ECB Policy Change Resulting from Brexit

Liam O’Donnell, Alexandre Bloch, Lara Gabrie

“The European Central Bank (ECB) is the central bank of the nineteen European Union countries which have adopted the euro.” The main purpose of the ECB is to maintain the importance of the euro in the European Union countries and also to maintain its weight. In 2008, The ECB and its member states faced one of the most challenging and dire situations, the financial crisis. This crisis damaged the global financial system and was the biggest crisis that the ECB has faced. For instance, Portugal, Greece, Italy, and Spain were deeply affected by it. Europe had failed to comply and solve this problem. Thus, for the United Kingdom, this was a turmoil since they had a different currency from the other European Union countries. Henceforth, this situation affected the ECB and the United Kingdom’s economy. In addition, national sovereignty and political elitism was affected in the United Kingdom since, EU countries and the UK had different opinions and ideologies for Europe. The purpose for this European Central Bank, is to solve the question of Brexit and the financial crisis in Europe.  

One proposal in regards to structural change in relation to discouraging another European Union exit similar to that of Brexit is the adaptation of the EU to a federalized state similar to the United States of America, coined a United States of Europe (USE), in which the EU has a stronger and centralized base of control over member states. This idea was a point of contention and debate among delegates within the European Central Bank (ECB), with some countries, such as Romania, France, and Greece being in full support of it, describing it as a way to ensure an equitable budget among EU member states (Romania), as it grants stronger centralized control in regards to monetary and fiscal policy. Furthermore, France described it as a form of incentivization for remaining in a EU, as it ties member states closer together, almost binding them into a single country. The ECB delegate from Greece is in agreement with the delegate from France, stating that such a formation as a USE would deeply “intertwine” member nations economically and diplomatically, disincentivizing withdrawal from the organization. The USA serves as a prime example of the effectiveness of such a federalized state, as it has remained politically stable for most of the 241 years that it has been a sovereign nation (minus the Civil War of the 1860’s). However, this central idea of federalization is a point of contention among numerous delegates of the ECB, such as Germany, the Czech Republic, Belgium, and Croatia, who strongly believe in the importance of their countries remaining sovereign nations, not directly attached to inner crisis and policy of neighbor EU states. Furthermore, deep nationalistic pride hinders the formation of a federal system, with many states viewing such a formation of states as encroaching on national interests. Furthermore, the delegate from Croatia described that his country, and potentially other EU states don’t want to involve themselves in other states’ domestic fiscal policies, and wish to remain independent within their domestic policy and budgeting decisions. The delegation from Denmark analogized these differences, describing that each nation has different needs and conflicting necessities, such as attendees of a dinner having different diets and requiring differing meals to fulfill their hunger and dietary requirements. The delegate from Belgium when speaking to the European Central Bank, described that under the current constitution and ideals of the EU, such a federalization is inherently impossible, as the EU’s purpose is to serve as a union of sovereign nations, rather than a sovereign nation in itself. This discussion brings to light the deep and difficult ideas of the current purpose of the European Union, and whether member states are willing to give up their individual sovereignty for the greater evolution of Europe. It remains to be seen as to whether the United States of Europe will become a feasible plan, but for now it remains solely a theory.

Some countries are trying to discourage others to not leave the EU, and others are trying to find solutions. Different decisions are being taken by countries and their choices remain split. On one hand, Poland is proposing to impose tariffs on countries that leave, and one the other hand, Estonia thinks that they can’t impose taxes and tariffs on entities that they are not in charge of. The Czech Republic is in support of incentives for staying and Estonia stated that they don’t want to tariff nations that have exited the EU. Moreover, Croatia is proposing that countries must pay for resolutions in full prior to leaving the EU. Portugal said that taxing other countries harms EU productivity and the GDP as well. Finally, France believes that if a country want to leave the EU, they should not discourage its withdrawal, because they believe in the greater evolution of the EU, and they do not want to lost some time by solving problems due to countries who simply would leave the EU.

While there are many possible solutions and adaptations that can be made to confront the exiting of Britain from the European Union, such solutions and actions, as the above discussed are still in early stages of debate and discussion. It remains to be seen whether such ideas will grow into solid policy change.