The party will be a little tarnished by the rise in prices. The European Central Bank celebrates this Wednesday its first quarter of a century of existence punctuated by the crises which have forced it to push the limits of its action.
About 200 guests are expected from 6:15 p.m. in the steel and glass tower of the monetary institution along the Main in Frankfurt. For the occasion, there will be music by Debussy and a birthday cake cut by ECB President Christine Lagarde and two of her predecessors, Jean-Claude Trichet and Mario Draghi.
Lagarde sees reason to “rejoice”
But a shadow in the picture: the party is taking place as inflation in the euro zone is sailing at a record level – still 7% in April – against a backdrop of energy prices and imported goods having jumped since the recovery post Covid-19 and the war in Ukraine.
Nevertheless, “we have good reason to rejoice at the ECB,” assured Christine Lagarde to the Dutch television channel Buitenhof TV. “25 years ago, our objective was to ensure price stability, better European sovereignty and to show more solidarity: we have kept our commitments on these three aspects,” she said.
Created on June 1, 1998, a few months before the introduction of the single currency, the ECB’s compass is to maintain price stability, which is currently defined by an inflation level of 2% over the medium term. Inflation has averaged 2.05% over the past 25 years.
But behind this good overall score, the institution saw all the colors. It had to put up with the imperfections of the monetary union leading to existential crises, such as the threat of seeing the euro implode in the 2010s, during the public debt crisis in the European Union. A long phase of sluggish inflation followed, followed by the surge in prices experienced for more than a year.
An unprecedented rate hike
Having believed for a long time that the return of inflation would be temporary, the ECB ended up having to fight it via an unprecedented increase in its key rates, by 3.75 points since July, thereby agreeing to eat away at growth.
On the other hand, its arsenal has expanded over the years beyond the classic weapon of interest rates: public and private debt buyback programs flirting with the ban on financing sovereign States and waves of giant loans to banks, all to support the European economies at arm’s length.
The construction of the digital euro
The institute has also made fatal mistakes. In 2011, Jean-Claude Trichet raises rates while a crisis is in the making. His successor Mario Draghi will correct the situation as soon as he arrives, later winning laurels from “Super Mario”, the savior of the euro zone. But the solitary management of the Italian ended up creating discord within the board of governors, where the bosses of the national central banks sit. Christine Lagarde has since closed ranks.
As for the euro, used by nearly 350 million Europeans in 20 countries, it will “survive for many years to come”, says Christine Lagarde. It will also be transformed: the construction of the digital euro is launched to set up a new means of payment in response to the proliferation of cryptocurrencies.