ECB turns 25: From guardian of the euro to crisis manager
Mischa Ehrhardt
May 24, 2023
The European Central Bank is currently fighting rampant inflation in the eurozone which is just one of the many crises its policymakers have had to face in the past 25 years.
The European Central Bank has ushered in a new era of monetary policy in EuropeImage: Florian Gaul/greatif/picture alliance
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There are phrases that go down in history as momentous and epoch-making. One of them is made up of a few crucially important words spoken by Mario Draghi, the then president of the European Central Bank, at the height of the eurozone debt crisis in 2012, when he declared the ECB's determination to defend the euro against financial speculation.
His resounding "whatever it takes" statement made on July 26, 2012 in London marked the turnaround in the EU sovereign debt crisis as it dispersed the crowd of greedy speculators already waiting to put the ax to the fledgling eurozone riven by the Greek crisis. If Greece were to have gone bankrupt and been expelled from the eurozone, few economists believed at the time the currency area could have survived.
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," were Draghi's famous words — what's less known, though, are the words he said before that are more important: "And believe me, it will be enough."
Lost bets and bailouts
Draghi's words made it abundantly clear to speculators that any financial bets against the ECB would be futile.
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What's followed in the years thereafter has been a show of the ECB's monetary firepower.
Even before the euro area debt crisis began to rear its ugly head in 2010, the Frankfurt-based ECB had already been buying up eurozone government bonds on the secondary market on a smaller scale. Those asset purchases would be expanded massively later on and lead to the desired result of falling yields for heavily-indebted states such as Greece, Spain, Portugal and Italy.
Falling borrowing costs averted debt defaults and provided the struggling governments on the EU's southern periphery with new financial room to maneuver.
At the same time, however, the ECB has been forced to take on a role it has not been mandated for — saving national governments with newly printed central bank money, also known as illegal state funding
"This was a major turning point," says economist Friedrich Heinemann of the European Center for Economic Research (ZEW) in Mannheim. "But to be fair: Mario Draghi saved the eurozone from complete collapse in the summer of 2012," he told DW.
Draghi's five years at the helm of the ECB
Five years ago, Mario Draghi took over as president of the ECB. Under him, the bank has been in crisis-fighting mode. Here are some of Draghi's best-known quotes, earning him praise or raising eyebrows.
Image: picture-alliance/dpa/A.Dedert
Save the euro!
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro, and believe me, it will be enough." This is arguably Draghi's most famous quote. It dates from July 2012, and the mere statement helped to calm markets.
Image: picture-alliance/dpa/D. Reinhardt
Fueling economic expansion
"Monetary policy has been the only policy in the past four years supporting growth in the eurozone." - This 2016 statement by Draghi following an April ECB governors' meeting in Frankfurt can easily be construed as a broadside against politicians.
Image: picture-alliance/dpa/J. Büttner
Greece in focus?
"The fewer changes made in a country, the more often I repeat my messages - and it works." Draghi could have had in mind a lot of eurozone nations when saying that, but Greece seemed to be an obvious candidate (perhaps without the "and it works" part of the quote).
Image: picture alliance/chromorange/Ohde
Europe's powerhouse
"We won't make the weak stronger by making the strong weaker. If Germany were less competitive, the euro area as a whole would lose, because less could be produced then." - However, Germany's excessive trade surplus remains a thorn in the side of fellow eurozone nations.
Image: picture-alliance/dpa/Bernd Weissbrod
Italy, Portugal, Spain and others
"There is no better protection against the euro crisis than successful structural reforms in southern Europe." That statement has lost nothing of its importance even now that the very existence of the single currency seems no longer theatened.
Image: picture-alliance/dpa/J. Stratenschulte
Critics galore
"Long-term interest rates are determined largely by global financial markets," Draghi said in defending the ECB's protracted period of ultra-low interest rates that savers feel are giving them a bad deal. And sometimes, criticism of Draghi's policies can be very direct.
Image: picture-alliance/dpa/B. Roessler
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The statutes of the Maastricht Treaty actually stipulated that euro countries must budget in such a way that they build up enough confidence in the capital markets to get the loans they need at affordable interest rates. The central bank, for its part, was actually only supposed to ensure the stability of the euro, meaning it should only work toward price stability of the currency.
