securities Markets Programme (SMP), as well as to the transfer of profits deriving from these purchases (the so-called SMP profits). Eventually, the ECB decided to shift to explicit conditionality. Under the Outright Monetary Transactions programme (OMT) and the Public Sector Purchase Programme (PSPP), sovereign bonds purchases became subject to compliance with the EU/IMF strict and effective conditionality. The temporary framework for collateral eligibility was modified following the same approach. While the shift to explicit conditionality has to be welcomed, it does not lessen concerns about the ECB’s democratic accountability and its interference in domestic reform processes. Some regards the ECB’s conditionality as a true political action departing from the standards of neutrality and independence that central banks should meet. This paper describes the set of policy instruments through which conditionality has been applied, with a view to assess the legitimacy of the ECB’s actions.
Keywords: ECB – conditionality – collateral – SMP – ELA – OMT – PSPP.
* Associate Professor of International Law, University of Torino, email@example.com.