Role of central banks calls for rigorous societal debate


As well as in 2008, the very necessary, unavoidable actions of central banks now in the Covid-19 crisis have massive side effects: cheap money is fostering asset price inflation, fueling inequalities. At the same time, central banks are still disregarding climate risk in the way they treat fossil assets as collateral. Time to sincerely debate about the purpose of central banks and the way their mandates relate to democratic decision making.


Ladies and Gentlemen, dear friends,

It is a great pleasure to welcome you all to the conference “Next Generation Central Banking: Climate change, inequality, financial instability”. My name is Barbara Unmüßig and I am the president of the Heinrich Böll Foundation. 

This is probably the first really big conference in Europe on to discuss the responsibilities of Central Banks beyond price stability. It is also so far the biggest event of the project “Transformative Responses to the Crisis”, that the Heinrich-Böll Foundation  and Finanzwende started in spring 2020. 

The  purpose of this Project Transformative Responses: to develop and advance new ideas that could help Europe move forward on the much needed socio-ecological transformation of our economies in the context of the the crisis  induced by COVID-19.

COVID-19 has triggered the sharpest global economic recession at least since World War 2, some say since the 18th century. 

Once again as in 2008, it was Central Banks that came to the rescue, avoiding a meltdown of the global financial system, and providing massive stimulus to our economies. 

Still, the crisis is not over yet, Europe is experiencing a double-dip recession at the moment. But the very necessary, unavoidable actions of central banks have massive side effects: It has been shown that cheap money is fostering asset price inflation. 

Those who own assets like real estate or shares benefited handsomely: multi-billionaires like Elon Musk or Jeff Bezos increased their obscene wealth in a crisis that ruined a vast number of existences, while at the same time housing, or farmland, became significantly more expensive for tenants. Inequality is soaring, and it is undermining our democracies. As Oxfam in its recent report stated: Covid 19 is a virus of inequality (Ungleichheitsvirus).

Huge bond buying programmes subsidised corporations who issue bonds, putting smaller businesses at a further relative disadvantage. 

All the while, central banks have been shown to fuel the climate crisis by financing fossil fuel companies, and disregarding climate risk in the way they treat fossil assets as collateral. The transformation or our economies towards zero emissions is not only, but also a huge investment challenge. 

Monetary policy will be one of the tools that our societies need to wield to face it. Time is incredibly short, and we will need all hands on deck. 

Central banks wield a unique power in modern societies: They can create money out of nothing. By doing so, they can’t be neutral – they inevitably have significant impacts on our societies and economies. 

So, Central Banks are hugely powerful, they are indispensable tools of a modern state, their actions have massive distributional and environmental impacts - but central banks are often treated as purely technocratic institutions that stand above the political system, above governments, parliaments, and maybe even the courts. In the ECB, the model of the independent central bank, which is historically relatively new, has been enshrined most vigorously. 

We think, this contradictory situation calls first and foremost for a rigorous societal debate about the purpose of central banks, a debate about their impact upon important societal challenges that threaten our democracies and the conditions for human existence on this planet, and a debate about the way central banks relate to democratic decision making. This conference aims to be a place for this debate, and we are happy that over 1400 people have registered for this event. This is huge, and if I am not mistaken, probably one of the biggest public events on central banking in recent memory.

I’d like to thank on this occasion to our partners in this undertaking, first and foremost Finanzwende, but also all our European network partners: E3G, Finance Watch, New Economics Foundation, Positive Money Europe, Sustainable Finance Lab, Centre for Sustainable Finance at SOAS University of London, and the Veblen Institute. 

I’d like to acknowledge the contribution of Adam Tooze, Daniela Gabor and Pierre Monnin who have been instrumental in conceptualising this conference. 

A look at the programme reveals a very broad line-up from central banks, academia, think tanks and civil society. Thank you very much, your participation is really appreciated. We regret that none of the invitees from the current leadership of the ECB accepted our invitation to speak here, despite our best efforts to make their participation possible. 

I’d also like to thank the authors of the background papers Jens van’t Kloster, Benjamin Braun and Daniela Gabor for their important intellectual contributions.

I’d like to thank our co-funders of the project Transformative Responses to the Crisis: Open Society Foundation, Hans-Böckler-Stiftung, Partners for a New Economy, and Fondation Charles Leopold Meyer pour le Progrès de l’Homme.

Last but not least I’d like to thank the organising team of this conference: Michael Peters, Marcus Wolf, Magdalena Senn from Finanzwende, Fiona Hauke and Jörg Haas as well as Julia Reiter from Heinrich Böll Stiftung, and the project leader Gerhard Schick who unfortunately was forced to cancel his participation on short notice.

We are looking forward to two days filled with panel debates and workshops with high-level speakers from academia, central banking, politics and civil society. I hope you enjoy our program! 

Thank You!