By buying up government bonds from the euro area, however, the ECB has entered terrain that is perilously close to indirect government financing.
Little wonder that the euroskeptics across the bloc openly criticized the ECB. In Germany, for example, conservative and right-wing politicians in 2015 filed lawsuits against the Bundesbank's involvement in the ECB bond purchases, which were all rejected by the German Constitutional Court.
ECB moves to new domicile
The European Central Bank has relocated its headquarters in Frankfurt, Germany. The modern structure is bright with plenty of office space.
Image: European Central Bank/Robert Metsch
A new home for the euro
After a decade of planning and four years of construction, the new ECB building is open for business. The bank has relocated from downtown Frankfurt to the city's East End - a short distance physically, but a long time in the making since its initial planning stages in 1998.
Image: European Central Bank/Robert Metsch
Tough design contest
The towering structure already dominates Frankfurt's skyline. The design competition was launched in 2003 and drew 80 renowned architects from home and abroad. Vienna-based architecture firm Coop Himmelb(l)au won the contest, with its building costing an estimated 1.2 billion euros ($1.5 billion).
Image: ISOCHROM.com, Vienna
Historic location
The EU's Treaty of Maastricht, signed in 1992, lays out Frankfurt as the ECB's headquarters. In 1998 the central bank moved into the city's Eurotower - an office building, whose rent turned out to be more expensive over time than the bank itself. Officials scrutinized 35 sites and then decided on a disused market hall (pictured) as the location.
Image: European Central Bank/Robert Metsch
Integrating the past
The sprawling area was last used in 2004 as a wholesale fruit and vegetable market. With most of the buildings dating back to 1928, preservation rules required the complex to be incorporated into the modern ECB structure. The market's five halls now house an exhibition area and a visitor center, as well as conference rooms and a cafeteria.
Image: picture-alliance/dpa/F. Rumpenhorst
Rising high
The ECB building's two towers are 185 meters (607 feet) and 165 meters tall, respectively, and are linked by an atrium on the ground floor. With 45 and 43 floors, they provide ample office space.
Image: picture-alliance/dpa
Glass and concrete
The whole structure is flooded with light, and the facades are partly asymmetric. The ECB said the new building should be an open work environment, with bright and flexible rooms. Many offices have moveable walls.
Image: European Central Bank/Robert Metsch
Old and new location
The ECB used to rent office space in four Frankfurt buildings - the best known being the Eurotower. The bank had to give up its plan of completely moving out of that building, once the new home was completed. With its new task of supervising Europe's banks, the ECB needed more space than originally planned.
Image: Getty Images/A. Dedert
The boss moves as well
ECB President Mario Draghi will move just like his coworkers. The downside: In the council's new conference room on the 41st floor, Draghi will be sitting with his back to the windows, thus missing out on the spectacular view of the city.
Image: picture-alliance/dpa/F. Rumpenhorst
Energy efficient and sustainable
The ECB is keen on saving energy. Rain water is collected on the roof of the market hall to water plants and to flush toilets. The heat generated by the bank's computer center is used to heat offices. In the summer, sunblinds and glare shields prevent the building from warming up.
Image: European Central Bank/Robert Metsch
'Mainhattan'
Shiny skyscrapers belonging to banks and insurance companies dominate the Frankfurt am Main city horizon. The new ECB headquarters (foreground) expands the skyline that gave the city its nickname "Mainhattan."
Image: picture-alliance/dpa
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More powers, more staff
As a result of the euro crisis and the ECB's new role in fighting them, the central bank has been handed additional powers. It is now tasked with supervising the biggest eurozone banks, and is allowed to run regular banking stress tests on them. In this way, it aims to identify risks in the balance sheets at an early stage and have them remedied.
In addition, during the sovereign debt crisis in Europe, the ECB was part of a group of powerful political players, including the International Monetary Fund (IMF) and the EU Commission. They acted as lenders of last resort providing liquidity assistance to affected states.
As its tasks expanded, so did the ECB's balance sheet total. In the years between 2010 and 2016, it rose from €163 billion ($151 billion) to almost €349 billion. Last year it stood at roughly €700 billion. The number of employees at the ECB also doubled from around 1,600 in 2010 to around 3,500 today.
