Vol 22 (2025) - Issue 5

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A New Proposal for a Crisis Management Procedure for the ECB to Ensure Price Stability among the Eurozone

Synopsis
This article proposes a new procedure for the Eurosystem as crisis law to achieve the price stability target in a better and safer way. To this end, the procedure is initiated in the event of high inflation rates. As a last resort, it envisages the Bank for International Settlements (BIS) as the ECB’s administrator in order to avert the danger of hyperinflation. This proposal suggests that a structured solution during times of higher inflation may be inspired by insolvency and restructuring laws that are not directly applicable to central banks. Therefore, the proposal at hand aims to integrate elements of these laws into the ECB’s framework to ensure price stability in the Eurozone. The proceedings are to be judicially supervised by a new chamber at the International Court of Justice (ICJ).
The procedural proposal consists of several phases:
– Phase 0 (normality): creating preventive plans and early warning systems;
– Phase 1 (opening): triggering the procedure upon exceeding certain inflation rates;
– Phase 2a (implementation): a new BIS committee overseeing the implementation of (monetary policy) measures to reduce inflation;
– Phase 2b (control): the new BIS committee taking over the ECB’s monetary policy if inflation persists; and
– Phase 3 (return to normality): the ECB regains its independence once inflation is stabilized.