The EU Parliament resolution on the ECB: where democracy meets central banking

UPDATE: The European Parliament adopted its annual report on the European Central Bank (ECB), with 378 MEPs voting in favour, 233 against and 26 abstentions. Check our press note for more info.

Today, the European Parliament’s plenary session will sit in Strasbourg to vote on its annual report reviewing the European Central Bank (ECB). The vote marks a crucial moment in the push to align monetary policy with climate goals while strengthening democratic oversight of the Eurozone's most powerful financial institution.

The vote comes as the EU stands at a crossroads. While the ECB guards its independence from political pressures, climate change is forcing a rethink of monetary policy. As floods ravage cities and heat waves devastate crops, the line between environmental and economic stability grows increasingly blurry.

Zooming out, we should remind our readers that a fundamental orthodoxy of central banking is the principle of "market neutrality”—the idea that the ECB shouldn't favour any particular industry. 

The truth is that this principle has often favoured fossil fuel companies over green ones and could undermine the bank's primary mandate of maintaining price stability. The fossil fuel industry has been a major contributor to EU inflation in the past, creating economic pressures that threaten both business competitiveness and household welfare.

The inclusion of language advocating for the principle of market neutrality in the Parliament’s report could hinder the ECB's climate-related actions. Nevertheless, it is worth mentioning that the ECB can justifiably deviate from the market neutrality principle. This perspective has been supported by several ECB figures, such as Isabel Schnabel, and stated very clearly in the ECB’s feedback to the EP last year (“Market neutrality is an operational tool, rather than a legal requirement. It can help ensure that the ECB’s interventions in the market comply with the open market economy principle. The ECB can justifiably depart from market neutrality in order to comply with the ECB’s objectives and with the relevant Treaty principles.”).

Sky-high energy prices, driven by Europe's dependence on fossil fuels and their price volatility, are a direct threat to EU competitiveness and to the ECB's ability to keep prices stable. The Parliament's report comes at a critical time as Europe faces increasing competition from the United States and China in the global clean technology race. The vote could push the ECB to redirect its considerable financial influence toward sustainable industries, potentially reshaping Europe's economic landscape in the process.

Today’s vote comes just a few days after we, along with more than 60 renowned economists, experts, and civil society organizations, wrote an open letter urging the Governing Council of the ECB to put forward a new and improved Climate Roadmap as part of the monetary policy strategy assessment to be concluded in 2025.

In this joint appeal, we highlighted specific measures the Bank could take. We suggested updating the ECB's collateral framework to prioritise green assets, actively reallocating its substantial asset portfolio away from fossil fuel companies, and offering cheaper loans for environmentally friendly projects. These concrete proposals offer a roadmap for the ECB to align its financial policies with the goals of the Paris Agreement and accelerate the shift toward a sustainable future.

On a positive note, the report acknowledges that inflation is partly driven by supply-side shocks, including potential climate change impacts (paragraphs 18-19), and also includes a new section on the ECB's secondary mandate (paragraphs 32-40), which explicitly mentions supporting broader EU economic objectives, in addition to price stability (paragraphs 32-33).

Beyond environmental concerns, the report also tackles governance reform, highlighting the persistent lack of diversity in the ECB's leadership. With only five women having served on its Board throughout its history, calls for better representation at the top levels of the institution have now grown louder. A more inclusive leadership could lead to policies that better address social inequalities and promote a more equitable financial system.

The Parliament's vote on the ECB's annual report is more than just a procedural formality. It’s about democracy and the needs of an evolving society. Simply put, the question is not just whether the ECB should be more accountable, greener, and more diverse. The question is whether it can evolve to meet the unprecedented challenges of our time.