Imagine you were a central bank with a legal duty to promote financial stability. In addition to that onerous task, things haven’t gone very well for you in the financial stability department in recent years. You consider some changes to formal structures and to communication. At the time of publication of a periodic financial stability document, do you:

A) Make a big show about transparency and publish the report at a specific moment, simultaneously holding a flagship press conference with the head of the central bank?

B) Make a big show about transparency, publish the report at a specific moment, allow journalists a controlled preview of the document to aide understanding, then hold a flagship press conference with the head of the central bank and those in change of financial stability?

C) Make much less of a show about transparency, allow a rather uncontrolled preview of the document under embargo, hold a background unattributable press briefing of the report with those in charge of financial stability and set a time under which the embargo is lifted and the document is published?

D) Do a  combination of the above options?

E) Do something else? Read more

By continuing to provide eurozone banks with as much liquidity as they want, the European Central Bank is financing the massive current account deficits of crisis-hit  countries such as Greece. Its actions have been akin to issuing “eurobonds” – without politicians having realised. Credit markets in other eurozone countries have been squeezed as a result.

Hans Werner Sinn, president of the Munich-based Ifo economic institute, has become a thorn in the side of the ECB by making such arguments. In Frankfurt today he spent more than two hours explaining his case to journalists – a clear sign that he is not going to give up anytime soon. Read more

What will happen to Italy’s Lorenzo Bini Smaghi, the European Central Bank executive board member?

Last week, Nicolas Sarkozy, France’s president, and Silvio Berlusconi, Italy’s prime minister, called for him to resign. They have found no fault with Mr Bini Smaghi – except his nationality. Once Mario Draghi, Italy’s central bank governor, takes over from Jean-Claude Trichet, ECB president,  there will be two Italians on the ECB’s six-man executive board. That, argued Mr Sarkzoy, would “not be very European” (especially as there would no longer be a French member of the board).

   Unsurprisingly, Mr Bini Smaghi, urged on by colleagues at the ECB, has stood firm. For the fiercely-independent ECB this is a matter of great principle; it cannot be seen to be swaying to political interference and Mr Bini Smaghi has stayed put. As such, the ECB has found itself in yet another standoff with eurozone governments. Read more

Nout Wellink, the Dutch central bank governor, was in rumbustious form in an Financial Times interview this morning. For him, the European Central Bank was at the end of the road in terms of the help it could offer Greece (even if it agrees on fresh reform efforts). Instead, eurozone governments should double the size of Europe’s rescue funds in an attempt to convince financial markets of their commitment to shoring-up the eurozone.

    I also asked him about the race to head the International Monetary Fund. Mr Wellink had a reason to be aggrieved.  Read more