The ECB's Role in the Design and Implementation of Crisis Country Programs: Ireland and Beyond

The European Central Bank (ECB) has been an integral participant in the design and monitoring of financial assistance programs for euro area countries. This paper focuses on the role the ECB played in the Ireland program and points to several missteps made by the ECB, including preventing burden sharing with senior bank creditors, pressing for swift deleveraging to reduce its exposure, and failing to provide ex ante commitments to provide liquidity support under the program. These missteps have tainted the ECB's legitimacy in Ireland. Similarly, the ECB's recent decision to freeze emergency liquidity assistance (ELA) for Greece has strong political associations, undermining its independence. The paper recommends that the ECB should not be a part of the troika, negotiating and monitoring programs. Furthermore, ELA should no longer be provided by national central banks and instead should be in the hands of the ECB under transparent procedures and proper accountability.