Strapped to the mast: EC central bankers between global financial markets and regional integration

Paradoxically, though the Treaty on European Union underlines the power of EC central bankers, they have been neglected in the literature on European integration. Central bank independence provides the key connection between changes in global financial markets and the new Treaty provisions on economic and monetary union (EMU). In recent years EC central bankers have been subjected to ever more volatile and competitive markets and new political pressures related to EMU. Central bank independence has offered a means of reconciling these twin changes. This article seeks to explain why central bank independence has strengthened its grip in Europe and the nature of the role of central bankers in European integration. The adequacy of existing theories of central bank behaviour is examined - public interest, personality, public choice and bargaining theories. Emphasis is given to explanations that focus on external factors: the structural power of the 'anchor' currency in the exchange rate mechanism (ERM); deep-seated change in the nature of capitalism; the role of economic crisis; the policy style of the European Community (EC); and the unique relationship of central bankers to the state and consequent capacity to pursue their corporate interests.